Having said goodbye to 2020 with all its hardship, we arrived in 2021 that will bring its own difficulties and problems, but also some opportunities to improve people’s lives. Hereafters are five challenges we believe are most important to deal with.
Inequality
One of the main challenges for 2021 will be to restore the deep economic and social fracture opened by the pandemic. Income and wealth inequality is certainly not a new issue. The World Inequality Database reveals that, even before the pandemic, the poorest 50% of the population owned on average less than the 10% of the global wealth.
The global recession in 2020 has worsened this divergency, revealing all the fragilities of the Western welfare systems. Indeed, the economic crisis due to the COVID-19 hit a lot of sectors and had the most devastating impact on the unemployed, women, occasional workers, young people or those who belong to the “informal” economy. According to Eurostat, between summer 2019 and summer 2020, the employment rate for young people with a medium level of education decreased by 2% in most of the EU, while the category of workers with low skilled jobs has suffered a collapse of 10%.
No national government or supranational institution can free itself from dealing with this situation, which risks becoming socially explosive. Thus, it will demand expansionary budget policies, in countertrend with respect to the last decade, crucially reaffirming progressive taxation.
Vaccination
A hot topic in these days are the vaccines and the prospect of defeating COVID-19. The first vaccines are now approved by the authorities, while a number of other vaccines are still in clinical trials or awaiting authorization. We are applauding the European Union for the 200 million doses currently ordered, but this is just the first step. A lot of work is yet to be done to produce, deliver, distribute, and administer the approved vaccines, as well as to provide public education to ensure that more people accept them.
Looking at richer countries being privileged in the distribution of doses, we cannot forget about who is doing worst. At the beginning of the pandemic, lots of countries, especially in Africa, had issues due to the supply of health devices: a similar scenario for the vaccines would be a terrible defeat for the supranational institutions. It should be their duty to organise an equal and accurate distribution, which comprehends huge financial funds where necessary. Thus far, the COVAX project is active in order to address this challenge, however, health authorities are still really worried.
Public Debt
In order to try to mitigate the economic consequences of COVID-19, a lot of countries undertook support and relief programmes for citizens, free-lance professionals and private enterprises, often financed by public debt. These deficits and the inevitable contraction of the economy have led to a strong increase in the debt/GDP ratio. In Europe, it increased by 10-20% on average, overcoming the absolute threshold of 100%.
Even though a higher use of debt does not raise particular concerns in the short term, there is a risk that it is not sustainable in the long run. Indeed, interest rates on debt are extremely low (even negative in some cases), and inflation is lower than the medium run objective of 2% (0,3% in 2020 and 1,1% in 2021 in Europe). Probably, we should be used to live with a high debt/GDP rate in the future. Going back to austerity measures would put the growth forthcomings in danger (further, not automatically guaranteeing a reduction of the debt/GDP rate). As suggested by economists as Olivier Blanchard and Larry Summers, the focus must be on using new debt in order to stimulate growth and making the rate debt/GDP rate sustainable.
Environment
Our analysis could not miss the environmental issue. An economic recovery with rising production and consumption can bring a huge increase in pollution.. At current state of technology, renewable sources are not able to sustain the energetic production at global level. Indeed, further research and trials are needed.
Meanwhile, there is a lot we can trust on and having hope for. The progress in alternative production systems which applies concepts of the circular economy is remarkable. Rethinking Economics collaborates with “Regeneration Italia”, a project which has as first objective the development and the implementation of mechanism of production completely sustainable and eco-friendly.
Some firms and corporations seem to have embraced the concept. In particular, the ESG (Environmental, Social, Governance) criteria are gaining an impressive relevance in the management of enterprises and especially among the investors.
Education
On the 2021 agenda, especially here in Italy, there should be education.
Face to face teaching has all the premises to take off for safety at school, especially for college students. But not in Italy… Were the 2.9 billion euro allocated for a safe restart not enough? Or the adopted measures were not appropriate? Or maybe, it is a matter of priorities. For a long time, education and research have not been priorities for Italy. The rate of investment in research and development amounts to 1.53% GDP, much lower than the EU average (2.49%).
Huge investments in education, research and development and in the employment of the best brains (otherwise draining) should be a priority in the 2021 agenda. Italian students who invest resources in their education have to to look for a job somewhere else where to create value, a value which is the key for a strong restart and a sustainable growth.
Just five challenges?
We have chosen to deal with issues we feel competent about and that we claim to be more urgent, among all those which are troubling the global society. However, it is worthwhile to highlight that this list is not exhaustive at all and many compelling issues are left to be considered. At the same time, we think we have provided a useful point of view to anyone who wants to act and comprehend the main causes of these hard situations and catch the insights in order to try to solve them.
Sources
https://www.camera.it/temiap/documentazione/temi/pdf/1105338.pdf?_1591284462151
https://www.istat.it/it/files//2020/09/Ricerca_e_sviluppo_2018_2020.pdf
https://voxeu.org/article/post-pandemic-debt-sustainability-eueuro-area
https://ec.europa.eu/italy/news/20201105_previsioni_economiche_d_autunno_2020_it