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Wednesday, 28 July 2021

Winds of change after the pandemic

Halting the Covid-19 pandemic is financially and practically feasible as a result of the development of effective vaccines, but we are still awaiting the necessary political will

Mahmoud Mohieldin , Friday 4 Jun 2021
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In the fight against Covid-19, health authorities around the world have been aiming to inoculate at least 40 per cent of the inhabitants of their countries by the end of this year and 60 per cent by the middle of 2022. According to two recent studies by the World Bank and International Monetary Fund (IMF), this will require up-front funding of $50 billion and not just pledges made at conferences. The sum is paltry when compared to the daily cost of dealing with the economic and social tolls of the pandemic. The reports add that the funding should prioritise providing facilities for testing, treating and preventing infection with the virus and increase the capacity to produce and distribute the vaccines. It should support healthcare systems to better enable them to perform their work and support poorer countries in their efforts to access and deliver the vaccines. 

In addition to such essential funding, action must be taken to facilitate the trade in vaccines and to ease restrictions on the intellectual property rights that keep developing countries with the capacities to meet international standards from manufacturing the vaccines. It has been eight months since India, South Africa and other developing nations submitted a proposal to the World Trade Organisation (WTO) for this purpose. However, it continues to encounter European opposition despite the recent US approval to go ahead with the process.

There also needs to be an international drive to induce the developed nations to donate surplus doses to the underdeveloped countries. Some developed nations have secured an estimated ten times their actual need for vaccines. In short, stopping the pandemic is financially, commercially and practically feasible after the scientific victory in developing the necessary vaccines in record time. The only obstacle is the lack of international political will. 

While attempts to bring the spread of the disease under control in most developing countries remain mired in full or partial lockdowns, economic activity is returning to full steam in other nations and in countries that were most successful in fighting the spread from the outset or that were simply not as badly hit as others. As a result, there is an emergent disparity in the economic recovery, adding a new dimension to already existing disparities between developed and developing nations. 

Within individual countries, the mounting regional, gender, generational and other disparities in the distribution of income and wealth are growing more acute. Although many economic activities sustained major losses during the pandemic, forcing many businesses into bankruptcy, other economic activities benefited. While some lost their jobs in the formal employment sector, governments opened their purse strings for the needy. But here, too, disparities arose due to differences in the amounts of the available funds and in the efficacy with which they reached their intended recipients. 

At the other end of the scale, the assets of the more fortunate increased in value in tandem with the rise in real-estate and stock-market prices. Often such disparities show little direct relation to the usefulness of the work concerned, or a given product’s or service’s added value, or sound cost-benefit calculations. The financial authorities in many countries also did not effectively perform their role in dealing with inequality through efficient and effective taxation systems or well-allocated public spending. 

But such problems cannot be blamed entirely on the pandemic. There were many shortcomings in public-policy design and execution that long predated the crisis.

It should be borne in mind that the economic recovery will not mean a return to life as it was before. Even with past crises of lesser scope and magnitude, there was no going back to the way things were before them. In large measure, this is because no economic crisis, such as that which accompanied the Covid-19 pandemic, has ever occurred without also precipitating a rise in discontent, racist and xenophobic movements, and socio-political polarisation and turmoil, to which the periods following the Great Depression in the 1930s, the emerging markets Financial Crises in the 1980s and the 1990s and the 2008 world financial crisis amply testify. 

Those countries that will be best protected against such phenomena are those that are the most flexible in responding to the needs and aspirations of their societies, the quickest to orient their policies towards generating investment and job creation, and the most effective in creating socio-economic safety networks and countering inflation. 

The achievement of development goals after the crisis and the sustainability of the progress made require the sound and balanced management of public and private financial resources. Also crucial is a properly planned and managed transitional phase towards the realisation of zero carbon emissions by 2050, in accordance with the Paris Climate Agreement. 

Developments related to the major petroleum companies last week, in what was dubbed “Black Wednesday”, signalled a major turning point, thanks to environmental activists pushing for the right to a clean and healthy environment. Within days of the International Energy Agency releasing a report warning of the possible failure to attain the goals of the Paris Agreement, a Dutch court ruled that the multinational oil company Shell must reduce its emissions by 45 per cent within ten years, shorter than the company had originally planned to in order to meet its commitments. 

On the other side of the Atlantic, major investment funds voted to replace two members of the board of directors of Exxon Mobil with environmentalists. The action was a form of protest against the oil company’s foot-dragging in taking serious measures to safeguard the environment. The international credit-rating companies then notched up the risk ranking of the major oil companies. 

This turning point marks the beginning of major changes in the structure of the oil market and the behaviour of oil companies of all sizes in meeting rapidly evolving climate policies and regulations. It is expected that they will incorporate technologies that can enable them to reduce carbon emissions at a faster pace. One CEO of a firm operating in the extractive industries told the present writer that this turning point had been expected but not so soon. When I suggested that the Covid-19 crisis had brought it forward through its accelerating effects, he did not disagree.

Against the backdrop of such accelerating developments, two mechanisms for progress have gained momentum from the fight against Covid-19. The first is a reinforced commitment to sustainable development, which should be seen from the perspective of a comprehensive approach to the realisation of the full gamut of social, economic and environmental aims of 2030 development plans. This inevitably includes investment to counter climate change, but it also involves activating the foundations of good governance, grassroots participation and local and international partnerships. 

The second mechanism is digital transformation. This inherently operates across economic and social sectors and activities. Its constantly developing innovations and new applications have become a way for life for many and serve an ever-increasing range of purposes, from interpersonal communications to educational, health and entertainment services. Digital services are now essential to operations in the manufacturing, transport, energy and utilities sectors. Without them, it would be impossible to perform financial transactions. With them, not just the way central banks operate will change, but so too will the shape of the currencies they will issue in the future. 

These are the winds of change by which we need to set our sails. As an Arab saying goes, catch the wind when you can, for every gust is followed by stillness.

*An Arabic version of this article appeared on Wednesday in Asharq Al-Awsat.

*A version of this article appears in print in the 3 June, 2021 edition of Al-Ahram Weekly

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