Future-Proofing the Global Economy After COVID-19

Novaira Junaid discussed about global economy with Nobel Laureates.

The COVID-19 pandemic has brought the fragility of our global economy into stark relief, halting swathes of economic activity with devastating consequences. An estimated 305 million jobs have been lost globally, with some of the hardest hit being young workers: One in six young people have lost their jobs. At the same time, in almost every country governments are racking up debt at a terrifying rate, deferring some or most tax payments, and introducing extraordinary stimulus packages through eye-wateringly expensive furlough schemes, grants and cash transfers.

Two Online Science Days 2020 sessions on Monday, 29 June 2020, sought to find solutions to mitigate the current economic crisis caused by COVID-19 and expose lessons that can be learned to future-proof our economies. The first of these was a chance to hear from the three Capitalism after Corona finalists of the Online Sciathon 2020: Group Jonelis, Group Maier and Group Abdelmageed.

Real-World Results From the Sciathon

Group Jonelis’s project aimed to build a data-led approach to predicting decision-making by policymakers during the pandemic and future crises. “If we develop an understanding of the reasons that are leading to decisions – decisions where protests all around the world are rising now – we can be more effective in dealing with a global pandemic or whatever will come in the future,” explained group member Elizabeth Burkhart. They did so by comparing government responses via the stringency index (OxCGRT) with Google searches for coronavirus, which acts as a proxy for public interest in the pandemic. Among other results, analysis showed that public interest, not increased number of confirmed cases, directly affected stringency measures.

Group Abdelmageed’s work centred around the hypothesis that COVID-19 may have accelerated digitalisation and automation of many roles across the globe and what this means for labour markets. “The effects of COVID-19 on vulnerable workers are undeniable – they are shared worldwide,” stated group leader Samar Abdelmageed. “Our project suggests a series of parameters and mechanisms for governments to mitigate these (…) consequences on the labour force.” One example for the short term was ensuring business bailouts are conditional on employers retaining staff and offering ICT training programmes. A longer-term proposal was to collect data about the employment sector and study the possibility of labour force restructuring and globalisation by establishing a triple partnership among government, the private sector and civil society.

The last team to present their project was Group Maier, whose focus was on the need to strengthen the social and human aspects of our societies. “We have to listen to those who are suffering from this crisis,” said group leader Stefan Maier. “By listening to them and talking to them, we can develop a strategy to move towards a more social and human form of capitalism.” For the team, this meant building the foundations for a global memorial to those affected by the pandemic that shows the impact of the virus beyond the statistics. Called Covid Voices during the 48-hour Sciathon the team collected 19 personal narratives from people around the world, and predict with further support they can add 5 million a year and 24 million stories in five years!

Any one of these (not to mention the other six) groups would have been worthy winners of the Sciathon, but there could only be one. The team that scooped first place was Group Abdelmageed.

Expertise from Economics

Later the same day, a panel of economists lent their expertise to the question of how to deal with the economic repercussions of COVID-19 in the Debate Corona and the Economy: Mitigating the Crisis.

Peter A Diamond, Robert J Shiller, Jean Tirole and Bengt R Holmström were awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2010, 2013, 2014 and 2016, respectively. These Laureates were joined by Novaira Junaid, a young economist from the Punjab Economic Research Institute (PERI) in Pakistan who will participate in the 7th Lindau Meeting on Economic Sciences next year, and 2017 Lindau Meeting on Economic Sciences Alumnus and Professor at the Vienna University of Economics and Business Jurgen Willems.

The debate began with a discussion of what we can learn from the past. Kicking things off, Diamond shared his view that “the most important way of framing looking back is asking: What from the past doesn’t carry over?” He continued: “For example, this recession and recovery will be very different from all the ones we’ve had before.”

Shiller, meanwhile, felt that economists must integrate not only history, but also psychology, sociology and epidemiology to gain a full insight into the economic impact of COVID-19: “These things do affect economic variables,” he said. “We have to learn from them and understand what people were actually thinking, and what they’re thinking now is surprisingly changing – opening the doors for actual change in our economic institutions.”

Moving on to solutions to the current crisis, Junaid called for greater collaboration between stakeholders: “The role of the state in pandemics swings from relief operations against an immediate threat to human lives, to ongoing research through its institutes (…) in redesigning complementary changes,” she explained. “So in order to generate a fund for attending to both the functions, I believe that the creation of a consortium of developed nations and financial institutions will be needed.”

From a different perspective, Holmström argued that addressing fear is key to recovery: “Without fear this would all be over tomorrow,” he commented during the live Q&A. “I think there’s excessive attention on vaccines and insufficient attention on simple treatments. If you could find a way to make this disease manageable and wouldn’t kill you, I think that would be an absolutely dramatic change.”

Though no firm consensus was reached on a way forward, what was clear was that economists will be very busy long into the future. Tirole, for example, shared a key problem facing France and many other countries: “You have to rescue firms (…) but how do you select viable firms to restructure versus zombie firms?”

And Willems brought up the question of whether investment in health services and the public sector more generally is the key to a better pandemic response in future: “Should there be more investment in the public sector to make sure that we have a higher capacity level?” he asked. “It might be a way to restart the economy again.”

With young economists like Junaid and Willems having to grapple with these questions and find solutions to the economic consequences of today’s pandemic and tomorrow’s crises, the debate ended with some words of wisdom from the Laureates, summed up best by Diamond: “I have a cardinal rule of advice to young researchers (…): Innovations come from the young people (…) not listening to the old people.”