Maurie J. Cohen
The Future of Finance, Economics, and Sustainability in the Post-COVID-19 Era
In this opinion piece, Maurie Cohen, Professor of Sustainability Studies at the New Jersey Institute of Technology and Editor-in-Chief of Sustainability: Science, Practice and Policy, considers the economic actions taken to address COVID-19 and the transformations still needed in our economic system to confront another crisis in our lifetimes: climate change.
In mid-April, former United States Treasury Secretary, Robert Rubin, published an op-ed in The New York Times offering a roadmap for the country’s economic recovery once the COVID-19 pandemic begins to recede. For readers who do not closely follow macroeconomic affairs, Rubin was one in a long line of erstwhile directors from Goldman Sachs, the behemoth multinational investment bank, to serve as chief national financial policymaker and occupied the office from 1995 to 1999, spanning parts of Bill Clinton’s two terms as president. Financially speaking, this was an extremely turbulent period and Rubin’s four years of public service coincided with several major economic crises triggered by developments in Mexico, Russia, Latin America, and Asia.
In his recent commentary, the financier correctly recognizes that rhetoric about booming economies is delusional and that the transition back from a current state of cold shutdown will be painstakingly gradual and intermittent. Rubin applauds recent actions by Congress and the Federal Reserve to provide fiscal and monetary stimulus (though these infusions are better understood for the moment as a means enabling survival) and calls out the irresponsible failure to adequately address the dire circumstances of small businesses. However, nowhere does he even mention the catastrophic threat of climate change.
With nominal adjustments to account for partisan affiliation and national cultures, Rubin is a doppelganger of virtually any past or present finance minister from an affluent country. While mulling over this calamitous blunder, I could hardly contain myself from screaming out the popular catchphrase, “OK, Boomer”—despite the fact that the age of the former Treasury Secretary makes him a member of the preceding so-called Silent Generation.
How can it be that someone of Rubin’s intelligence and accomplishment has not absorbed one of the most important lessons of the coronavirus outbreak? We clearly face problems that are much larger and require more than providing “intermediate and longer-term stimulus” that “increase[s] productivity” (even if does entail coupling these objectives with “address[ing] glaring deficiencies in our social safety net laid bare by the crisis”). The pre-COVID-19 economic system is shattered beyond repair. Truth be told, and apparent to anyone who bothered to take even a moderately close look, it has been profoundly broken for several decades. The current contagion has simply provided a stress test that has revealed the full extent of its perverse social inequity and environmental perniciousness.
In addition, it is utterly inconceivable to me—and presumably to many others who do not wear the same blinkers as Rubin and his fellow financiers—how a plan to bring “the economy back to life” could be conceived without any contemplation of the need to greatly reduce human demands on the biosphere, especially with respect to greenhouse gas emissions.
The standard rejoinder is that ameliorating social problems and caring for the environment are luxuries we cannot afford right now. We must be single-minded in our resolve TO GET THINGS BACK TO NORMAL! Another response is, well, Rubin is a finance guy so cannot be expected to know anything about the stressed out condition of the Earth. And that is, quite frankly, the crux of the problem. Unless we bring the world of international finance into common conversation with energy, health, and environmental policymaking we are destined to regularly—and tragically—revisit the situation in which we presently find ourselves.
Yes, we urgently need a vaccine for COVID-19. However, we also need to consider more systemic reforms that go beyond immediate fixes. For instance, going forward every student who takes a university course in economics or finance should be required to complete a complementary semester-long class in sustainability science. And vice versa, because aspiring sustainability scientists need desperately to understand the workings of hedge funds, public finance, bond rates, and so forth as these are the institutions and tools that turn the world. Or better yet, academic administrators should compel instructors of macroeconomics and international finance to team up with colleagues in the environmental and sustainability studies department.
This gesture—and we really need to acknowledge that it really is little more than a modest indication of intent—will need to be part of a process of deeply penetrating cultural change. More ambitiously, perhaps we need to think seriously about merging our finance ministries with their energy, health and environmental counterparts. The truth of the matter is that economics and finance are not separate and apart from sustainability science.
Indeed the origin of the term “economics” traces back to the classical Greek notion of oikonomia meaning “stewardship” or “household management.” And the medieval French conception of finance refers to the “settling of a debt” and we know today that our overspending is not only of the familiar monetary kind but also includes accumulated ecological arrears that need to be repaid. In other words, it is pointless to talk about climate change, biodiversity, air pollution, and so forth without an understanding of the ways in which finance and sustainability science intersect and how prevailing macroeconomic policies far too frequently undermine planetary well-being.
These endeavors, at their core, speak to a common need to reconcile our lifestyles and investment strategies with the requirements of responsible conduct and to exist within our means rather than continuing to borrow against the future, both financially and ecologically.