Sam McBride: Is an economy that begs us to spend on what we don’t need to save jobs sustainable?

Much has been written about ‘revenge shopping’ – the idea that once the lockdown is lifted there will be a surge of pent-up demand from consumers with an insatiable demand to return to, and perhaps exceed, the rampant consumerism of the pre-pandemic world.
Some people were desperate to get back to non-essential shops – but Sam McBride felt no such urgeSome people were desperate to get back to non-essential shops – but Sam McBride felt no such urge
Some people were desperate to get back to non-essential shops – but Sam McBride felt no such urge

There is evidence of this happening from China where in one store of the French brand Hermes a reported $2.7 million was spent on the day that it re-opened in April to the Philippines where the scale of the crowds flooding re-opened shops last month was such that restrictions had to be reimposed.

In Belfast there have been long lines of customers outside major retailers such as Ikea and Primark when they re-opened earlier this month.

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As the suppression of coronavirus moves much of the focus from the health crisis to an economic crisis growing by the day, such images suggest that a rapid recovery may be possible over coming months – essentially that the lockdown has been a temporary restriction on normal human behaviour which will swiftly return to its natural equilibrium.

But I wonder, not just because I feel no such urge myself, but because it is becoming increasingly clear that the world has changed in far more profound ways than many people envisaged three months ago.

When we entered lockdown, like many people I assumed that when the government lifted the restrictions on our freedoms that I would return to past habits – indeed that I would rush back with renewed zeal.
But that expectation did not foresee the psychological changes which occur during a period of enforced solitude as a household at a time of fear and death.

While there are many activities whose resumption I relish, it is the simpler ones – being able to see the children hug their grandparents, or playing football with my friends – which are more important than being allowed to shop for a new sofa or yet another tie.

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And if I, as someone phlegmatic about the personal risk of contracting the virus and in a lower risk category, feel apathy at a rush back to activities such as non-essential shopping, the drop in demand will surely be exacerbated by those who have a deep fear of Covid-19 as well as those who simply no longer have any spare cash to spend.

But if enough of us feel comfortable consuming far less, the temporary economic collapse during lockdown is likely to become a prolonged economic slump.

Last Wednesday, the front page headline in the Belfast Telegraph expressed that bluntly: “Spend your cash to save our jobs”.

The headline was based on the comments of Neil Gibson, the respected chief economist of business advisory firm EY Ireland.

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Highlighting that many people – especially in the public sector – had retained their full salaries and saved money during the shutdown, Mr Gibson said: “It will be our responsibility as citizens and as businesses to show confidence in the sectors of our economy that need it most.

“This will require a collective effort to go out for a meal, to buy a coffee from our local cafe and to go to the cinema when they open.”

In terms of economic theory, his logic is flawless – if we all reduce our spending, the unavoidable consequence will be dramatic job losses.

Those job losses are not even likely to hurt all sections of society equally.

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It already seems clear that the recession into which we have entered is disproportionately hitting women, the young and those who were already the poorest.

This week the Belfast-based think tank Pivotal published a report which set out a landscape of economic devastation which, because it has been masked and delayed by unprecedented government support during the lockdown, does not appear to have been grasped by many people.

The report said: “The scale of contraction in the Northern Ireland economy is estimated to be much faster and larger than previous recessions ...the nature of the Northern Ireland economy makes it vulnerable to not returning to ‘pre-Covid’ functioning for some time, if at all”.

The report also noted some of the benefits of lockdown and the opportunities which it now provides for Stormont and councils to reshape Northern Ireland by addressing embedded problems.

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It noted that less travel has meant less congestion and cleaner air, that some businesses have adapted to create new products and find new customers, and that society now has greater appreciation of those essential workers who until now have in many cases been at the bottom of the social and salary scales. 

And yet herein lies a conundrum. On the one hand, many of us want to retain some of what we have valued about the last few months – the slower pace, the increased focus on our families, the appreciation of the small things in life, and the realisation that contentment is often not simply found in material gain.

And yet on the other hand, we want to retain our salaries, and the paraphernalia which accompanied pre-pandemic prosperity.

What if those two aspirations are incompatible?

Mr Gibson made clear that he was not advocating reckless spending and his argument was centred on local cafés and restaurants who are facing a brutal prognosis if social distancing rules remain.

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However, a return to far wider consumerism will be necessary to avoid massive retail job losses, and then the associated impacts on other sectors such as the property market.

Others have gone far further. Last month the French labour minister called on people to “consume” while the local government in Wuhan, the epicentre of the pandemic, created $71 million of ‘consumption coupons’ to encourage its residents to spend.

One does not have to be a hardline socialist or an ascetic to wince at the idea that we now have some sort of civic duty to go out and spend money on items we don’t need which damage the earth and clog our homes because otherwise there will be mass joblessness.

As young people in particular become increasingly alarmed about the future of the planet, is an economy which depends on begging us to resume wanton consumerism, rather than focussing on what we need, ultimately sustainable?

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If not, can and should the economy be rebuilt in a more productive and sustainable way?

While the answers to these questions will be influenced by global forces far beyond Northern Ireland, our politicians have considerable power to help shape whether the new economy is simply an attempt to replicate as much as possible of what went before.

Already there are glimpses of new thinking in Stormont.

To the surprise of some observers, the DUP environment minister Edwin Poots is already pursuing some innovative environmental policies – from a vast tree-planting programme to an attempt at massively increasing not just how much we recycle, but how much of that material is recycled in Northern Ireland rather than leaving our shores with no guarantee that it is actually reused.

SDLP infrastructure minister Nichola Mallon has energetically pledged major focus on expanding cycle lanes and pedestrianisation.

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Those projects both have the potential for significant job-creation.
This week’s report by Pivotal calls for “inclusive growth that benefits everyone in Northern Ireland” and which “should focus on good quality jobs that offer fair pay, security and progression prospects, underpinned by improved skills that enable people to access these opportunities”.

If the immediate future is as economically grim as anticipated, the temptation will be for a desperate Stormont to simply encourage any jobs at all – regardless of their sustainability, environmental impact or how the workers are treated.

If we want to retain some of the gains of recent months, with slower, simpler lives, it almost inevitably follows that we will be poorer – at least for some time.

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