Building back better in a post-Covid world

The desire to ensure something good comes out of the pandemic plays on people's wish that the sacrifice of jobs, businesses and incomes made at the behest of government should not be in vain.

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  1. Charles Stanley

‘Building back better’ is one of US Presidential candidate Joe Biden's campaign slogans. It has emerged as a popular mantra with centre left parties and movements – and is now finding it into the language of some centre right politicians as well. We will be hearing much more about it in the next few years as the world economy struggles to recover fully from the Covid-19 lockdowns and damage.

The phrase is born of the desire of many to ensure something good comes out of the pandemic. It plays on people's wish that the sacrifice of jobs, businesses and incomes made at the behest of the government to try to reduce the spread of the disease should not be in vain.

On both sides of the Atlantic, political movements and governments of the centre left want to fashion a recovery policy which furthers their aims of greater equality, more fairness, and a greener future. The policies they cluster beneath this banner vary a little, but there is always the same, irreducible core. They all want to decarbonise economies more quickly, and lay emphasis on the new green jobs they envisage as major public and private investment is directed and subsidised towards wind farms, solar installations and electric vehicles.

They all wish to use the power of the state more, to intervene to promote greater equality. Joe Biden talks of recruiting a corps of Public health employees to promote better health care. He plans a "Protecting the Right to Organise Act", to give union rights to public-sector workers – and to strengthen the rights of others in the private sector with union affiliation.

The UK campaign talks of protecting and investing more in public services, creating good union-backed jobs. There is a hostility to large corporations, with the UK movement wanting to redistribute power away from the "profits of the big banks and executives of corporations that fuel climate-change inequality". Mr Biden makes higher taxes for the rich and big business a central feature of his campaign pledges.

There is usually a wish to improve health care, using technology to do so, and allowing more access to it for those on low incomes where that remains an issue. There is an acceptance of higher public spending and investment – and an implicit wish to take advantage of ultra-low interest rates to borrow substantially.

The World Economic Forum has signed-up to much of this and will be seeking no doubt to flesh out more of the details in January at its main Davos event. They call for a great reset of capitalism "to build a new social contract that honours the dignity of every human being". They tread into very political territory by calling for wealth taxes, alongside the withdrawal of carbon subsidies – and want the digital revolution to assist governments and health services more.

The IMF too has a three-aim manifesto. It wants greener growth. It seeks fairer growth. It proposes smarter growth. These are our old friends the green and digital revolution packaged up with the fashionable wish for governments to use tax and spend to promote more fairness. The Managing Director even name-checks and praises the NHS as the kind of approach her institution has in mind.

It looks as if various centre-right governments wish to come to an accommodation with much of this thinking. They too welcome many of the statements and plans for green growth – and are happy to see the digital revolution sweep on to encompass health and other public services. They might not be so keen on the extent of state involvement, the magnitude of state recruitment and revenue spending, nor on the union measures.

Ironically these same governments have been forced by the virus into adopting sweeping state-led controls over their economies and, at least temporarily, accepting a role akin to nationalising big areas of economic activity by underwriting losses and employee costs. Their words and actions over tax rises and the scale of deficits will be watched carefully to see if they make this a point of differentiation.

These developments dovetail naturally with world government requiring environmental, social and governance matters to be built into investment. This will be the subject of a future blog. The green revolution has many powerful friends and will spawn considerable legislation, subsidy and public money over the next few years. It will be up to markets to try to locate the popular products and services which will democratise what remains a movement of the elites and the radical young.

So far, the green agendas are more of the same. There will be a drive to additional renewable power to produce higher percentages of electricity output, using subsidy and regulation to do this. There will be further limits placed on diesel and petrol vehicles, with strong discouragement to those thinking of buying new ones.

The purists want more bicycles and green buses, whilst others will seek to promote electric cars. There is a recognition that much could be done to raise insulation standards and purge homes of gas boilers, but we still await the popular products to entice more consumers. In the UK the electricity companies are struggling to even get customers to accept smart meters when offered universally free to the individual user, with the cost charged to users in general whether they want one or not.

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