COVID-19 – Five lessons for improving future economic and social resilience

by , | Jun 26, 2020


The COVID-19 crisis is another timely reminder of the need for building resilience into our social, economic, and financial systems – locally, nationally, and globally. COVID-19 demonstrates the extent of globally inter-linked systems of trade and finance, and reveals their fragility. The crisis has exposed the vulnerability of our societies, most notably of our health systems, but also the susceptibility of supply chains and the gig economy, where large parts of the working population have little to no social security. Financial systems have held up relatively well, thanks to stricter capital requirements introduced after the 2008 crisis and decisive intervention by central banks, but are now also starting to show cracks.

When building back our economies and societies after the crisis, increasing resilience needs to be one of the main guiding principles to ensure we are better prepared to withstand future pandemics but also the other major looming threat to humanity – climate change.

“There is little glory in prevention…but we need to massively scale up our collective efforts to strengthen resilience”

If we take the right policy choices now and design recovery policies around resilience, we will not only be able to meet short term needs for economic stimulus, but also make our societies and economies safer and more prosperous in the future. Resilience research can offer at least five important lessons for preparing for crisis and moving forward.

First, the cost of inaction or late action is usually high. From delaying lockdowns to PPE shortages to testing and tracking regimes, COVID-19 shows in real time how weak preparedness and delays in containment result in far higher costs than anticipatory preparedness. Delays in response have unnecessarily increased the death toll and human suffering, as well as economic fallout. Evidence from humanitarian responses demonstrates the value of taking prompt action to stem crises. As a first step, crisis contingency planning and forecast-based early action approaches can help to quickly cope with a potential emergency when it does arrive.

Second, we will be better in preventing crises or responding to them when they occur if we adopt a ‘resilience thinking’ approach. Popularised by researchers interested in the links between human and natural systems, such approaches consider how multiple interacting systems at different scales can be managed to handle shocks, surprises, and uncertainty. Systems thinking will help us identify weaknesses and develop the capacity of our societies and economies to cope with shocks and adapt to change.

Third, we cannot rely solely on market solutions when foresight and long-term thinking are needed. Social, economic, and financial stability are public goods, and we need well-designed public interventions to ensure that long-term benefits for society prevail over short-term special interest. The financial sector in particular has been driven by short-term profit optimisation over long-term value creation and sustainability. The same is true for carbon-intensive businesses which have created wealth for relatively few while undermining the long-term wellbeing of humanity. COVID-19 shows that public policy interventions are needed to protect the health and safety of citizens. Public policies to help businesses through the COVID-19 crisis should build in resilience goals, including disclosure of climate risks and incentives to decarbonise their activities.

Fourth, experience matters for action. While heatwaves, storms, and fires brought the climate crisis into stark focus in 2019, for many people these events were still distant. COVID-19 has made crisis proximate, with 80% of the world’s population locked down in some way. Crisis is no longer abstract – including for UK Prime Minister, Boris Johnson. This lived experience is vital to providing the social appetite and political will for implementing mechanisms to strengthen resilience to future shocks and stresses. We need to build on a shared understanding that societies need to prioritise investments in public goods that enhance future resilience.

Fifth, and finally, global co-operation in preventing and coping with disasters is crucial. Global challenges such as pandemics and climate change cannot be addressed by any country alone. In a globalised world, we cannot shield ourselves from problems elsewhere. Just like a virus can spread across borders, the impacts of climate change will be felt across the world, not least through flows of international migrants. The sad truth is that the impacts of climate change will be felt most in countries that contributed the least to global warming. The imperative for international support for countries destabilised by conflict, disasters, poverty, and now COVID-19 has never been greater.

It is said that there is little glory in prevention. But COVID-19 illustrates the great urgency in strengthening resilience against natural hazards. COVID-19 also illustrates that we are as strong as the weakest link. We need to massively scale up our collective efforts to strengthen the resilience of our societies and economies and protect or restore the environment and earth systems on which we depend. Failing to invest in making our economies and societies more climate resilient undermines our future growth and well-being.

Author

  • Thomas Tanner is Director of the Centre for Development, Environment and Policy (CeDEP) and a Reader in Environment and Development at SOAS University of London. A development geographer, he specialises in the policy and practice of building resilience and adaptation to climate change. Tom’s research has included partnerships with UK DFID, the World Bank and the Rockefeller Foundation, among others. Along with other publications, Tom co-authored the leading textbook on Climate Change and Development (Routledge) and edited a collection on investment decision-making in Disaster Risk Management (Springer). He lives happily by the sea in Brighton, UK.

  • Ulrich Volz is Director of the SOAS Centre for Sustainable Finance and a Reader in Economics at SOAS, University of London. He is also a Senior Research Fellow at the German Development Institute and Honorary Professor of Economics at the University of Leipzig. He is a Director of the Global Research Alliance for Sustainable Finance and serves on the Advisory Council of the Asian Development Bank Institute. Ulrich was Banque de France Chair at EHESS in Paris and taught at Peking University, Kobe University, Hertie School of Governance, Freie Universität Berlin, Central University of Finance and Economics in Beijing, and the Institute of Developing Economies (IDE-JETRO) in Tokyo. He spent stints working at the European Central Bank and the European Bank for Reconstruction and Development and held visiting positions at the University of Oxford, University of Birmingham, ECB, Bank Indonesia, and Aoyama Gakuin University in Tokyo. Ulrich holds a PhD from Freie Universität Berlin and was a Fox International Fellow and Max Kade Scholar at Yale University. Ulrich was part of the UN Inquiry into the Design of a Sustainable Financial System and has acted as an advisor to several governments, central banks, international organisations and development agencies on matters of sustainable finance and development.


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