The Covid crisis is questioning many of the hidden assumptions of contemporary capitalist economies. Already policy innovations by governments have begun to crack the carapace of business as usual. I suggest here that this includes the hegemony of the neo-classical theory of value – that price determines value, and that rating the social contribution of different sectors, groups of workers and consumption practices is an impertinence. It is not.
What the coronavirus has changed
The spread of Covid-19 and the extraordinary policy reactions of governments around the world are sparking a tsunami of debate and ideas about society, humanity, ecology, culture. One set of questions concerns the nature and purpose of the economy – see Will Davies or Julia Steinberger. And one aspect of the economy thrown into revolutionary relief is the nature of economic value – what activities have value, are essential or critical to survival, prosperity and justice in some way, and what are wasteful or destructive.
This was brought home to me by a mundane list published by the UK government on March 19th, 2020: Guidance for schools, childcare providers, colleges and local authorities in England on maintaining educational provision. It listed those groups of essential workers whose children would be entitled to continuing educational provision after the shutdown of schools, preschools and colleges. In so doing it set out the sectors of the economy ‘critical to the COVID-19 response’. The list is pasted into the last column of the table below. The sectors extend way beyond health and care or emergency services. They include farmers, supermarket staff, workers in water, electricity, gas and oil, teachers, telecommunication workers, transport staff, workers in law and justice, religious staff, social security staff and retail banking staff.
It is the first official list of essential occupations since the Schedule of Reserved Occupations (Provisional) published in January 1939, and much revised during the course of the Second World War. There are differences of course between the two lists, such as the prominence of munitions workers in 1939. Another noticeable difference is the absence of industrial and manufacturing workers in the 2020 list – a reflection of the tremendous de-industrialisation of the UK economy and the export of supply chains to China and the rest of the world. Reserved occupations in 1939 included a vast supply chain of colliers, foundry workers, toolmakers, machinists, shipbuilders, engineers, railwaymen, bargemen and even tree fellers. (My father was excluded from national service as an engineering fitter in Stevenage.) But there are many parallels: farmers, doctors, nurses, teachers, and so on.
These essential sectors covered a similar proportion of the working population. Around five million men (and it was designed for men to begin with) were in scheduled occupations in 1940, and around seven million adults are covered by the 2020 list, according to the Institute for Fiscal Studies , equivalent to around 22% of the total labour force.
Identifying essential workers in this way has been anathema to conventional neo-classical economic theory, where any activity is deemed valuable or productive if it is remunerated, whatever its social value or disvalue. This market price theory of value, developed in the late nineteenth century, marked an epistemic break from the classical political economy of Adam Smith through to Karl Marx, for whom the distinction between productive and unproductive labour was central (though they differed over where the line was drawn). Ignoring both inequality and the composition of production/consumption leaves the price mechanism impregnable: demand is determined by consumer preferences (themselves subject to swathes of hidden and overt pressures) backed by money, and that’s it. It is then objectionable and immoral for government or ‘society’ to declare any occupation or consumption item better or worse than any other. A carer equates with a hedge fund manager; buying a round-the-world cruise is no different in kind to buying a pizza to stave off hunger.
So the coronavirus has achieved in a few weeks a shift in perspective unequalled in eight decades. It has begun to question the nature of economic value. We can discuss again ‘valuing what matters’. It takes a major crisis to achieve that sort of shift in common sense understanding. Yet a much, much greater crisis is now walking towards us – that of climate and ecological breakdown. What are the lessons we can learn from the above?
The climate crisis: valuing what matters
The dominant global response to the climate crisis (where it exists at all) is green growth: to decouple the link between output/consumption and the emissions causing global heating and climate breakdown. This is the basis and logic of the 2015 Paris agreement. But it is insufficient for two reasons. First, it cannot reduce emissions fast enough under any scenario. The world is currently heading for a rise in global temperatures of 3.2°C by the end of this century. To limit this to a safe temperature rise of 1.5°C, according to the UN Environment Programme, would require annual cuts in emissions of 7.6 per cent from 2020 to 2030 – five times more ambitious than the sum of agreed cuts pledged in Paris. To achieve this solely by decoupling emissions from a fast growing world output is pure fantasy.
Second, it is unethical in not questioning the inequalities built into the present system. For example, it does not challenge rich nations’ overwhelming responsibility for global consumption-based emissions (considerably higher than their territorial emissions). Recent analysis by Tim Jackson suggests that a fair carbon budget for the UK between now and the end of this century might be as low as 2.5 billion tonnes of CO2. Scenario analysis indicates that remaining within this budget would require a reduction in the UK’s carbon footprint of around 95% within the space of little more than a decade. So planned reductions in consumption emissions will be essential in Europe and the global North.
An economy and a value theory to cope with these times must focus not on market exchange value but on sustainable wellbeing. This includes two fundamental components. First, meeting common human needs as the fundamental ethical goal, and second, prioritising provisioning for these needs in a foundational economy.
First, to understand sustainable wellbeing requires a rigorous theory of human need. This was the subject of an earlier book I co-authored with Len Doyal which has gained a renewed following in recent years. Julia Steinberger usefully summarises our theory as follows: we all share a finite number of satiable and non-substitutable human needs. Wellbeing can be understood roughly as a pyramid, with basic need satisfaction at the bottom underpinning physical, mental health and autonomy, culminating in wellbeing and social participation – see the figure below. Unlike wants or preferences, needs are in theory satiable. The distributive principle entailed by human need theory is sufficiency: to bring all individuals up to a threshold (though this can be defined in different ways).
The idea of non-substitutable need satisfiers entails a different conception of the economy as a network of ‘systems of provision’ advocated by the LiLi (Living Well Within Limits) research group. We must move beyond an idea of the economy as a uniform space within which nameless and substitutable commodities are produced, exchanged and consumed. In particular, there exists a ‘foundational economy’ which directly delivers a range of essential need satisfiers in contemporary market economies. The main components are: pipe and cable utilities; transport infrastructure; food production, processing and distribution; housing; health care, education, child care, social care; police and emergency services; public administration and retail banking and payments systems. This entire foundational economy accounts for about 50% of both employment and expenditure in the UK and across Europe. These services are all ‘mundane’. They are taken for granted until they fail.
The table linked to below (first three columns) shows there is a close match between contemporary satisfiers of basic needs and the sectors of the foundational economy. Both frameworks recognise the irreducible variability of consumption, the multi-faceted nature of human needs and the variety of systems on which we all depend. Both recognise the importance of shared systems and mutual benefits. Together these concepts ground the recent case for entitlements to Universal Basic Services.
This returns us to the last column of the table – the government’s list of Covid-critical sectors and occupations. Despite the different raison d’etres there is a close match with our lists of need satisfiers and provisioning systems. When we need to identify essential or critical occupations we come back to human need satisfaction and the foundational economy.
Recomposing consumption as a vital climate policy
This has relevance for radical strategies to tackle the far vaster, if longer-term, threats of climate and ecological breakdown. The major alternative to green growth is radical degrowth in the rich zones of the world. Yet how to transition from 21st century capitalism to an utterly different economic principle and system is far from clear. In my own view a crucial component of that transition will be to recompose consumption in the rich world: to reduce consumption emissions by switching from high- to low-carbon goods and services (without necessarily at this stage cutting overall consumption expenditure). To make this fair or just would then entail the idea of a ‘consumption corridor’, between minimum consumption standards, allowing every individual to live a good life, and maximum standards, ensuring a limit on every individual’s use of natural and social resources in order to guarantee a good life for others in the present and in the future. This means drawing distinctions between necessities and luxuries; or between necessities, comfort goods, and luxuries. And this takes us back to need theory.
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This is not a completely novel idea. Quirky economists like William Baumol have distinguished between productive, unproductive and destructive labour. Elite policy makers such as Adair Turner have urged a rethinking of neoclassical economics to distinguish between the production of ‘rational necessities’ (productive), branded fashion goods and positional goods (unproductive), and activities causing congestion, environmental degradation and systemic crisis (destructive). As chairman of the UK Financial Services Authority, Turner famously labeled some financial activities as ‘socially useless’ – a meaningless term in neoclassical economics.
Organisations such as the New Economics Foundation (NEF) have challenged the market valuation of different jobs and proposed ‘valuing what matters’. The NEF report by Steed and Kersley found large discrepancies between the social and market valuation of occupations, suggesting elements of an inverse law, where socially beneficial jobs are paid least and the least beneficial or most harmful are paid most. For example, childcare workers were estimated to generate between £7 and £9.50 benefits to society for every £1 they are paid, and waste recycling workers £12. On the other hand, tax accountants and investment bankers were estimated to destroy £47 and £7 respectively of social value for every £1 they were paid. No prizes for guessing which categories were included in the Covid-critical list.
So there are precedents and concepts for challenging market valuation of occupations, and proposing alternative ideas that connect with meeting basic needs. Of course Covid-19 is a huge but short-term crisis, at least compared with the cumulative onslaught of climate breakdown. Beyond the very short term, this list would have to be extended in two ways to include, first, workers in supply chains who create the essential inputs for the above need satisfiers, and second, workers creating capital plant for future rounds of production. The class of key workers will be larger in the medium to long term. But a start has been made.
To generalise this questioning of occupations, activities and consumption categories, care will have to be taken to ensure extensive citizen participation, to avoid accusations of ‘nanny statism’, elites knowing what’s best for ordinary people, bureaucratic or professional authoritarianism. At the same time, the irreplaceable contribution of experts must be acknowledged – another lesson Covid-19 has brought home. The growing experience of citizen’s assemblies and forums, which bring together experts and citizens in an ongoing panel, will be invaluable here. Citizen forums have submitted recommendations on a range of policies in Ireland (notably abortion reform) and on Canada’s future, and are now underway on how to cut emissions in France and the UK (now online).
The Covid crisis is questioning many of the hidden assumptions of contemporary capitalist economies. Already policy innovations by governments have begun to crack the carapace of business as usual. I suggest that this includes the hegemony of the neo-classical theory of value – that price determines value, and that distinguishing the social contribution of different sectors, groups of workers and consumption practices is an irrelevance or an impertinence. It is not. It is absolutely central to building a sustainable and just economy.