Hoping for a roaring 20s

If I say 2020 was the worst of times, most will justifiably react "duh!" Believe it or not, some say it was the best of times, the year of wisdom, breakthrough in medical science and digitisation.

Unfortunately, the price was a little too high.

There was no real choice once the virus invaded. On balance, looking back at 2020, all I can think of is good riddance to a year that blended all the days into one, making it awfully hard to parse the details of what happened. Most of the year seems like a blur.

The confluence of events and their immediate consequences have challenged societies in 2020 in ways not experienced in the last 100 years. Medicine, economics, psychology, and the art of governance have been impacted like never in retrievable memory.

Much as we would like to forget the year, history will not both because of its vicious disruptiveness across most social classes throughout the globe and some goodness from facing the tough challenges that arose.

Tale of miseries and insecurity

The jury will be out for many years on how 2020 will be remembered. It will certainly be written about extensively and taught in schools as a year of the pandemic, unmeasurable morbidity, major health care tradeoffs, massive unemployment, children out of school, and spontaneously synchronised protests worldwide against inequality and social injustice.

Those who lost loved ones to Covid-19 will find it difficult, if not offensive, to appreciate the collateral benefits of the extra time gained by commuting less, exercising more, preparing meals, remote work, more time with their own family and pet care. These are luxuries only the wealthy and the digitised could afford.

The world has had over 81 million infections, about 1.8 million deaths, and hundreds of thousands more contracting the disease every day. The clock of dismal statistics is still ticking. Covid-19's economic devastation stripped nations of the wherewithal to move towards Sustainable Development Goals 2030. The global economy experienced its worst downfall since the 1930s. All countries, regardless of economic size, have struggled.

Borders closed, workers stayed home, and social activity seized. Covid-19 unravelled and deepened the failure of the global community to bring an end to the economic and social injustices that have plagued the globe for far too long.

Yesteryear's issues such as the climate crisis, inequality, and the pervasiveness of divisive politics are alive and well.

2020 would probably have been an extraordinary year even without the pandemic. Bushfires destroying millions of acres of the Australian landscape kicked the year off. Deadly riots broke in India early in the year precipitated by the Citizenship Amendment Bill and at the end by the farm bills. Streets in Hong Kong resounded in protests against draconian security laws and the outskirts of Beirut rattled by an earth-shattering explosion. Comical leaders, trade wars, Brexit, infodemic, and US elections created a historic calendar, contrasting starkly with the dullness of lives that characterised 2019.

Historians were beginning to salivate to record some momentous positives with the vaccine rollout at the top of the list, thinking the worst of the pandemic may be confined to just one year. But no, 2020 punched a farewell blow with the appearance of a 70% more infectious strain posing threats to the part of the population considered relatively safe from the virus – children.

As 2020 dawned, many hoped that the new decade would witness a time of revolutionary human innovation from the growing global technological capabilities. Indeed, digitalisation has accelerated. The world experienced two years' worth of digital transformation in the first two months of the pandemic. Digital capabilities for remote schooling, e-commerce, or working from home have become more essential than ever.

However, with a pre-existing digital divide in every region of the world, only those on the right side of the divide could cope and some even prosper. The vast majority on the wrong side will save 2020 memories in a folder storing miseries and insecurity.

Unsolicited transformation

With everyone in a completely unfamiliar situation, we were faced with behavioural changes that many are still finding hard to accept. Suddenly, routine interactions were not healthy anymore. Not being able to see people in person, and not just in congregate settings, has been perhaps the most consequential change that the pandemic brought. Even without lockdowns, public interactions are far from normal due to masks and social distancing, not to speak of resisting the habit to hug and shake hands.

Life at the start of 2020 looked like a constant; something that happened over and over every day, without failure. Rarely did people take a moment to appreciate everything that life has to offer. These range from something big, like the opportunity to pursue a career, language, or an art, to something small, like nursing the garden on the rooftop or sneaking out for desserts in the coffee shop at the street corner.

The imperatives of dealing with the pandemic took a lot of these routines away, making societies realise they have been taking for granted things that make life seem so short. Individuals and families have been forced to be flexible and conquer challenges never faced before. People are learning to live their day-to-day lives in ways as different as night and day.

Criticality of collective action

The pandemic presented a quintessential collective action problem, highlighting just how easy it is for governments to fail, even in its core functions, and how important these core functions are for markets to allocate and distribute resources efficiently and equitably, across space and time.

With cities shut down around the world, wildlife blossomed, skies got bluer, water in the rivers and sea cleaner, and air quality fresher. Reduced activity meant declines in harmful greenhouse gases. Experts conjecture the globe could have seen a 5.5% reduction in emissions in 2020, compared with 2019. Yet the news is not all positive for the environment either. Medical waste is on the rise and recycling facilities also had to shut down.

The positive environmental "side effects" are temporary. Similar drops in emissions occurred during the financial crash of 2008. Emissions rebounded in 2010. As more and more people get vaccinated, old habits will inevitably return with emissions and pollution. However, the refreshing pictures of our vast and diverse planet during this pandemic could inspire a greener world. The pandemic, a dramatic gale whipping the globe, and climate change, a far deadlier gathering hurricane, have renewed urgency to international cooperation.

A system of good governance characterised by unity of action, common purpose and coordination at all levels is discernible among countries who managed the pandemic better than others. These include New Zealand, Germany, Australia, Singapore, Thailand, Vietnam, Cambodia, South Korea, Japan, and Taiwan, among the most prominent ones. Successful countries have demonstrated that decisive, cohesive, and evidence-based government action, largely free from political interference, can deliver public good most efficiently.

What enables these is not easily explainable except the cliché that success was due to trust in government. The government's willingness to be led by science builds the trust in leadership needed for the transformative, collective action the pandemic and the ecology demands.

Dealing with the legacy of 2020

The weight of the extended pandemic-related recession could leave an indelible mark on the psyche of consumers and investors. Rising household and corporate debt levels hold implications for financial stability. Non-performing loans and defaults could rise as extraordinary support provided to protect households, jobs, and business tapers.

Central banks have mitigated immediate liquidity risks in most economies. Financing rates for governments in advanced economies have fallen compared with pre-crisis levels despite much higher debt. However, any normalisation steps of central bank policies could lead to a repricing of risk. The pandemic will have a bigger impact on private-sector risk appetite and, hence, investment and growth.

The crisis has altered the expectations of government policies. Post-crisis fiscal policies will likely concentrate on maintaining a pro-growth stance to achieve fiscal consolidation rather than relying on austerity as they did after the global financial crisis. Monetary policy will remain highly accommodative. Revisions to central banks' policies in the context of quantitative easing and ambitions to support green transitions could transform global central banking in the years ahead.

These carry their own long-term risks. If robust higher growth does not materialise over the coming years, large deficits could translate to unsustainable debt dynamics, forcing more permanent central bank interventions and higher inflation.

Outlook moving forward

The global economic recovery began to decelerate amid rising new cases of Covid-19 in many regions in November-December. Developments on the vaccine front have improved sentiments about medium-term growth prospects. This unprecedented breakthrough marks the beginning of the end of the pandemic. Movements in financial markets and commodity prices reflect rising optimism.

The most optimistic view looking forward to 2021 and beyond is that the economic recovery may resemble the Roaring Twenties experienced on the heels of World War I and the 1918 Spanish Flu. Technological advances such as the electrification of homes and factories and the rapid adoption of the automobile, aviation, telephones, radio, electrical appliances ushered in a new decade of solid growth in the 1920s.

As the world emerges from the cloud of the pandemic, months of pent-up demand may unleash a robust period of recovery and expansion. The pandemic has irreversibly triggered productivity increasing trends such as work automation and digitisation of economies.

A more realistic view projects a return to pre-pandemic output levels by the end of 2021. World economies rarely move in lockstep. A synchronous global recovery, where growth in both developed and emerging markets accelerate in the same year, has happened only a dozen times over the past 40 years, the last in 2017.

The recovery path is likely to be uneven and varied across industries and countries, even with an effective vaccine. A modest rebound of 5.2% global economic growth is now expected by the IMF in 2021, much of it fuelled by China's projected 8.2% growth. The return to 2019 levels of GDP per capita around the world will take several more years.

Perhaps the lowest of the low is in the rear-view mirror. The road ahead in 2021 has much better visibility than believed even two months ago. The ride will still encounter a few bumps, nothing good governance cannot handle. A turnaround is in the wings presenting opportunities for accelerated and inclusive recovery that bad governance could squander in many countries. 2021 will be a time of historic consequence, with much riding on how the world's governments answer the urgent call to revitalise global cooperation. It may shape up to be the most significant year for multilateralism in recent memory.

The pandemic provided a temporary exposure to the new models of growth visualised in journal articles. Sadly, the exposure resulted from a despicable disease.

It is up to us as individuals and societies to institute permanent changes in our routines. The pandemic forced environment friendly behavioural changes that all the noise against global warming and the destruction of the natural world had failed to bring about. The stark social inequalities within and between countries will likely be further compounded by disparities in vaccine availability. A radically new approach to prioritising social justice and the natural environment will be needed in the same way that radical health and economic actions were taken in response to the pandemic.