My take on:
The World Economic Situation and Prospects Report 2020
I figured that 2020 would go down in the history books as a year when the pandemic struck, why not understand our economic progress which always has promised a better coming year.
2020 was a year that has gone down in history as a roller coaster of events. It has brought change and gave precedence to something new. New in the sense, as a reminder to rectify our errors. To make mistakes is being human while to fix, it can be close to being divine. On that thought, I found revisiting the Economic situation & Prospects Report of 2020, published by the United Nations as an apt bookmark in the book we write about our history — to remind me about how much there is yet still to be made right. The World Economic Situation and Prospects Report is an annual report which is a product of the collaboration between the United Nations Department of Economic and Social Affairs, the United Nations Conference on Trade and Development, and five United Nations regional commissions for Africa; Europe; Latin America, the Caribbean; Asia and the Pacific; Western Asia.
Lockdowns and quarantine measures have worked more successfully than we could assume. But, its impact on the stability of the international market cannot be understated. The universal market had already been affected by a set of diverse problems. From undefined monetary conditions, domestic debt, trade tensions to lack of explicit trade policies.
Let us consider a few umbrella pointers that the report chooses to clarify for the year 2021.
Setbacks in the pursuit of Sustainable Development
The 2030 agenda for Sustainable Development, signed by the member nations of the United Nations hopes to achieve the correct stimulation in areas of paramount importance for a better human society. The pandemic has impeded initiatives, to reduce poverty and the road towards clean and renewable energy. The chances of a negative relapse become more profound with each passing day, as many of the concerns and problems remain with no discussion and unsolved.
There remains a gap between the present world — dependent on fossil fuels, and a world in which the energy system is designed to be environmentally friendly and capable of generating clean energy with minimal waste. Strategies exist and must exist in the delivery of accessible and reliable energy with the support of policies and public support, to achieve the goal of a better society by the next decade.
Increasing uncertainty on Global Investments
The majority of the international supply chains are operational or operating under massive restrictions. This reality has directly impacted the tariff (tax) rates of each imported or exported material. This development has had unwanted effects on the general trend of global investments. One of the primary contributors to the decline of global investments is the uncertainty of international trade policies. According to this report, global tensions have contributed to an approximate 0.3 decline in the growth of global trade in 2019.
Electronic and Automobile sectors, to name a few, were the ones that were affected the most. Their extensive cross-country supply networks are the appropriate incentive for companies to reconsider their supply models to minimize damages (monetary or employment wise).
Though this new reality has benefited numerous nations by forcing them, reminding them of the potential found on a domestic scale. This shift may have set in motion the need to produce locally and prompt national economic growth by supporting small businesses and startups.
National policies need to be boosted by International Collaboration
2020 reminded us that many development challenges are global and that moving forward is a team game. These concerns cannot be satisfactorily tackled by domestic mechanisms alone. Areas of climate change, international trade, and global finance are the most vital regions where national policies need to be complemented by international cooperation to achieve goals that will benefit a larger population in the long run.
Nations need to also understand the new changes in the global decision-making matrix, which is now being slowly moved towards developing countries — India, Turkey. This change needs to be recognized to promote international cooperation and allow for underdeveloped countries, appropriate representation.
Eradicating Poverty has become harder
Over the last decade, the share of the entire population living in extreme poverty has declined steadily. This is largely due to the experience of India and China in tackling their poverty. Though this progress is laudable, many nations in the African continent and parts of Latin America and the Caribbean still face the monumental task of reducing their increasing poverty. Sustained progress towards eliminating poverty would require two elements; a Significant boost to productivity and a firm commitment by the international community to combat inequality of the ones who benefit.
In the past decade, one argument was a constant in numerous economic arguments to fix poverty. Tax Cuts.
The biggest concern regarding tax cuts is the choice of time in which it is introduced in a nation. Taking the example, the United States of America. The introduction of tax cuts has always accompanied when expenses on defense, infrastructure, and foreign direct investments towered over the needs of backing medical, educational sectors. By introducing such cuts, the nation saw an increased rise in the deficit, which in turn contributed to the debt. If this is the case of a nation with the stability and the capability of the United States of America, when LDC’s (least developed countries) are brought into the equation, it allows us to understand the complexity of the problem.
A need for an all-round policy
The report makes an important statement — “The modest rebound in global growth foreseen for 2020 is contingent on the assumption that numerous risks lurking on the horizon do not materialize”.
The fact that 2020 was a year that was simply because of something that never took place is a frightening thought. The fact that trade tensions and tariffs did not intensify; that Brexit was concluded with a competent framework; that geopolitical discord did not increase and that climate change remained to the minimal.
The importance of a long-term plan for the global economic landscape is more than ever important now. It should consider factors such as climate change and the…
Climate change continues to be considered a problem that does not exist, even if it does… only on the sidelines. It continues to be underestimated, which encourages and promotes short-sighted decisions that directly or indirectly contribute to the environmental damage with no one taking responsibility. The idea for entities that share the major bulk of polluting the region to pay and shoulder the responsibility sounds good as a theory but fails to make sense in the real world.
Why? Let us take the example of India.
A country largely dependent on fossil fuel will not be able to lobby effectively and pass a policy that taxes polluters and require them to shoulder the damages their products have caused to the environment. But, this will give rise to a new problem. Companies, entities, and the government will be exposed to newly found vulnerabilities as many would be required to pay for the damages caused.
It would cause sudden losses to investors and also the present assets of the nation. This reality or prediction makes solving environmental concerns a big problem to solve.
A reminder to take urgent action
Slowly, but surely the window of opportunity to act is narrowing. It has now become a game of being able to throw a ball through a window into a moving train. Though possible, it is not a stage we all would like to bet our futures on.
“Members of the United Nations have declared this a decade of action to deliver the Sustainable Development Goals by 2030, and rapid progress towards achieving the energy transition must feature high on this agenda.”
The present situation in terms of monetary policies has proven insufficient to stimulate investment. This reality has held back many foreign investments in other countries and has affected business confidence. The biggest concern that I was able to find was the way we have been defining debt. Much of the debt is being handled in assets rather than being used to raise the productivity of certain industries.
How is that possible? If a bank suffers debt after lending a loan to a potential entrepreneur who wishes to start a factory, then the nation benefits due to the productivity boost it would experience, and the employment opportunities it generates. But, this is not what is being done. Rather, most of the debts are being called in safer and stagnant investments by the financial sectors. This shows a pessimistic view about economic growth and something that must be done in the coming decade.
Eventually, the new generation will be taking on the mantle of leading this world should consider all the facts and understand the correct definition.
This report serves as a reminder of the future and it’s a product of the choices we make. The world needs to come together as the pandemic slows down and allows nations to go back to the state it was in, but now we have to make choices and decisions that will ensure a better future, and a better normal.
