As the world grapples with the socio-economic consequences of the COVID-19 pandemic, there is increasing demand to shape a new economy that addresses broader societal and environmental challenges while generating economic growth. To achieve this, the world needs to set an ambitious agenda of technological and socio-institutional innovations to pilot new markets that can help solve these challenges.
The World Economic Forum highlights 20 markets that could transform our economies. Some will rely particularly on advances in technology (e.g. broad-spectrum antivirals, spaceflights), while others will require radically new social and institutional set-ups (e.g. skills capital, water rights, quality credits). Others will emerge from a combination of both elements (e.g. data, genes and DNA sequences). Each of these markets has potential benefits in multiple dimensions. For example, they could help societies to protect and empower people (e.g. precision medicines and orphan drugs, EdTech and reskilling services), advance knowledge and understanding (e.g. artificial intelligence, spaceflights, satellite services), or protect the environment (e.g. greenhouse gas allowances, reforestation services, hydrogen).
“While protecting people remains the priority at present, now is also the time to plan a post-pandemic transformation of our economies. We must ensure that new economic activities do not only generate growth but also provide solutions to the problems that our societies are facing, said” says Saadia Zahidi, Managing Director, World Economic Forum. “The future of our economies, societies and the planet depend on developing these new, inclusive and sustainable markets.”
Creating these markets will require close collaboration between the public and the private sectors to:
- Invent new products that can be sustainably produced
- Nurture a set of companies to produce new products and bring them to market
- Foster enough demand to sustain a commercially viable market
- Establish clear standards that all actors can rely on and the market can converge on
- Create alignment within society on how to value the new product
- Develop the legal frameworks to identify, hold and exchange the new product
- Build the necessary infrastructure to exchange, distribute and store the new product
Coalitions of actors at country and global level can come together to pursue the establishment of these conditions. For optimal societal outcomes, these markets should be designed around fairer and more sustainable ways of producing and distributing value. Examples include more collaboration between the public and the private sectors, innovative models to finance research and development, and designing the public sector’s risk-taking into the new ventures. Public institutions have a key role to play in catalysing public-private collaborations and create the systemic conditions for selected markets to emerge.
A preliminary mapping of countries’ potential for breakthrough technological and socio-institutional innovation indicates that those with advanced technological capabilities, strong social capital and future-oriented institutions are likely to succeed in developing a broader set of new markets. In particular, the Netherlands, Luxembourg, Denmark, Germany and Norway have the highest potential for socio-institutional innovation, while Japan, Germany, the United States, the Republic of Korea and France have the highest potential to generate breakthrough technological development.
Most advanced economies also score highly across both these dimensions. A number of high-income economies from the Middle East (Bahrain, Saudi Arabia, United Arab Emirates) and East Asia (Indonesia, Malaysia) as well as a few small island states (Barbados, Cyprus, Malta, Mauritius, Seychelles) and emerging African countries (Kenya and Namibia) can rely on significant levels of social capital and future orientation of policy-makers but do not yet have a mature technological system. A smaller group of advanced economies (Czech Republic, Israel, Italy, Japan, Spain) as well as the BRICs and other emerging economies (Hungary, Poland) present solid technological systems but need development in the social and institutional fabric to deliver these markets.
The disruptions brought by the COVID-19 pandemic provide an opportunity to pilot breakthrough technological and socio-institutional innovations that can grow into entire new markets. Success will ultimately depend on how well multistakeholder actors work together to create the necessary conditions for a number of key new markets to emerge that will help make economies more inclusive and sustainable. Existing market structures are not neutral; high levels of concentration and market power in adjacent industries to the new markets might slow down or even curb the establishment of such new markets.