Dec 16, 2020 05:35 PM

Opinion: How Countries Can Remake Their Post-Pandemic Economies

Saadia Zahidi is managing director of the World Economic Forum.

As 2020 comes to a close, countries are looking to what lies ahead in 2021. Facing the ongoing public health crisis of Covid-19 and the pandemic’s lasting effects on the global economy, policymakers around the world must take this moment to reflect not just on the immediate recovery, but on how this moment can be used to transform their economic systems.

Growth and productivity alone are not enough without addressing inequality and the environment. There is a critical need to shift policies so that economies make sustainability and social inclusion endogenous to how they function. This requires not just policies to manage environmental externalities or to build safety nets for people, but to build the policies and investments that embed the greener, fairer and people-focused markets of tomorrow. In other words, a country’s economic competitiveness must include how well it supports and protects its people and the planet.

According to the World Economic Forum’s Global Competitiveness Report Special Edition 2020, which analyzed 37 countries for their readiness for economic transformation, countries can revive their economies and societies in the short term and make them more resilient in the long term by following recommendations across four main areas.

1. Create an enabling environment based on a long-term vision

The pandemic has put into stark relief the importance of prioritizing the delivery of public services. To serve their citizens, public institutions must have strong governance principles and transparency to gain public trust. According to the report, the countries most prepared in this area are Denmark, Finland, New Zealand and Switzerland.

Countries must also prioritize the energy transition by upgrading their infrastructure, as Denmark, Estonia, Finland, and the Netherlands show. In the Netherlands, the share of energy from renewable sources doubled between 2008 and 2019, while Denmark is on track for renewables to cover at least half of the country’s total energy consumption by 2030.

No transformation would be complete without analysis of how corporations, wealth and labor are taxed nationally and internationally. There must be a shift toward more balanced and progressive tax structures, as exemplified by the South Korea, Japan, Australia and South Africa.

2. Support people with education, skills and care

As the Forum’s Future of Jobs Report 2020 found, Covid-19 has caused spikes in unemployment around the world and accelerated the shift to automation in the workforce, with 85 million jobs in medium and large businesses likely to be displaced across 15 industries and 26 countries by 2025. To respond to these shifts and meet the needs of the workforce, governments must rethink labor laws and social protections. Germany, Denmark, Switzerland and the United Kingdom are already taking steps to combine adequate labor protection with new safety-nets models.

At the same time, more than 97 million new roles could emerge by 2025 in the “markets of tomorrow” that are adapted to new divisions of labor between humans and machines. This requires governments to update education curricula. The Netherlands, Denmark, Switzerland and Finland are showing promising efforts to maintain schools’ curricula relevant to these changes in the job markets.

With more than 50% of employees requiring reskilling by 2025, countries must also expand investment in the skills needed, such as data analysis, artificial intelligence (AI) and machine learning, and focus reskilling and upskilling efforts on those currently displaced or at greatest risk of job displacement. Countries are experimenting with new ways of providing such support by granting individual skills accounts in countries such as Singapore and France; in France the government provides all workers in the country with up to 800 pounds ($1,070) a year for training programs across a range of disciplines.

Covid-19 has also shown the inadequacy of health care systems that have been slow to adjust to increasing populations in the developing world and aging populations in the developed world. A key priority for economic transformation is to increase eldercare, child care and health care infrastructure to support current and future health needs. Sweden, Finland and Canada are leading the way in allocating a relatively higher amount of public resources to this sector.

3. Build more resilient and future-ready markets

Despite greater stability since the financial crisis of 2008-2009, even before the effects of the pandemic, the financial system displayed some fragility, with issues including increased corporate debt risk and unequal access to finance.

The pandemic and its economic fallout have also exacerbated market concentration across all sectors. Countries should rethink competition and anti-trust frameworks to lower barriers to entry and enhance competition and vibrant business models. Canada, Finland, China and the United States perform relatively well in these areas at present, but all countries must improve this area of regulation to prepare for the new economy.

Countries must also prioritize financial stability while introducing incentives for companies to engage in long-term, sustainable and inclusive investments, focusing on new thresholds for environmental, social and corporate governance standards. Here, Finland, Sweden, New Zealand and Austria emerge as relatively better prepared than other advanced economies. Notably missing at the top of this list is the United States, which is the least ready to perform based on the assessment in the report.

4. Invest in innovation for tomorrow

The technologies of the Fourth Industrial Revolution will be critical to delivering solutions to support recovery from the pandemic. Yet progress has lagged in applying technology to areas such as curbing emissions and providing inclusive social services. More must be done to support public-private collaboration to roll out these technologies, as exemplified by the U.S., Sweden and Japan.

Governments can also support new investments and job creation in the “markets of tomorrow” by developing a network of public institutions that support and implement the science, tech and innovation agenda, as seen in Finland, Japan, the United States, South Korea and Sweden. In the United States for example, the National Institute of Health (NIH) has a long history of creating new markets in areas such as antibiotic drug discovery, rare diseases and, most recently, the development of mRNA vaccines that are currently being deployed for Covid-19. This is achieved by providing grants and other financing schemes that support a rich research and development ecosystem including universities, research centers and promising startups.

Finally, the public sector must play a role in incentivizing firms to embrace diversity, equity and inclusion to foster greater creativity and meeting the needs of more segments of society. China, Sweden, New Zealand and the United States perform best in this area among countries assessed in the report. In Canada, the 50–30 Challenge is an initiative between the government, business and diversity organizations to achieve gender parity on boards and across senior management while increasing the share of under-represented groups to 30%.

Rethinking growth for the post-pandemic economy

The Covid-19 crisis has shown just how critical it is that we transform economies to be more productive, more sustainable and more inclusive. Policymakers have an opportunity and a responsibility to shape new economic systems that benefit their populations and the planet as a whole. From providing 1 billion people with better education, skills and jobs by 2030, to focusing on economic targets beyond GDP, to accelerating the arrival of the markets of tomorrow, the World Economic Forum is collaborating with the public and private sectors to make this economic transformation a reality.

The views and opinions expressed in this opinion section are those of the authors and do not necessarily reflect the editorial positions of Caixin Media.

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