In the online panel of the 24th Forum 2000 Conference on October 14th, titled “Can we take advantage of the disaster? The economic priorities for a New World”, Jan Svejnar, Professor and Director of the Center on Global Economic Governance (CGEG) at Columbia University’s School of International and Public Affairs, and Jeffrey D. Sachs, University Professor and Director of the Center for Sustainable Development at Columbia University, had a conversation about the world's economic priorities during and after the Covid-19 pandemic. They discussed the importance of effective science-led public health measures to implement sound economic policies and the challenges and opportunities the world faces to restart its economy.
Governments caught off guard
Both experts spoke about the worldwide lack of preparation to face the pandemic that caught governments off guard and cost hundreds of thousands of lives. As Sachs explained, no one anticipated these issues. These pandemics (Ebola, H1N1, and COVID-19), one after the other, are the symptoms of the overall environmental crisis the world is facing. The COVID-19 crisis and its management failure, the environmental challenges of climate change, and the shift in geopolitics, especially the outcome of the United States' presidential election, will shape the world and how we will rebuild our countries.
Svejnar stated that countries managed the epidemic differently, such as China and South Korea, which handled the pandemic relatively well. Meanwhile, Europe is suffering a second wave, and the United States still has infection peaks in several regions of the country. Each government’s measures will be decisive in handling the pandemic not only in the short-run but also in regards to the management of medium to long-run issues, including environmental challenges.
We have to get more serious
Sachs stressed the consequences of populist leaders' choices who, instead of making fact-based decisions and implementing policies based on scientific evidence, have decided to ignore science and are heavily responsible for thousands of deaths during the pandemic. Populism is a big challenge for all the democracies of Europe and the US.
According to Sachs, the first lesson we need to learn from this pandemic is that countries have to get more serious and more systematic in solving the Covid-19 crisis. Good public health policies must be enacted to get back to normal and prevent a massive second wave.
Svejnar seconds that statement, expressing that the situation's seriousness has been underestimated. Governments haven't done enough testing, smart quarantine measures, and test tracing to break the exponential growth seen in many countries. The scientific evidence and data have not been respected and utilized enough, leading to a decline in governments' credibility in several countries, especially in the US, that even with a change in office, will suffer irreversible damage.
The role of the government
One positive aspect pointed out by Svejnar is that most governments did not hesitate at the beginning to be fiscally active to help the economy during this crisis, demonstrating a change in paradigm on the part of the government and some of the thinkers. The bottom 10% of the population in most countries was hugely impacted, and these policies helped relieve their suffering. It is expected from governments to assume a more active role in this crisis, and it will be interesting to see how far they will go. These economic measures have great importance, and the worry about indebtedness should be secondary. Governments' primary concern should be how to jump-start the economy and how to get the economy to grow. The debt to GDP ratio will decrease as the GDP grows, but if the GDP doesn't increase, the problem will be further exacerbated.
Sachs signaled that the best economic strategy is implementing public health measures, social distancing measures, contract tracing, and universal face mask use to control the pandemic. The countries that have succeeded have followed these measures systematically, with minimal rhetoric and maximum action. Governments must not think that it's lockdown vs. the virus; it's public health vs. the virus.
After the situation is under control, then government spending must be aimed at investment-led recovery and growth. The European Green Deal, which establishes a recovery fund and a substantive budget that can support the transformation to renewable energy, electric vehicles, and sustainable land use, is an excellent strategy for the continent. This policy has set a template for public investment for the future.
Science and investment for governance
Svejnar stressed the importance of scientific developments and innovation during our modern history and how they drove humanity's accomplishments in terms of the unprecedented increase in wealth, living standards, arts, and creativity. It is imperative to bring back this importance. Governments need to get credibility; they have to have a specific policy so people will follow. Governments have to explain to their citizens very clearly which measures are being taken to control the pandemic to regain their trust.
Furthermore, Svejnar states that governments must follow a strategy of "wise investment," investments with a high social return. Governments can currently acquire debt with low-interest rates and sustain high debt levels. They can then invest in short-term gains such as epidemiological and health measures, and medium to long-term gains like infrastructure and protecting the environment. The European Union decided to take a big step in creating a resilience fund, a major Europe-wide initiative, an investment in sustainable development for the future.
The conversation was held as part of the Form 2000 conference “A New World Emerging? Restoring Responsibility and Solidarity”, in cooperation with the Center on Global Economic Governance and Project Syndicate.
Jorge Marquez Gaspar
SIPA MPA-DP 2021
