The most important lesson of the epidemic is the need to solve the joint problem
The International Monetary Fund published an article in which leading experts shared their views and forecasts of how the coronovirus epidemic would change the world community.
Economic inequality, employment challenges and increasing digitalization
Daniel Saskin, an economics researcher at Oxford University’s Balliol College and author of The World Without Work, said that to stop the spread of coronovirus, world leaders needed a “political response in the form of an artificially stimulated economic disaster”.
The expert stressed that many aspects of the current crisis are not new. Among them, he said:
- Economic disparities reflected differences in COVID-19 rates and treatment outcomes;
- The inability of the market to adequately assess truly important sectors, resulting in significant discrepancies between the “critical categories of workers” and the social value of the work done by their low wages;
- The lack of properly coordinated measures at the international level, against the backdrop of rising populism, a decline in confidence in experts and “my country tops” the political course of various countries of the world.
Suskind emphasized that the current crisis has drawn the collective attention of society to the multitude of injustices and shortcomings that are now “difficult to ignore.”
James Maniaca, president and director of the McKinsey Global Institute, said the epidemic has reinforced the development of such trends in the global economy:
- Development of Digital Economy – Against the background of increasing frequency of use of digital technologies (distance work, for distance education, receiving telemedicine and delivery services);
- The acceleration of structural changes – with the possible regionalization of supply chains and the advancement of cross-border data flows.
Furthermore, according to Maniyka, Coronarasis has multiplied the problems of the employment sector:
- Income polarization;
- Vulnerability of workers;
- Increase in the number of short-term contracts;
- Workers need to adapt to changing occupations.
“The economies of countries and labor markets will take time to recover, and there is a high probability that they will eventually undergo many changes.”
As the impact of these trends increases, the realities of the current crisis have modified many existing beliefs that may influence the adoption of long-term decisions in the socio-economic arena.
He also said that inspections of health systems often reveal their inefficiencies, while Social benefit concepts (Paid sick leave, unconditional basic income) has received renewed attention. As a result, one can expect Long-term change in social protection Citizens and a more inclusive social contract, the expert said.
Need for reform and support for developing countries
The COVID-19 pandemic “continues to challenge the limits of global cooperation,” said Jean Saldanha, director of the European Credit and Development Network. Very low level of support for developing countries… The expert noted that such countries faced a global economic slowdown in the early stages, including record capital outflows and poor financial condition.
According to Saldani, the United Nations should develop a reform program, in which the IMF should also participate, to address structural problems that have increased the debt burden of developing countries. Improvement program should include:
- Using development finance for reforms to revive the market and create incentives to attract private investment;
- Denial of the dogma of austerity;
- Fulfillment of official development assistance commitments by rich countries;
- Fixing the imbalance of power within international institutions to recognize the needs and rights of two-thirds of the world’s population living in countries of the “global south”.
“A new multilateral system, in which the reform of Bretton Woods institutions will play an important role, is now needed, and should be based on a development approach that focuses on human rights, gender equality and climate issues,” Saldah.
Asylum Barrow, Secretary General of the Federation of International Trade Associations, said that after the first wave of COVID-19, the world should become more inclusive, sustainable and resilient.
According to him, as a result of race from below in trade regulation, as well as in relation to poverty among representatives of a large part of the global workforce, inequality between countries and regions has increased within countries.
Barrow noted that many countries have suffered external shocks due to the lack of COVID-19:
- A universal social security system, a reliable health system, and plans to achieve carbon neutrality by 2050;
- A stable real economy with quality jobs.
According to the expert, public investment in care, education and low-carbon infrastructure services can be a stimulating foundation to reduce inequality.
Wage policies, collective bargaining and labor market regulation can revive demand and restore income levels, as well as abolish business models that waive liability for employees who hire a company allows for.
The debt problem must be resolved through a debt relief process focused on achieving the United Nations Sustainable Development Goals and maintaining sustainable economic growth in each country.
Part-time employment to keep jobs
Professor of International Finance in the School of Management. Kellogg University Sergio Rebelo of Northwestern University believes that the COVID-19 epidemic has taught the world many important lessons that will have lasting effects for the global economy.
According to the expert, countries need to invest in infrastructure designed to detect future outbreaks of the virus. “Such investments will protect the economy if the population’s immunity to COVID-19 is temporary,” Rebelo said.
Rebelo stated that during the epidemic, many countries adopted options for the German part-time program – Kurzarbeit… This program ensures the preservation of jobs by reducing working hours and wages; However, the government compensates to some extent for the loss of wages. By maintaining labor relations between companies and employees, the economy will be better prepared to recover quickly.
Mechanisms for implementing such programs should be improved and become part of the existing set of tools for economic recovery. Also, according to the expert, remote tasks may be more extensive.
He said that the epidemic crisis has accelerated the process of digitization with the further proliferation of e-commerce and increased the pace of adoption of telemedicine, video conferencing, distance education and financial technology.
Rebelo hopes that some companies have experienced supply shortages and other difficulties, which may return part of the previously withdrawn production to their countries. Also, according to his forecast, this trend will not create a large number of jobs, as the bulk of production is likely Will be automated…
Governments, insurance companies and act as last resort investors will become more important in times of crisis. The national debt will grow rapidly, causing financial problems around the world.
Ian Bremer, president and founder of the Eurasia Group, said that coronoviruses accelerated three major geopolitical trends that would underlie the new world order:
- Deglobalization The gradual departure from the use of global value chains due to logistical difficulties that ensure timely delivery.
- Localization of business activities As companies transition to nationality and regional supply chains, the number of economic problems increases with the increasing influence of nationalism and politics under the slogan “My country is above all”.
- The possibility of a Cold War between China and the United States. The Donald Trump administration is actively exploiting and reinforcing the general distrust of the PRC in its election campaigning strategy to try to hide information about the coronovirus outbreak. However, China, as Ian Bremer explains, “will not be left as such.”
We will recall, last week, that Donald Trump signed a bill on sanctions against China, as well as an executive order to deprive Hong Kong of US trade and economic priorities.
According to the US president, such measures were introduced to hold China accountable for its “discriminatory actions” against the people of Hong Kong.
It is a US bill that provides for sanctions against Chinese individuals and legal entities in relation to the situation in the PRC’s Special Administrative Region, where a new law on national security came into force on 1 July.
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