As part of an OECD Forum series, our virtual conference addressing "A systematic recovery" took place on 28 April 2021.
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Five takeaways from NAEC
The COVID-19 pandemic has revealed the interconnectedness, complexity and fragility of our global system. It has highlighted the need—and the opportunity—to build a more resilient system not only able to withstand, but also able to reduce the probability of such crises in the future. This means rethinking the design, operation and management of the overall economic system.
The OECD’s New Approaches to Economic Challenges (NAEC) brought together some of the world’s most distinguished economists to its latest event, A Systemic Recovery, to discuss the policy approaches necessary to develop this resilience on 28 April 2021.
Here are five takeaways from the event.
Martin Sandbu, European Economics Commentator, Financial Times (co-moderator)
Mark Carney, Special Envoy for Climate Action Finance, United Nations
Gita Gopinath, Economic Counsellor and Director of the Research Department, International Monetary Fund
Paul Krugman, Distinguished Professor of Economics, City University of New York
Mariana Mazzucato, Professor in the Economics of Innovation and Public Value, University College London (UCL), and Founding Director, UCL Institute for Innovation & Public Purpose
Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy, Harvard University
- States vs. markets—or states and markets?
Does the market economy allocate capital efficiently? A large portion of the stimulus packages during the 2007–2008 global financial crisis ended up back in the financial system, while sovereign bailouts were disbursed on condition of fiscal austerity measures. It was a missed opportunity to reform markets in favour of productive investment in people and in the real economy. The COVID-19 stimulus responses are different: the European Union’s recovery scheme, for example, is contingent on investment in climate and digital strategies. This shift may represent a “new approach to public-private partnerships that brings together governments and companies to co-create growth”, explained Mariana Mazzucato. It underscores the opportunity to form a new “social compact” to direct capital investment to objectives that target essential public-good outcomes. Other areas that need attention include the intellectual property and competition-policy frameworks. Patents are a state-given right that, managed badly, can discourage innovation and support unproductive entrepreneurship—the opposite of what it is supposed to achieve. Inadequate enforcement of competition-policy frameworks have resulted in regulatory capture, allowing new sectors to grow unhindered. Public sector innovation, moreover, has frequently paved the way for private sector innovation through the de-risking of investment—the internet and GPS being two prominent examples. How should we reassess the respective roles governments and companies, and how they interact—and how do we ensure we get the governance right?
2. Is this the once-in-a-lifetime opportunity to tackle climate change?
In revealing the vulnerability of the world to a global crisis, COVID-19 has revealed the vulnerability of the world to future crises—and there is no graver threat to the world than climate change. The fragility of the world’s economic system underlines the need for much greater resilience in the face of future threats. It is providing an opening for governments, policy-makers and civil society to reimagine what a resilient economy could look like—an opportunity for governments to use their comprehensive recovery packages to create a programme of public investment in partnership with the private sector that can jumpstart the transition to net zero. Building new public-private partnerships where recovery support is contingent on realising green objectives is key. But hurdles remain, including, according to Gita Gopinath and Kenneth Rogoff, agreeing a global framework of carbon pricing. Can governments and companies think afresh about how they bring their many different areas of expertise to the table and form a new “social compact”?
What can governments do to support an inclusive recovery?
The fragility of the world’s economic system is revealed not only in its capacity to confront the climate crisis, but also in its capacity to create a healthy, happy and productive workforce. The pandemic has laid bare the stark contrasts in outcomes in healthcare, jobs, education and training, whether within or between countries. A digital divide has emerged in education, with poorer children more likely to be locked out of remote education. Many of these inequalities have been well trailed. Less obvious have been the effects of policy incoherence or gaps in policy application. For example, fiscal incentives make investing in information technology infrastructure much more attractive than investing in workers, said Mark Carney. An unreformed global tax system has encouraged multinational corporations to avoid paying taxes where they make their profits, weakening public finances and the ability of governments to provide necessary support to, and investment in workers and citizens. What can governments do to put well-being front and centre of their policy prescriptions?
More on the Forum Network: As the Doors Begin to Open: Entering a more inclusive, neurodiverse post-pandemic world by Jonathan Wittenberg, Rabbi, New North London Synagogue
How can the power of digital technology be harnessed for good?
The availability of digital technology has arguably rescued rich countries from the worst effects of the pandemic: many workers were able to continue to work and many learners were able to continue to learn. Not everyone, however, has access, with the emerging digital divide a concern for policy-makers. Moreover, big tech has reinforced its already significant monopoly power. Debates about the displacement effects of technology vis-à-vis labour are not new: what matters is governance. A wholesale financialisation of markets has resulted in the prioritisation of shareholder value above other metrics. But if technology will continue to have a significant role to play in shaping the future, we must ask what we want technology to do for us, said Mark Carney. How can we use it to help us solve some of the intractable problems of climate change? How do we harness the power of technology for good?
5. Vaccine nationalism: why it’s a problem
Only around 0.3% of COVID-19 vaccinations administered worldwide—that’s just three per 1 000—have gone to low-income countries, according to the WHO in April 2021. An effective, co-ordinated cross-border vaccination programme has the characteristics of a global public good: it is overwhelmingly in everyone’s “enlightened self-interest”, as Martin Sandbu put it. Yet since the first jab was administered in December 2020, the first phases of the vaccine rollout have been marked by a tendency towards so-called vaccine nationalism—the inclination to impose controls on the trade of vaccines due to overwhelming demand for something in short supply. This damages trust and reduces international co-operation, said Paul Krugman—and will damage efforts to put in place an effective global inoculation programme. What actions can policy-makers take? First, provide much greater support to COVAX to ensure equitable access to vaccines (Rogoff). And second, consider explicit trigger points at which excess vaccine supplies are distributed to countries most in need (Gopinath), for example after a particular portion of a given country’s population has been inoculated.
Visit the OECD's New Approaches to Economic Challenges ( NAEC) site for more information
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