As governments attempt to steer their economies through the mounting economic fallout of the COVID-19 pandemic, stimulus packages should focus on fostering new models of sustainable and inclusive economic growth, according to panelists at a webinar hosted earlier this month by the World Resources Institute (WRI).
“We’re confronted with three pretty profound crises—we have a health crisis, we have an economic crisis that has in no small part been induced by the health crisis, and we have a climate crisis—and the scale and scope of these three crises are absolutely mind-boggling,” said WRI Executive Vice President Manish Bapna, the opening speaker for the webinar.
Given the scale and complexity of the situation at hand, he said, it is essential that governments find solutions that can address multiple problems at the same time, with stimulus packages that prioritize the health and livelihoods of those who have been hardest hit by the pandemic, while channeling job creation and fiscal stimulus to building more resilient, carbon-neutral economies. At the same time, he added, the world’s economic powers need to encourage a “new social contract”—one that protects the vulnerable communities that will be hardest hit by the economic fallout of the pandemic.
Offering lessons from “stimulus past,” Helen Mountford, WRI vice president of climate and economics, noted that the fiscal crisis accompanying the pandemic is very different from the most recent economic crash in 2008, in that it involves “both a demand side and a supply side chop”. Still, South Korea’s actions during and after 2008 show that investing in the green economy can be a powerful way of driving post-crisis economic recovery.
In 2009, South Korea targeted more than 80% of its fiscal stimulus package at green measures—the most, on a percentage basis, of any OECD nation—with the intent to create 960,000 green jobs. A “second wave” of this stimulus now being enacted in South Korea includes a measure to increase the subsidy for solar rooftop installation from 30 to 50% of total costs.
Mountford noted that South Korea’s post-2008 approach promised to address a number of key problems simultaneously: building out renewable energy infrastructure by increasing demand for solar, relieving financial pressure on businesses and households by slashing electricity bills, and creating jobs that would ultimately help to reduce carbon emissions. The results were encouraging: “In the first quarter of 2009, South Korea was one of a few countries to show positive growth,” Mountford recalled, “and by the third quarter, it had a growth rate of 2.8%, one of the highest in the OECD.”
The post-2008 recovery package in the U.S. only directed around 10% of stimulus spending to the green economy, but that still represents “the largest-ever clean energy investment in U.S. history,” providing more than US$90 billion in clean energy investments and tax incentives and supporting 900,000 green jobs between 2009 and 2015. Mountford’s comparison of investment returns showed that, in many cases, the clean infrastructure created by the stimulus outperformed other sectors, in some cases even doubling the number of jobs provided.
In this year’s crisis, China’s economy had recovered more than 86% of its pre-pandemic capacity by March 27, said WRI China Chief Representative Li Fang. The country’s COVID-19 cases peaked only two weeks after widespread lockdowns were implemented, a history that could “bring some hope” to parts of the world that are still in the teeth of the crisis, she said.
Although the worst of the pandemic seems to be over in China, Fang said it had a “deadly impact” on the national economy: at the height of the lockdown measures, the Chinese manufacturing index plunged 15 points. The economic shock continues to produce significant shifts in the structure of the Chinese economy, and in the nature of its economic policy. One key study recently released by researchers at WeBank’s AI Moonshot Team—which uses deep learning tools to track the pandemic’s ongoing effect on China’s economy—reported that, by the close of the lockdown, online working had increased by 537%.
Supply chain disruption in China has also brought questions of food security, resiliency, circular economy, and energy storage into sharper focus. At the height of the crisis, many Chinese citizens felt an “intense need for essential things,” said Fang. This experience is still present in people’s minds, and China is now seeing intense discussion around the concept of “healthy supply chains” built to prioritize food security, climate change mitigation, and biodiversity.
But data from the early stages of post-2008 recovery also point to a world that was too ready to return to its dangerous status quo: the economic bounceback from that financial crisis coincided with a massive increase in carbon emissions, which “grew faster than ever,” said Fang.
WRI United States Director Dan Lashof outlined an astounding economic shock confronting his country—one as “unprecedented as the health threat that has been caused by the virus itself”, with more than 10 million Americans applied for unemployment benefits in the last two weeks of March alone. The U.S. Congress passed a $2-trillion rescue package, “the largest in our recent history,” noted Lashof, but most economists agreed more stimulus would be needed.
As leaders wrangle over the details of the next bill, said Lashof, it will be important to remember that the wind and solar energy industries are “one of fastest growing sectors in the U.S. economy,” employing 350,000 people before the shutdowns began. In getting this dynamic sector up and running again, Lashof suggested, the U.S. should return to policies it used after 2008, such as temporarily allowing cash payments in lieu of tax credits. Investment in grid upgrades and electrified public transit infrastructure would also be an effective job creator while creating pathways toward energy transition, bringing “idle factories online,” and preventing future damage to “the lungs of our kids.”
The U.S. must also “get the over two million Americans in the energy efficiency industry back on the job upgrading our buildings,” he said.
Lashof also encouraged leaders to consider a public works “tree restoration program” that would target “not just forests but also agricultural land and urban landscapes.” With a sustained effort, he said, the U.S. “could eventually plant 60 billion trees and remove over 500 million tonnes of CO2 per year,” while creating 150,000 jobs.
Wanjira Mathai, vice president and regional director of WRI Africa, said that while her continent had reported lower COVID-19 transmission rates so far, the “impact of the virus and the crisis it will precipitate will hit us significantly—it already has.” Mathai commended African countries and governments for the “balancing act” they were managing in handling both the critical need for livelihoods and jobs in an economically vulnerable region, and the curfews, shutdowns, and other necessary steps to counter the spread of the virus.
“This crisis has torn us apart in a way, and has helped us realized that, internally, we have got to find our own solutions—we’ve got to innovate,” said Mathai. In the coming months, the “strength of our governance, the strength of our systems and, suddenly, the strength of our social capital will be tested in ways that have not happened before.” African governments, recognizing the vulnerability of their economies, are “organizing themselves around how to engage international bilateral and multilateral institutions” to pull together whatever economic stimulus can be generated, while acknowledging that, with the low GDPs of many African nations, even best-case models predict “sub-zero” economic growth rates.
At the same time, “what is exciting is what it’s doing internally to get the private sector and public sectors working together,” said Mathai. “Food at the moment is one of the most critically threatened of the value chains and supply chains, and one that we cannot afford under any circumstance to have blocked.” While borders and ports close to human traffic, they must continue to allow food to pass. Domestic farmers and food producers will also need economic “cushioning,” and unhindered access to the critical inputs that will keep food prices flat and ensure the survival of populations.
Across all nations in the COVID-19 crisis, “cities and urban areas are at the front lines,” said Anjali Mahendra, director of research at the WRI Ross Center for Sustainable Cities. Many of the world’s cities have seen their health care, sewage, and public transit systems overwhelmed or unable to function at all, with the worst of the suffering and job losses falling on low-income people. As it passes through cities, the virus is exposing the “existing fault lines of our systems, in terms of inequalities, infrastructure, and access to core services,” said Mahendra. As the world looks at recovery and stimulus packages, “we need to use this opportunity for cities to be able to build back better, to be more resilient, more low-carbon, and certainly to be more equitable.”
Mahendra’s data showed that those hardest hit by the COVID-19 crisis are the providers of essential services. Yet, despite the need for their work—which “underpins urban economies”—these workers are often left without critical social supports. Unprotected by employment contracts, and unable to rely on income insurance, low-wage workers in the gig and informal economies are “facing a tough choice between exposing themselves to the virus or dealing with hunger for themselves and families”—a reality that is revealing the degree to which the world’s cities lack the “fiscal and social safety nets that are so essential to build economic resilience in times like these.”
Mahendra added that “density is not the problem per se,” noting that Hong Kong and Singapore, two “incredibly dense” cities, have managed the crisis better than most. To identify the major risk factors, she said governments must “break down density into things like overcrowding, floor space, occupancy, access to services, and so on.” The deeper analysis shows that “density starts becoming a problem when there is overcrowding, lack of physical infrastructure, and [limited] access to services.”
As cities recover from the pandemic, there is an opportunity to “identify and invest in high-risk locations”—both in major urban centres and in poor, under-resourced “informal settlements” around the world, said Mahendra. “We need targeted financial support for the most vulnerable urban residents, so that health care and essential services are consistently accessible and affordable.”
Critical to the success of any of these initiatives, she concluded, is the need for “granular data”—information at a city and neighbourhood scale that will allow decision-makers to better assess needs on the ground. This data can only be gathered successfully when cities work in partnership with local communities, she said, and win the trust of marginalized groups by listening to their needs and investing in them. As an example, Mahendra cited the community monitoring stations set up in Hong Kong and Singapore during the 2002-2004 SARS outbreak, and how those stations are now serving their countries well in the current crisis.
