- COVID-19 presents us with many challenges, the greatest of which could be a loss of confidence in our institutions.
- It has exacerbated existing tensions and created new ones.
- We must tackle these challenges with purpose and urgency – or risk deepening social and economic crises, too.
The pandemic is very different from previous crises - not only because of its origin, its effects and its severity, but also because of the response from governments and its social impact. There are several combined crises: health, economics, fiscal, sectoral and, in many cases, political.
Perhaps the biggest challenge we face is a deep recession of confidence. Not only in the institutions, which had been suffering for a long time, but now also among people, in neighbourhood shops, in favourite restaurants and in the local economy in general. This is a major challenge for the recovery of the economy, which will leave scars that are difficult to eliminate.
The world was already experiencing pockets of tension before the pandemic, and the current crisis is accentuating those trends. The financial crisis of the past decade left many disappointed with the capitalist-liberal system – people who concluded that globalization worked only for a few, leaving the majority behind. This culminated in Brexit and the election of populist leaders in several countries.
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But COVID-19 has changed the cards for all players. It is a completely new game.
We are in the midst of the deepest recession in the history of most countries in times of peace. IMF, World Bank and OECD studies show a devastating impact around the world. However, the effect is not the same for all countries or sectors of the economy, and consequently for all people. It’s like being in a storm in the middle of the ocean. Everyone feels the impact of the huge waves. But some of us are in a large transatlantic ship, whereas others have to swim on their own.
What will the world be like after the pandemic? In general, there is little visibility and a lot of speculation. But some things we know for sure, and others seem reasonably possible: accelerating digitalization, increasing public and private debt, changes in value chains and consumption patterns and greater political polarization.
In the face of much larger deficits to avoid a negative spiral in the economy, society will find it difficult to accept austerity policies. Tax increases are possible, especially for higher incomes and for companies.
Governments are looking for ways to increase the resilience of both society and the economy against future crises. Many advocate incentives for local production and consumption, which can lead to protectionist measures.
Politics will also be more polarized. The conflict, which comes from before, between a more nationalist right and a more progressive left, seems to have been exacerbated in many countries. These groups will struggle to define what role a more assertive state should play.
At the geopolitical level, the rivalry in fields where traditionally there was collaboration has been accentuated. Even during the Cold War, the blocs found points of convergence in health, technology and the environment. Currently, these three areas face challenges due to a greater dispute between countries.
What is the World Economic Forum doing to manage emerging risks from COVID-19?
The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.
As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.
To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications - a companion for decision-makers, building on the Forum’s annual Global Risks Report.
Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.
In other aspects we are much more ignorant. Is it possible to completely control the disease? We do not know if and when a vaccine will work. We do not know what the path to economic recovery will be like.
It is essential to have a sense of urgency if we are to rebuild a more inclusive and sustainable economic model. If we do not face the challenges accentuated by the pandemic, the social crisis will intensify, leading to greater polarization and even more intense confrontations. It is up to all of us that the human and economic tragedy is not the only legacy of this crisis. It is not a question of starting from scratch, but of starting better.
A Portuguese version of this article was published in Brazil by the Folha de São Paulo on 12/07/20