Ian Bremmer, political scientist and author, mapped out the risk landscape for businesses and investors in a recent Barclays Asia Forum webcast session. In our latest “3 Point Perspective” article, he sees a “great acceleration” of the trends that will define the next decade.
Some have pointed to the effects of the COVID-19 pandemic as an outright revolution, but Ian Bremmer says we are not quite there yet. However, he does concede that the global order is going to fundamentally change, and he calls the period we are facing “the great acceleration”. The coronavirus has ramped up existing underlying trends, and we are all going to feel the jolt.
Technology, which we are relying on to get through the pandemic, was already disrupting various aspects of society. Many people will be displaced from their current jobs both by COVID-19 and technology, and Bremmer believes the economic burden will be on those that are not part of the knowledge economy.
This disparity should contribute to the acceleration of global financial inequality. Growth of inequality, particularly in wealthy economies, has been advancing for decades. Bremmer believes that this trend will greatly accelerate over the next six to 18 months, leading to greater anti-establishment sentiment, populism and nationalism.
Source: WID.world (2017). See wir2018.wid.world for data series and notes.
In 2016, 22% of global income was received by the Top 1% against 10% for the Bottom 50%. In 1980, 16% of global income was received by the Top 1% against 8% for the Bottom 50%.
Nationalism, in turn, reflects the decline of multilateralism. The G20 has offered no collective or coordinated response to the coronavirus, either epidemiologically or economically. Countries are acting in isolation.
In all of these ways, we are experiencing a great acceleration of broad economic and societal trends.
It seems likely that even effective COVID-19 vaccines will be no silver bullet to end the pandemic and lead to economic recovery. The amount of human capital being deployed to develop a hundred potential vaccines — many of which are now in phase three trials — is likely well beyond what seemed globally possible.
But keep in mind that the vaccines will require at least one booster shot to be effective. That means double the production time and double the difficulties of global distribution. Even established flu vaccines are only about 60% to 70% effective.
Source: WHO as of 3 November 2020.
Still, there are many reasons to be hopeful. Even without a vaccine, the advancement of therapeutics and standard of care have lessened the human impact of the disease significantly in just six months.
But ultimately, any recovery will likely not be V-shaped or U-shaped. Instead Bremmer believes it will be a jagged swoosh owing to the stop-and-start nature of progress. That’s because the response from individual governments appear mainly driven by the competing demands of healthcare and the economy, trade-offs which are incredibly difficult to navigate, even for some of the most advanced countries in the world. Election cycles also tend to politicise the response.
Some elected officials want to open up their economies while others want to lock them down. This creates a whipsaw dynamic inside countries that is contributing to the start-and-stop nature of the global recovery.
There is no technical definition of a depression, but Bremmer feels our current situation clearly meets certain criteria to be defined as one: It is larger than a recession, it is truly global and systemic, and life afterwards will be fundamentally different.
After the coronavirus pandemic, people will live and work differently. They will travel differently, operate and buy things differently.
Source: Barclays Research.
Disruptions will come – some good, some bad. The good could be exciting, such as seeing 10 years of technological investment compressed into 18 months.
Perhaps the greatest unintended consequence of response to the virus will be unlocking of human potential in both developed and developing economies. Imagine a decade of progress in distance telemedicine and distance learning, a decade of progress in data collection to improve the efficiency of agriculture, and more.
This is why Bremmer believes we shouldn't fear using the term ‘depression’ as it implies a dramatic change in the way people live. Increasingly we're facing a world of much more dramatic change, which can be positive.