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Amid fears of worst recession in decades, urgent calls for solidarity, a united economic front

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With multilateral cooperation under strain, senior UN officials, Nobel laureates and eminent academic experts, gathered virtually on Wednesday for the launch of a new report recommending “an adjusted approach” to economic development, and a policy dialogue exploring how countries can recover from COVID-19, in ways that lead to real structural transformation.

‘Parallel threats’

“Parallel threats linked to health, economic and social crises have crippled countries and left us at a standstill”, said Liu Zhenmin, Under Secretary-General for Economic and Social Affairs (DESA), as he presented a new report by the High-level Advisory Board on Economic and Social Affairs.

Titled Recover Better: Economic and Social Challenges and Opportunities, it analyses economic trends critical to the achievement of the Sustainable Development Goals (SDGs) and recovery from COVID-19.

Among its recommendations is a greater focus on the environment, he said, as well as promotion of research and development, investment in infrastructure and education, and improvement in economic equality.

“Overcoming the crisis and getting back on track to achieve the Sustainable Development Goals will require a strengthened multilateralism”, he said. COVID-19 has laid bare how much leadership, foresight and collaboration among all Governments and stakeholders, matter.

First global poverty rise since 1998

In a video message, UN deputy chief Amina Mohammed, said as many as 100 million people are expected to be pushed back into extreme poverty in 2020 – the first rise in global poverty since 1998.

“We need all hands on deck if we are to rebuild our economies sustainably and inclusively”, she assured. Noting that the report calls for better international tax cooperation and more equitable access to digital technologies, she said the sustainable management of natural resources, and value-added approaches to trading goods, will also be critical.

The 2030 Agenda remains the agreed framework for recovering in ways that accelerate progress on climate change, poverty and gender inequality, and address the fragilities exposed or exacerbated by the pandemic. “We must all do more,” she said.

Equality, structural reform

During two policy dialogues, 12 experts wrestled with whether the world is currently in a recession and if so, what it will take to recover in ways that can thoroughly reform underlying vulnerabilities.

“There is no trade-off between economic efficiency and equality”, said Alicia Barcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), who contributed a chapter on the topic.

45 million at risk

During a panel on the theme, “Ensuring a sustainable recovery through more inclusive and strengthened multilateralism”, she underscored the urgent need for structural change. Between 2000 and 2010, 60 million people in Latin America and the Caribbean moved out of poverty. Now, 45 million risk being pulled back in.

“The market is not going to equalize society. We need a new social and political compact altogether”, she said, pointing out that Costa Rica, Uruguay and Cuba – societies that have high trust in government – have fared better during the pandemic than others.

She also called for a progressive tax system, as countries in the region have a 23 per cent tax burden, lower than those in the Organisation for Economic Cooperation and Development (OECD), as well as more regional integration. “The post-pandemic world is going to be a world of regions, a world of blocs.”

Ricardo Lagos, former President of Chile, suggested the creation of an internationally binding agreement on pandemics, forged under the auspices of the World Health Organization (WHO).

Europe’s social contract

Along similar lines, Marcel Fratzscher of research institute DIW Berlin, said that on 21 July, European countries agreed to establish a €750 billion ($850 billion) recovery fund, transferring resources from stronger to weaker countries with the goal of rebuilding Europe.

“There is an institutional framework being put into place that could ultimately lead to fiscal union help strengthen capital market union”, he said.

Trade Woes

Others drew attention to the significant drop in global trade, which Merit Janow, Dean of Columbia University’s School of International and Public Affairs, said was occurring in the context of growing nationalism, geopolitical tensions and strain around multilateral institutions – all of which underscores the vulnerability of global supply chains.

The first priority should be to keep the global trading system open, she said. Practical, problem-solving approaches will be needed, which countries might undertake regionally or through “coalitions of the willing”. She pointed out that when the World Trade Organization appellate body disbanded, a cluster of countries agreed on arbitration for some purposes.

Africa needs 4 million teachers

In a second discussion on “Assessing the state of the global economy and recovery pathways”, Cristina Duarte, the Secretary-General’s Special Adviser on Africa, who is the former Minister of Finance, Planning and Public Administration of Cabo Verde, said that for Africa, recovering better requires a look at why, after 25 years of uninterrupted growth, systems are still lacking.

She said Africa must mobilize itself – beyond emergency solutions – to understand the nature and quality of economic growth. The continent was not socially inclusive before the pandemic hit, lacking jobs for 60 per cent of its young people.

She said Africa needs 4 million more teachers and a further 1 to 2 million health professionals – and importantly – to break away from ideas that equate poverty management with development management. Income redistribution, rather than economic growth, must be at the centre of all recovery strategies.

Heizo Takenaka of Toyo University, said Japan’s experience with COVID-19 revealed the need to carefully consider the governance systems in place during an emergency. “We should be very careful about the possibility of asset inflation from here on, considering that monetary authorities are applying a huge amount of money in many countries.”

Historical lens

Broadly speaking, Nobel economist Joseph Stiglitz said that at a moment when more global cooperation is badly needed, strong forces are fraying the global economy.

While the “Trump-kind of protectionism” will go by the wayside, he argued, the deeper problem is that supply chains have not been resilient and instead made countries more vulnerable.

He described the disappearance of optimism prevailing after the US-Soviet Cold War era, that countries were converging around liberal democratic models and free-market economies.

Under the turmoil of COVID-19, authoritarianism is now flourishing in some parts of the world, which has led to a split among nations.

“Post-COVID-19, the world is going to have a very different architecture, no matter who is in the White House, no matter what is going on around the world”, he explained.

Worse than the Great Depression?

He said the global economic downturn will be the worst since the Great Depression of the 1930s – and in many dimensions, worse than that seismic failure of the global system. “We should use the massive amount of Government intervention in countries…to create a new world that is more in accordance with our views of what our societies should be”.

Countries that have done well, he said, have high trust in Government, high social solidarity, an understanding of the externalities associated with disease spread, and trust in science.

“Forty years of denigrating the role of the State means that in some countries, the State was not able perform a role that was essential,” he added.

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Post-COVID-19, regaining citizen’s trust should be a priority for governments

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The COVID-19 crisis has demonstrated governments’ ability to respond to a major global crisis with extraordinary flexibility, innovation and determination. However, emerging evidence suggests that much more could have been done in advance to bolster resilience and many actions may have undermined trust and transparency between governments and their citizens, according to a new OECD report.

Government at a Glance 2021 says that one of the biggest lessons of the pandemic is that governments will need to respond to future crises at speed and scale while safeguarding trust and transparency. “Looking forward, we must focus simultaneously on promoting the economic recovery and avoiding democratic decline” said OECD Director of Public Governance Elsa Pilichowski. “Reinforcing democracy should be one of our highest priorities.”

 Countries have introduced thousands of emergency regulations, often on a fast track. Some alleviation of standards is inevitable in an emergency, but must be limited in scope and time to avoid damaging citizen perceptions of the competence, openness, transparency, and fairness of government.

 Governments should step up their efforts in three areas to boost trust and transparency and reinforce democracy:

 Tackling misinformation is key. Even with a boost in trust in government sparked by the pandemic in 2020, on average only 51% of people in OECD countries for which data is available trusted their government. There is a risk that some people and groups may be dissociating themselves from traditional democratic processes.

 It is crucial to enhance representation and participation in a fair and transparent manner. Governments must seek to promote inclusion and diversity, support the representation of young people, women and other under-represented groups in public life and policy consultation. Fine-tuning consultation and engagement practices could improve transparency and trust in public institutions, says the report. Governments must also level the playing field in lobbying. Less than half of countries have transparency requirements covering most of the actors that regularly engage in lobbying.

 Strengthening governance must be prioritised to tackle global challenges while harnessing the potential of new technologies. In 2018, only half of OECD countries had a specific government institution tasked with identifying novel, unforeseen or complex crises. To be fit for the future, and secure the foundations of democracy, governments must be ready to act at speed and scale while safeguarding trust and transparency.

 Governments must also learn to spend better, according to Government at a Glance 2021. OECD countries are providing large amounts of support to citizens and businesses during this crisis: measures ongoing or announced as of March 2021 represented, roughly, 16.4% of GDP in additional spending or foregone revenues, and up to 10.5% of GDP via other means. Governments will need to review public spending to increase efficiency, ensure that spending priorities match people’s needs, and improve the quality of public services.

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Sweden: Invest in skills and the digital economy to bolster the recovery from COVID-19

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Sweden’s economy is on the road to recovery from the shock of the COVID-19 crisis, yet risks remain. Moving ahead with a labour reform to facilitate adaptation in a fast-changing economic environment, and investing in digital skills and infrastructure, will be crucial to revive employment and build a sustainable recovery, according to the latest OECD Economic Survey of Sweden.

The pandemic triggered a severe recession in Sweden, despite mild distancing measures and swift government action to protect people and businesses. GDP fell by less than in many other European economies in 2020, thanks to reinforced short-time work, compensation to firms for lost revenue and measures to prop up the financial system, but unemployment still rose sharply. Solid public finances provided room for further stimulus in 2021 to buttress the recovery.

 The Survey recommends maintaining targeted support to people and firms until the pandemic subsides, then focusing on strengthening vocational training and skills and increasing investment in areas like high-speed internet and low-carbon transport. Addressing regional inequality, which is low but rising, should also be a priority as the recovery takes hold.

 The Survey shows that Sweden has been among the most resilient OECD countries in the face of a historic shock. Yet, like other economies, it faces challenges from demographic changes and the shift to green, digital economies. Investments in education and training, and labour reforms along the lines negotiated by the social partners, will support job creation and strengthen economic resilience. Building on Sweden’s leadership in digital innovation and diffusion will also be key for driving productivity.

 After a 3% contraction in 2020, interrupting several years of growth, the Survey projects a rebound in activity with 3.9% growth in 2021 and 3.4% in 2022 as industrial production resumes and exports recover. The recovery in world trade is bolstering the Swedish economy, however the country remains vulnerable to potential disruptions in global value chains.  

The pandemic has aggravated a mismatch in Sweden’s job market, with unfilled vacancies for highly qualified workers coinciding with high unemployment for low-skilled workers and immigrants. The public employment service needs strengthening to provide better support to jobseekers, including immigrants and women, and labour policies should strike the right balance between supporting businesses and workers and supporting transitions away from declining businesses towards growing sectors.

A rising share of youths and older people in the population, especially in remote areas, is affecting the finances of local governments, which provide the bulk of welfare services. Strengthening local government budgets and ensuring equal welfare provision across the country will require providing tax income to poorer regions more efficiently and raising the economic growth potential across regions through investments in innovation. Improving coordination between government entities and reinforcing the role of universities in local economic networks would help achieve that aim.

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Fewer women than men will regain work during COVID-19 recovery

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Generations of progress stands to be lost on women and girls' empowerment during the COVID-19 pandemic. Photo: ILO

Fewer women will regain jobs lost to the COVID-19 pandemic during the recovery period, than men, according to a new study released on Monday by the UN’s labour agency.  

In Building Forward Fairer: Women’s rights to work and at work at the core of the COVID-19 recovery, the International Labour Organization (ILO) highlights that between 2019 and 2020, women’s employment declined by 4.2 per cent globally, representing 54 million jobs, while men suffered a three per cent decline, or 60 million jobs. 

This means that there will be 13 million fewer women in employment this year compared to 2019, but the number of men in work will likely recover to levels seen two years ago. 

This means that only 43 per cent of the world’s working-age women will be employed in 2021, compared to 69 per cent of their male counterparts. 

The ILO paper suggests that women have seen disproportionate job and income losses because they are over-represented in the sectors hit hardest by lockdowns, such as accommodation, food services and manufacturing. 

Regional differences 

Not all regions have been affected in the same way. For example, the study revealed that women’s employment was hit hardest in the Americas, falling by more than nine per cent.  

This was followed by the Arab States at just over four per cent, then Asia-Pacific at 3.8 per cent, Europe at 2.5 per cent and Central Asia at 1.9 per cent. 

In Africa, men’s employment dropped by just 0.1 per cent between 2019 and 2020, while women’s employment decreased by 1.9 per cent. 

Mitigation efforts 

Throughout the pandemic, women faired considerably better in countries that took measures to prevent them from losing their jobs and allowed them to get back into the workforce as early as possible. 

In Chile and Colombia, for example, wage subsidies were applied to new hires, with higher subsidy rates for women.  

And Colombia and Senegal were among those nations which created or strengthened support for women entrepreneurs.  

Meanwhile, in Mexico and Kenya quotas were established to guarantee that women benefited from public employment programmes. 

Building forward 

To address these imbalances, gender-responsive strategies must be at the core of recovery efforts, says the agency. 

It is essential to invest in the care economy because the health, social work and education sectors are important job generators, especially for women, according to ILO. 

Moreover, care leave policies and flexible working arrangements can also encourage a more even division of work at home between women and men. 

The current gender gap can also be tackled by working towards universal access to comprehensive, adequate and sustainable social protection. 

Promoting equal pay for work of equal value is also a potentially decisive and important step. 

Domestic violence and work-related gender-based violence and harassment has worsened during the pandemic – further undermining women’s ability to be in the workforce – and the report highlights the need to eliminate the scourge immediately. 

Promoting women’s participation in decision-making bodies, and more effective social dialogue, would also make a major difference, said ILO. 

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