NEW YORK - The year 2020 is ending with the world caught up in an unprecedented human and economic crisis. The pandemic has contaminated 75 million people and killed 1.7 million. With the lockdowns, the global economy has suffered the worst recession in 75 years, causing the loss of income for millions of people. In such a bleak environment, what will the new year bring? Whilst uncertainty is the only certainty, eight points are likely to be key in the year ahead:
1. A gradual but uneven recovery
With the deployment of vaccines and public support, high-income countries will be on the path to recovery from the second half of 2021. However, middle income and particularly low income countries in Africa, Asia and Latin America will see recovery delayed – unless the UN or China provide them with sufficient COVID19 vaccines and governments escalate public support. The more affected sectors – tourism, travel, hospitality, entertainment and labor intensive activities – will take longer to recover. China was the only country that experienced significant economic growth in 2020 and that trend will accelerate in 2021. International trade will rebound, but it will be a more “deglobalized” world, with diminished global supply chains and more local components.
2. More poverty and inequality in 2021
While a few have benefited from the pandemic such as online shops, remote tools/software, pharmaceuticals and medical services – the majority have not. The International Labour Organization (ILO) estimates that 590 million full-time jobs were lost during the last half of 2020. Numerous social protection measures have been implemented, but these are insufficient and poverty is increasing in all countries. With forty percent of the world population (3.3 billion people) living below the international poverty line of 5.5 dollars per day, the World Bank estimates that 150 million additional people will fall into extreme poverty by 2021. More public support and progressive taxation are needed to redress these trends. However, so far large corporations have benefited most from the trillions of dollars of COVID19 financial relief and assistance programs, contributing to growing inequalities. Poverty and inequalities will lead to more protests in 2021.
3. More public health but unnecessary austerity cuts
A positive aspect of the pandemic is that the world has realized the need for public health systems – generally overburdened, underfunded and understaffed after a decade of austerity (2010-20). While public health expenditure will continue to rise, many are concerned about the threat of new austerity cuts. The unforeseen costs of the pandemic have caused unprecedented levels of debt and fiscal deficits, and governments may resort to austerity cuts and reforms to public services, instead of looking at alternatives to increase budgets such as wealth taxation, fighting tax evasion and illicit financial flows. Governments choosing austerity in 2021 should expect protests and social unrest, given the negative social impacts.
4. Digitalization and changes in the world of work
The pandemic has accelerated technological change at the workplace. More telework and less office time will prevent women from having to choose between work and family and make fathers more involved in household responsibilities. Studies suggest that 47 percent of US companies will let employees work from home full-time after the pandemic. On the other hand, essential workers such as health workers, cleaning staff, delivery drivers or retail employees, will have more bargaining power in 2021, can press harder for better working conditions.
5. Redressing world disorder
US President-elect Biden will renew multilateralism, the Paris treaty and other international agreements, the defense of human rights and the interests of the Pax Americana. The UN will continue to struggle given low financing. Four years of Trumpism and fake news have left their mark upon the world, and despite democratic attempts to improve world order, 2021 will not yet see a reversal of the trend towards authoritarian nationalist governments – for this, more efforts will be needed to fight polarization, inequality and disinformation. Jihadism will continue to increase in Africa and South Asia.
6. An opportunity on climate change
The world would need to replicate the emissions reductions seen in 2020 during the next decade to curb global warming to 1.5 degrees by the end of the century. However, low oil prices may delay investment in alternative energy sources in 2021, even though these will replace fossil fuels in much of the world in the medium-term.
7. The risk of a new financial crisis will remain high in 2021
With industry and services stagnant, investments went to the under-regulated financial sector, where greater profits were to be made from speculation. Stock markets will remain volatile but likely buoyant, de-linked from the real economy. However, rising bankruptcies means that banking risks will increase significantly in 2021.
8. A new roaring 20s
After a year of lockdowns, people will want to make up for lost time and rush to parties, dinners, festivals, shows, sports and travel as soon as possible. The year 2021 may well flourish into a new summer of love, a creative existential time – carpe diem!
The debate on the possible ways out of the current crisis will continue throughout the year. This is an unprecedented crisis that still could have new turns, and governments are learning by doing. Overall, there are two options. One is the restoration of neoliberal policies, austerity and minimal public services eroding welfare, with limited taxation to the wealthy, that will lead to more inequality and social unrest. The other is a more democratic and socially progressive route, where public policies deliver to citizens, including equitable job-creating economic policies with social protection, financed by progressive taxation, the elimination of tax evasion and illicit financial flows. The coronavirus crisis could be turned into an opportunity to make the world a better, fairer place for all in 2021.
Isabel Ortiz, Director of the Global Social Justice Program at the Initiative for Policy Dialogue at Columbia University, was Director of the International Labor Organization and UNICEF, and a senior official at the United Nations and the Asian Development Bank.