- June 14, 2020
- Posted by: Vishnu Krishna
- Category: Global growth
It is almost cliched to say that the world could be staring at the worst economic depression since the 1930s. Sure enough, the downturn has already started to begun. International Monetary Fund (IMF) is predicting advanced economies (that includes USA, Germany, France, Italy, Spain, Japan, UK & Canada) to contract by almost 6% in 2020. BRICS nations aren’t faring any better with the downfall being the range of -5% to 1%.
With casualties still mounting around the world, the pandemic is far from over. Left unchecked, there is a real risk that inequalities and social deprivation will increase. Daily wage workers, self-employed professionals and small business owners are the worst affected.
We have a chance, however, to build a better world – and we must take it. Consumer behaviours are already changing. In March, global consumer spending decreased every week. In the last two weeks of April and early May, however, consumer spending recovered a little each week in anticipation of a move into a ‘normalisation’ phase – where economies reduce lockdown measures and show signs of economic recovery. At first, the expenditure was on basics, such as groceries, but now spending is more focused on home improvements and clothing. There is not yet any significant expenditure on entertainment.
Working remotely comes with its own problems – it increases the risk of isolation, as well as alcohol, tobacco & domestic abuse, and physical problems through poor ergonomic posture and no strenuous activity.
Left unaddressed, these crises, together with COVID-19, will deepen and leave the world even less sustainable, less equal, and more fragile. Incremental measures and ad hoc fixes will not suffice to prevent this scenario. We must build entirely new foundations for our economic and social systems.
However, we can emerge from this crisis a better world, if we act quickly and jointly, writes Professor Klaus Schwab, Founder of World Economic Forum. To achieve a better outcome, the world must act jointly and swiftly to revamp all aspects of our societies and economies, from education to social contracts and working conditions. Every country, from the United States to China, must participate, and every industry, from oil and gas to technology, must be transformed.
The level of cooperation and ambition this implies is unprecedented but not impossible. In fact, one silver lining of the pandemic is that it has shown how quickly we can make radical changes to our lifestyles. Almost instantly, the crisis forced businesses and individuals to abandon practices long claimed to be essential, from frequent air travel to working in an office. Populations have immensely shown a willingness to make sacrifices for the sake of health-care and other essential workers and vulnerable classes such as the elderly.
Clearly, the will to build a better society does exist. We must use it to our advantage that is so badly needed. This will require stronger and more effective governance and it will demand private-sector engagement every step of the way.
Governments should implement long-overdue reforms that promote more equitable outcomes. Depending on the country, these may include changes to wealth taxes, the withdrawal of fossil-fuel subsidies, and new rules governing intellectual property, trade, and competition. At a time of diminishing tax bases and soaring public debt, governments have a powerful incentive to pursue such action.
The second agenda would be to ensure that investments advance shared goals, such as equality and sustainability. Here, the large-scale spending programs that many governments are implementing represent a major opportunity for progress. Rather than using these funds, as well as investments from private entities and pension funds, to fill cracks in the old system, we should use them to create a new one that is more resilient, equitable, and sustainable in the long run. This means, for example, building “green” urban infrastructure and creating incentives for industries to improve their track record on environmental, social, and governance (ESG) metrics.
The third and final priority would be to harness the innovations of the Fourth Industrial Revolution to support the public good, especially by addressing health and social challenges. During the COVID-19 crisis, companies, universities, and others have joined forces to develop diagnostics, therapeutics, and possible vaccines; establish testing centers; create mechanisms for tracing infections; and deliver telemedicine. Imagine what could be possible if similar concerted efforts were made in every sector.
The COVID-19 crisis is affecting every facet of people’s lives in every corner of the world. But this need not last foreover. On the contrary, the pandemic represents a rare but narrow window of opportunity to reflect, reimagine, and reset our world to create a healthier, more equitable, and more prosperous future.