The writer, a former editor of The Economist, is co-director of the Global Commission for Post-Pandemic Policy
In the rich north, this summer promises vaccines and forms of restoration. Northerners divide into those happy with their nation’s vaccine programme and those frustrated, those optimistic about a “roaring twenties” and those who fear the light at the end of the tunnel will be snuffed out by a mutant strain. But we share a feeling that the worst might nearly be over. Socially and locally, that may be true.
But the pandemic is far from over in many parts of the southern hemisphere, given India’s catastrophe, the death toll in Latin America and the virus’s resurgence in south-east Asia. Politically and globally, tough challenges lie ahead.
Most western governments played a blinder during the 2008 financial crisis: the lessons of the 1930s were learnt, banking systems were saved, a new depression was averted. There was even effective global collaboration. But in the medium term they failed to confront worsening inequality, depressed real incomes and a multi-faceted alienation that led to populism, nationalism, Brexit and the election of leaders such as Donald Trump. By 2020, relations between the world’s major powers were in their worst state since the cold war.
With Covid it promises to be “déjà vu all over again”, as the baseball coach Yogi Berra once said. Having muddled through the health crisis in ways so far largely forgiven by their publics, and having garnered praise for taxpayer-funded rescue efforts poorer countries couldn’t afford, there is every chance that rich-country governments will again follow tactical success with strategic failure. The trade-offs are just as tough as after 2008. When debating these trade-offs at the Global Commission for Post-Pandemic Policy, six main themes have emerged.
The first is that the human and economic costs of the pandemic have been so huge as to make state investment in support of some public goods a no-brainer. The clearest case is vaccine manufacturing. The US, the UK and China got this right, the EU fumbled it, and Japan totally blundered. But it is not too late. Vaccine capacity remains too small to vaccinate the world speedily and for future booster jabs and hoped-for nasal and oral vaccines.
The other neglected global public good that needs state money urgently is the creation of surveillance labs and detection systems against future zoonotic diseases. The world has far too few of these, especially in places where viral leaps from wildlife to humans are likeliest, perhaps inevitable.
The second point is less gung-ho about public spending: against the consensus, our commission insists that high sovereign debt levels do matter and the risk of inflation must be taken seriously, even with interest rates low. Economic recovery is not just a matter of this year and next but needs to be enabled for the longer term if new, politically dangerous crises — as happened in the euro area in 2010-12 — are not to develop.
Therefore, while governments should not switch quickly to austerity, they do need to transition from consumption and debt-boosting welfare transfers to investment targeted at raising productivity and growth. Accelerating the transition to green technologies should form a large part of this. Intelligent regulation, including minimum wages and reformed labour institutions, need to play a bigger role in treating inequality than money transfers.
Fourth, urgent attention must be given to sovereign debt in poor and middle-income countries, which are hampered by frail public finances and delayed vaccinations. A sharp inflation-driven rise in dollar interest rates could trigger a crisis. Investment in vaccine capacity along with further big donations to the Covax initiative for poor countries will be part of the answer. But there must be an international accord on debt restructuring, akin to the Brady Plan in the early 1990s.
Fifth, efforts to construct such an accord or to collaborate on other issues will confirm how fractured and adversarial relations between the great powers have become. Calls for collaboration need to go beyond virtue signalling and focus clearly on joint provision of critical public goods: vaccination, surveillance, debt, climate. The thrust has to be: talk where you can, act with allies where you must.
The final, and arguably most important, message is that a focus on future threats — new pandemics, bio-terror, cyber and the biggest of all, climate — must begin today. The plainest but hardest lesson of 2020-21 is that fine words about resilience butter no parsnips. Actions that put preparedness at the heart of national security planning, with protected lines in national budgets, are essential. The time to prepare for the next threat is now.
Source: Economy - ft.com
