1 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Editors Brahima S. Coulibaly Kemal Derviş Homi Kharas Zia Qureshi
Managing Editor David Batcheck
Authors Alaka M. Basu Homi Kharas Kaushik Basu Ayhan Kose Amar Bhattacharya John W. McArthur Max Bouchet Anthony Pipa Brahima S. Coulibaly Eswar Prasad Alistair Dieppe Zia Qureshi Kemal Derviş Jose Maria U. Tapia David Dollar Emiliana Vegas Marcela Escobari Rebecca Winthrop Carol Graham Eduardo Levy Yeyati
Design Blossom.it Reimagining the global economy: Building back better in a post-COVID-19 world About the Global Economy and Development program
Founded in 2006, the Global Economy and Development program at Brookings aims to shape the policy debate on how to improve global economic cooperation and fight global poverty and sources of social stress. With a long-term vision of strong, sustainable, and balanced growth for a prosperous world, the program undertakes high-quality research, identifies target audiences and policy opportunities, and shares its findings to inform new policy solutions.
To learn more visit www.brookings.edu/global Follow on Twitter at www.twitter.com/BrookingsGlobal Acknowledgements
The Brookings Institution is a nonprofit organization devoted to independent research and policy solutions. Its mission is to conduct high-quality, independent research and, based on that research, to provide innovative, practical recommendations for policymakers and the public. The conclusions and recommendations of any Brookings publication are solely those of its author(s), and do not reflect the views of the Institution, its management, or its other scholars. Brookings recognizes that the value it provides is in its absolute commitment to quality, independence and impact. Activities supported by its donors reflect this commitment and the analysis and recommendations are not determined or influenced by any donation. A full list of contributors to the Brookings Institution can be found in the Annual Report at www.brookings.edu/about-us/annual-report/
4 Table ofcontents 10 12 11 4 8 6 9 2 3 7 1 5 How to transform schoolsystems? Global education: isgoodgovernance? How important The complexityofmanagingCOVID-19: Is ittimeto prioritize well-being? The humancostsofthepandemic: Is there acure? Tackling theinequalitypandemic: What policiesto mitigate theshock? Dislocation oflabormarkets: What policiesto rekindle? The globalproductivity slump: What are theimplicationsforinternationaltrade? The future ofglobalsupplychains: How to fititforpurpose? andfinancialsystem: The internationalmonetary What shouldtheprioritiesbe? Rebooting theclimateagenda: What policyoptionsto strengthen internationalcooperation? Multilateralism: How cancitiesdrive asustainablerecovery? Leadership atthelocallevel: How canthey beahandrail forrecovery? Sustainable Development Goals: Preface
96 86 78 70 60 52 46 38 32 24 16 8 6 5 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Preface
The COVID-19 global pandemic has produced handrail for recovery policy. Recent examples a human and economic crisis unlike any from governments and the private sector in recent memory. The global economy is show a momentum towards incorporating the experiencing its deepest recession since world’s economic, social, and environmental World War II, disrupting economic activity, targets into recovery. The pandemic has travel, supply chains, and more. Governments revealed the importance of good leadership at have responded with lockdown measures the local level. In Essay 2, the authors explore and stimulus plans, but the extent of these the role that global cities can have in driving actions has been unequal across countries. a sustainable recovery. Within countries, the most vulnerable Given the global nature of the pandemic, populations have been disproportionately there have been calls for greater international affected, both in regard to job loss and the cooperation. The author in Essay 3 spread of the virus. examines the state of multilateralism and The implications of the crisis going forward presents lessons of caution as its future is are vast. Notwithstanding the recent reimagined. Central to global cooperation announcement of vaccines, much is unknown is the shared recognition of the climate about how the pandemic will spread in the agenda. In Essay 4, the author explores how short term and beyond, as well as what will international action can pursue a recovery be its lasting effects. What is clear, however, that produces sustainable, inclusive, and is that the time is ripe for change and policy resilient growth. The pandemic has also reform. The hope is that decisionmakers exposed the weaknesses in the international can rise to the challenge in the medium financial systems and the need to improve term to tackle the COVID-19 virus and the financial safety net for emerging and related challenges that the pandemic has developing countries. In Essay 5, the authors exacerbated—be it the climate crisis, rising make the case for an international monetary inequality, job insecurity, or international and financial system that is fit for purpose to cooperation. help countries better withstand shocks like a global pandemic. In this collection of 12 essays, leading scholars affiliated with the Global Economy The pandemic’s impact on the global and Development program at Brookings economy and the future of trade has been present new ideas that are forward-looking, significant. International trade has slowed, policy-focused, and that will guide policies and existing trade challenges, including and shape debates in a post-COVID-19 world. automation, new data flows, and the rise of protectionism, could accelerate post-COVID. Some have questioned whether the pandemic In Essay 6, the author discusses these has put attaining the already ambitious 17 challenges, the future of global supply chains, Sustainable Development Goals (SDGs) out and the implications for international trade. of reach, and whether they should be scaled Another trend that the pandemic could further back and deprioritized. In Essay 1, authors accelerate is the fall in global productivity, argue that the SDGs remain as relevant as which has been slowing since the global ever and that the goals can in fact provide a
6 equipment to sendingstudentshome sufficient suppliesof personal protective From strictlockdowns to ensuring sustain societies. economic growth aloneisnotenoughto Ultimately, thepandemichas shownthat combat theeffects ofthe lockdowns. being measurement andstrategies to 10, theauthoroffers alookinto well- the poorduringpandemic.InEssay suggesting higheremotionalcostsfor and mentalhealth affecting thepooris another componentdisproportionately fostering inclusive economic growth. Yet policies to betterharnesstechnologyfor To tackleinequality, theauthordiscusses redistribution policiesinmanycountries. technology, globalization,andweakening as to whyinequalityisrising,including resiliency. Essay 9presents evidence broadening laborprotections to bolster work andpoliciesforformalizing 8, theauthorsexplore thefuture of affected. InEssaydisproportionally as low-wage,high-contactjobsare advanced anddeveloping countries markets differently across andwithin the pandemicisaffecting labor off populations.Onthejobsfront, have beenfelt harder by lesswell- economic costsofthepandemic Throughout theworld,health and andwell-targeted. be country-specific approaches to boostproductivity must Essay 7,theauthorsargue thatpolicy investment growth andproductivity. In Ebola showtheirnegative impacton recent pandemicssuchasSARSand financial crisis. Evidence from other , withevidence human well-being back betterfrom reimagine theglobaleconomyandbuild a wayforwardfor together, theidea create achallengingpolicyenvironment, pandemic anditseffectloomlarge While theuncertaintyaround better serveallchildren. for transforming education systemsto authors present anaspirational vision countries were ableto. InEssay 12,the education, whileninein10high-income countries wasableto provide remote pandemic, oneinfourlow-income could provide: At onepointduringthe governmentsseen through whatservice has accelerated educationinequalityas education systems economic activity. COVID-19 disrupted of infection and avoid prohibiting strategies thatbothreduce thespread crisis sofar, asthey designgovernance emerging markets have managedthe authors examinehowgovernments in to respond to thevirus.InEssay 11,the world have enacted varyingmeasures from school,governments around the Global Economy andDevelopment Vice President andDirector Brahima S.Coulibaly COVID-19. s intheseessaysoffer decisionmakers to e verywhere and
7 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 8 1 have made headlines. Less publicizedthat the fact is States fromand agreements institutions international internationalism. withdrawalThe potential by theUnited seems to have reinforcedrather nationalism than global cooperation to defeat a pandemic, COVID-19 Making matters worse,despitethe inherent need for 90 percentin recession) ofallcountries acute foodinsecurity. poverty moreestimated 140million peoplewilllive inextreme decline) (-5.4percentrecession GDP inmemory per capita development.global sustainable The deepest global COVID-19 hastriggered an onslaughtofbad news for The issue John W. McArthur Brookings Institution Senior Fellow, CenterforSustainableDevelopment, Homi Kharas Development, Brookings Institution Senior Fellow andDirector, CenterforSustainable handrail forrecovery? How canthey bea Development Goals: Sustainable -7 percent thisyear), during the first half of 2020), of half first the during collapses incross-border tourism(-65 percent decline registeredconsequences some ofthehuman just amid developing countries(asmuchas-45percent). during the first half of 2020), half first the during care disruptions, additional childrendue tomonths six dyingin health havestaggering: asmany as1.2million beensimilarly as ofSeptember, 3 1 and potentially 130 million people or morepeople or million 130 andpotentially into andthebroadest(morethe 1870s since than 5 6 810 million childrenmillion 810 of school out still and 400 million jobs lost. jobs and400million
10 4 Broader societal disruptions and foreign investmentinto 8 trade (aroundpercent-15 9 remittances(roughly 2 couldimplyan 7 These are These
11
9 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD while advanced economies will likely spend $11 trillion on their domestic responses to the crisis, the appeal to raise 0.3 percent of that amount, $35 billion, to make COVID-19 vaccines, diagnostics, and treatments available to all countries has struggled to raise a small fraction of the amount required. Against this troubling backdrop, some analysts have started to wonder whether the Sustainable Development Goals (SDGs), the world’s agreed economic, social, and environmental targets for 2030, remain relevant or not. The ideas
The case to scale back SDG ambitions garnered increased attention following a July 2020 article in Nature12 and a follow-up editorial.13 The gist is that COVID-19 has made the already-challenging path to SDG success so difficult that a major prioritization and more “attainable” level of ambition is required. The argument suggests that goals and targets should be screened according to three points: (1) is this a priority, post-COVID-19; (2) is it about development not growth; and (3) is its pathway resilient to global disruptions? Counterarguments have been made, including by us, underscoring the importance of the SDGs as a “North Star” to guide a path out of the crisis.14 Leaders of the Sustainable Development Solutions Network have stressed that goals remain technically and financially achievable, even if current policies are falling short, and that the goals can be used to motivate “truth to power” in pointing out where changes are needed.15 The extent of the crisis doesn’t change the underlying urgency of ending extreme poverty, halting climate change, protecting the oceans, or building inclusive societies. Quite the opposite, the world needs a common scorecard to ensure mottos like “great reset” or “build back better” have objective standards for assessing progress. The SDGs are the guiding framework that all 193 U.N. member states already agreed on in 2015, and that a wide and growing network of business, scientific, and local governments across the globe have already begun to align around. Moreover, investments towards the SDGs can serve as both a means and an end towards a post-COVID recovery. As U.N. Secretary- General António Guterres noted, “Had we been further advanced in meeting the Sustainable Development Goals and the Paris Agreement on Climate Change, we could better face this challenge.”16
10 Note: Resultsshowtheaverage response foreachSDG-focusedRoom. intheBrookings-RockefellerSource: Survey taken ofparticipants Foundation “17Rooms”dialogue. Attitudes towards COVID-19 impactontheSDGs Table 1.1 Room/SDG Q6 Q4 Q2 Q3 Q5 Q1 Average 10 11 12 13 14 15 16 17 1 2 3 4 5 6 7 8 9 (1 = Stay the course; nochange required, 9 = Radical change required) associated crises require to drive action onyour Room’s SDG? Post-2020, howmuchofachangeinapproach willCOVID-19 and (1 = No progress likely, 9 =SDGlikely to be achieved successfully) progress onyour Room’s overarching SDGpriorities? Over thecomingdecade,by 2030,what isthelikelihood ofglobal (1 = No progress likely, 9 =Hugeprogress likely) Room’s overarching SDGpriorities? Next year, in2021,whatisthelikelihood ofglobalprogress onyour (1 = Big drop inattention,9 = Big increase in attention) attention toward oraway from your Room’s substantive priorities? Do you perceive COVID-19 andrelated 2020crisesto have shifted (1 = Not ambitious at all, 9 = Extremely ambitious) your (Room’s) SDGtargets to be? Be 9 =Much more important) (1 = Much less important, as a global policy priority? or more important SDGs less important Do you consider COVID-19 and related 2020 crisesto have made the fore thisyear’s crisestook shape,howambitiousdidyou consider
7.6 8.2 7.9 6.9 7.9 8.5 8.3 8.1 7.8 7.6 8.2 8.2 7.8 7.4 8.3 8.5 7.6 8.2 Q1 6.7 6.2 7.0 7.1 6.7 6.7 6.2 6.0 6.8 6.1 6.3 6.3 6.6 6.2 7.6 7.3 6.2 6.7 Q2 5.7 6.8 8.3 6.2 6.5 6.4 6.4 6.8 7.5 8.8 8.5 8.5 5.6 5.3 3.9 5.6 7.0 6.3 Q3
5.7 4.8 6.5 4.3 5.7 6.0 6.0 5.3 6.9 3.8 6.0 6.0 4.9 5.9 5.5 5.8 6.3 6.5 Q4
6.2 6.1 7.1 6.1 6.5 6.8 6.7 6.6 7.6 5.0 6.5 6.5 7.0 5.9 6.9 5.6 6.5 7.3 Q5
7.8 7.5 7.0 7.0 6.9 6.6 6.4 5.3 6.2 7.3 7.2 7.2 6.4 7.6 8.0 6.8 7.5 6.3 Q6 11 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD As a starting principle, any SDG-oriented strategy needs to recognize the diverse ways in which COVID-19 has affected different constituencies’ outlooks. Table 1.1 summarizes the results of a poll of more than 150 influencers and opinion-leaders taken in the lead-up to the annual September summit of the 17 Rooms initiative convened by Brookings and The Rockefeller Foundation. Participants were organized by 17 different working group “Rooms,” each focused on a topic within one of the corresponding SDGs. So in Table 1.1, the first row provides the average answers given by Room 1 members, who were focused on extreme poverty. The bottom row shows how Room 17, focused on universities as hubs of societal partnership, answered the same questions, and so on. Looking across the table, one of the first things to note is the common view, under Question 1, that this year’s crises made the SDGs even more important. There is surely sampling bias in the context of the SDG- focused 17 Rooms initiative, but it is still striking the extent to which COVID-19 only seems to have heightened perceptions of relevance of the SDGs. Under Question 2, respondents by and large already felt their respective SDG targets were moderately ambitious prior to COVID-19. There were broad differences, however, under Question 3, on how the crisis had shifted attention. Members of Room 3 on health, Room 10 on inequality, and Room 11 on cities felt the crisis had generated a big increase in attention to their priorities, while several environment-focused groups—Room 12 on responsible consumption and production, Room 13 on climate change, Room 15 on life on land, and especially Room 14 on oceans—were less sanguine, as was Room 1 on extreme poverty. Importantly, under Question 4, increased attention did not necessarily imply increased optimism for progress next year. Some groups registered pessimistic outlooks, especially on inequality (Room 10), education (Room 4), and hunger and food systems (Room 1). Under Question 5, most Rooms were slightly more optimistic about progress by 2030, but no room was fully confident their SDG objectives were likely to be attained. Members of Room 9, focused on digital infrastructure, had the most positive outlook. Under Question 6, all Rooms seemed to agree that COVID-19 required new approaches in order to generate meaningful progress. Our key takeaway from this small sample is that the SDGs remain as relevant as ever. But there is no single answer to how all the different SDG priorities should best be approached in 2021 and beyond. Given the practical interconnections among the goals, with success in one often dependent on success in the other, whole-of-society approaches still need to tackle all of the goals together.
12 “ oceans, and biodiversity—on which all life depends. Advanced economies can be drivers in bettermanagement of the global commons—climate, the pandemic everywhere, the largest and fastest-growing economies tolead tothe addition resourcesensuretaking of In adequacy to fight and recovery,to they accelerate alsohave theopportunity global gains. mitigation COVID-19 to devoted being firepower financial more much and acrossAnd becauseadvancedcountries. all have economies so areThe SDGs auniversalframework, within applicable development. point toexamples These drivers newglobal sustainable of be intheoffing. environmentallyinclusive andsocially sustainable could companies the long-term, a major reallocation ofprivate capital towards more in returns financial stronger to linked is performance ESG better that morecontribute togrowingwith well-being. Coupled societal evidence theory, permitinvestorsto allocatecapitaltowardsthat companies their standards and frameworks.will, in Such alignmentonmetrics StandardsAccounting Board—alsoagreed to worktogether to align and theSustainable Council, Integratedthe International Reporting DisclosureInitiative,the Climate Standards Board, theGlobalReporting metrics. Economic World the and Forumand SDG-linkedcommon of a newset announced corporate firms accounting 4” “big the September, The private sector isshowinggreater SDG alignment too. In SDGs. the by words, her in inspired, Europe, for Plan vonUrsula derLeyenthe core hasmade sustainability oftheRecovery President Commission European the SDGs. to challenges financing to linkCOVID-19haveministers a majorU.N.effort beenco-chairing of therecoverylandscape. policy The Canadian andJamaicanprime Theretowards momentum some is the SDGsaspart implementing The way forward hi $. tilo i ana fnnig ih h SG ad the Paris and SDGs the Agreement. with financing annual in trillion $2.3 their sustainability. Public development bankshave also agreed to align change in Glasgow next year, has committed to a strong focuson climate meeting on of theCOP26 of theG-7andhost chair Kingdom, have objectivestandards forassessingprogress. mottos like“great reset” or“buildbackbetter” The worldneedsacommonscorecard toensure 19 A number of othergroups—the Anumber DisclosureCarbon Project, 18 17 The United The 13 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD also have disproportionate power to change the rules of the global economy in ways that promote equity and sustainability. For example, the OECD/G20 Inclusive Framework is showing signs of progress on fair taxation of multinationals—a proposal that, if accepted, would transfer far more money to developing countries than all foreign aid combined, even if not always to the countries that need the resources most.20 This and other tax fairness measures could substantially raise developing country revenues. COVID-19 has underscored the great challenge embedded in achieving the SDGs. But it has also demonstrated that the SDGs are not “nice to have” goals; they are “need to have” milestones for the resilient global economy that must be built. Great feats tend to be anchored in corresponding heights of ambition. As always, history provides lessons for the future. Eighty years ago, amid authoritarian onslaught and one of Britain’s darkest hours, Winston Churchill famously galvanized a nation’s courage—not with a squidgy call to “reconsider what is achievable”—but with a crisp pledge to “never surrender.” Today, in the face of crisis, is not a moment to reconsider the SDGs. This is a moment for absolute clarity in continuing to fight for what the world needs.
In addition to taking the lead to ensure adequacy of resources to fight the pandemic everywhere, the largest and fastest-growing economies can be drivers in better management of the global commons—climate, oceans, and biodiversity— “on which all life depends.
14 20. 19. 18. 17. 16. 15. 14. 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Endnotes
“What isBEPS?”OECD, https://www.oecd.org/tax/beps/about/ reporting-metrics-with-world-economic-forum Today, September23,2020, Michael Cohn,“BigFour metricswith firms release ESG World reporting Economic Forum,” Accounting en/actualites https://www.afd.fr/en/actualites/joint-declaration-all-public-development-banks-world?origin=/ “Joint Declaration ofAllPublicDevelopment BanksintheWorld,” AFD, November 12,2020, en/SPEECH_20_963 Era ofCOVID-19 andBeyond,” May 28,2020, “Speech by President von derLeyen attheUNHigh-Level Event onFinancingforDevelopment inthe unsdg.un.org/sites/default/files/2020-03/SG-Report-Socio-Economic-Impact-of-Covid19.pdf “Responding to thesocio-economicimpactsofCOVID-19,” UnitedNations,March 2020, Nature, August 17,2020, Jeffrey Sachs, Guido Schmidt-Traub “Speaking truth to power about the SDGs,” & Guillaume Lafortune, lowered ambition,” HomiKharas,Amar Bhattacharya, JohnW. McArthur, “SDGs:great feats are rarely aproduct of https://www.nature.com/articles/d41586-020-02002-3 “Time to revise theSustainableDevelopment Goals,” Nature, July6,2020, Robin NaidooandBrendan Fisher, “ResetSustainableDevelopment Goalsforapandemicworld,” 2020. UNCTAD, 2020:InternationalProduction “World Beyond Investment Report thePandemic,” June16, Development_Brief%2033.pdf 33, October 2020, World Bank,“PhaseII:COVID-19 Crisisthrough aMigration Lens,” Migration andDevelopment Brief en;jsessionid=LZQoZLf3TDd0s2sazaLhc8hV.ip-10-240-5-188 https://www.oecd-ilibrary.org/economics/oecd-economic-outlook/volume-2020/issue-1_34ffc900- OECD, “Coronavirus: Livingwithuncertainty.” https://www.e-unwto.org/doi/epdf/10.18111/wtobarometereng.2020.18.1.5 UNWTO, “World Tourism Barometer,” August/September 2020, briefingnote/wcms_749399.pdf June 2020, ILO, “ILO Monitor: COVID-19 andtheworldofwork,Fifthedition:Updatedestimatesanalysis,” https://en.unesco.org/covid19/educationresponse “Education: From disruptionto recovery,” Lancet: GlobalHealth inlow-incomeandmiddle-incomecountries:amodellingstudy.”maternal andchildmortality etal.,“EarlyestimatesoftheindirectTimothy Roberton effects oftheCOVID-19 pandemicon lives-and-livelihoods 17, 2020, WFP, showshungerisdueto soarascoronavirus “Newreport obliterates lives andlivelihoods,” July global-extreme-poverty/ 21, 2020, Homi Kharas, “TheimpactofCOVID-19 onglobalextreme poverty,” economic-prospects World Bank,“GlobalEconomic Prospects, June2020,” org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020 IMF, “World Economic Outlook,October 2020:ALongandDifficultAscent,” https://unctad.org/news/global-foreign-direct-investment-projected-plunge-40-2020 https://www.wfp.org/news/new-report-shows-hunger-due-soar-coronavirus-obliterates- www.brookings.edu/blog/future-development/2020/10/21/the-impact-of-covid-19-on- https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/
https://www.knomad.org/sites/default/files/2020-11/Migration%20%26%20 Nature, August 17,2020, https://www.nature.com/articles/d41586-020-01999-x 8(7):E901-E908. https://www.nature.com/articles/d41586-020-02373-7 https://www.accountingtoday.com/news/big-four-firmsrelease-esg- UNESCO https://www.nature.com/articles/d41586-020-02375-5 https://ec.europa.eu/commission/presscorner/detail/ OECD InterimEconomic Assessment , September2020, Nature, July14,2020, www.worldbank.org/en/publication/global-
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The 15 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 16 2 struggled to coordinate collective action. of knowledge asthetraditional multilateral system and exchange collaborative support, leadership,mutual cooperation and networks ofcitiesprovided a source of voidby left governments. national Globally, city-to-city intostepping often ensure aleadership health services, safety protocols, medicalrequirements,supply and of months theythe crisis, took decisive measures todevelop first the In security. economic and health COVID-19 response,protecting and restoring public Mayorsthe frontleadersform and local of lines comes to controlling transmission. the uniquenessofcitiesare vulnerabilities when it define that traits the of networks—many creative and theinterminglingofdiversetransportation, business of density, cultural andsocial gatherings,public iis wt a etmtd 0 ecn o confirmed of percent inurbanareas. 90 cases worldwidereported estimated an with cities, of The COVID-19at the pandemichas heart struck The issue Development, Brookings Institution Senior Policy Analyst,CenterforSustainable Max Bouchet Brookings Institution Senior Fellow, CenterforSustainableDevelopment, Anthony F. Pipa recovery? drive asustainable level: Howcancities Leadership atthelocal study estimated thatmorestudy slum thanhalfofMumbai experienced rapidsettlements transmission; one growing citieswith aprevalenceand informal of slums exposed deep inequalities. Some underlying The crisis
2 1 High rates 17 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD dwellers contracted COVID-19.3 In high-income countries such as the U.S., frontline workers working in sectors essential to the health and continuity of the society earn lower wages4 and are more likely to be people of color, while data shows that Black people are dying at twice the rate of white people and represent more than four times more hospitalizations.5 They are also disproportionally impacted by the economic consequences of the crisis.6 The ideas
PROTECTING PUBLIC HEALTH NOW—AND ADVANCING A GREEN AND JUST RECOVERY As the pandemic persists, city leaders are dual-tracking. They must continue to prioritize immediate measures to ensure public health and safety—from social distancing policies, to mechanisms for opening schools and other public institutions, to readying communication and pipelines for the dissemination of a forthcoming vaccine. Cities are innovating to “stop the bleeding,” finding ways to provide immediate support to the most vulnerable such as Bogota’s cash transfer initiative7 and Milan’s Mutual Aid Fund,8 partnerships that match city funds with private and other public sources. At the same time, mayors sense an urgent need to address the existential crisis by committing to transformational recovery. They envision a rebuilt economy and society that will result in more inclusive, equitable, and sustainable cities. That starts with a focus on equity and reaching the most vulnerable first; at the same time, they see an imperative to accelerate action on climate change, and recognize a need to invest in infrastructure that support a green COVID-19 recovery. During the pandemic, Boston Mayor Marty Walsh pledged to make the city carbon-neutral by 2050.9 Cities such as Paris, Berlin, and Buenos Aires have accelerated the development of biking and pedestrian infrastructure in their city. This demand by local leaders is reflected in multiple agendas and pledges created through global city-led networks since the start of the pandemic. Common themes of equity and sustainability run throughout the “Decalogue for the COVID-19 Aftermath”10 of the United Cities and Local Governments (UCLG); the “C40 Mayors Agenda for a Green and Just Recovery”11 of C40 Cities; the “Cities for a Resilient Recovery”12 coalition; and the Communiqué put forward by the Urban 20 (U20),13 with financing issues taken up by its “Special Working Group on Covid-19 and Future External Shocks.” This collective political commitment by mayors may be starting to influence the global agenda. In his remarks on the release of a U.N. report on the urban characteristics of COVID-19, Secretary-General 18 “ donors priorto theCOVID-19 pandemic. Freetownin received percent70 about budget fromof its foreign MayorAki-Sawyerr’s move to taxes, overhaulcouncil thecity property informal sectorinformal (80percenteconomy inAfrica). oftheurban face additional constraintssouth to thesizeincluding action, of the personal safety. Mayorsacross the globeare even experiencingthreats to their several ledby cities Democratic mayorsas “anarchist jurisdictions.” labeled governmentsand leaders.Department IntheU.S., Justice and many are pressurefacing intensepolitical from theirnational are rarely involved in the design of fiscal stimulus and relief packages, Theyinto quicklyrun regarding barriers authorities. jurisdictional They toof progress actasthenexus towards a green recovery.and just Yet mayorsleaders faceconstraintsand city ability that hindertheir to asuccessfulandtransformational recovery. haveand citynetworks worked hard tothemselves position ascentral significantly lower tax revenues and fees related to utilities and over billion of $360 2020-2022. budget shortfall toutilities fees related and In the amid the U.S. alone,citiesface crisis. permitting a potential revenues tax lower significantly havecities suffered massiverevenue,in losses receivingmany with Faced with strong resourceeven limits before thepandemicbegan, resultsthat morein resilient,inclusive, cities. and sustainable AntónioGuterres of rebuilding recognized inaway the importance FACINGCHALLENGES TOVISION THEIR reopen theeconomy andcitylife. enable themtotacklestructural challengesasthey models ofgovernanceandcitizenengagement that Mayors andlocalgovernmentsare pursuingnew 15 18 16 Cities in the global Cities 14 17 Mayors Before 19 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD EXPANDING GOVERNANCE TO MAINTAIN POLITICAL MOMENTUM To maximize their influence and leadership nationally and globally, while maintaining political momentum at the local level, mayors and local leaders are innovating with governance and flexing their collective economic assets. This begins by leveraging the trust and legitimacy conferred by their constituents, which is often higher than state and national authorities. Polls consistently show that local government is more trusted than the federal or national government, with the largest gaps occurring in the U.S. (20 points), Japan (15 points), and France (11 points).19 To make the most of this confidence, mayors and local governments are pursuing new models of governance and citizen engagement that enable them to tackle structural challenges as they reopen the economy and city life. They are rethinking decisionmaking and policymaking models. Recognizing that their equity and sustainability objectives will require sustained political will, they are developing ways to create and manage alliances across the city ecosystem, to enable buy-in and investments from the private sector and promote meaningful engagement from residents and neighborhoods. For example, the One-City governance model of Bristol is bringing together a wide range of local leaders on thematic boards that are shaping the city’s recovery policy. Cities are also experimenting with tools to involve citizens and the general public in decisionmaking. Mannheim undertook surveys and focus groups to develop its city strategy and priorities; New York City has “Sector Advisory Councils” comprised of representatives of civil society and the public and private sectors, to provide guidance on the city’s reopening and response to the COVID-19 crisis. INFLUENCING INTERNATIONAL POLICYMAKING AND DECISIONS A growing movement of cities worldwide are localizing the Sustainable Development Goals (SDGs) framework to improve their policymaking and, in the post-COVID recovery, mainstream the principles of equity and sustainability into decisionmaking. Increasingly cities across the world are voluntarily reporting their local progress on the SDGs through Voluntary Local Reviews (VLRs). This movement takes its inspiration from Voluntary National Reviews (VNRs), which countries use to report on progress at the U.N. as part of the official follow-up on the SDGs. As cities promote a green and just recovery, the SDGs are increasingly gaining attention from municipalities as a useful common language to connect diverse efforts around common goals and indicators. Cities are completing VLRS to provide accountability and transparency to 20 “ and achieve accelerated progress onsustainabledevelopment. the COVID-19on decisions policy recovery towardspriorities— their these may give citiesandtheirleaders the bestchanceto bendglobal affecting globaldecisionsremains limited. Collectiveas such actions collectivevoice, political tothe extent but whichthey arein successful No longer is it unusual for cities to band together and advocate with a private and markets.theyto public seek as influence game the in skin as private aswell sources.signal thatmayors are to willing These efforts own their put of government levels other from financing upon to ofcities The success achieve agreenrecovery andjust depend will government before flowing to localgovernments). as theWorldsuch Bank Group havemust theapprovalthe national of banks development multilateral through financing (financing international municipalities direct to enable to cities, for cities, by created toplans Resilience Fund.”a “GlobalUrban launch tois It beafund The U20, a network of cities that seek to influence the G-20, announced in climate solutions thatpromote decent jobs. investments financial their increase and companies fuel havecities recentlyto committed divestcity’stheir fromassets fossil flex their own combined resources and assets. The mayors of 12 major To buildcredibility fortheiragenda, cities are totaking steps collectively under theircontrol. for transformational recovery—yet themeansto payentirely foritisnot credibility for these mayors and local government officials to advocate stakeholders and sectoral leaders provide a measure of political they aretheytrust havefrom eliciting multiple and thesupport built independence from provincial and national governments. The public global cities enjoyeconomically powerful limitedeconomic arrangements. financial new Seeking The way forward discourse ofglobalrecovery. the locallevel cangive mayorsa footholdinthepolicymaking and cities Guterres astheframework“building backbetter,” for theiradoptionat Giventhe public. thepromotionof theSDGsby Secretary-General resources andassets. taking stepstocollectively flextheirowncombined To build credibility fortheiragenda,citiesare 20 Evenlargest the and most 21 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Endnotes
1. António Guterres, “COVID-19 in an Urban World,” United Nations, July 2020, https://www.un.org/sites/ un2.un.org/files/sg_policy_brief_covid_urban_world_july_2020.pdf
2. Anthony F. Pipa and Max Bouchet, “How to make the most of city diplomacy in the COVID-19 era,” Brookings Institution, August 6, 2020, www.brookings.edu/blog/up-front/2020/08/06/how-to-make- the-most-of-city-diplomacy-in-the-covid-19-era/
3. Benjamin Parkin, “Over half of Mumbai slum dwellers have had Covid-19, study claims,” Financial Times, July 29, 2020, https://www.ft.com/content/5cfb2253-40ec-4ef3-9c1a-94b8a7bf2307
4. Adie Tomer and Joseph W. Kane, “To protect frontline workers during and after COVID-19, we must define who they are,” Brookings Institution, June 10, 2020, https://www.brookings.edu/research/to- protect-frontline-workers-during-and-after-covid-19-we-must-define-who-they-are/
5. “COVID-19 Hospitalization and Death by Race/Ethnicity,” Centers for Disease Control and Prevention, August 18, 2020, www.cdc.gov/coronavirus/2019-ncov/covid-data/investigations-discovery/ hospitalization-death-by-race-ethnicity.html
6. Bradley L. Hardy and Trevon D. Logan, “Racial Economic Inequality Amid the COVID-19 Crisis,” The Hamilton Project, August 2020, https://www.brookings.edu/wp-content/uploads/2020/08/EA_ HardyLogan_LO_8.12.pdf
7. “Summary of Measures to Mitigate the Effects of COVID-19,”Office of the Mayor of Bogotá, May 8, 2020, www.citiesforglobalhealth.org/sites/default/files/documents/2020-05/ENG Summary of Measures to Mitigate the Effects of COVID-19- May 8th %281%29_0.pdf
8. “Milan – A new Fund for Mutual Aid,” Eurocities, March 23, 2020, https://covidnews.eurocities. eu/2020/03/23/milan-a-new-fund-for-mutual-aid/
9. “Reducing Emissions,” City of Boston, Updated September 25, 2020, https://www.boston.gov/ environment-and-energy/reducing-emissions
10. “UCLG DECALOGUE for the COVID-19 aftermath,” United Cities and Local Governments, https://www.uclg.org/en/node/31076
11. “C40 Mayors Agenda for a Green and Just Recovery,” C40 Cities, www.c40.org/other/agenda-for-a- green-and-just-recovery
12. “Cities for a Resilient Recovery,” Resilient Cities Network, https://resilientcitiesnetwork.org/ programs/cities-for-a-resilient-recovery/
13. “Communiqué from the Urban 20 (U20),” U20, Octobver 2, 2020, www.urban20riyadh.org/sites/ default/files/2020-10/U20 2020 Communique.pdf
14. “Secretary-General Launches COVID-19 Policy Brief on Cities to Help Urban Areas Build Back Better, Address Inequalities,” United Nations, July 28, 2020, www.un.org/press/en/2020/sgsm20189.doc.htm
15. Emma Beswick, “French local mayors facing wave of violence, says association,” euronews, August 31, 2020, www.euronews.com/2020/08/31/french-local-mayors-facing-wave-of-violence-says- association
16. “What COVID-19 means for cities finances,” National League of Cities, June 2020,https://covid19.nlc. org/wp-content/uploads/2020/06/What-Covid-19-Means-For-City-Finances_Report-Final.pdf
22 20. 19. 18. 17.
www.c40.org/press_releases/cities-commit-divest-invest Recovery from COVID-19 Crisis,” C40Cities,September22,2020, “Mayors of12MajorCitiesCommitto Divest From Fossil Fuel Companies,Invest inGreen andJust press-release institution,” Edelman, May 5,2020, “Government trustsurges to anall-timehighamidCOVID-19 pandemicmakingitthemosttrusted rotten-property-tax www.economist.com/middle-east-and-africa/2020/06/18/a-mayor-is-reforming-sierra-leones- “A mayor isreforming Sierra Leone’s tax,” rotten property The Economist, June18,2020, theconversation.com/can-covid-19-inspire-a-new-way-of-planning-african-cities-145933 inspire anewway ofplanningAfricancities?” The Conversation, September20,2020, Patrick Brandful CobbinahEllisAdjeiAdams,andMichaelOdeiErdiaw-Kwasie, “CanCOVID-19 https://www.edelman.com/news/trust-2020-spring-update-
https://
23 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 24 3 include references values,as the such to certain Many appealsto cooperation international inaddition global contexts. cooperationof utilitarian principles also applyto sub- essay’sWhile this topic isglobal multilateralism, the The of“Whycooperate?”question strengthened multilateral cooperation? rivalry,toit possible is imagine a post-COVID future of weakened multilateralism andgrowing great power tocalls. Butgiven internationalist therecent record of predictionsan evenof credencepandemic—lend worse the effectsepidemiologists’ of climatechange or and thethreatcatastrophic ofother as risks—such cooperation. The sheerscaleofthecurrentcatastrophe arefollowed by usually to calls strengthen international toll. Suchreferences to the global nature of the crisis been affected in termsofthe medical and economic together”. Trueand peopleshave enough,allcountries respectshow “thevirus borders”no areand “we this allin the eraIn COVID-19, of we’ve allheardabout statements The issue Brookings Institution Senior Fellow, GlobalEconomy andDevelopment, Kemal Derviş cooperation? strengthen international policy optionsto Multilateralism: What cooperative solutions to specific coordination problems. “utilitarian” or “realist” rationale focuses on the benefits of the provisiongoods. ofglobalpublic The pragmatic havesome countries and 2) thegainsfromon others, the positive)maximizing spillover effectsof theactions international of cooperation:the 1) the negativegains ofminimizing (or benefits concrete two to pointing by 2 isoftenanswered 1 3
25 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD intrinsic equal value of human life: Ethical considerations are added to self-interest as a rationale for cooperation. A recent example is the COVID-19 Vaccine Global Access (COVAX) proposal, which argues both: That every country can benefit from an equitable global vaccine deployment to help protect from “imported” outbreaks, and that there is a “moral imperative of ensuring that people are not cut off from lifesaving drugs.”4 How best to imagine a global system of cooperation for the future that is grounded both in a purely utilitarian dimension (managing spillovers and providing global public goods) and in an idealistic dimension that builds on shared values and ethical goals?5
While there may be a great diversity in the specific constitutional arrangements characterizing a democracy, liberal democratic values reflect universal human aspirations and are relevant to “a discussion of international cooperation. The ideas
Utilitarian cooperation can and has been achieved among countries with differing histories, political regimes, and cultures. The pandemic has exposed weaknesses of cooperation in the health domain, but many other domains are facing serious problems because developments in geopolitics and technology have changed the way cooperation can work. The response demanded by the pandemic and ensuing economic contraction has enhanced the role of the nation-state. Coupled with the resulting desire for protection from dependence on others (especially in global supply chains), this is likely to lead to some deglobalization; some see this retreat as potentially strong and lasting.6 But such a retreat from a relatively laissez-faire globalization could actually increase the benefits from cooperation. Compared to a world of limited state intervention, a world of more active industrial policies, however much these may be justified from the perspective of a particular country, increases the likelihood of retaliatory cycles if there are significant spillover effects, with everyone ending up worse off in the process. Before the pandemic hit, most countries already practiced some form of industrial policy. The post-pandemic situation is likely to be one of a more activist state everywhere. This tendency is reinforced by new technologies characterized by inherently anti- 26 data management and artificial intelligence. artificial and management data the incentivestostates for cyberspace, as such domains in intervene technologies lendthemselves to “weaponization”, increasing further where controllingconfersthe “hubs” power.much Moreover,these competitiveof scaleandhub-and-spoke economies typenetworks, international agreements easierto achieve andmore stable. todimension the utilitarian can complement and globalcivics make intelligence. artificial and biotechnology cyberwarfare, of domain the in rules add to tointentions, remain which wewillhave ofthesameorder ofimportance, and usage,includingdueto themiscalculationofanopponent’s that holds a community together.”that holdsacommunity to national communities, “athe cement of sensepart is civics of analyses, compromises would be very difficult to arrive at.cost-benefit With analogy material pure by only governed be to were behavior all If considerations. toethical thanks consented “sacrifice” some without utilitarian ruleseasier to achieve. An agreement isoftenharder make to reach helps also justification, ethical intrinsic own its having besides the signatories agreed on.A values-driven legitimationofcooperation, that imperatives ethical reflect hunger, ending on 2 SDG and poverty common Paris Agreement on climate change,alsocontainstrong appealsto Goals (nowSustainableDevelopment Goals,orSDGs)andinthe as wellmore recently intheadoptionofMillenniumDevelopment desirable world order that one finds in the Charter of the United Nations, self-interestWhile drivesof multilateral much cooperation, a of the vision democracies to authoritarianregimes ofvarious persuasions. differentcountries withvery typesofgovernments, ranging from liberal states. Cooperation between been possible domains has many in nation- of self-interest well-understood the by justified be can provision negative spillovers andreduce thedanger of “technologicalwars.” creationan argumentbut ofgoodjobs, favor in toof rules minimize policies toagainst industrial accelerate innovation orchannelitto the important globalpublicgoods. important bio-terror) andlimitingclimatechange are usuallymentionedastwo sharing. Pandemic prevention (includingprevention ofbio-error or will typicallyrequire substantialresources andagreement onburden the provision ofaglobalpublicgoodsuchasclimatechangemitigation (although theirimplementationandmonitoring willrequire some)while that agreement onrulesperse doesnotrequire anymaterialresources for utilitarianmultilateral cooperation. Onedifference thatremains is themselves beunderstood aspublicgoods,merging thetworationales The rulesto reduce negative (orincrease positive) spillover effects can values 10 All theseglobalpublicgoodshave incommonthattheir . 11 The 17SDGs,forexample,suchasSDG1onending 9 Rulesto prevent nuclearproliferation 12 Anethosofglobalcommunity 7 an argumentThis isnot 8
27 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD The way forward
Can a values-based cooperation complement the already challenging global public goods provision in the future? Is a post-COVID strengthening of global civics too much to expect? Ongoing support for the SDGs (and the associated targets and indicators), as well as climate activism, allows some hope. While enlightened self-interest is embedded in the SDGs, there is also a strong global civics component that explains the momentum achieved by the 2030 Agenda. The same is true of the growing support for climate change mitigation and adaptation. In both cases, visible support from civil society can make it easier for government negotiators to reach agreements. Moreover, agreements with altruistic concessions have more support when there is burden-sharing, a major point for multilateralism. In a recent survey in the U.S., a majority of respondents favored increasing foreign aid by $101 billion a year to help achieve some of the SDGs provided other donor countries made similar efforts.13 What has allowed a values-based universal adoption of the SDGs has been what one could call their “non-political” nature. The SDGs omit fundamental features of liberal democracy such as freedom of expression and free competitive elections. But while they do not refer to freedom from political constraints, they do reflect values of “enabling freedoms”—giving people the ability to achieve economic and social goals. Isiah Berlin’s distinction between negative and positive liberty is relevant here; as he argued, too often liberals refer only to the former.14 As Berlin also argued, neither concept should be taken to extremes.15 Notwithstanding the SDGs mostly aspirational nature and the additional difficulties COVID-19 has created for their achievement, the universal adoption of the 2030 Agenda and support for the positive liberties it includes has been a substantial step forward for international cooperation. Should our vision of a desirable international system stop there and give up on liberal democratic values as universally compelling? Are liberal values a reflection of western culture only and no longer relevant in a world where the traditional “West” will no longer be dominant? Has the COVID-19 crisis illustrated the benefits of a controlling state where the individual has much less freedom than in a liberal democracy? This essay stands by the belief that while there may be a great diversity in the specific constitutional arrangements characterizing a democracy, liberal democratic values reflect universal human aspirations and are relevant to a discussion of international cooperation.16 One can imagine a dual approach that focuses on global public goods and the positive freedoms embodied in the SDGs on the one hand, and on liberal democratic values on the other. But how to implement such an approach? 28 “ Copenhagen Criteria. small group offoundingcountriesandcouldbeinspired by theEU’s of a “circle of building democracies”. Membershipcriteriamay initiallybe agreed onby a difficulty the underlines example telling This borders andcontinentswillbemore effective intheyears ahead. promotingliberal anddemocratic values andcooperating across Instead, a growing community of people and civil society organizations elusive circle ofdemocratic countries to thesevalues aroundan lending support theglobe.Institutionalizing of liberal democratic valuesstopand shouldnot fromsociety civil This need with abeliefintheuniversalnot beincompatible validity the goalisto bereached. involve regimes far fromliberal democracy,maybut be unavoidable if on whichthey canallagree. Suchcooperation, say onclimate,will economicandsocialgoals global publicgoodsandachieve important allowing countrieswithdifferent politicalregimes to cooperate, provide in valuable uniquely is SDGs the of adoption its and membership U.N. problemsalways existandbeusefulto Buttheuniversal solve particular caution. Coalitionsoflike-minded countriesofvarious typeswillcertainly In imaginingmultilateralism forthefuture, theselessonsshouldinduce suspend orexpelnoncompliantmembers. but regimes change,andcredibility requires theabilityandresolve to asthemostobvious example—notonlygovernments with Hungary Moreover, astheexperienceofEUitselfdemonstrates—again intense politicalpressures andoverriding foreign policyconsiderations. held responsible fortheviews expressed. Lombardi, and Dani Rodrik are also gratefully acknowledged. None of them should be Domenico Işik, Graham, Yusuf Carol Gertz, Geoffrey Ahmed, Masood by Comments joint workon and international cooperation with Sebastian ongoing discussions Strauss, as from well as benefitted from his greatly specific has comments. draft This Note: credentials. Bronislaw Geremek, personalitieswithimpeccableliberal democratic of Democracies”“Community conceived by Albright and Madeleine Creating aclubofdemocratic countrieshadbeentheobjective ofthe prime ministerderidesliberal democracy, onitsGoverning Council. role ofthenation-state. ensuing economiccontraction hasenhancedthe The response demanded bythepandemicand 17 The organization, however, nowhasHungary, whose 19 Buttheirinterpretation wouldalways besubjectto isunlikely to beofmuchhelp. 18
29 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Endnotes
1. Kemal Derviş and Sebastian Strauss, “What COVID-19 Means for International Cooperation,” Project Syndicate, March 6, 2020, https://www.project-syndicate.org/commentary/global-cooperation-can- prevent-next-pandemic-by-kemal-Derviş-and-sebasti-n-strauss-2020-03 2. Incidentally, this question is also the title of Scott Barrett’s 2007 book “Why Cooperate? The Incentive to Supply Global Public Goods” (Oxford University Press). For another classic on the subject, see Todd Sadler, Global Collective Action (Cambridge: Cambridge University Press, 2010). 3. For a concise summary see Jean Pisani-Ferry, “Collective Action in a Fragmented World,” Bruegel, September 11, 2019, https://www.bruegel.org/wp-content/uploads/2019/09/Bruegel_Policy_ Brief-2019_05_1.pdf. More recently Dani Rodrik and Stephen Walt offer their comprehensive “realist” vision of what a future global order in which the US and China play a dominant role should look like, https://drodrik.scholar.harvard.edu/publications/constructing-new-global-order-project-framing- document 4. Seth Berkley, Richard Hatchett and Soumya Swaminathan, “The Fastest Way Out of the Pandemic,” Project Syndicate, July 15, 2020, https://www.project-syndicate.org/commentary/covid-19-vaccine- cooperation-covax-by-seth-berkley-et-al-2020-07 5. A particular version of such a vision was provided by Joseph Nye “After the Liberal International Order,” Project Syndicate, July 6, 2020, https://www.project-syndicate.org/commentary/biden-must- replace-liberal-international-order-by-joseph-s-nye-2020-07 6. According to Nathan Gardels: “We will see a patchwork of industrial policies aimed at strengthening national resilience instead of global integration.” Nathan Gardels, “From Globalization to a Planetary Mindset,” Noema Magazine, August 7, 2020, https://www.noemamag.com/from-globalization-to- a-planetary-mindset/. Also see Carmen Reinhart speaking in interview, May 21, 2020, Bloomberg News, https://www.bloomberg.com/news/videos/2020-05-21/reinhart-says-covid-19-is-the-last- nail-in-the-coffin-of-globalization-video 7. Henry Farrell and Abraham L. Newman, “Weaponized Interdependence: How Global Economic Networks Shape State Coercion,” International Security 44, no. 1 (Summer 2019): 42-79. 8. There are good arguments in favor of using industrial policy to achieve social and economic goals, notably by Dani Rodrik and Daron Acemoglu. Dani Rodrik and Stephen Walt use a narrow definition of beggar-thy-neighbor policies as policies that “create domestic gains only to the extent that other nations lose”. This essay uses a broader definition of such policies as those having significant negative spillover effects. 9. Martin Rees, “The Biomedicine Threat,” Project Syndicate, September 6, 2020, https://www.project- syndicate.org/commentary/biomedicine-future-threats-ethical-dilemmas-by-martin-rees-2019-09 10. William J. Perry and Tom Z. Collina, The Button: The New Nuclear Arms Race and Presidential Power from Truman to Trump (Dallas: Ben Bella Books, 2020). 11. The Preamble of the UN Charter states that “We the peoples of the United Nations [are] determined... to reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women and of nations large and small.” Article 55, Chapter IX of the Charter committed all member states to promote “universal respect for, and observance of, human rights and fundamental freedoms for all without distinction as to race, sex, language, or religion.” 12. Kemal Derviş, Foreword to Global Civics: Responsibilities and Rights in an Interdependent World, ed. Hakan Altinay (Washington, DC: Brookings Institution Press, 2011), vii-x. 13. https://www.publicconsultation.org/energy/americans-favor-major-increases-in-us-aid-toward- sustainable-development-goals-if-other-countries-do-their-part-as-well/ 14. Isaiah Berlin, “Two Concepts of Liberty,” Four Essays On Liberty (Oxford, England: Oxford University Press, 1969), 118-172. There is a vast philosophical debate on these concepts going back to Kant.
30 19. 18. 17. 16. 15.
https://eur-lex.europa.eu/summary/glossary/accession_criteria_copenhague.html 15/hungary-on-path-to-shed-junk-grade-and-shield-forint-orban-says.html withBloomberg14, 2014,speakingininterview News, liberal. There’s democracy period,itdoesn’t inHungary needanymodifiers.” Viktor Orban,December inHungary. littlesupport or very WhatIwantto say isthatit’s nottruethatademocracy canonlybe problem. IntheHungariancontext,word liberal hasbecomenegative. Liberal democracy hasno ‘Hungarians welcomedilliberal democracy. The factthatinEnglishitmeanssomethingelseisnotmy https://community-democracies.org/values/ needed to sustaintheirregimes. cultures reflect non-democratic andilliberal values are notcredible inthefaceof repression fundamental forademocracy. The claimsby manyauthoritariansthattheirnation’s histories or of individualismandsocialcohesion. This neednotnegatetheuniversal appealofwhatismost Different histories andcultures may implydifferent evaluations andperceptions ofdesirable degrees andwithoutshelter.hungry from politicalconstraintsminorities; ontheotherhand,apersonhaving liberty cannotreally befree if Too have oftensocialgoalsinterpreted aspositive beenimposedby smallauthoritarian liberties http://www.bloomberg.com/news/2014-12- 31 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 32 4 impacts haveimpacts also beensevere with a major threat of tragiclifeof loss costs. andhugesocial The economic Worldsince crisis any than War II. Therebeen has the COVID-19with deeper and broader crisis, impacts crises. climate and needs toThe world tacklethe COVID-19simultaneously climate change. and adapttocountries, thealready evidentof impacts structuralemerging changein marketsand developing and deficits infrastructure to respond capital, polluting Agreement—to accelerate the replacement ofagingand and tothis bygoals set meettheclimate theParis investmentin boost major needed orderis in to achieve can deliver a net zero carboneconomyby 2050.A of natural and that services, capital and ecosystem fuel dependencebased on fossil and the degradation growthfuture—one model century thatescapesa20th offers the prospect ofa better and more sustainable the degradationStrongecosystems. of action climate of biodiversityseeing analarmingriseintheloss and with the risks associated with inaction. associated with the risks with of climatechange arewhile thecosts along mounting and to crisis the climate adapttoshrinking, is impact its 1.5-degree increase. The time theworldhasto address be kept can global warming hope that at around the s ofglobalnetzeroby emissions and to 2050 maintain trajectorytois it if quickly very meet thecollective target and willneed and adaptation,to reset theemissions’ “off-track”is The world mitigation climate both on but the poorestespecially mostvulnerableand people. COVID-19pandemic, affecting everyone, everywhere— been deepeningevenhad crisis The climate before the The issue Brookings Institution Senior Fellow, CenterforSustainableDevelopment, Amar Bhattacharya priorities be? agenda: Whatshouldthe Rebooting theclimate The world has beentransformedThe world by 1 We are also 33 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD global depression. The economic impacts are particularly severe in emerging and developing countries (capital flight, drastically reduced remittances, falling commodity prices). The pandemic has highlighted that the old normal was deeply fragile and dangerous, including in the probability of pandemics. The damages due to climate change and biodiversity loss could be even bigger and more lasting than those we are experiencing from COVID-19. Decisions made now are crucial in shaping the future of people and the planet: we must not go back to the old normal.2 The imperative now in recovery is to “build back better” on a path of sustainable, inclusive, and resilient growth.
In shaping a better recovery, there is a tremendous opportunity to harness advances in technology and private sector dynamism and innovation. “The ideas Governments need to design and implement comprehensive stimulus packages to promote a strong recovery and “build back better” in a way that tackles underlying weaknesses in the global economy, sets a course for the next decade and fosters the long-term transformation to a new form of growth and development. This is the big challenge of our time. In shaping a better recovery, there is a tremendous opportunity to harness advances in technology and private sector dynamism and innovation. A sustainable recovery can improve productivity, new forms of employment and support the transition to a zero-carbon and climate- resilient economy. It can boost employment in areas that need it most; helping to avoid extended and severe unemployment, which can de- stabilize politics and society. And it can generate strong multipliers for economic recovery and growth and can be accompanied by powerful co-benefits including reduced congestion and pollution. This imperative has been recognized by the Coalition of Finance Ministers for Climate Action. Their recent paper sets out how finance ministers have a unique opportunity to design and implement comprehensive stimulus packages that can drive a strong recovery and build a better future.3 Exceptionally low prices for fossil fuels in the aftermath of the pandemic offer a propitious opportunity to accelerate carbon pricing and the elimination fossil fuel subsidies. Carbon pricing, including subsidy reform, can be a critical component in a package of climate policies needed to restore growth and decarbonize the economic system. Together they can tilt incentives to support green recovery 34 development, orproduction. are provided through subsidiesortaxbreaks to fossilfuelexploration, subsidies amountedto more than$317billionin2019,andeven more consumption fuel fossil of value estimated the taxpayers. Globally, to harmful fossilfuelconsumptionsubsidies,whichare ahuge burden governmentsfor Thereto may out phase opportunities be also $937 billion,respectively). billion inlow-incomeandlower-middle-incomecountries($45 $982 around is gap stimulus fiscal estimated the that assesses report challenging context, with limited access to financing and with many likely with to face and debt difficulties and financing heightened vulnerabilities. to access limited with context, challenging it, butemerging markets anddeveloping countriesfaceanextremely from recover and COVID-19 to respond to support fiscal in trillion $11 and transformation. to overcome theimmediatecrisisandembarkonsustainedrecovery countries, developing by faced constraints financing actionandcooperation willbeneededto Concerted tackle the debtand sustained transformation to meetthedevelopment andclimategoals. countries to embark onagreen, inclusive andresilient recovery and willbeneededto enablethese much larger andsustainedsupport emergency andalleviate theimmediatesocialandeconomicimpacts, emerging markets anddeveloping countriesto respond to themedical banks (MDBs)have provided to historically unprecedented support Fundthe InternationalMonetary (IMF) andthemultilateral development Inparticular, more effectively. While importance. critical of be will them IFIs the from financing exceptional utilize and finance of pools all emissions or“carbon neutrality” by 2050 atthelatest. the largest ever alliance committed to achieving netzero carbon investors—creating biggest the of 38 and universities 505 regions, 21 the Climate AmbitionAlliance—together449 cities, 992 businesses, zero by Japan,and Korea. 2060), Morehavecountries than120 joined the Europeanincluding recentlyU.K., andmost Union, China (to net haveemitters major of number tocommitted now zero the net target climate ambition and provide a benchmark for climateaction. Secure commitment to a global target of net zero by 2050 that can raise momentum onthisagenda: Fouraction canhelpbuildthenecessary of international pillars The way forward reform. fiscal smart through revenues further unlock to potential the generated more than$45billioningovernment revenues in2019,with investments andthejusttransition. Carbonpricingprograms globally strategies andinvestments andcangenerate valuable revenues for 6 Advanced economieshave announcedmore than 8 It will be vital for them therefore Itwillbevitalfor to mobilize 5
9 to enable them to enable them 7 A recent ILO
A growing 4
35 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Making a green and sustainable recovery the centerpiece of global cooperation. Collaboration across governments (including through the G-7 and the G-20) and between the public and private sectors, including a coherent sense of purpose, is essential and will come from a shared recognition that a sustainable recovery is a strong recovery.
Building on the leadership coming from the private sector. Despite the impact of COVID-19, corporate momentum on climate action continues to build through 2020. There have been new 2020 announcements by Amazon, BP, Microsoft, Reliance, and Google among others.10 In addition, there are growing commitments from financial institutions to take portfolios to net zero with dates and milestones.11 Finally, there is growing evidence of the link between responsibility and good risk-returns.12
Unleashing the potential of the development finance institutions. Development banks including the multilateral development banks are uniquely positioned to support transformational change. They can help countries tackle policy and institutional impediments to unlock sustainable investments, and play a critical role in reducing, sharing, and managing risk to foster private sector investment. The International Finance Development Club will be convening the first global summit of all public development banks across the world, providing a good opportunity to build collective ambition and cooperative action.13 Greater ambition on the part of the MDBs will also require greater ambition on the part of their shareholders.
The damages due to climate change and biodiversity loss could be even bigger and more lasting than those we are experiencing from “COVID-19.
36 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Endnotes
See corporate/about-us/sustainability-resilience-research “Sustainable investing: resilience amiduncertainty,” BlackRock, 2020, committed to transitioning to net-zero theirinvestment portfolios GHGemissionsby 2050. PensionDanmark, andSwissRe),representing nearly$5.0trillionassetsundermanagement,have investors (asof3August 2020)(initiatedby Allianz,CaissedesDépôts,CDPQ,Folksam Group, The UN-convened Net-Zero AssetOwnerAlliance,an internationalgroup of29institutional FI PrinciplesforResponsibleBanking,ScienceBased Targets Initiative. Initiatives suchas theinvestors ClimateAction100+,Collective Commitmentto ClimateAction,UNEP The growth oftheWorld Economic Forum’s CEOAllianceofClimateLeadersto 80+members. ambition-alliance/ in thewake ofthepandemic,” COP25,June5,2020, “Cities, regions andbusinessesramp up ambitiononclimatechangeto deliver healthiereconomies level ofstimulusrelative to working-hourlossesinhighincomecountries. This gaprepresents theamountofresources thatthesecountrieswouldneedto matchtheaverage out ofthe69forwhichdataisavailable—i.e., justover halfinthesecategories. income countriesshowsthere are 8countriesalready indebtdistress and27athighriskofdistress The IMF’s latestpublishedlist(September30,2020)ofdebtsustainabilityanalysisoutcomes forlow- development-finance-proposals-for-the-global-covid-19-response/ COVID-19 response,” Brookings Institution,August 2020, Homi Kharas andMeaganDooley, “Sustainabledevelopment financeproposals fortheglobal phase-out-fossil-fuel-consumption-subsidies June 2,2020, “Low fuelpricesprovide to phaseoutfossilfuelconsumptionsubsidies,” ahistoric opportunity IEA, handle/10986/33809 “State and Trends ofCarbonPricing2020,” World Bank,2020, org/sites/cape/files/inline-files/Better%20Recovery%2C%20Better%20World%20FINAL.pdf The CoalitionofFinanceMinistersforClimateAction,July2020, “Better Recovery, BetterWorld: ResettingclimateactionintheaftermathofCOVID-19 pandemic,” building-a-better-world-after-covid-19/ www.lse.ac.uk/granthaminstitute/news/from-rescue-to-recovery-to-transformation-and-growth- Environment, April27,2020, building abetterworldafterCOVID-19,” Grantham Research InstituteonClimateChangeandthe andNicholasStern,“FromAmar Bhattacharya rescue to recovery, to transformation andgrowth: weather-disasters-to-affect-millions-worldwide/ Worldwide,” E&ENews,September2020, of theCOVID-19 pandemic.(ThomasFrank, “COVID CollideswithWeather Disastersto Affect Millions 54 millionpeopleworldwidefacedweather-related disastersthisyear whiledealingwiththeeffects https://financeincommon.org/ https://www.iea.org/articles/low-fuel-prices-provide-a-historic-opportunity-to-
www.scientificamerican.com/article/covid-collides-with- ) https://cop25.mma.gob.cl/en/tag/climate- www.brookings.edu/research/sustainable- https://openknowledge.worldbank.org/ www.financeministersforclimate. https://www.blackrock.com/ 37 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 38 5 cycles of capital flow stalls and surges complicate complicate surges and stalls flow macroeconomic managementinthesecountries. capital of such relief, cycles temporary provides this While dollar. the of weakening the and environment rate interest low global the to due inflows capital resurgent facing are countries, in advanced economies. Now many EMDEs, notably larger yields bond government in decline the to contrast sharp sovereigntheir spreadsin on as widened, tightened bonds sound relatively macroeconomic with fundamentals, financing countries conditions those for Even rates. exchange their pressures on downward and inflows capital of stops Atof thepandemic,EMDEsfaced theonset sudden even theadvanced economies. ought to shocks such withstand the interest bein of the worldeconomy,in better helping thesecountries such with faced devastating global shocks. Given when their rising importance maneuver to room little have times, in normal even pressures economic significant economies (EMDEs). which face These countries, developing and market emerging for protection more need for a better global financial safety net that provides wroughtthe worldeconomy, on has highlighted the The COVID-19 pandemic,and the carnage it has The issue Brookings Institution Senior Fellow, GlobalEconomy andDevelopment, Eswar Prasad Development, Brookings Institution Vice President andDirector, GlobalEconomy and Brahima Coulibaly purpose? system: Howto fititfor andfinancial monetary The international
39 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD EMDEs will remain subject to capital flow and exchange rate volatility as major advanced economies rely on monetary policy measures, both conventional and unconventional, for economic support and the spillover effects of these policies cause whiplash effects. Reliance on dollar funding remains a source of vulnerability for many EMDEs, with the Fed’s actions and the dollar’s trajectory, in particular, affecting them considerably as a result. Several EMDEs with high levels of external debt and balance of payments vulnerabilities have faced downgrades of their sovereign debt and lost access to global financial markets precisely at their time of greatest need to fight the pandemic and shore up their economies. Lowincome countries face even greater challenges. Their economies and export markets have collapsed, leaving many of them with crushing burdens of debt repayment. Sovereign debt levels were already high in many low-income countries and the pandemic is likely to make the situation worse as these countries have few other sources of domestic or foreign revenue to turn to. Even before COVID-19, the global financial architecture was due for reforms to keep up with the evolving dynamics of the global economy, but the pandemic has highlighted the extent of these weaknesses, underscoring the need for reforms. It will take some bold actions on the part of the international community to make the global financial system better fit for purpose in the post-COVID world.
Sovereign debt levels were already high in many low-income countries and the pandemic is likely to make the situation worse as these countries have few other sources of domestic or foreign “revenue to turn to.
40 to therecordof requests number forassistance. crises, but its limited resources have constrained its ability to respond financial global in countries to nets safety provide to system financial ofthe size the global economy. and the global in institution the important the most The IMFis system with financial the commensurate of level complexity in a increase to capacity a lending (IMF) incorporate Fund’s should system financial tomechanism Monetary the International bolster systematically global post-COVID-19 A f e SR o te il f odr o alctd n uue SDRs. unused and allocated of holders of will the or SDRs new of IMF’s the depends entirelyshareholders onthewill ofthemajority inthecase SDRs limits of deployment the which such, As voluntary,effectively. tool this largely use to ability is SDRs existing the of funding of forms alternative to more could be needy helpful aswell. countries The reallocation to access with countries resourced better from a reallocation large, sufficiently thatthe is SDRs the extent unused of To pool countries. beneficiary the by used been not have that SDRs created previously be may there SDRs, new Besides thatwasnecessary.lack ofsuper-majoritysupport the pandemic spread throughran theworld as agroundof the account on SDRs new issuing for proposal A EMDEs. all of share voting combined the than more significantly is which percent, 85 of majority crisis financial super requiresa activation Its G-20. the by call a toresponse in (GFC) global 2008-09 the during recently most history, its The ideas another tool in the global financial system’s arsenal that should lending facilities. that arsenal system’s financial deployed be systematically asneeded tothe existing complement global is the (SDRs) in Rights Drawing tool Special another new create to ability IMF’s The subscriptions shouldbethemainsource ofresources. resources withthe IMF’s isinconsistent that quota basicprinciple resources will decline to about $450 billion. The reliance on non-quota These facilities are set to expire renewed,soon and, unless the IMF’s which are temporaryand are atthediscretioncountries. donor of agreements, borrowing bilateral and (NAB) Borrow to Arrangements New the namely funding, resourcesfor non-quota overrelianceon the borrowerspotential for resourcesis source andamajor ofuncertainty resources as a share of GDP will decline. An additional risk to the IMF’s these rise, to continues GDP global as and, COVID-19 as such crises financing for a few country crises, it is insufficient to manage systemic percent of global GDP. While this amount might be sufficient to provide 1.1 only trillion, $1 around to amount institution’sresources available RECAPITALIZEIMF THE SYSTEMATICALLY DEPLOY SDRS 2 The IMFhasdeployedtool this in times four only 1 uuaiey the Cumulatively,
41 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD A mechanism that empowers the IMF to reallocate SDRs to where they are most needed will be an improvement. ESTABLISH SWAP LINES ACCESSIBLE TO A BROADER RANGE OF COUNTRIES A third reform would be to establish a framework to systematically expand access to temporary foreign exchange liquidity to a wide range of countries. The bilateral swap arrangements, which have become a common tool among central banks of advanced economies during global shocks since the GFC, are not available to most EMDEs to alleviate their foreign exchange liquidity shortages. During the COVID-19 pandemic, the swap lines offered by the Federal Reserve have helped provide dollar liquidity to global financial markets. However, most of these swap lines are with the central banks of other advanced economies. At the height of the pandemic, the Fed did offer dollar funding lines to more countries, collateralized by their central banks’ holdings of U.S. Treasury securities. But such ad hoc measures fall short of a more structured approach. Institutionalized mechanisms for emergency liquidity assistance would be more effective and would also reduce the incentive for EMDEs to undertake self-insurance through reserve accumulation, which is inefficient at both the national and global levels. IMPROVE DEBT RESTRUCTURING MECHANISMS In the absence of a sufficiently strong global safety net, the G-20 announced a debt standstill initiative (DSSI), calling on all creditors to grant delays in debt repayments for the least developed countries through the end of 2020. Full implementation of the DSSI is projected to mobilize $12 billion for the eligible countries. To date, at only $4 billion, the outcome has fallen significantly short. Among the key obstacles are the legitimate concerns from eligible countries that participation might trigger a sovereign downgrade and undo hard-fought-for efforts to gain access to international capital markets. Beyond the DSSI, several countries will emerge from the pandemic with unsustainable debt levels. Even such cases where debt restructurings are inevitable pose challenges for a financial system that is not well designed to address this issue. One reason is the evolution of the landscape for sovereign debt, notably the higher share of private sector creditor for several low-income countries, and a creditor base that is more diffuse with the emergence of bilateral official creditors including China. While the plurality of creditors brings several benefits, it makes it difficult to achieve the level of consensus required for debt restructuring.
42 system, especially weaknesses in the safetyin especially weaknesses system, EMDEs. for net financial international the in fractures highlighted has COVID-19 The Special sector debt. creditworthy and well-capitalized Purpose Vehicles, perhaps funded by SDRs, to help restructure private as such mechanisms bonds sovereign creativeother to consider ripe be might clauses. of time the The without stock sizeable a remains there restructurings, debt sovereign some in helpful proved and 2014 in enhanced were (CACs) clauses action collective While involved. are creditors private circumstancesand thecreditor when multiple especially landscape, altered economic substantially of prove light in otherwise difficult, will the comingyears.debt fora larger Restructuring of countries number over distress debt in countries of number the in increase anticipated one shouldbeakeyEstablishing to priority manage helpbetter the debt. external EMDEs’ of restructuring orderly an for system financial Finally, there iscurrentlymechanism inthe nowell-functioning oenne tutr, hc rmis oiae b te advanced the economies by dominated remains which structure, governance reformingin step the IMF’s would beanimportant calculations yet ambitious, The following reasonable, changesto thequota risks. that mitigatecounterparty such swap lines for a broad group of countries by providing guarantees to broaden their accessto more countries. The IMF could helpunlock and Japan) of Bank and ECB, (Fed, banks central G-3 the by offered from the IMF’s shareholders will also be toimportant support institutionalize swap lines Strong system. financial of global mission the its safeguarding fulfill to IMF the allow to imperative are mechanism resourcesin reform andaconcomitant the quotaallocation of who areEMDEs, of has becometooclients, themain wide. An increase institutions those and shareholders, dominant the the are who economies, advanced of realities financial the between divergence international The revamp. a of major need in is the of governance The The way forward the EUhas,inaddition,asinglemarket. internal, astheeurozone hasasinglecurrency andcentral bank; Considering intra-eurozone trade orperhapsintra-EU trade as modest weight. Adding populationasanothervariableinthequotaformula,witha 3 : 43 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD World leaders should chart a new course of action to improve the functioning of the international monetary and financial system and to better prepare it to cope with future crises. This requires not just a commitment of more resources but also political will on the part of the major economic powers. The legitimacy of the international financial institutions and the global governance system is at stake.
World leaders should chart a new course of action to improve the functioning of the international monetary and financial system and to better “prepare it to cope with future crises.
44 3. 2. 1. Endnotes
development/2019/07/01/the-governance-of-the-international-monetary-fund-at-age-75/ at age75,” Brookings Institution,July1,2019, Brahima CoulibalyandKemal “TheGovernance Dervis, System oftheInternationalMonetary financial-fallout-in-developing-countries/ future-development/2020/03/26/imf-special-drawing-rights-a-key-tool-for-attacking-a-covid-19- for attackingaCOVID-19,” Brookings Institution,March 26,2020, Kevin P. Gallagher, Jose Antonio Ocampo,andUlrichVolz, “IMFSpecialDrawing Rights:Akey tool institutions to cushiontheshockandto prepare theground foradurable economicrecovery. Admittedly, themulti-facetednature ofCOVID required, appropriately, from various financial support https://www.brookings.edu/blog/future- https://www.brookings.edu/blog/ 45 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 46 6 percent, afarsharperdrop thanwasseenforGDP. of2020,globaltrade wasdown18.5 the secondquarter have hadadevastating effect oninternationaltrade. In The COVID-19 pandemicandassociatedglobalrecession The issue international trade? are theimplicationsfor supply chains:What The future ofglobal Brookings Institution Senior Fellow, JohnL. Thornton ChinaCenter, David Dollar harm development? These are naturally highlyspeculative national and internationallevel canmitigate effects that environment fordevelopment? Whatpoliciesatthe difficult more a create these Will trade? global in changes the cyclical downturn, are there likely to bepermanent In otherwords, oncetheglobaleconomyrecovers from the mediumto longrun aftertheCOVID-19 pandemic? likely evolution ofsupplychains andinternationaltrade in The mainquestionaddressed inthisessay is,whatisthe as welltheU.S.-Chinatrade war. 4.0 Industry both reflected probably trade merchandise of wasrisingmoreservices rapidly. The decliningimportance GDP, breaking along-standingpattern,thoughtrade in merchandise trade wasincreasing lessrapidly thanworld factories. Intheyears beforeand smart thepandemic, physical systems,theinternetofthings,cloudcomputing, exchange inmanufacturingtechnologies,includingcyber- current 4.0—the trendIndustry automation of data and of otherissuesthatwere already affecting trade, notably future. uncertain The COVID-19 pandemiccomesontop electronics, andtourism are cutbackaspeoplefacean internationally, whilethewidelytraded goodssuchascars, utilities—isnottraded housingservices, health services, of theeconomicactivitythatcontinuesinapandemic—
1 Much Much 47 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD questions, but by thinking of them now, we can potentially mitigate the worst long-run effects of this crisis on development.
China’s exports to the U.S. have gone down, but China’s exports to those other developing countries have gone up.
The ideas “I divide the potential long-run effects on trade into three categories: (1) changes in the structure of demand; (2) acceleration of Industry 4.0; and (3) protectionism dressed up as national security. As the virus is brought under control globally, especially if there is a reliable and widely available vaccine, life should return towards “normal.” But it is likely to be a new normal. The specifics will be hard to predict but there are likely to be some permanent changes in the structure of demand. People in advanced economies may do more work from home permanently, reducing demand for cars and gasoline. We may have less demand for office and retail space. Those changes would tend to put downward pressure on commodity prices and trade volumes. Three industries with extensive value chains involving developing countries are autos, electronics, and clothing.2 I would expect more demand for electronics and less for autos and clothing in a post- pandemic world. But the general point is that there could be large shifts in these industries that affect development opportunities. In terms of services, international tourism may not fully recover to its previous level; this has been an important export for many developing countries. On the other hand, demand for healthcare, childcare, and elderly care is likely to rise; these are all immigrant-intensive industries in advanced economies so demand for migrant workers may well increase. The pandemic will probably accelerate the spread of Industry 4.0. The idea that everything was going to be done by robots was never realistic, as there are many activities where it is not cost effective to deploy an expensive robot. Garment sewing is still done primarily by people, in the developing world, as are many fine tasks in the electronics and auto value chains. But the pandemic has to change the cost calculation at least to some extent. Imagine an activity where it is slightly less expensive to hire workers in the developing world compared to deploying a robot in an advanced economy. Now firms are aware of potential disruption from pandemics and/or trade blockages. With that risk factored in, the robot may now be the cost-effective choice. Industry 4.0 is not suddenly eliminating manufacturing opportunities in developing countries, but it has to be constraining them, and more so after COVID-19 than before. 48 that they donotwant to have to do. a Chinesesphere withdeveloping countriesforced to choose, something Worst casewouldbeadivision oftheworldinto anAmerican sphere and turn inward, thatwillcreate poorenvironment avery fordevelopment. inputs in itsvalue chains.If both theU.S.andChina to eliminateimported But italsomay presage amore protectionist policyinwhichChinatries developmentcreatesChina’sthat for tradingnew opportunities partners. bolster household incomeandconsumption,which wouldbeahealthy that playcannot thesameroleneeds to China that and past the in as recognition exports a reflect simply may it clear; not is entails this exactly trading system,China hasannouncedapolicyof“dual circulation.” What protectionism inChina.Facing theriskofanincreasingly closedglobal to force production oftheseitems athome. There isalsoariskofrising a lesserextent).So,there istalk nowofusinggovernment procurement protective gearandpharmaceuticalsare comingfrom China(andIndiato the U.S.andotheradvanced economies,itbecameanissuethatmuch now collidewithconsiderationswar issues raised by In the pandemic. low-wage countriesasdescribedintheprevious paragraph. while aboutone-seventh are consideringshiftingsomeproduction to are none relocatingconsidering toback U.S., the that virtually found sofar continues to rise. A recent survey ofAmerican manufacturers inChina nore-shoring been also of manufacturingbackto theU.S.,andChina’s share ofworldexports has There deficit. tendsto trade one that but the increase economy thiscrisis in policy correct fiscal the huge deficit, the of because down gone has saving U.S. Overall saving. affected by tariffsbutrather isthedifference betweeninvestment and directly not is it because expected be is to which rise, continues to deficit tariffs aimedatChinahave notmetanyofitsobjectives. The U.S.trade The dangernowisthattheU.S.willexpanditsprotectionism, sincethe to thecountriesdoingfinalassembly.then exported chains, producingandmedium-techcomponents,whichare machinery #3 (withtheEUat#2). to dropped has U.S. the while China’s partner trade as biggest place first other developing countrieshave goneup.ASEAN hasnowmoved into China’s to theU.S.have gonedown,butChina’s exports to those exports even before inthedataisthat Whatwecanobserve thetrade warstarted. and higherwagesinChinawere already drivingthisproduction abroad Indonesia, andMexico. These tendto bethemostlabor-intensive tasks, in assembly final garments, footwear, andelectronics shiftedto of countries suchasVietnam, amount certain A countries. developing other for percent25 createdactually run, this rate. newopportunities Intheshort from Chinaata the recession, theU.S.wastaxingabouthalfofimports protection before thepandemic,mostofitaimedatChina.Heading into dressed upasnationalsecurityprotection. The U.S.introduced serious world isgrowing protectionism inmore advanced economies,often Probably inthedeveloping thebiggestriskfortrading opportunities 3 Chinahasmoved into themiddle ofmanyvalue 4 These trade trade These 49 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD The way forward
The best hope for addressing all of these risks is new trade agreements that maintain an open trading system. There are some positive developments here. China has reached an agreement with ASEAN plus Australia, Japan, New Zealand, and South Korea on a Regional Comprehensive Economic Program. This is not a particularly deep agreement, but it should allow duty-free movement of parts and components, making Asia-Pacific supply chains more predictable and resilient. The Trans-Pacific Partnership (TPP) has also gone ahead and is setting new standards for cross-border data flows, investment, intellectual property rights (IPR) protection, and subsidies. The African Continental Free Trade Area will link 1.3 billion people in 55 countries. Tariffs are not particularly high in Africa so most of the benefit comes from cutting red tape and simplifying customs procedures.5 While these various regional agreements are better than nothing, they risk dividing the world up into different clubs with different rules. Also, the U.S. is not participating in any of them. The ideal in the long run should be an updated WTO agreement that deals with the new issues of cross-border data flows, services, IPR protection, and state enterprises. Intermediate steps could include the U.S. and China (and others) joining TPP or simply a comprehensive trade agreement between China and the United States. This will be politically difficult for any U.S. administration, but it is good policy, nevertheless. In the short run it also would help to resist the worst protectionist ideas arising from national security concerns. Countries such as the U.S. need to do a better job of preparing for the next pandemic (and other global shocks). But the solution is not to produce everything at home. This will prove to be very costly and will deprive developing countries of production and trading opportunities. For many products such as protective gear, simple medical equipment, and pharmaceuticals, the cost-effective policy will be to have adequate stockpiles. This provides insurance if there is a crisis and problems with global supply chains. Domestic production of these items can be developed quickly if needed; this would be more economic than requiring domestic production in perpetuity, which will be an expensive proposition. This is true for the U.S. and even more important for smaller economies. The danger of rising protectionism also extends to immigration. As noted, there will be rising demand for migrant labor in the U.S. and other advanced economies as populations age and demand more of various services. Welcoming more immigrants could be win-win and in part substitute for the potential decline in goods trade. Remittances sent back to families are crucial for many developing countries. But it would take more openness than we currently observe in the U.S., Europe, and Japan to realize these win-win outcomes. 50 5. 4. 3. 2. 1. Endnotes
www.amcham-shanghai.org/en/article/amcham-shanghai-releases-2020-china-business-report “AmCham ShanghaiReleases2020ChinaBusinessReport,” AmChamShanghai,September9,2020, www.amcham-shanghai.org/en/article/amcham-shanghai-releases-2020-china-business-report “AmCham ShanghaiReleases2020ChinaBusinessReport,” AmChamShanghai,September9,2020, top-trading-partner-q1-2020/ ASEAN Briefing,May 15,2020, Ayman Falak Medina,“ASEAN EUto Overtakes BecomeChina’s Top Trading inQ12020,” Partner impact-of-gvcs-on-economic-development/ Brookings Institution,July2017, David Dollaratal.,“Measuringandanalyzing theimpactofGVCs oneconomicdevelopment,” www.wto.org/english/news_e/pres20_e/pr858_e.htm “Trade fallssteeplyinfirsthalfof2020,” World Trade Organization, June22,2020, www.aseanbriefing.com/news/asean-overtakes-eu-become-chinas- www.brookings.edu/research/measuring-and-analyzing-the-
51 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 52 7 “ rekindle? slump: Whatpoliciesto The globalproductivity slowing aroundslowing theworld(Figure 7.1). the COVID-19pandemic, productivity growth hadbeen growth.income Unfortunately,even beforeof theonset source capita per lasting of important most the single Growthproductivity—outputlabor of worker—isper Development, Brookings Institution Nonresident SeniorFellow, GlobalEconomy and Ayhan Kose Team LeadEconomist, European Central Bank Alistair Dieppe associated with COVID-19. prospectsfor productivity andovercome thechallenges comprehensiveapproach policy isneeded to improve the protracted slowdownin productivity. A proactive and the adversecompound from consequencesstemming reduce productivitygrowth pandemic couldfurther and productivityoff in growth decades. in The COVID-19 synchronizedand most longest, the steepest, fall- and developing(EMDEs) haveeconomies experienced market emerging crisis, financial global 2007-2009 the the aftermathof In the late1990s. since been underway a trendcontinues the slowdown economies, has that is keytoreducing poverty. standards ofliving,productivity growth In additiontopromoting better 1 Inadvanced 53 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Figure 7.1 Productivity growth
Advanced economies EMDEs
8
6
4
PERCENT 2
0
-2
1981 1985 1990 1995 2000 2005 2010 2018
Source: Dieppe (2020).
Note: Productivity is defined as output per worker in U.S dollars (at 2010 prices and exchange rates). Sample of 29 advanced economies and 74 emerging market and developing economies (EMDEs). Shaded areas indicate global recessions and slowdowns (1982, 1991, 1998, 2001, 2009, 2012).
The COVID-19 pandemic could further reduce productivity growth and compound the adverse consequences stemming from the protracted “slowdown in productivity.
54 recorded history.economic percent90 about in capita income the highestfractionof countries, in World War II. The global recession2020 coincideswitha decline in per The COVID-19pandemic hasledto thedeepestglobalrecessionsince The ideas more commontakingatoll oninvestment. eventuallyservices, ran Natural theircourse. have disasters become fromas theshift such employment lower-valuein to manufacturing of resources from lessproductive sectorsto more productive ones, stability. Atthe sectoral level,productivity gains dueto thereallocation effectiveness,the control the ruleoflaw, ofcorruption, andpolitical improvementin perceptions sincethe 1990s ofgovernment too:according to survey measures,there limited hasbeenonly improvementsThe paceof has declined institutions of the quality in The leveling-off ofurbanizationhasalsoplayed asignificant role. productionhas slowedasthegrowth ofglobalvalue chainshasstalled. intoThe speed of expansion more diverseof forms andcomplex Educationalmomentum. attainmenthasstabilized in manycountries. Some structural drivers ofproductivitygrowth have alsolost and growing debtburdens. foreignslowing direct investmentimporters, commodity for exporters, advanced adverseeconomies, terms-of-trade shocks forcommodity range of reasons: heightened uncertainty,policy lower growth the in wide a to due crisis financial global the since slower been has growth decades haveEMDEs. Investmentin faded recentin years, particularly productivitypreviousduring of thefactorsMany that supported driven by lackofdemand. productionprocesses; andabroad-based weaknessin investment development ofnew digital technologies and their incorporation into only innovations withmarginal productivitygains; a delay between factors:returnsdiminishing from technologicalprogress leaving growth inadvancedto economies hasbeenattributed multiple raises questionsaboutitscauses. The weakness in productivity The globalslowdownofproductivitygrowth overdecade thelast The issue crises. Forcrises. Ebola, andZika, as SARS,MERS, such example, epidemics, productivitythe slowdown of compound growth as didprevious health the pandemic isexpected toimpact onoutput, Beyond itsshort-term and trade, erosion ofhumancapital,and persistentunemployment. productivitythrough weakerincluding channels, multiple investment MOSTLY A DARKER PICTURE FOR PRODUCTIVITY 2 This willlikely have a negative impact on 55 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD left lasting scars on labor productivity in affected EMDEs because of their significant adverse impact on investment growth (Figure 7.2). Prior to the COVID-19 pandemic, many countries faced elevated levels of debt. Corporate balance sheets may eventually buckle because of COVID-19-induced recessions, straining bank balance sheets to an extent that could trigger financial crises. This would lead to obsolescence of capital as well as larger losses of employment.
Figure 7.2 Impact of epidemics on productivity and investment
0 0
-2 -5
-4 -10 PERCENT
PERCENT -6 -15
-8 -20
t t+3 t t+3 LABOR PRODUCTIVITY INVESTMENT (RHS)
Source: Dieppe (2020).
Note: Bars show the estimated impacts of the four most severe biological epidemics on labor productivity and investment levels relative to non-affected EMDEs. The four epidemics considered are SARS (2002-03), MERS (2012), Ebola (2014-15), Zika (2015-16). Swine flu (2009), which coincided with the 2008-09 global financial crisis, is cludedex to limit possible confounding effects. The sample includes 116 economies: 30 advanced economies and 86 EMDEs.
56 further outofreach. further move may crisis financial global the to prior economies advanced in growth taken by EMDEsthatconverged rapidly to productivitylevels approach to increasingand export-led the manufacturing productivity chains, supply increases automation thepaceof and leadsto shorter and advancedgap betweenEMDEs the pandemic If economies. rates,would take it to more halve thanacentury theproductivity economy productivitylevels hasslowed. At recent productivitygrowth the global financial crisis, the pace of EMDEs’ convergence to advanced- of COVID-19, may impede progress toward development goals. Since The post-crisis productivity growth slowdown, magnified by the shock productivity growth. year. rates Over thesame period,poverty rosewith lower incountries ratespoverty by anaverage of more than1percentageper point growth between 1980 and2015were able to reduce their extreme keyis to reducingpoverty. productivitylabor EMDEswiththefastest In addition to promoting betterstandards ofliving,productivitygrowth into globalvalue chains. investment,and knowledge transfer well integratednot economies for and improve resilience. promotecould This trade, foreign direct be restructuredcould chains ways in that helpincrease their diversity offsetthe negative impact ofschoolclosures. Supply could partially Investment indigital skills and technology wouldlikely increase, which consequences forproductivity andwelfare. be direct of theCOVID-19 outcomes recession,with important with greater capitalintensity, essentialproducts,could of certain manufacturing, finance, and education or the onshoring of production, towardshift teleworking,theincorporationof digitaltechnologiesin changes that may improve sectors.A sustained productivitycertain within Technological firms. across sparked bytranslate thepandemiccould into structural changes technology of acquisition of isindicative This in EMDEs. the generation,in rigidities or labor of misallocation transfer, other and and particularly firms, firms, large productive often less are which frontier, firmsat technological the productive highly between remain gaps Significant about. fostered bysearch our tosolutions for it brought thedisruptions haveto thepotential leadto productivity-enhancingopportunities as thosecausedbysuch disruptions economic Major thepandemic SIGNIFICANT CONSEQUENCES FOR DEVELOPMENT BUT THERE COULD BE SOME OPPORTUNITIES 57 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD The way forward
There is no silver bullet to rekindle productivity growth. Instead, EMDEs need to urgently put in place the necessary preconditions to seize the potential opportunities offered by the disruptions caused by the COVID-19 pandemic. This means they need to implement policies that would promote sustained productivity growth. Policymakers will need to facilitate investment in physical and human capital. Resources will need to be reallocated toward more productive sectors and enterprises, including through strengthening competition. Firms’ capabilities to adopt new technologies and to innovate will need to be reinvigorated, as well as ensuring that workers possess appropriate skills to transition to new sectors. Given the disruption to schooling and the labor market due to COVID-19, fostering investment in digital technology could help build skills by expanding access to quality online schooling and training as well as improving labor market flexibility. Better-targeted social safety nets could also prevent the school dropouts that are associated with long-term income losses. A stable macroeconomic environment and a growth-friendly institutional environment will increase the effectiveness of these policy measures. Streamlined government regulations and robust bankruptcy procedures that ensure prompt and efficient resolution of failing firms could also facilitate labor reallocation from low-productivity firms and sectors to higher-productivity ones. Lowering registration costs and removing barriers to enter the formal sector would help address the challenges of informality that could, over time, shrink the large part of the economy that is particularly vulnerable to disruptions. Rapid technological changes triggered by the pandemic may result in large productivity gains. Even so, policymakers must ensure that any gains in these areas are broadly distributed and that any technology- related labor market shifts are managed with training and social protection. Similarly, government investment in widespread internet access could broaden the availability of quality online schooling and training. A better-educated workforce is one that is less likely to be replaced by automation. Although the productivity growth slowdown is common to a large number of countries, the policy initiatives to boost productivity must be country-specific and well-targeted. Individual country characteristics and the interactions between policy measures need to be taken into account to achieve the best outcomes.
58 2. 1. Endnotes
World Bank,GlobalEconomic Prospects, June2020(Washington, DC:World Bank,2020). Alistair Dieppe,GlobalProductivity: Trends, Drivers, andPolicies (Washington, DC:World Bank,2020). 59 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 60 8 into more calibrated policy responses to putpeople developingtranslate economies, andhowthisshould to highlightthecontrast betweendeveloped and COVID-19 isaffecting labormarketsthe Americas in of COVID across theglobe.Below, weshedlighton how overlooked lensto characterize thedifferential impact individual countriesandisanessential,albeit often correlates closelywiththedegree ofdevelopment of the fiscal space, the nature of the labor market channel Indeed, asweargue in thisessay, unlike differences in of COVID-19 onpoverty, inequality, andwell-being. to understandingtheasymmetricconsequences These labordynamicsanddifferences are critical income divergence betweenregions andwithinthem. adoption—may determineCOVID-19’s lastingimpact: differences ininequality, informality, andtechnological within theAmericasandtheirlabormarket structures— Less obvious ishowpreexisting regional differences economic effects, plunginginstantlyinto recession. Unsurprisingly then,theAmericas suffered devastating contributing more than20percent oftheglobaltotal. of allglobalcases—withtheUnitedStatesalone any other region, accountingforabout50percent The COVID-19 pandemichittheAmericasharder than The issue to mitigatetheshock? markets: What policies Dislocation oflabor Development, Brookings Institution Nonresident SeniorFellow, GlobalEconomy and Eduardo Levy Yeyati Brookings Institution Senior Fellow, CenterforSustainableDevelopment, Marcela Escobari
61 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD back to work, protect workers from further harm, and prepare for a post-pandemic future. The ideas
From the 1980s through the early 2000s, labor markets in developed economies experienced the influence of two main global drivers of the new millennium: China’s integration into global value chains and technological change. Globalization and, more recently, technological substitution, led to a decline in the demand for routine, middle-skill workers and labor market polarization,1 as well as a growing share of (gig and freelance) independent work. Over the years, however, trends shifted in favor of higher-wage occupations. Polarization (2009-2014 in Figure 8.1) gave way to growing job inequality (2014-2019). COVID-19 drastically altered this pattern. New data suggest a dramatic shift in U.S. employment trends, disproportionately disrupting low-wage occupations—as the inverted-U curve in Figure 8.1 illustrates. The shift reflects abrupt employment declines in low-wage, high-contact jobs (e.g., cleaning, hospitality, or health care activities) and the fact that many “remotable” jobs require skills or hardware that low-wage workers may not have.
Figure 8.1. Recent US employment trends show low-wage workers hit hard
SMOOTHED CHANGES IN EMPLOYMENT BY OCCUPATION WAGE PERCENTILE
0.10%
0.00%
2009-2014
-0.10% 2014-2019 CHANGE IN EMPLOYMENT SHARE CHANGE IN EMPLOYMENT 2019-2020
EARNINGS PERCENTILE 2009 (RANKED BY MEDIAN LOG WAGE)
Source: Author’s calculations using the CPS and ACS.
62 “ additional workers (Figure 8.2b). approximately twopercentagehigher, points equivalent to 3million structure as Argentinawould haveU.S. joblosses or Mexico, been formal employment,respectively. IftheU.S.had the sameoccupational labor market; U.S. the of in Argentinathese and jobs representMexico, 40and 47 percent of 29 percent represent hardest-hit five the The pattern isrepeated acrossIn the United States, occupations. of informalworkers). approximately 15percent ofworkers (notincludinga likely high number before the pandemic. InArgentinasales jobsrepresented and Mexico, representedsales jobs but only 9percent oftheU.S.labormarket relatedcontracted occupations by 20percent intheUnitedStates— sales jobsforexample. Between February and jobs insalesand April, occupations is more heavily concentrated in thehigh-contact,non-remotable Compared toemploymentthe U.S., countries American Latin in seen higherjoblossesfrom COVID-19 thantheU.S.has. why theregionexplains relatively haslikely unskilledlaborforce partly high levels andforvaried reasons). At thesametime,LatinAmerica’s market polarization relativelabor, abundanceofunskilled resulting labor less much in to the adoption ofnewtechnologieshasbeenslowerdue in part where, asinmanydeveloping economiesover recent decades, the The COVID-19America Latin bode wellfor does not the U.S seen in shift not tothejobbuthoursworked. salaried work,where benefitsare portableandtied self-employment andthe—oftenhighlyprotected— halfwaybetweentheprecarityworkers, of salaried The future ofworkcallsforanew regime fornon- 4 hit hardest hit byCOVID-19 (see Figure 8.2).Consider 2 andeven declininginequality 3 (albeitfrom very 63 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Figure 8.2 Argentina and Mexico have more workers in the hardest-hit occupations
RELATIVE DECLINE SHARE OF EMPLOYMENT OVER Q1 2020 OF EMPLOYMENT
18% 18%
16% 16% 15% 15% 15% 13%
10% 10% 9% 9% 10% 8% 7% 7% 6% 5% 5% 5% 4% 5%
2% 2%
0% 0% Feb 2020 - Apr 2020 production production Human care Human care occupations occupations occupations Occupations Industrial and entertainment hospitality and and assistance Food preparation, preparation, Food Sales and Related Domestic services
Argentina Mexico United States
Source: Author’s analysis of the CPS, Argentina’s Permanent Household Survey (EPH) and Mexico’s National Survey of Occupation and Employment (ENOE).
Note: The comparison of participation rates by occupation was accomplished by collapsing occupation-detailed employment data into 34 comparable occupational groups based on Argentina’s National Occupation Classification. Figure 8.2b estimates the counterfactual employment changes in the US by applying the U.S.’s percentage change in occupational employment to Argentina’s and Mexico’s occupational structure.
Furthermore, the estimates given in Figure 8.2 should be taken as conservative because they do not account for a second, distinctive feature of the labor market channel in developing economies: the precariousness of their labor markets, which disproportionately exposes low-income workers to income shocks. In the particular case of Latin America, about half of the workers are5 informal wage-earners or self-employed without a college degree; in Bolivia, Nicaragua, Paraguay, and Perú, more than two-thirds of workers are informal. Consequently, many of these workers live beyond the reach of traditional government support programs (e.g., wage subsidies and furlough schemes.) 64 pandemic, activepandemic, market labor policies will likely seeincreased demand thefuture.in and afterthe During throughoutareoccupations some the Americas, growing still and To besure,all doomandgloom.Amiddramaticnot is it losses job the lowestreallocation prospects.analyses Similar Transportationworkers and Construction are amongthegroupswith toadaptable than others transitioninto while otheroccupations, in Administrative are andManagement occupations relatively more Argentina’sUsing job-to-job transitionsthat workersshows network data of U.S.workers’ job-to-job transitions unemployment. A network ofthelabormarketfrom built historical workersnavigate markets labor and transition through of periods and vocational trainingtoadult education)willbecritical or help to reach workers. Perú, high like limit governments’ self-employment ability and informality of degrees resources fiscal significant with countries in Even atformalization,may provespending, withoutefforts inadequate. of GDP compared to 14percent intheU.S.),simplyincreasing percent 1.2 to Latin American countries (for instance, Mexico’s many amounted response has in small been have responses fiscal while Thus, American workers facefargreater risks. workers may bemore protected thanU.S.workers, whilelow-wageLatin protections altogether. As aresult, LatinAmerica’s high-wagesalaried by outrightlayoff bans),mostinformalandindependentworkers lacklabor payments were doubledpriorto thepandemic,before they were followed toworkerssalaried high-wage Argentina,in as (such And whilemanyLatinAmericancountriesoffer generous laborprotections Administrativeor HR Clerks, Specialists. Accounting Supervisors, promisingtransition prospects to growingas such occupations, psychiatriccare. Similarly,likea decliningoccupation Secretary has may training easilymake the transition and support, to and nursing This proximity indicatesthatpersonalcare aides, often withtargeted moreAides, anoccupation resilientto thecurrentclimate. economic recentlyoccupation indecline,isnearby toand Psychiatric Nursing ForFigureexample, asshownin Personal 8.3, Care Aides,an to helpworkers transition from decliningto growing occupations. specifically policies market labor active these targeting by further go reallocation prospects. workers and Construction are amongthegroupsthe lowest with others to transitioninto while otheroccupations, Transportation are and Managementoccupations relatively more adaptable than job-to-jobtransitions show thatworkersnetwork Administrativein WORKER MOBILITY DURING AND AFTER THE PANDEMIC 7 8 9 (such as wage subsidies (such can assist policymakers canassist to 11 6 using Argentina’s using where severance 10
65 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Figure 8.3 Job transition data show viable opportunity for workers in hard-hit occupations.
SHARE OF TRANSITIONS TO GROWING OCCUPATIONS
Personal Care Aides Secretaries
Supervisors of Nursing and Administrative Psychiatric Aides Support Workers
Social Accounting Workers Clerks
Other Registered Management Nurses Specialists
Teacher HR Assistants Specialists
Community and Legal Social Specialists Assistants
0.0% 5.0% 10.0% 15.0% 20.0% 0.0% 5.0% 10.0% 15.0% 20.0%
SHARE OF TRANSITIONS (2003-2019)
Change in employment 2019 - 2020
6% 12% >15%
Source: Author’s analysis of the CPS.
Note: Historical job transition data show viable opportunity for workers in declining occupations to move into growing occupations, given the frequency with which those transitions occurred in the past.
66 majority. To fromthe premise besure,has to anytraining start effort the developing worldwhere they are agrowing andrelatively unskilled expand toin addressthe needsofindependent workers—particularly we propose,looking oneas mayneed towill be enough:it not adaptand a standardBut vocationaltraining program, even agranular,forward- economies. collaboration,state-labor-business other advancedin most the norm as providers of training,three-way,alongside educationinstitutions—a involvementprivate of employersas sourcesboth and information of direct the requires This skills. specific for demand the of projections the characteristicsbased on displaced workersof informed and on training towardsand wage upside, with highmobility occupations employmenton Moreincome. and labor precisely,to orient an effort targeted trainingtoessential is system mitigatetheCOVID shock the currentin As mentioned, a morecontext, dynamic and informed reducing firmincentives to investfurther inautomation. wages and increaseof low-skillworkers the number lookingforjobs, oftechnology.the diffusion Instead, the pandemic willlikely depress flat rather premiums,education as investment,capital of tohigh costs and barriers well as labor, unskilled of abundance and informality place: first the in losses job COVID-related to vulnerable more region to accelerate automationdue to thesamefactorsthat made the Latin America,byIn contrast,the COVID-19 likelyless shockis induces labor-replacing automation.) heavily while subsidizing capital through tax breaks and other benefits, friendly R&D andtheargumentfriendly levels even suppresswages atlower-income and further janitorialor services, dampen demand for less-skilled service work, less-skilled service dampen demand for whereasoccupations, travel less andmore remotelikely workwill digitalization canbe expected to create high-skill jobs inmostly developedIn pandemic-induced automation economies, and the world. labor markets. The significance of these changes will likely vary across impact ofsocialdistancingthatwillshape the impact ofCOVID-19 in undercurrentlayoffspermanent of the moreassociated with persistent workers inEuropeanare countries) returning,there is an emerging who were temporarily unemployed in the U.S. (similarto furloughed fewer active workers,they are unlikely toWhile someworkers unlearn. have Nowthatcompanies learned toremains operate uncertain. with The extent to which current trends willbecomepermanentchanges The way forward THE POLICY IMPERATIVES 13 asthe pandemic wanes. (Hence, the calls formore labor- 14 that the tax system, bysystem, thatthetax labor taxing 12 like hospitality, food, 67 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD that not all precarious workers will access formal jobs. There is simply not sufficient demand in the private sector for all of them. Instead, the training tool will need the flexibility to include occupations for freelancers and microentrepreneurs to improve their productivity and labor income. Moreover, the future of work calls for a new regime for non-salaried workers,15 halfway between the precarity of self-employment and the— often highly protected—salaried work, where benefits are portable and tied not to the job but to the hours worked. This transitional regime is essential in developing economies both to stabilize the labor income of the precarious labor force and to expedite labor inclusion, as the new regime may work as a bridge to job formalization in developing countries where economic volatility and large severance and litigation costs reduce the demand for formal workers. Policymakers should act now. Formalizing, broadening labor protection with portable benefits, investing in lifelong workforce development programs, partnering with the private sector to orient smart active labor policies to the creation of jobs with genuine upside and productivity: this is the labor inclusion agenda opened by the pandemic. The labor market channel was a critical driver of the differential welfare impact of COVID around the globe; it should also be the door to rebuild a better, more inclusive economy.
Note: The authors thank Ian Seyal, Carlos Daboin, and Sebastian Strauss from the Workforce of the Future initiative for their contributions.
In the current dynamic context, a more informed and targeted training system is essential to mitigate the COVID shock on employment and “labor income.
68 14. 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Endnotes
new-regime-independent-workers Centre forEconomic Policy Research, April16,2020, Eduardo Levy Yeyati andLuca ”Work afterCOVID: Sartorio, Anewregime forindependentworkers.” org/commentary/shaping-technological-innovation-to-serve-society-by-dani-rodrik-2020-03 Dani Rodrik,”Technology forAll.” Project Syndicate. March 6,2020, automation.pdf org/-/media/community-development/publications/discussion-papers/discussion-paper_ from Current Population Survey Data.” Federal BankofPhiladelphia. Reserve Ding, Lei,andJuliethSaenzMolina.September2020.”’Forced Automation’ by COVID-19? Early Trends FINAL.pdf Jobs.” The Hamilton Project, July2020, David Autor andElisabethReynolds, ”TheNature ofWork aftertheCOVID Crisis: Too Few Low-Wage hks.harvard.edu/centers/cid/publications/faculty-working-papers/specificity-of-human-capital on Job-to-Job Transitions.” CenterforInternationalDevelopment, Harvard University. April2020, Eduardo Levy Yeyati Montané,“SpecificityofHumanCapital:AnOccupation SpaceBased andMartín Please see research/life-after-coronavirus-strengthening-labor-markets-through-active-policy/ markets through active policy,” Brookings Institution,April20,2020, Eduardo Levy Yeyati, Montané,andLuca “Life aftercoronavirus: Martín Sartorio, Strengthening labor covid-new-regime-independent-workers independent workers,” Centre forEconomic Policy Research. https://voxeu.org/article/work-after- Eduardo Levy Yeyati andLuca April16,2020.“Work Sartorio. afterCOVID: Anewregime for another-two-months.phtml 2020, “Government extendsbanonunjustlay-offs foranothertwomonths,” BuenosAires Times, May 19, english/document/The-Inequality-Crisis-Latin-America-and-the-Caribbean-at-the-Crossroads.pdf Crossroads.” Inter-AmericanDevelopment Bank,2020, Matías BussoandJulíanMessina.“TheInequalityCrisis:LatinAmericatheCaribbeanat at-a-distance--the-availability-of-teleworkable--jobs-an0.html latinamerica.undp.org/content/rblac/en/home/presscenter/director-s-graph-for-thought/working- can actuallyworkfrom home.” UnitedNationsDevelopment Programme, LatinAmerica.https://www. López-Calva, Luis Felipe. July1,2020.“Working in Times ofPandemic: Onlyoneinfive workersLAC in document/Twenty_Years_of_Wage_Inequality_in_Latin_America_en_en.pdf Working Paper SeriesNo.IDB-WP-1041. Messina, Julían,andJoanaSilva. 2019.“Twenty Years ofWage InequalityinLatinAmerica.” IDB english/document/The-Inequality-Crisis-Latin-America-and-the-Caribbean-at-the-Crossroads.pdf at theCrossroads.” Inter-AmericanDevelopment Bank. Busso, Matías,andJulíanMessina.2020.“TheInequalityCrisis:LatinAmericatheCaribbean working_papers/w15150/w15150.pdf U.S. LaborMarket,” NBERWorking Paper No.15150,July2009, David H.Autor andDavid Dorn,“TheGrowth JobsandthePolarization ofLowSkillService ofthe https://www.batimes.com.ar/news/economy/government-extends-ban-on-lay-offs-for- https://www.brookings.edu/interactives/wof-mobility-pathways/ www.hamiltonproject.org/assets/files/AutorReynolds_LO_ https://publications.iadb.org/publications/english/ https://voxeu.org/article/work-after-covid- https://publications.iadb.org/publications/ https://publications.iadb.org/publications/ https://www.nber.org/system/files/ https://www.project-syndicate. https://www.brookings.edu/ https://philadelphiafed. www. 69 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 70 9 but itsfalloutispushinginequalityhigher. and vulnerabilities ofthoseleftbehindby rising inequality The pandemicisnotonlyexacerbatedby thedeprivations concentrated ineconomically disadvantaged minorities. and declinesinwell-being. These effects are even more the healthrisksandmore likely to experience joblosses society. Low-incomepopulationsare more exposed to by poorer segments of being bornedisproportionately andelsewhere. The costsofthepandemicare States the United inequality in economic the highandrising U.S. history.” “The COVID-19 recessionmodern unequal in the most is The issue Brookings Institution Visiting Fellow, GlobalEconomy andDevelopment, Zia Qureshi States. The increase in inequality hasbeen especially sharplyintheUnited decades. Ithasrisen particularly major advanced economiesover thepasttwoto three Income andwealthinequality hasriseninpractically all cure? pandemic: Isthere a Tackling theinequality in inequality. address thedeeper,structural driversoftherise impacts ofthecrisis.Butpoliciesmustalso the vulnerable from thehealthandeconomic priority istoprotect the disadvantaged and pandemic ismakingitworse.Theimmediate Inequality wasbadandtheCOVID-19 1 The pandemic has thrown into starkrelief 2 71 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD marked at the top end of the income distribution (Figure 9.1). Those with middle-class incomes have been squeezed and the typical worker has seen largely stagnant real wages over long periods. Intergenerational economic mobility has declined. Income distribution trends are more mixed in emerging economies but many of them have also experienced rising inequality, including some major emerging economies such as China and India.
Figure 9.1 A pandemic of inequality (Share of richest 10% in national income)
0.6
0.55
0.5
0.45
0.4
0.35
0.3
0.25
0.2
1980 1985 1990 1995 2000 2005 2010 2015
Brazil Canada China France India
Italy Japan Germany USA UK
Source: World Inequality Database. The figure shows pre-tax national income shares for the world’s 10 largest economies, including seven advanced economies (G-7) and three emerging economies.
72 “ markets. toward the shift market shares, morecompetitiveless fortifying oligopolistic, increasing further are firms advanced technologically large recent decades. technological change as akey driver in inequality observed in oftherise affectresearchbut distribution income hasincreasingly focusedon What doesresearch sayMany factors aboutwhyinequalityisrising? The ideas societal andeconomicfragility to shocks. And asthepandemichasrevealed,nationalism. has increased it It has stokedand populist political polarization, social discontent, by dampeningaggregate demand and slowing productivitygrowth. and political consequences.Ithasdepressedsocial, economic growth adversewith time, our of line fault a major economic, is inequality Rising marketslow-wage against low-skilled, workers. workforce are hitespeciallyhard. models heavilybusiness reliantand onhumancontact low-skilled commerce, and work to accelerate. the digitaltransformationdynamics. Itiscausing of production, The COVID-19reinforcing pandemicis these inequality-increasing become more unequal,andincomehasshiftedfrom laborto capital. higher-levelof bothcapitaland the labor incomehas distribution skills, technologies favoringwinner-take-allcapital, and outcomes, business the new With spectrum. at thelowerendofskill wages andjobs tasks hasshifted labor demand toward higher-levelhurting skills, tomiddle-skill oflow- automation Increasing profits. of share lion’s dominance inincreasingly concentrated marketsthe andcapturing at thetechnologicalfrontier have broken away fromthe rest, acquiring Inequalities have increased between firms and between workers. Firms this technologicaltransformation have beenshared highlyunequally. of benefits The further. revolution digital the driving are intelligence and how we work and do business, and the latest advances in artificial pushing inequalityhigher. behind byrisinginequalitybutitsfalloutis deprivations andvulnerabilities ofthoseleft The pandemicisnotonlyexacerbatedbythe 5 Increasedlabor tilting automationand telework are further 3 Digitaltechnologieshave beentransformingmarkets 4 While smaller firms struggle, firms smaller While 6 Industries with Industries 73 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Globalization also has contributed to rising inequality within economies—although technological change has been the more dominant factor. But it has been a force for reduced inequality between economies. Expanding global supply chains have been a major spur to economic growth in emerging economies, enabling them to narrow the income gap with advanced economies. The pandemic could disrupt this economic convergence by stoking the backlash against globalization and provoking nationalist trade policy responses, including reshoring of production. This would add to the challenges emerging economies face as increasing automation necessitates search for new growth models less reliant on low skill, low-wage labor as the source of comparative advantage. A weakening redistributive role of the state also has been a factor pushing inequality higher. As shifts in product and labor markets caused by technological change—and globalization—drove inequality of market incomes within economies higher, the role of the state in alleviating market-income inequality through taxes and transfers diminished. In OECD economies, taxes and transfers typically kept disposable- income inequality one-fifth to one-quarter lower than market-income inequality. In recent years, the role of fiscal redistribution in offsetting the rise in market-income inequality has shrunk because of reduced progressivity of personal income taxes, lower taxes on capital, and tighter spending on social programs.
A weakening redistributive role of the state also “has been a factor pushing inequality higher.
74 research anddevelopment canhelp “democratize” theinnovation and more effectiveinvestmentpublic of on use policies and tax technologies embodying newknowledge. Reform ofpatentregimes ecosystem shouldbe improved to promoteof wider diffusion In anincreasingly knowledge-driven economy, the innovation to reflect widerstakeholder interests. waysto broadenand reform capitalownership corporate governance natural beaddressed.must monopolies New thinking isneeded on concentration resultingfrom techgiantsthatresemble natural orquasi- revolvingaround data (thelifeblood and market oftheneweconomy) regulatoryreform and stronger enforcement.antitrust Newissues strong, keep competition firms, and check the growthstructures. ofmonopolistic This includes for field playing level and open an should berevampedthe digital age for to ensure thatmarkets provide governinginstitutions marketskeep must pace. policies Competition As technologytransformsand policies the world ofbusiness, technological transformation to fostermore inclusive economicgrowth: ofthisbroader agendaisto core better harnessthe potentialof part A “predistribution” thatcanmake thegrowth process itselfmore inclusive. distributional dynamics.Butthere isamuchbroader policyagendaof be bolsteredshould wealth and income taxing for new of the light in given theerosion ofthestate’s redistributive role. Inparticular, systems transfer element,especially policies. an important of course is This and redistribution―tax of terms in narrowly seen often are inequality driversthe underlying in inequality.rise ofthe secular Policiesto reduce Beyondagenda toa longer-term is actions these immediate address existing inequalities. recovery,be thedirectwill the less worsening in of thecrisis impact arethese actions protectingeconomic in the vulnerable andsupporting activity.and economic on jobs the impact cushion The more successful strengtheningsystems, safetyand nets, implementing policiesto taking preventive measureshealth up againstthepandemic,shoring have thelesswell-off.Countries responded degrees invarying hurt by immediate health consequences thatdisproportionately and economic address and pandemic its the is order contain business first to of The outcomes are possible. better,With more responsivemore policies, inclusive economic Policiesno. have to beenslow respond to change. the challengesof driventransformations—and economic globalization? is The answer an inevitable inequality rising Is consequenceoftoday’stechnology- The way forward 7 75 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD system so that it serves broader economic and social goals rather than narrow interests of a small group of investors.8 Biases in the tax system favoring capital relative to labor that create incentives toward “excessive automation”—that destroys jobs without enhancing productivity—should be corrected.9
The foundation of digital infrastructure and digital literacy must be strengthened to expand access to new opportunities. The digital divide remains wide between groups within economies, and is wider still between economies at different levels of development.
Investment in education and training must be boosted, with stronger programs for worker upskilling, reskilling, and lifelong learning that respond to shifts in the demand for skills. This will require innovation in the content, delivery, and financing of (re)training, including new models of public-private partnerships. Persistent inequalities in access to education and training must be addressed. While gaps in basic capabilities have narrowed, those in higher-level capabilities that will drive success in the 21st century have widened.10
Labor market policies should shift to a more forward-looking focus on improving workers’ mobility, helping them to move to new and better jobs rather than seeking to protect existing jobs being rendered obsolete by changing technology. The pandemic has exposed weaknesses in social safety nets. Social protection systems should be strengthened, indeed overhauled. Traditionally based on formal long-term employer- employee relationships, they should be adapted to a job market with more frequent job transitions and more diverse work arrangements. Social contracts need to realign with the changing economy and the nature of work. At the international level, not only must past gains in establishing a rules-based international trading system be shielded from the rise of protectionist sentiment, new disciplines need to be devised for the next phase of globalization led by digital flows to ensure open access and fair competition. International cooperation on tax matters becomes even more important in view of the new tax challenges of the digital economy. Inevitably, major economic reform is politically complex. Today’s elevated political divisiveness adds to the challenges. One thing reform should not be paralyzed by, however, is continued trite debates about conflicts between growth and equality. Research has increasingly shown this to be a false dichotomy. Crises can shift the political setting for reform. The fault lines exposed by the pandemic can be a catalyst for change.
76 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Endnotes
Inclusiveness Nexus,2018,Paris. Productivity andReducingInequality, 2019,Washington, Report, DC;andOECD, The Productivity- Brookings InstitutionandChumirFoundation, Productive Equity: The Twin ChallengesofReviving Inequalities inHumanDevelopment inthe21stCentury, NewYork. 2019:BeyondUnited Nations,HumanDevelopment Income,Beyond Report Averages, Beyond Today - Brookings Papers onEconomic Activity, Spring2020. Daron Acemoglu,Andrea Manera, andPascual Restrepo, “DoestheU.S. Tax CodeFavor Automation?,” Dani Rodrik,“Democratizing Innovation,” Project Syndicate,August 11,2020. Jacob Hacker, “TheInstitutionalFoundations ofMiddleClassDemocracy,” Policy Network,May 2011. Project, Brookings, July2020. David Autor, “TheNature ofWork aftertheCOVID Crisis: Too Few Low-Wage Jobs,” The Hamilton Nancy 27249, July2020 Alex ChernoffandCasey Warman, “COVID-19 andImplicationsforAutomation,” NBERWorking Paper Zia Qureshi, “InequalityintheDigitalEra,” inWork intheAgeofData,BBVA, Madrid,February 2020. Inequality? Evidence from Past Pandemics,” Covid Economics 12: 138-57,May 2020. and Furceri, Davide, Prakash Loungani,JonathanOstry, andPietro Pizzuto, “WillCOVID-19 Affect Responses andViral OutcomesAcross U.S.Counties,” NBERWorking Paper 27549,July2020; Ravallion, “Inequality and the Coronavirus:Caitlin, and Martin Covariates Socioeconomic of Behavioral to Recovery andLong-Term Structural Change,” CenterforEquitable Growth, August 2020;Brown, Heather Boushey andSominPark, “TheCoronavirus RecessionandEconomic Inequality:ARoadmap www.washingtonpost.com/graphics/2020/business/coronavirus-recession-equality/ most unequalinmodernU.S.history,” The Washington Post, September30,2020, HeatherLong,Andrew Van Dam,AlyssaFowers andLeslieShapiro, “Thecovid-19 recession isthe July 2020. L.Rose,“WillCompetitionbeAnotherCOVID-19 Casualty?,” The Hamilton Project, Brookings,
77 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 78 10 income and social cohesion as those jobs disappeared.jobs as those cohesion and social income jobs werethen experienced but declinesin plentiful, aged whites—a privilegedgroupwhen manufacturing concentratedcollege educated among less thanmiddle took overlivesmillion 1 overjust in a decade. These were lows, deathsofdespair—due to opioidsand suicides— record at was unemployment official the and booming In theU.S.,pre-COVID-19, whenstock markets were over 10percent, forsimilarreasons. fell optimism high—both life andreported satisfaction reductiongrowth have andpoverty beenexceptionally the process. Inthe past decade in India—inwhichboth increasingin and losers gapsbetweenthe winners associated with change, as well and uncertainty of theirrapid growth,due to increasesinequality in and suicides increased sharply atthe height reports fellsatisfaction more than 20percent and mental health countries. other and many the U.S well-being in in inequities than they areheightening deep the rich, pre-existing for pandemic are much higher forthe poor and vulnerable of the analyses suggestthattheemotionalcosts Our gruesome death toll—are much more difficult to assess. the pandemic—above of costs human andbeyond the losses willbe recovered over time, somewillnot. The shuttered restaurants,more.and much Someofthese dramaticGDP growth,in falls compromised schooling, of COVID-19The highcosts are evidentjobs, lost in The issue prioritize well-being? pandemic: Isittimeto The humancostsofthe Brookings Institution Global Economy andDevelopment, Leo Pasvolsky SeniorFellow andResearch Director, Carol Graham middle-income countries. remarkable progressparadoxes rapidly in growing 1 Before COVID-19,our data discovered 2 In the late 1990s in China, lifein China, Inthelate1990s
79 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Pockets of deep vulnerability—and ill-being—persisted and even deepened in the decade of steady growth following the financial crisis. Since COVID-19, these trends and other pre-existing inequities have been exacerbated and are reflected in deep declines in reported well- being.3 A survey in March highlights the differences in the costs to well- being across the rich and poor.4 Low-income respondents significantly reported more negative emotions than did high income ones, including more worry, sadness, loneliness, and anger. There were also significant increases in negative emotions relative to earlier years for all income groups. Our comparisons are imperfect, given that they are based on similar but not the same samples: the Gallup panel for March 2020 versus the 2017 Gallup daily poll, although for the same income groups. The differences are stark. The average in 2017 for reported stress and worry for the low-income respondents was greater than for high income ones (Figure 10.1). There is a clear increase in March 2020 for both groups (for example, 64 percent worry for low-income groups versus 41 percent in 2017).
Figure 10.1 Well-being across income groups
100%
80%
60%
40%
20%
0% STRESS WORRY ENJOYMENT
Low-income Middle income High-income households households households (<$36k/year) ($36k-$90k/year) (>$90k/year)
Source: Graham and Pinto (2020) calculations based on Gallup 2017 data; 2013-16 patterns are very similar.
80 percentincrease drug related in deaths. that a1percent increaselevelcounty in unemploymentresulted a 3 in suicides). Beforesuccessful most estimated study a 2017 the crisis, such assharpincreasessigns, in gunsales(gunsare responsible for calls are slightlyhigher thanearlieryears,only butthere are worrisome while cardiac arrest and respiratory problem callsincreased. Suicide accidents other and traffic for decreasedto 2020—due in thelowervolumelockdown,during of activity as calls—such EMS of kinds Other almost 45,000perweekin2020. fromto2019 periodfor the sametime per week in 35,000 under just for mentalandbehavioral2020. Calls period for problemsincreased February andMarchto 2019 the sametime week per in 5,000 almost for example,increasedactivities, from roughlyper week 2,000 in allowing usto followchangingtrends. EMS callsforopioid-related coversdata only a fraction realcollected in is deaths, it actual of time, data to assess COVID-19-related declines inwell-beingand mental Yetcountries. rich in higher than much typically have wedonot recent The death tollthem—is within among thepoor countries—and poor in compliance withgovernment guidelinesduringthe pandemic. due tohigh levels worry.of Poornegativelyhealth is mental related to experiences accessing food,orunableto payhaveonly not bills, the worst difficulty having job, a losing to due vulnerable, particularly are who at risk. low incomes—disproportionately Those and peoplewith adults appear to haveyoungwith thesesame minorities—and worsened, COVID-19. health andloneliness that mental found The same study h Ntoa ES nomto Sse (ESS poie first provides (NEMSIS) System responderrespondentsmillion 46 data for from Information 2017-2020. EMS National The has spiked significantlyinthefallof2020. affectwith thepandemicstill rural them.Incidencein areas, meanwhile, associated metropolitanand uncertainty costs the economic ones, tend tobe rural likely andless tohave highCOVID-19than incidence already vulnerable to deathsofdespair. ofthesepopulations Whilemost There isevidence ofspillover effects ofCOVID-19 amongpopulations disproportionately high levels ofanxiety disproportionately report and other minorities In the U.K., forexample,Asians,Muslims, likely to beassociatedwithdeaths of despairasthey are in theU.S. the characteristicsof vulnerable groupsdiffer, andthe trends were less COVID-19of The impact acrosswas similar Yetcountries. rich many it ishard to imagineapositive scenario. magnitude makesof this to itimpossible projection,a similar impose refusalsto gotoby thehospitals overdose victims. and behavioralmental naloxone,and theneedfor issues, and in increasewas asharp activatedcalls in by drugoverdoses anddeaths, comparedof 2020 July tothereand the 2018, same periodfor2019 , but suffer, but additional negative effects onmentalhealth 7 Whileanemploymentshock 8 compared to whites during 6 WhiletheNEMSIS 5 In March- In objective 81 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD health there. Given extensive poverty and greater difficulty associated with social distancing, it is difficult to imagine an absence of negative effects. Anecdotal evidence for India, meanwhile, suggests increases in rural suicides. India instituted one of the world’s strictest lockdowns amidst high rates of poverty. Perhaps because of that, it still had one of the worst results worldwide controlling the virus. Lockdowns resulted in millions of more Indians entering poverty and exacerbated one of the highest suicide rates in the world.9 The additional numbers of suicides are estimated to be well into the thousands. Farmers, unable to take their products to market and to employ rural labor to field their crops during lockdown, were particularly vulnerable. A country with already low levels of well-being and high levels of vulnerability now displays the worst manifestations of the virus on public health and the economy, as on mental health.
The pandemic has highlighted how economic growth alone is not enough to sustain economies and societies. “The ideas Well-being measurement gives us a lens into the emotional and mental health costs associated with the pandemic and some strategies to resolve it. It allows us to assess how trends in life satisfaction, hope, anxiety, and depression compare for the same population groups pre- and post-COVID-19. Well-being data reflect actual trends and can be predictive of future behaviors. We find that ill-being markers—such as despair and stress— are strongly associated with the probability of dying from deaths of despair (both for individuals and places).10 The increases in despair preceded the increase in deaths by two decades, suggesting a possible predictive role.11 We are now using the metrics as warning indicators of overdoses, suicides, and other despair related deaths.12 As such, they provide us with a means to take societies’ temperature during good times and bad, and certainly during this public health crisis. A recent study of the well-being effects of lockdowns in Australia, New Zealand, and South Africa used Twitter data13 to find that reported average daily happiness fell on average by 16 percent compared to the previous year. The daily happiness measure was strongly and negatively correlated with reported depression and anxiety. The drops 82 subsided. surrounding them trendsas thelockdowns assoon and theuncertainty average levelsof well-beingtrended back upward to nearpre-COVID-19 havewhich wedo Ireland,the U.K., the U.S., as data,such andSweden, levelsfor that inthe countries ofwell-being.Assuch,itisnosurprise to crimetopoverty health problems—and returnto high theirinitial remarkably resilientand canfaceawiderange ofchallenges—from surprisingly positive trends. Surveys find that, on average, humans are Despite thesehigh levels ofhumansuffering, there are alsosome The way forward increases, aninsightwhichcaninformfuture labormarket policies. to workers’ well-beingandproductivity,salary forexample,thando being datashowthatautonomy andpurposeatworkmatter more as thepandemichaschanged nature ofworkforsomany. Well- healthy andsustainableplacesforpeopleto live andwork,notleast re-thinking and a living wage, and betterjobtraining efforts supporting being inschool,improvingfor front-line workingconditions workers, investingchildhood developmentearly in to not of combatthecosts trust. public ReviewMarmot The 2010 hasalsobeenupdated to include socialcapitaland build resiliencesuch assupporting within systems, the governments’on radar screen,and toas isolation, such to work vulnerabilitiesto emphasizeto newareastarget previously not support, highlight theneed to to identifypre-existingrecovery inform efforts, Richard Layard,well-being aswelltheOECDguidelinesonusing The U.K.government’sto led byloneliness, combat Lord efforts a great deal. suggesting that the nature and details of lockdown policiesalsomatter New Zealandscale in and Australia,Africa, South in points was 1.5 it post-lockdown drop happiness happiness on the0-10 point wasafull exercise.on salesofalcoholandoutdoor Whiletheaverage pre- to severeimplemented the most lockdown ofthe three, a including ban were starkest and moreAfrica, whichhasmuch South in poverty and/or diefromCOVID-19, pandemic. Whilethese same groupsare much more likely to contract displayBlacks andHispanics, as poor such being terms, the during it pandemic, as wellfuturepandemic, waveshas alsoemphasizedone. It ofthis being inadditionto growth, we will remain vulnerable very to thenext health societies’ and comprehensivewell- approach, whichsupports enough toeconomies andsocieties.Intheabsenceofamore sustain has highlighted growththe pandemic how economic Still, not aloneis groups, andthey alsoexperiencedlessofadeclineduringCOVID-19. Blacks haveincome higherlevelsother low-income than ofoptimism morethe futurefor optimism the pandemic.Low- thanwhitesduring 14 Within the U.S., groupsthe U.S., Within that are traditionallyresilient well- in 15 they also report better mental healthand better they alsoreport 83 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD how infectious diseases cross borders within and across countries, and that ignoring the well-being of the poor and the vulnerable has broad costs within and beyond national borders. Well-being metrics give policymakers a tool to attach relative values to things like lost jobs, lack of health insurance, and insecurity. Many countries have adopted a well-being approach in their policies, most notably New Zealand, which is also one of the world’s leaders in virtually eliminating COVID-19. And, as we have written earlier,16 New Zealand also has exceptionally high levels of public trust compared to those countries that have fared poorly in controlling the pandemic—such as the U.S. and India. Incorporating well-being into economic models and policy priorities would surely leave many other countries better prepared to handle crises in which the solutions hinge on public health systems and norms of public trust and cooperation.
Our analyses suggest that the emotional costs of the pandemic are much higher for the poor and vulnerable than they are for the rich, heightening deep pre-existing inequities in well-being in the “U.S and many other countries.
84 16. 15. 14. 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Endnotes
reopening-america-how-division-and-vulnerability-hamper-our-response/ response,” Brookings Institution,June25,2020, Carol Graham andSergio Pinto, “ReopeningAmerica:How divisionandvulnerability hamperour being-and-mental-health-amid-covid-19-differences-in-resilience-across-minorities-and-whites/ minorities andwhites,” Brookings Institution,June24,2020, Carol Graham etal.,“Well-being andmentalhealthamidCOVID-19: Differences inresilience across healthandsocialcare/conditionsanddiseases (COVID-19),” OfficeofNationalStatistics,2020, Gallup, “U.S.EmotionsMixed Aftera Tense MonthofCOVID-19 Response.”; “Coronavirus Discussion Paper 584,2020,https://www.econstor.eu/handle/10419/221748. Talita Greyling etal.“A taleofthree countries:HowdidCovid-19 lockdown impacthappiness?”GLO front/2020/07/15/a-new-tool-for-tracking-vulnerability-and-premature-mortality-in-america/ in America,” Brookings Institution,July15,2020, Carol Graham andSergio Pinto, “A newtool fortracking vulnerability andpremature mortality Graham-JEBO-2019-2.pdf www.brookings.edu/wp-content/uploads/2019/11/Optimism-and-Longevity-OConnor-and- expectancy intheUnitedStates,” JournalofEconomic Behavior andOrganization, November 2019, Kelsey J.O’Connor andCarol Graham, “Longer, more optimistic,lives: Historic optimismandlife article/10.1007/s00148-018-0687-y premature mortality,” JournalofPopulation Economics, March, 28,2018, Carol Graham andSergio Pinto, “Unequalhopesandlives intheUSA:optimism, race, place,and coronavirus-farmer-suicides-lockdown.html The NewYork Times, October 8,2020, Karan Deep Singh,“’The Lockdown KilledMyFather’: Farmer SuicidesAddto India’s VirusMisery,” https://whatworkswellbeing.org/blog/wellbeing-at-the-heart-of-covid-recovery/ Deborah Hardoon, ofCovid “Wellbeing recovery,” attheheart WhatWorks Wellbeing, July8,2020 bah/2017no3/are-opioid-deaths-affected-macroeconomic-conditions “Are OpioidDeaths Affected by Macroeconomic Conditions?”NBER,September2017, uploads/2020/10/NEMSIS-TAC-Update-to-COVID_19-Trends-10_22_2020-Pre-Findings-V1-1.pdf N. Clay Mann,“EMSby thenumbers,” NEMSIS,slide17and25, See https://news.gallup.com/poll/306026/emotions-mixed-tense-month-covid-response.aspx Gallup, “U.S.EmotionsMixed Aftera Tense MonthofCOVID-19 Response,” April2,2020, front/2020/06/25/reopening-america-how-division-and-vulnerability-hamper-our-response/ our response,” Brookings Institution,June25,2020, Carol Graham andSergio Pinto, “ReopeningAmerica:Howdivisionandvulnerability hamper Issue 6412:287-288,October 12,2018, Carol Graham, KateLaffan,andSergio Pinto, “Well-being inmetricsandpolicy,” ScienceVol. 362, surveysBased onGallupdata,PulseCensusandothercomplementary fortheU.S. https://nemsis.org/ https://www.nytimes.com/2020/09/08/world/asia/india- https://science.sciencemag.org/content/362/6412/287.full www.ons.gov.uk/peoplepopulationandcommunity/ www.brookings.edu/blog/up-front/2020/06/25/ https://www.brookings.edu/blog/up- https://www.brookings.edu/blog/up- www.brookings.edu/research/well- https://nemsis.org/wp-content/ https://link.springer.com/ nber.org/
85 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 86 11 that we saw thistimeexceeds that inprevious such crisis. The governmentto activism the contain virus the to reacted firms and workers, people, ordinary how responded tomeasures it—what governmentstook and the COVID-19of a resultbut pandemic havehow we of entirelyis not fall-out The economic thedirect outcome may hitemerging economiesespeciallyhard. globally,economic crises and the prospect thatthese death toll fromWe thevirus. are referringto thegrowing Moreover,a parallel problem may well exceed the direct and theHongKongAsian Flu of1957-58 Fluof1968-69. of severity,that, interms the thispandemicwillsurpass mark afewmillion likelylooks weeksagoandit now tothe deathscontinue rise. breachedThe latter the1 nowherepandemic is sight. in of casesand The number behaves,of howthevirus the rudiments the endof and webegintolifts the fogofconfusion understand havenot that wecould imaginedeven ayear ago. As a shadow worldwide, casting healthsystems public of The COVID-19 pandemichasexposedtheinadequacy The issue Student, CornellUniversity Jose MariaU. Tapia Development, Brookings Institution Nonresident SeniorFellow, GlobalEconomy and Kaushik Basu University; SeniorFellow, UnitedNationsFoundation Professor, ofGlobalDevelopment, Cornell Department Alaka M.Basu governance? isgood How important managing COVID-19: The complexityof 87 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD crises, which may have dampened the spread of the COVID-19 but has extracted a toll from the economy. This essay takes stock of the policies adopted by governments in emerging economies, and what effect these governance strategies may have had, and then speculates about what the future is likely to look like and what we may do here on.
Nations that build walls to keep out goods, people and talent will get out-competed by other nations “in the product market. The ideas
It is becoming clear that the scramble among several emerging economies to imitate and outdo European and North American countries was a mistake. We get a glimpse of this by considering two nations continents apart, the economies of which have been among the hardest hit in the world, namely, Peru and India. During the second quarter of 2020, Peru saw an annual growth of -30.2 percent and India -23.9 percent. From the global Q2 data that have emerged thus far, Peru and India are among the four slowest growing economies in the world. Along with U.K and Tunisia these are the only nations that lost more than 20 percent of their GDP.1 COVID-19-related mortality statistics, and, in particular, the Crude Mortality Rate (CMR), however imperfect, are the most telling indicator of the comparative scale of the pandemic in different countries. At first glance, from the end of October 2020, Peru, with 1039 COVID-19 deaths per million population looks bad by any standard and much worse than India with 88. Peru’s CMR is currently among the highest reported globally. However, both Peru and India need to be placed in regional perspective. For reasons that are likely to do with the history of past diseases, there are striking regional differences in the lethality of the virus (Figure 11.1). South America is worse hit than any other world region, and Asia and Africa seem to have got it relatively lightly, in contrast to Europe and America. 88 twice thatofArgentina at679. is ahead of 1039 of the secondhighest,BrazilCMR, and almost at749, features. Peru’srate or COVID-19 population, million per mortality they largely share ecological and their social,economic, demographic Both Peruwith whom andIndiadomuchworsethantheneighbors which havehistories hadsimilar (Figureand viruses of illnesses 11.2). to fare lookathowthese countries within important To theeffect understand thereforeis it interventions, of policy Source: Coronavirus Worldometer. DataaccessedOctober 27,2020 COVID-19 deathsby region Figure 11.1 be ignored. evenBut analysis. these arewe awaitthat, as differencescannot that The starkregional differencefor moreout cries epidemiological 100 200 300 400 500 600 700 800 0 America South
COVID-19 DEATHS PERMILLION POPULATION America North
Europe Asia Africa theirownregions, Oceania 89 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD Figure 11.2 COVID-19 deaths in South America and South Asia
COVID-19 DEATHS PER MILLION POPULATION
Sri Lanka 0.9
Nepal 32
Pakistan 31
Bangladesh 36
Afghanistan 39
India 88
Argentina 679
Chile 741
Bolivia 743
Colombia 610
Brazil 749
Peru 1039
0 200 400 600 800 1000 1200
Source: Coronavirus Worldometer. Data accessed October 30, 2020
Similarly, India at 88 compares well with Europe and the U.S., as does virtually all of Asia and Africa, but is doing much worse than its neighbors, with the second worst country in the region, Afghanistan, experiencing less than half the death rate of India. The official Indian statement that up to 78,000 deaths2 were averted by the lockdown has been criticized3 for its assumptions. A more reasonable exercise is to estimate the excess deaths experienced by a country that breaks away from the pattern of its regional
90 known forwhattheOxford University’s COVID Policy Tracker On theCOVID-19 policyfront, bothIndiaandPeru have become after thelockdown. allothercountries,occurredsharp downturn,sharperthanvirtually economies intheworld. The slowdownbeganin2016,thoughthe that untilafew years agoitwasamongthethree fastest growing The turnaroundfor Indiahas beenespecially surprising,given dissonance between strong governance andgoodgovernance. governance,this draws attentiontotherethat the fact may be a both thesecountriesare oftentreated ascase studiesofstrong in Q22020amongthecountriesdisplayed in Table 2,andgiven that Peru andIndiahave poorlyintermsofGDPgrowth performed rate relatively pooroutcomes. policy response thatdiffered markedly andmightaccountforthese conditions arebroadly similar, toleft is one theit isinfact ask if economic downslideinIndiaandPeru? Iftheregional background What mightexplainthisoutlierexperience ofCOVID-19 CMRsand avoided ifithadexperiencedthesamevirushitasitsneighbors. its currenttoll COVID-19of some122,099 havewould deaths been 49,950 deathsfrom COVID-19 today. Inotherwords, more thanhalf And ifithadtherate by Bangladesh,itwouldhave reported had rate,COVID-19 itwouldby nowhave mortality had54,112deaths. neighbors. So,forexample,ifIndiahadexperiencedAfghanistan’s several papers,suchasthat ofRay andSubramanian, sought to be brought to astandstill.Naturally, asdescribedin all movement outsidetheperimeterofone’s homewasofficially four hours’notice,acompletenationwideshutdown.Virtually 8 pmonMarch 24,2020,the Indiangovernment announced,with “stringency”the government’sthe of responseto epidemic. Atthe India, since over 20millionpeople didexactlytheopposite ofwhat Indeed, “lockdown” isabitofmisnomerforwhathappened in spread the virusfrom thecityto the town andthe town to the village. townsthese creatingvillages, and a“lockdown thatscatter” and they setoff,on footsincetrains andbuses hadbeenstopped, for After afew weeksofprecarious livingintheirmigrant destinations, from theirplacesofwork. origin insmalltowns andvillagesoftenhundreds ofmilesaway that theonlysafe spacethatbeckonedthemwastheirplaceof temporarysavingstheir and homes livelihoods,lost these with so workers inplacesfar-flungfrom theiroriginalhomes,alsolost In addition,tensofmillionstheseworkers, being migrant well asmore marginally formalsectors, losttheirlivelihoods. turn meantthathundreds ofmillions ofworkers intheinformal,as that mosteconomiclife alsocameto asuddenstandstill,whichin 5 thismeant 4 calls 91 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD one does in a lockdown. Thus India had a strange combination of lockdown some and scatter the rest, like in no other country. They spilled out and scattered in ways they would otherwise not do. It is not surprising that the infection, which was marginally present in rural areas (23 percent in April), now makes up some 54 percent of all cases in India.6 In Peru too, the lockdown was sudden, nationwide, long drawn out and stringent.7 Jobs were lost, financial aid was difficult to disburse, migrant workers were forced to return home, and the virus has now spread to all parts of the country with death rates from it surpassing almost every other part of the world. As an aside, to think about ways of implementing lockdowns that are less stringent and geographically as well as functionally less total, an example from yet another continent is instructive. Ethiopia, with a COVID-19 death rate of 13 per million population seems to have bettered the already relatively low African rate of 31 in Table 1.8
We hope that human beings will emerge from this crisis more aware of the problems of sustainability. “The way forward We next move from the immediate crisis to the medium term. Where is the world headed and how should we deal with the new world? Arguably, that two sectors that will emerge larger and stronger in the post-pandemic world are: digital technology and outsourcing, and healthcare and pharmaceuticals. The last 9 months of the pandemic have been a huge training ground for people in the use of digital technology—Zoom, WebEx, digital finance, and many others. This learning-by-doing exercise is likely to give a big boost to outsourcing, which has the potential to help countries like India, the Philippines, and South Africa. Globalization may see a short-run retreat but, we believe, it will come back with a vengeance. Nations that build walls to keep out goods, people and talent will get out-competed by other nations in the product market. This realization will make most countries reverse their knee-jerk anti-globalization; and the ones that do not will cease to be important global players. Either way, globalization will be back on track and with a much greater amount of outsourcing. 92 connectivity its historical andcontemporary record ontamperingwithinternet To return,more totime, this critically Ethiopia, earlier asideon our “creative consumption”: music,andculture. art, from goodsto luxury betterhealth,andwhatisbestdescribedas the problemsof of sustainability. demandsome could divert This We hopethathumanbeingswillemerge from thiscrisismore aware This isausefulreminder forallemerging market economies. itwellinsuchapost-pandemicscenario.political dissentwillnotserve is someemerging literature to control thepandemicwhilekeeping theeconomyopen. There to passes. the pandemic be ableeconomy once important is it Thus to navigate thecurrent predicament sothatthey have aviable But to nationswillneed take advantage ofthesenewopportunities, mean muchlarger healthcare andpharmaceuticalsectors. Safeguards willbeneededagainsttheserisks. choosing to getCOVID-19 inorder to qualifyforthesespecialjobs. corruption. There isalsothemoral hazard challengeofpoorpeople aware thatapolicylike and thiswillcomewithitsriskofbribery research anddesign before beingimplemented.We have to be of governance. As withmosteconomicpolicy, thiswillneedcareful the free market doesnotadequatelyreward. Itismore achallenge GDP andtherefore isaclassiccaseofpositive externality, which of marshalingthislaborforce isontheaggregate economyand increase butinthiscase,themainbenefitcaused suchasalary chains unbroken. Normally, themarket wouldhave onitsown require physical interaction withothers. This willhelpkeep supply These peoplecanbeoffered tohigh salary workinsectors a that definitive evidence onthelengthofacquired immunity. stillhaveand are immune,even no ifonlyintheshort-term—we is to tapinto the“resource” ofthosewhohave already hadCOVID-19 amidstthischaosHere isanexample. Oneinteresting opportunity imitating Europe andAmerica. without stridentcontrols oneconomicbehavior andwithout blindly on new infectionsdown tamping of duty double this doing for Emerging economieswillhave to devise novel governance strategies run,forgovernments to stepintoin theshort fillthecaveat. marketsdisrupted normal has pandemic thereand leastat need, is This isagovernance challengeofakindrarely faced,because the 9 inanattemptto muzzleinter-ethnictensionsand 11 onthis,butmuchmore isneeded. 10 The formerwill 93 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD But we believe that any government that succeeds in implementing an intelligently-designed intervention to draw on this huge, under- utilized resource can have a big, positive impact on the economy12. This is just one idea. We must innovate in different ways to survive the crisis and then have the ability to navigate the new world that will emerge, hopefully in the not too distant future.
Note: We are grateful for financial support from Cornell University’s Hatfield Fund for the research associated with this paper. We also wish to express our gratitude to Homi Kharas for many suggestions and David Batcheck for generous editorial help.
94 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Endnotes
un-Nisa, duringaseminarofSouthAsianEconomics Students’Meet(SAESM). For helpfuldiscussionconcerningthisidea,weare grateful to Turab Hussain,DakshWalia andMehr- content/10.1101/2020.08.24.20180752v3 outcomes duringtheCOVID-19 epidemic,” medRxiv, August 2020, Guanlin Lietal,“Disease-dependentinteraction healthandeconomic policiesto support Cambridge University Press, 2018). Patrick Kabanda, The Creative Advance Wealth Development? ofNations:CantheArts (Cambridge: shutdown-after-unrest/2020/07/14/4699c400-c5d6-11ea-a825-8722004e4150_story.html 14, 2020, Cara Anna,“Ethiopiaenters3rd weekofinternetshutdownafterunrest,” Washington Post, July https://www.ft.com/content/7c6327ca-a00b-11ea-b65d-489c67b0d85d “No lockdown, few ventilators, butEthiopiaisbeatingCovid-19,” Financial Times, May 27,2020, https://www.bbc.com/news/world-latin-america-53150808 Pierina PighiBelandJake “Coronavirus: Horton, What’s happeninginPeru?,” BBC,July9,2020, cases-rise-says-ghosh-11597801644015.html Mint, August 19,2020, Gopika GopakumarandShayan Ghosh,“Rural recovery couldslowdownascasesrise,says Ghosh,” 2020, Debraj Ray andS.Subramanian, “India’s Lockdown: AnInterimReport,” NBERWorking Paper, May “COVID Policy Tracker,” Oxford University, https://github.com/OxCGRT/covid-policy-trackert. article/ppr/ppr183813#A1 Suvrat Raju,“DidtheIndianlockdown deaths?”medRxiv, avert July5,2020, Lockdown/23-05-2020-193002/ Cites-Various-Statistical-Models-Says-Averted-Between-1-4-million-2-9-million-Cases-Due-To- Due To Lockdown,” Business World, May 23,2020, “Government Cites Various StatisticalModels,Says Averted Between1.4Million-2.9MillionCases forecast/gdp-annual-growth-rate “GDP AnnualGrowth Rate-Forecast 2020-2022,” Trading Economics, https://www.nber.org/papers/w27282 https://www.washingtonpost.com/world/africa/ethiopia-enters-3rd-week-of-internet- https://www.livemint.com/news/india/rural-recovery-could-slow-down-as- www.businessworld.in/article/Government- https://www.medrxiv.org/ https://tradingeconomics.com/ https://europepmc.org/ 95 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD 96 12 U.S. hadlittleornoaccessto technologyforlearning. school closures, 1in 10 ofthepoorest children inthe are alsostaggering.For example,duringtheCOVID-19 access to remote differences learning,within-country school systems? How to transform countries were. learning, whilecloseto 90percent ofhigh-income low- income countrieswere providing of anytypeof remote percent 25 than less that pandemic—found Analysis inmid-April 2020—intheearlythroes ofthe all have to theskillsnecessary thrive. deliveringtoneeded education quality the ensure that tooin systems education that werecountries many not thereout ofschoolinearly2020, was a global consensus Even before COVID-19students leftasmany1.5billion The issue with a handful of their favorite friends by a teacher hired during thepandemic. They are taughtintheirhomes around the globe,schoolinghasnever beenbetterthan Yet, forafew young peopleinwealthycommunities Global education: Education, Brookings Institution Senior Fellow andCo-director, CenterforUniversal Rebecca Winthrop Center forUniversal Education, Brookings Institution Senior Fellow andCo-director, Emiliana Vegas and life. basic secondary-level skillsneededto thrive inwork of childrento inhigh-incomecountriesfail masterthe of children inmiddle-incomecountries,and30percent percentchildren of percentcountries, 50 low-income in burden, with pre-pandemic analysis estimating that 90 children across theheaviest theglobewhocarry 2
3
Ontop ofcross-country differences in 1
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4 97 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD by their parents.5 Some parents have connected via social media platforms to form learning pods that instruct only a few students at a time with agreed-upon teaching schedules and activities. While the learning experiences for these particular children may be good in and of themselves, they represent a worrisome trend for the world: the massive acceleration of education inequality.6 The idea
The silver lining is that COVID-19 has resulted in public recognition of schools’ essential caretaking role in society and parents’ gratitude for teachers, their skills, and their invaluable role in student well-being. It is hard to imagine there will be another moment in history when the central role of schooling in the economic, social, and political prosperity and stability of nations is so obvious and well understood by the general population. The very fact that schools enable parents to work outside the home is hitting home to millions of families amid global school closures. Now is the time to chart a vision for how education can emerge stronger from this global crisis and help reduce education inequality. Indeed, we believe that strong and inclusive public education systems are essential to the short- and long-term recovery of society and that there is an opportunity to leapfrog toward powered-up schools. A powered-up school, one that well serves the educational needs of children and youth, is one that puts a strong public school at the center of the community and leverages the most effective partnerships to help learners grow and develop a broad range of competencies and skills. It would recognize and adapt to the learning that takes place beyond its walls, regularly assessing students’ skills and tailoring learning opportunities to meet students at their skill level. New allies in children’s learning would complement and assist teachers, and could support children’s healthy mental and physical development. It quite literally would be the school at the center of the community that powers student learning and development using every path possible (Figure 12.1).
98 “ stem-education/ https://oese.ed.gov/2015/11/communities-come-together-to-support- Source: Adaptedfrom Office andSecondary Education, ofElementary Powered-up schools Figure 12.1 understood bythe general population. and stabilityofnations issoobviousandwell the economic,social, andpoliticalprosperity in historywhenthecentral role ofschoolingin It ishard toimaginethere willbeanothermoment Institutions Families protection agencies Health andsocial Technology Schools Out ofschool Business programs 99 REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD While this vision is aspirational, it is by no means impractical. Schools at the center of a community ecosystem of learning and support are an idea whose time has come, and some of the emerging practices amid COVID-19, such as empowering parents to support their children’s education, should be sustained after the pandemic subsides. The way forward To achieve this vision, we propose five actions to seize the moment and transform education systems (focusing on pre-primary through secondary school) to better serve all children and youth, especially the most disadvantaged.
Leverage public schools and put them at the center of education 1. systems given their essential role in equalizing opportunity across society By having the mandate to serve all children and youth regardless of background, public schools in many countries can bring together individuals from diverse backgrounds and needs, providing the social benefit of allowing individuals to grow up with aset of common values and knowledge that can make communities more cohesive and unified.7 Schools play a crucial role in fostering the skills individuals need to succeed in a rapidly changing labor market,8 play a major role in equalizing opportunities for individuals of diverse backgrounds, and address a variety of social needs that serve communities, regions, and entire nations. While a few private schools can and do play these multiple roles, public education is the main conduit for doing so at scale and hence should be at the center of any effort to build back better. Focus on the instructional core, the heart of the teaching and 2. learning process Using the instructional core—or focusing on the interactions among educators, learners, and educational materials to improve student learning9—can help identify what types of new strategies or innovations could become community-based supports in children’s learning journey. Indeed, even after only a few months of experimentation around the globe on keeping learning going amid a pandemic, some clear strategies have the potential, if continued, to contribute to a powered-up school, and many of them involve engaging learners, educators, and parents in new ways using some form of technology.
100 4. 3. 5. ouetto, elcin qik edak op, andcourse loops, feedback quick reflection, documentation, research methodswillneed to be complemented by real-time teacher, but they are, based on several large-scale surveys, around the world are not interested in becomingtheirchild’s toschools realize alliesparents what powerful canbe. Parents intoinvolvedthat is theskill teachers and teaching andfor in for parents andfamiliestoCOVID-19 gain insight isanopportunity what issoessentialto bringingparents onboard. feasiblebut role. The natureand the of theinvitation relationship is adapt to parents’ schedulesandthatprovide parentswith anactive communicated throughunderstand information mechanismsthat families toinviting children’s bealliesin learning by easy-to- using children happens, and schools learnandthrive. byThis occurs When arespectfulrelationship among parents, teachers, families, teachers Forge stronger, more trusting relationships between parents and student engagement(through, for example,videosandgames). forstudentpractice; and (4) increasing(3) expanding opportunities example, computer-adaptiveliveor learning tutoring); one-on-one differentiatedteaching); (2)facilitating (through, instruction for (by,instruction prerecordedexample, for high-quality of lessons coreinstructional through thefollowingways: (1)scalingupquality interactionsthe crucial help improve the in by learning supporting Other recent research school closures. topositioned offering continue the face of in education quality best prepared to useeducationtechnologyeffectively willbebest that aresystems School After COVID-19,certain: one thingis a costlydistraction teaching andlearningneedsprevent technologyfrom becoming Deploy educationtechnologytopowerupschoolsinawaythatmeets o mly h picpe o ipoeet science. improvement of principles the employ to words,other In what enablingconditions. under a moment is this take aniterative approach toand whom, for what works, learning The speed and depth of change mean that itwillbeessentialto power upschoolsovertime course correct, document,andscalenewapproaches thatcanhelp Embrace theprinciplesofimprovement sciencerequired toevaluate, capable orwillingto helptheirchildren learn. are not think thatparentsand familieswiththe leastopportunities sector ofthoseintheeducation is challengingthemindset who apowered-up school supporting for insights important the most tobe engaged a different, in more active waythe future.in Oneof 10 by one of us finds that technology can technology that finds us of one by 12 Traditional 11 asking 101
REIMAGINING THE GLOBAL ECONOMY: BUILDING BACK BETTER IN A POST-COVID-19 WORLD correction. Rapid sharing of early insights and testing of potential change ideas will need to come alongside the longer-term rigorous reviews. Adapting the scaling strategy is especially challenging, requiring not only timely data, a thorough understanding of the context, and space for reflection, but also willingness and capacity to act on this learning and make changes accordingly.
Emerging from this global pandemic with a stronger public education system is an ambitious vision, and one that will require both financial and human resources. But such a vision is essential, and that amid the myriad of decisions education leaders are making every day, it can guide the future. With the dire consequences of the pandemic hitting the most vulnerable young people the hardest, it is tempting to revert to a global education narrative that privileges access to school above all else. This, however, would be a mistake. A powered-up public school in every community is what the world’s children deserve, and indeed is possible if everyone can collectively work together to harness the opportunities presented by this crisis to truly leapfrog education forward.
Emerging from this global pandemic with a stronger public education system is an ambitious vision, and one that will require both financial “and human resources.
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org/our-ideas/six-core-principles-improvement/ Foundation fortheAdvancement of Teaching. August 18,2020. “The SixCore PrinciplesofImprovement.” The SixCore PrinciplesofImprovement. Carnegie uploads/2020/05/LH_2020-Parent-Survey-Partner-1.pdf Learning, 2020. “Parents 2020:COVID-19 Closures: ARedefiningMomentforStudents, Parents &Schools.” Heroes, learning-for-all/ https://www.brookings.edu/essay/realizing-the-promise-how-can-education-technology-improve- education technologyimprove learningforall?”Brookings Institution,September2020, Alejandro J.Ganimian,EmilianaVegas, andFrederick M.Hess,“Realizingthepromise: How can learners, andcontentaddedparents. both frameworks, usingtheterminstructionalcore to describetherelationships betweeneducators, and competencieshowto assessthem.Here wehave pulledfrom elementsthatwelike from educational materialsandaddedanewelementofcontentto represent thechoicesaround skills later adaptedtheframework usingthetermseducators, learners,andresources to represent terms teachers,students,andcontent. The OECD’s initiative on“Innovative LearningEnvironments” David CohenandDeborah Loewenberg Ball,whooriginatedtheideaofinstructionalcore, usedthe Management 6,no.4(1987):628-41 M.“EducationLevin, Henry asaPublicandPrivate Good.” JournalofPolicy Analysisand schools/537903/ September 11,2017. Christakis, Erika.“Americans Have Given UponPublicSchools. That’s aMistake.” The Atlantic. articles/2020/07/29/could-the-pandemic-pod-be-a-lifeline.html Parents ora Threat to Equity?” Education Week. August 18,2020. Samuels, ChristinaA.,andAriannaProthero. “Couldthe‘Pandemic Pod’ BeaLifeline for parenting/school-pods-coronavirus.html on Their Own?” The NewYork 22,2020. Times. January Moyer, MelindaWenner. “Pods, Microschools and Tutors: CanParents Solve theEducation Crisis https://www.census.gov/newsroom/press-releases/2020/household-pulse-results.html “U.S. CensusBureau ReleasesHouseholdPulseSurvey Results.” UnitedStatesCensusBureau, 2020, closures-government-responses-and-learning-inequality-around-the-world-during-covid-19/ during COVID-19.” Brookings Institution,April14,2020. Vegas, Emiliana.“SchoolClosures, Government Responses,andLearningInequalityaround theWorld https://report.educationcommission.org/report/ Commission onFinancingGlobalEducation Opportunity. “The LearningGeneration: Investing inEducation foraChangingWorld.” The International before-covid-19/ brookings.edu/research/beyond-reopening-schools-how-education-can-emerge-stronger-than- stronger thanbefore COVID-19” by thesameauthors,whichcanbefoundhere: https://www. This essay isbasedonalongerpapertitled“Beyond reopening schools:Howeducationcanemerge https://r50gh2ss1ic2mww8s3uvjvq1-wpengine.netdna-ssl.com/wp-content/ https://www.theatlantic.com/magazine/archive/2017/10/the-war-on-public- https://www.brookings.edu/research/school- https://www.nytimes.com/2020/07/22/ https://www.carnegiefoundation. https://www.edweek.org/ew/
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