A year after the World Health Organization officially declared COVID-19 a pandemic, we are beginning to comprehend the magnitude of the devastation and suffering the virus has caused. 2.6 million people have died. There have been 120 million confirmed cases, and billions of people from every part of the world have made tremendous sacrifices to prevent the virus spreading further. Yet these are just the immediate consequences; many social, political, and economic ramifications are still to come. It is estimated that some 80 – 400 million people will be pushed back into extreme poverty. There are warnings of a global mental health crisis. As government borrowing has increased to combat the pandemic, public debt and deficit levels have soared – with the debt-to-GDP ratio expected to reach 140% in developed economies.
Although we long for a return to life as normal, the truth is we cannot afford to go back to the way things were before COVID-19. We must learn the lessons from the pandemic so that we are better equipped to tackle the multitude of challenges facing the world – from securing the recovery to navigating the rise in temperature, new technologies, and trade wars. Each of these seismic changes has the potential to destroy jobs and livelihoods, and multiply inequalities.
The pandemic has made clear that multilateral cooperation is at a crossroads. The institutions, values and norms that underpin global cooperation have come under fire as countries around the world retreat from globalisation. But the scale of the profound transformations happening around the world can only be met through a shared commitment and cooperation on health, climate, trade and jobs, poverty reduction, finance, and security. We know, for instance, that if developing countries do not have access to a vaccine, COVID-19 will endure, mutate, and spread back to areas thought to be free from the virus. Despite this, we are seeing countries turn to vaccine nationalism – which will ultimately prolong this crisis.
To combat the pandemic, the World Bank expects to deploy up to $160 billion in financing to support countries against health, economic, and social shocks, including over $50 billion of IDA resources on grant and highly concessional terms. The International Monetary Fund has offered $88 billion in financial assistance to countries in need and has focused on a range of measures including emergency financing, grants for debt relief, calls for bilateral debt relief, enhancing liquidity, and adjusting existing lending arrangements.
Yet economists are worried that the COVID-19 recovery may be ‘K-shaped’ – that is, characterised by a bifurcation between those that can recover quickly, such as large firms and public institutions with access to government and central bank stimulus packages, and those that cannot, such as small and medium-sized enterprises and blue-collar workers. Such an outcome can hardly be considered a recovery as it will have devastating consequences for livelihoods and further entrench social divisions.
The recovery will also need to balance short-term needs against long-term considerations. Lockdowns during the pandemic may have led to some direct, albeit temporary, environmental benefits, particularly around emissions and air quality, offering a vision of what a recovery could look like. If we are to build back better after the pandemic and avoid this ‘K-shaped’ recovery, there are several measures policymakers can take.
Legislators can start by providing stronger oversight and scrutiny on government progress towards the Paris Agreement and UN Sustainable Development Goals, which are the best constellations to guide us to build back better, while emphasising measures that protect public services, workers’ rights, and public health. As with previous crises, governments will use targeted and infrastructure spending as an economic stimulus – and countries whose policymakers can credibly show they intend to stand by their public-private partnerships will prosper after COVID-19. Governments should also consider cross-sectoral and cross-government approaches that take a longer-term and more holistic view. For instance, parliamentarians should prioritise and incentivise investment in green energy and infrastructure and enact legislation that contributes to the creation of green jobs.
COVID-19 will also accelerate the Fourth Industrial Revolution. While this will bring with it many new opportunities, it will imperil 15-30% of jobs in the next decade. In order to ensure economies remain dynamic, healthy and diverse, governments will need to spend around 1% to 4.5% of GDP to retrain individuals from occupations at high-risk of automation, and may need to support SMEs by helping them apply, innovate and scale such technologies. Simultaneously, the speed of this Fourth Industrial Revolution will require politicians to quickly improve their understanding of data governance so that data regulations enable information to be shared safely with considerations for transparency, accountability, privacy, justice, reliability and economic sustainability.
Perhaps most importantly, governments can strengthen multilateral cooperation. For the first time since the World War II, globalisation is in retreat. Economic integration, as measured by the ratio of world imports and exports to global GDP, has not recovered since the Great Recession of 2007-2009. As COVID-19 has shown, the most pressing problems facing the world cannot be tackled by countries in isolation. Yet our international institutions are no longer well equipped to deal with these challenges. The solution is not to retreat from multilateralism but to restructure and strengthen these institutions.