What makes a resilient economy? Why is it that some economies are more able to weather an economic shock than others? There is no shortage of work suggesting answers to this crucial question. Equally, there is a thriving literature criticising the suggestions put forward. In part this is because much of the work to date has focused on identifying the correlates to resilience (however that is measured) rather than on the structural determinants of this. More fundamentally, however, much of the contestation appears to be down to the simple fact that different writers are exploring different things.
In considering what constitutes a resilient economy there is a common adage which is worth remembering. This asks the seemingly simple question: resilience of what, to what, for whom? Other permutations of this explicitly include the permutation of time (resilience by when?). Whilst this is simple to say, it appears to be often forgotten when common lessons for resilient economies are sought or, more especially, advocated.
Taking the first of the elements of this adage, resilience of what? This can be a local economy, a town or city, a sector or even, at times, a particular firm or organisation. Other permutations include individual communities, neighbourhoods or individual households. At a larger scale, regional or national economies are frequently considered. Whilst there may be similarities as to what confers resilience on these various entities, the differences in scale, complexity and complexion will arguably create great diversity and makes drawing out meaningful comparisons more challenging. Being clear as to what should be resilient will make this process more credible. A corollary of this question of what is to be made resilient, is the measure against which resilience is considered. For some researchers it is levels of economic output (such as GDP), for others it is income and for others it is employment. Each measure has merit and none is necessarily superior, but it is the rare case that demonstrates resilience against all three measures as trade-offs are often involved.
Turning to the second what, it is readily apparent that there are many different types of shock that can have economic consequences. Some are sudden onset natural hazards, such as earthquakes, hurricanes, wildfires or floods. Others are natural events which might be more slow to take effect, such as droughts or, possibly, epidemics. Man-made events can also create shocks, these may be primarily economic in nature (such as recessions, factory closures, or events such as BREXIT), whilst others, such as pollution events or conflict, may have economic consequences. Some writers would also include technological shocks as a consideration, particularly where this can lead to the decline or obsolescence of other economic sectors. Again, the very diversity of the causes of shocks makes it difficult to justify developing simple comparisons that suggest common foundations to resilient societies (other than at the broadest characterisation). However, the process of identifying the particular threats which are of most concern can help policy makers to distil out key policy messages from the wealth of literature that is now becoming available.
Thirdly, there is the question of resilience for whom. This is a particularly crucial question as many critiques of resilience strategies are predicated on the fact that the costs of shocks are not equally borne by all parts of society. Some are affected more adversely, and some are more able to absorb the costs and to respond more positively to changing circumstances. Often this is based on the resources which actors have available at the outset of a shock or a crisis. Indeed ,there is evidence that societies where wealth is more equally distributed tend to experience more resilient outcomes. As the distributional impacts of shocks and the implications of this for resilience outcomes and on resilience outcomes are increasingly recognised so policy makers would do to well to explicitly consider who policies promoting resilience might favour and where any costs might potentially fall.
Finally, policy-makers may wish to question the time-scales over which resilience outcomes might be secured. There is a tendency to seek to find common outcomes over a given period of time, particularly in comparative research studies. Typically, this applies a common date to the start of a shock – which might be realistic for some shocks but certainly is not the case for all – and, more contentiously, to look for a common date against which the resilience of an economy can be assessed. The challenge here of course is that fixed dates do not bear much scrutiny in the real world. How does one compare an economy which exhibited a sharp fall in activity but recovered output levels within a year against one that exhibited a gentler fall in activity, but did not recover output levels for three years? These are political questions which require political answers. In practice, nearly all economies recover levels of economic output given enough time and most (but crucially not all) recover levels of employment. How long is an acceptable period of time is again a political question but also should be an empirical question for research.
To bring us back to the question of what makes a resilient economy, the search for answers is challenging partly because what makes a place resilient is specific to that place at that time and to that particular shock. That makes the quest to find common solutions and common determinants something of a fools errand unless we are specific about the comparisons that are being made. Rather than searching for a universal truth it is better, perhaps, to think of economic resilience as a collection of desirable characteristics that shape the ability of an economy to respond to shocks in the short and the long-term. By explicitly considering the complex questions implicit in the phrase resilience of what, to what, for whom and by when then policy-makers will have a valuable chart against which to consider the particular path that they wish to take. Similarly, researchers and pundits should also take care of the comparisons that they draw.
Dr. Adrian Healy is a UKRI Future Leaders Fellow. All views expressed are his own.