Economic Development Association Scotland Blog: Blog: "COVID-19: How round will the future be?"

Charlie Woods is EDAS's Policy and Practice
sub-group Chair and Director of the
Scottish Universities Insight Institute

A starting point for beginning to reimagine a post Covid economy is to look at the processes that underlie economic activity, such as the supply chains, which encompass consumption, production, financing, distribution and exchange. Globalisation has tended to lead to ever extended chains, relying on ‘just in time’ supply, as companies look to increase efficiency and become more competitive.

The response to the pandemic has severely tested the resilience and effectiveness of some of these chains. As restrictions are lifted and demand begins to pick up it wouldn’t be a surprise to see these processes coming under increased scrutiny[1]. This is likely to focus initially on increasing resilience to future shocks, but it could also be an opportunity to review how current arrangements perform relative to other goals, such as sustainability and wellbeing.

The metaphor of a supply chain implies a linear production process, which can be characterised as ‘take, make and dispose’. Perhaps the future will look much more circular as greater attention is given to reducing non-renewable inputs and reducing the disposal of waste in the natural environment (as illustrated in the diagram below from Zero Waste Scotland[2] in relation to CO2). It has been argued that such an approach offers opportunities to help both planet and profit[3].

The concept of a rounder economy is also at the heart of ‘Doughnut Economics’[4]. A term coined by Kate Raworth to get across the idea of an economy that provides a necessary social foundation for human wellbeing, while respecting the natural constraints of the planet. The ‘doughnut’ is the sweet spot between the two goals. And is illustrated in the diagram below. The diagram also shows the degree to which the social foundation is currently being missed, while the environmental constraints are being overshot.

If the overall objective is sustainable wellbeing, then a focus on wider social and environmental measures may give a better indication of how well the economy is contributing to this. This may then allow you to look at how different approaches to organising an economy work in terms of achieving desired ends.

This is the approach the Social Progress Imperative[5] have taken in developing their index of social progress. They don’t use any purely economic measures in constructing the index. Instead they look at 51 indicators across three broad categories (see below): basic human needs, the foundations of wellbeing (including environmental quality), and opportunity.

In these approaches increasing productivity remains at the heart of development, but more attention is focussed on overall resource productivity, alongside the distribution of wealth and income within and between countries resulting from increased productivity.

If we do move towards a rounder, more sustainable, wellbeing economy, what might be some of its characteristics? They could include:

· A greater focus on the prevention of social and environmental problems to improve outcomes and reduce expenditure and less on more costly amelioration

· A more stable financial system geared to realising economic potential to generate social returns

· Investment and innovation focussed on a zero carbon transformation and renewable resources

· Carbon costs and other positive and negative externalities being internalised to influence incentives for consumers and producers

· More local production/sub-contracting and greater decentralisation of decisions – to provide more resilience in a crisis and give a greater sense of agency

· Widen ownership and control of assets to spread returns and give more people a stake in success

· A strong partnership between the private, public and third sectors to stimulate investment, address externalities and ensure a fairer distribution of opportunities and outcomes

One consequence of the experience of coping with Covid-19 might also be greater global cooperation to tackle other cross border issues such as the climate emergency. The framework for this cooperating already exists in the form of the UN’s Agenda 2030 and associated Sustainable Development Goals (SDGs)[7], summarised in the graphic below. These goals, agreed in 2015, already influence policy and practice around the world, for example they underpin Scotland’s National Performance Framework[7].

A key challenge in pursuing the goals is to understand the way in which complex socio-economic systems interact, generating both positive synergies and negative trade-offs. The operation and design of supply chains (or their rounder equivalents) could play an important role in this, bringing together many of the goals. For example:

· The use of natural resources and the disposal of waste (SDGs 12, 14, 15)

· The skills and conditions of workers throughout the chain (SDGs 1, 2, 3, 4, 5, 8, 10)

· Innovation, production and distribution processes (SDGs 7, 9, 12, 13)

· Reuse and recycling of products (SDGs 11, 13, 14, 15)

· Trading arrangements (SDGs 16, 17)

· Supply chain resilience (SDGs 3, 9)

Developing the economy post Covid is going be extremely challenging in the short term as places struggle to rebuild and recover, however, the interruption caused by the pandemic also offers a longer term opportunity to reimagine and restructure a rounder, more sustainable and inclusive economy, with wellbeing at its core.