“We can’t predict when, but given the continual emergence of new pathogens, the increasing risk of a bioterror attack, and the ever-increasing connectedness of our world, there is a significant probability that a large and lethal modern-day pandemic will occur in our lifetime.” – Bill Gates, 2018
The Covid-19 pandemic is upon us. It is a multisystemic crisis, spinning out of control, threatening the healthcare system, senior living communities, the education system, the food delivery system, our transportation systems, and indeed the entire economic system, the financial system and with it the retirement system, and as a result, the political systems of the world, all at the same time.
It is a multisystemic shock, threatening multisystemic collapse, and demanding a multisystemic response, both immediate and in the medium term. First to the immediate.
By now the necessary and urgent medical response to the pandemic is becoming clear, frustratingly late, but that’s an issue for another day. What is also clear is that the richest country in the world, that prides itself in the best health care system in the world, is woefully unprepared. Governors and local officials are filling the vacuum left by an abysmal failure in Federal leadership. Shift power and resources to governors.
An urgent economic policy response is equally critical. Aggressive central bank monetary policy support is a necessary but insufficient first step. But the unprecedented shut down of entire industries and a large share of the global economy, potentially for months, demands unprecedented government action. Private sector demand destruction and associated wages, coupled with unknowable uncertainty about the future, is comparable only to wartime as an economic shock. A rapid, wartime-like response is imperative, first to mobilize a surge in our human healthcare response and associated needs, and then to plug the demand gap for the interconnected global economy.
The financial condition of the United States is fragile. Thanks to the Wall Street induced financial crisis, and to the reckless late expansion stimulus by the Trump administration, our debt to GDP ratio exceeds 100%, exacerbated by massive “off-balance sheet” obligations ranging from our underfunded pension obligations to the looming liabilities associated with climate change. The private sector is also over leveraged as well, thanks to a borrowing binge on artificially low interest rates, again leftover from the 2008 financial crisis. Other countries are even worse off. And yet, there is no alternative to a massive government stimulus program to plug the immediate demand gap triggered by the necessary lock-down to slow the spread of the pandemic and hopefully prevent a health care system collapse.
In such times, countries such as the US have a weapon at their disposal that has not been used since Lincoln financed the Civil War with Greenbacks. Central banks with their own reserve currency have the ability to simply print money and spend it into circulation, in accordance with Modern Monetary Theory. Think of it as “Qualitative Easing” to complement “Quantitative Easing” (which entails printing money to purchase securities in order to manipulate market prices). No new debt. No new debt service burden. And in circumstances such as this, with a massive hole blown through the demand side of the economy, there is no risk of inflation. On the contrary, not filling the whole invites spiraling deflation and depression.
Stephanie Kelton and her Modern Monetary Theory (“MMT”) colleagues have made the compelling case for MMT for years. They have shown that unlike the inflation hawk story we have been told, the balance of the private sector surplus with an equal and offsetting public sector deficit is an accounting identity, not a policy option. Any private sector deficit caused by an unemployment shock MUST be and will be met with an equal and offsetting public sector surplus, the last thing we want in a recession. A massive infusion of public sector stimulus is essential, or the private sector will collapse.
What MMT reveals is that we don’t need to pile on debt in a demand crisis like this. In simple language, since we have our own reserve currency, we can and must print money, and get it into the hands of all citizens whose wages have been temporarily cut-off by the crisis, and particularly into small businesses, the lifeblood of the real economy. And if we want our transportation systems to survive, a public infusion will be necessary. No doubt this stimulus will approach a Trillion dollars in the United States alone before we are done, but only time and the severity of the downturn will tell. What matters now is to act boldly.
But what about the medium term? What does a genuine multi-systemic response look like beyond the crisis tourniquet to stop the hemorrhaging? To answer this question, we must shift from our problem-solving instinct to holistic design thinking.
A holistic approach begins with understanding, as quantum physics proves, that everything is literally connected to everything. It is, in fact, one multisystemic crisis. And it is one system that may well have entered collapse. After all, scientists have warned for years that we are in the 6th great extinction due to the literal collapse of biodiversity. However, too few are able to see how the expansion of the human economy footprint, particularly the relentless expansion of industrial, degenerative agriculture (feed lot grazing systems and clearcutting forests included) into the world’s remaining wilderness areas is what is causing the collapse in biodiversity. And epidemiologists are learning how such altered landscapes are the root cause of new infectious diseases spreading from the wild to humans, when humans come into contact with animals in new ways with an inability to adapt quickly enough. Pandemics are the result, as we were warned.
But this pandemic, like the Climate Crisis, are mere symptoms of a new reality. We are living through the end of the Modern Age and entering the Regenerative Age. This moment, forced upon us against our will, is the consequence of an extractive, exponential growth driven economy as the source of our prosperity that has run to its natural unsustainable conclusion. Wisdom demands we see ourselves as one system, embedded in, not separate from, the sacred Blue Marble that is our only home. Wisdom demands we source our future prosperity by harnessing the immense potential available if we align our economy with the patterns and principles of living systems, as if we intended our economy to behave like a living system that sustains itself over long periods of time – that is, as a Regenerative Economy. Such wisdom is aligned not only with modern living systems science, but also with the teachings of Indigenous cultures around the world, the only cultures in human history that have not yet collapsed.
The Covid-19 pandemic will alter life as we know it. The question remains whether it will alter the way we think.