COVID-19 has plunged the world into the deepest crisis in industrial history in just a few months. What began as a local epidemic in Wuhan in December 2019 has developed into a global pandemic along the travel and trade networks so characteristic of 21st Century globalization. The inevitable lock-down has led to GDP losses in the G7 countries of between 20–30% for the first two quarters of 2020. 1The size and duration of the current economic decline will ultimately depend on the pandemic's duration, i.e., on the availability of a vaccine. Some economists already doubt whether a full recovery 2 is even possible. The fear of a "95% economy", i.e. a permanent worldwide reduction in economic activity, is making the rounds.
This terrifying scenario nurtures the urge of some politicians to open up their economy too quickly, which at first sight seems to create a trade-off between public health and public wealth, between saving lives and saving the economy. Paul Krugman, the 2008 Nobel Laureate in Economics, has sharply rejected the underlying misunderstanding: 3 Infected workers and entrepreneurs cannot save an economy any more than fearful consumers could. Without an end to the health crisis, there can be no end to the economic crisis. Simply closing our eyes to the pandemic's dangers is not the way out of the economic crisis. Only a coordinated strategy to combat the pandemic and recover the economy can — the priority is clearly on health policy. Still, economic policy innovations are important and, like every crisis, they offer the opportunity for change — for a transformation towards an inclusive and green economy. Cities can manage this crisis and even emerge as hubs of resilience and innovation — as they always have been throughout economic history — but inclusiveness and the degree of green will take conscious policy choices, particularly with respect to inequalities, local capacities and promoting new forms of solidarity.
Challenges for Cities
With an estimated 90% of all reported COVID-19 cases, urban areas are the epicenter of the COVID-19 pandemic. The size of urban populations and their high level of global and local interconnectivity make cities particularly vulnerable to the spread of the virus. On the other hand, there is no evidence which would suggest that density per se correlates to a higher virus transmission 4. The socio-spatial structure, access to health care, poverty and homelessness, determine the fatal spread of the virus.
Tackling inequalities and urban development
Far from being "the great leveler", the pandemic has sharply exposed and even deepened existing structural social and economic inequalities. Tell me where you live and I tell you what your risk of infection — and death — is. This is especially true for people without a permanent home. Homelessness is not only a particular vulnerability to the pandemic, but a home is also the first line of defense against the spread of the virus, while it is also a risk factor for those living in crowded homes. Lockdowns and social — or better physical distance — is difficult to maintain without a place to live or in cramped housing conditions. The same can be said for access to urban health care. Fighting homelessness and improving access to health care is a moral duty to the poor as well as public health policy in the pandemic. Cities basically have everything it takes to withstand a pandemic — but only with consistent plans and resources for community health.
Strengthening the capacities of local governance
COVID-19 has highlighted the crucial role of local authorities on the front line of crisis management, whether national health care policy is centralized or not. The measures taken by local authorities have been essential and, in many cases, cities were pioneering efforts in tackling pandemic risks. They have also played a crucial role in supporting local businesses and enterprises in the crisis. At the same time however, the COVID 19 pandemic has significantly reduced the revenues of local and sub-national governments and restricted their budgets by closing local tax-paying businesses. An incomplete or slow recovery of local government revenues will jeopardize important investment in urban infrastructure for years to come, lead to lasting cuts in public services and undermine wider efforts to achieve sustainable urban development. In Germany, the national government's fiscal stimulus package of EUR 130 billion 5 includes EUR 25 billion allocated in support of municipalities, including EUR 8 billion to compensate for declining local business tax revenue. This is a good first step on how to contribute to maintaining essential local capabilities, strengthen local resilience and prevent setbacks in climate protection, but more is needed. Can the same be said for the US?
Promoting new forms of solidarity
The power of images in countries with coronavirus hotspots has led to an astonishing breadth of changes in everyday behavior. Shopping and using public transport only with a mask on has become commonplace in Europe. Renouncing private parties, renouncing contacts up to the renouncement of vacation trips are also becoming normal. Slowly the realization is maturing that there is no fixed end point of the exceptional situation. This is creating a hitherto unknown form of urban coexistence that until 2020 has been characterized by diversity, choice and anonymity.
A different kind of attention is being paid to strangers, car numbers are registered, and foreigners are met with distance and suspicion. On the other hand, new forms of solidarity are developing at the local level. Local solidarity, e.g. local care and aid networks and creativity, e.g. offers of help through contact-free means of delivery in dealing with the crisis show the potential for community cohesion and resilience. Whether these are accepted and how long they will last is completely open, not least because the emergence of new solidarity often only reveals the precariousness of urban living and working conditions. In a crisis we can count on spontaneous creativity and solidarity, but only with enlightened leadership and the dismantling of bureaucratic hurdles can the conditions be built that make this sustained.
Green and inclusive recovery
Responding to the Corona crisis itself cannot contribute to climate protection. Even if the shutdowns in March and April 2020 led to global CO2 emissions reductions 6 of up to 30% and some heavily polluted cities such as New Delhi were finally able — after many decades — to report "blue skies", this cannot hide the fact that the pandemic and the measures taken to combat it will not reverse the trends in climate change. It will therefore be decisive whether we emerge from the crisis with grey or green reconstruction programs.
Stimulus packages around the globe could drive economic development towards low-carbon and climate-resilient development or lock us into long-term development paths that increase the climate risks and the vulnerability of people. Right now, chances are good in many places, but not everywhere. The move away from the demand stimulation that dominated in the past, e.g. during the financial crisis of 2008/2009, to investment stimulation in most national economic stimulus packages can already be seen as a success. Moreover, it is now undisputed among experts 7 that "green" infrastructure spending is significantly more employment-promoting in the long term than general "grey" infrastructure spending — measured in terms of the multiplier effect of state funding policies. In the face of rapidly declining prices of renewable energies, it would also be cheaper for the economy. But an inclusive, green recovery needs more than good economic arguments. It needs enlightened leadership, growing climate and pandemic risk awareness and support for new forms of solidarity.
- “Evaluating the Initial Impact of COVID-19 Containment Measures on Economic Activity.” OECD.org, Organisation for Economic Co-Operation and Development, 10 June 2020, www.oecd.org/coronavirus/policy-responses/evaluating-the-initial-impact-of-covid-19-containment-measures-on-economic-activity-b1f6b68b/ ” ↩
- “Nagarajan, Shalini. “The Economic Hit from COVID-19 Will Be Felt 'for a Long Time' Even If a Vaccine Is Ready in 2020, a Top Economist Warned | Markets Insider.” Business Insider, 22 July 2020, 11:21 AM, markets.businessinsider.com/news/stocks/economic-impact-coronavirus-long-lived-even-with-vaccine-raghuram-rajan-2020-7-1029418899 ” ↩
- “Krugman, Paul. “On the Economics of Not Dying.” The New York Times, 28 May 2020, www.nytimes.com/2020/05/28/opinion/coronavirus-economy-death.html ” ↩
- “Hamidi, Shima, et al. “Longitudinal Analyses of the Relationship between Development Density and the COVID-19 Morbidity and Mortality Rates: Early Evidence from 1,165 Metropolitan Counties in the United States.” Health & Place, Elsevier Ltd., July 2020, www.ncbi.nlm.nih.gov/pmc/articles/PMC7315990/ ” ↩
- “The Territorial Impact of COVID-19: Managing the Crisis across Levels of Government.” OECD.org, Organisation for Economic Co-Operation and Development, 16 June 2020, www.oecd.org/coronavirus/policy-responses/the-territorial-impact-of-covid-19-managing-the-crisis-across-levels-of-government-d3e314e1/ ” ↩
- “Forster, Piers M., et al. “Current and Future Global Climate Impacts Resulting from COVID-19.” Nature News, Nature Publishing Group, 7 Aug. 2020, www.nature.com/articles/s41558-020-0883-0 ” ↩
- “Hepburn, Cameron, et al. “Will COVID-19 Fiscal Recovery Packages Accelerate or Retard Progress on Climate Change?” Green Finance Platform, 5 May 2020, greenfinanceplatform.org/resource/will-covid-19-fiscal-recovery-packages-accelerate-or-retard-progress-climate-change ”
Reimund Schwarze is head of climate economics at the Helmholtz Centre for Environmental Research — UFZ in Leipzig and Professor of International Environmental Economics at the European University Viadrina in Frankfurt/Oder. Executive Board of the German Committee for Disaster Prevention (DKKV) and Scientific Advisory Group to UN-DRR