Think at London Business School
Paolo Surico and Andrea Galeotti, professors of economics at London Business School, share their fiscal recommendations around the pandemic
By Andrea Galeotti, Paolo Surico
The social entrepreneur, economist and civil society leader Muhammad Yunus has been called “the world’s banker to the poor”. In 2006 he was awarded the Nobel Peace Prize in recognition of his pioneering work in microfinance and microcredit as founder of Bangladesh’s Grameen Bank.
Today, in a conversation filmed for the Wheeler Institute's COVID-19 series, Professor Yunus argues that – as the world considers its path out of the crisis, we must use the opportunity to create a better world rather than attempting to recreate the world as we have known it. A new mindset is called for.
“If we follow the old ideas, old thinking, old structures,” he says, “we will follow the same path of destruction that the planet was on before. So we should forget about all the old paths, all the old ideas, and instead get fresh ideas.”
Professor Yunus believes we must work towards what he calls “the three zeros” – zero wealth inequality, zero environmental degradation and zero unemployment – in a new financial and political order based on social consciousness.
“We must work towards the three zeros – zero wealth inequality, zero environmental degradation and zero unemployment”
Those businesses that caused the problems which confronted the world before the crisis should not be revived, he says. Government bailouts should not focus on supporting rich and established businesses; instead, they must focus on the extremely poor, as without help they will have no money to buy food and people will die of starvation, not of Covid-19.
At the same time, he warns that multilateralism and consensus are fragile – that human instinct is to protect the tribe rather than build a broader consensus. It is this tribalism among our national leaders has hindered our ability to take on a common enemy in the virus.
Before the pandemic struck, Professor Yunus notes, many people were already considering the 2020s as “the last decade” because of concerns about the planet’s survival. Covid-19 means we have an opportunity to change this direction of travel. He considers it a relief that financial institutions are not functioning during the pandemic, because they help fuel the concentration of wealth. Now, he claims, while we all face the threat of unemployment because of artificial intelligence, we can take this moment to look afresh at how we can tackle this issue.
Another bonus is the environmental improvement that have resulted from the drop in human activity. This shows how we can make progress towards a world with zero environmental degradation.
Again, Professor Yunus stresses that money allocated to the rebuilding of economies should not be used for regenerating the old, destructive power. Instead, we should support businesses that help the planet. To this end, he encourages us to imagine the world we want to create so we can prioritise the elements we want to promote – and choose which to eliminate.
In the future, he says, the self-interested aspect of businesses needs to be balanced with social consciousness, while a new financial system must become a vehicle for social consciousness so that it benefits society as a whole rather than being a mechanism to increase wealth inequality. Indeed, human creativity needs to be harnessed into a new form of productivity, with a redesigned financial system that is focused on supporting entrepreneurs who wish to set up a business for the first time.
Professor Yunus cites his frustration at not being able to grow Grameen bank globally because of restrictive legislation: policies that favour incumbents need to be redesigned to enable more venture capital funding for social businesses.
One example of the way business can be reimagined comes from healthcare, where the rise of “digi-health” during the epidemic is changing the way patients interact with doctors – firstly to reduce the number of people in a waiting room at any one time, and then through online delivery of prescriptions.
Similarly, initiatives such as coronavirus insurance – which targets poor families and covers the cost of any hospitalisation as a result of the virus as well as life insurance – have been provided as part of a social business so the subscriber pays nothing. In this way, the insurance and hospital systems can be redesigned so that they work towards a greater social good.
Adaptations to lifestyles also have to be considered, such as the creation of a world where nobody eats meat – thereby shifting eating habits in a way that reduces the damage caused by climate change. People also need to change their eating habits to reduce obesity and this can be driven by incentives related to microcredit, where families have to go through 16 checks in order to qualify. Businesses must introduce a social or environmental consciousness “screen” so that they do not harm somebody’s life to make a profit for themselves.
Professor Yunus points out that instead of focusing global resources to counteract the pandemic, national leaders have reduced their cooperative efforts, such as Donald Trump’s withdrawal of the US from the World Health Organisation. We all suffer as a result of decisions such as this, says Professor Yunus. With leaders taking us in the wrong direction, responsibility must be passed on to the individual to screen whether decisions are being made through the lens of social consciousness. Instead of attacking multilateralism, world leaders need to set aside tribal instincts and promote collaboration.