The Architecture of Post-Pandemic World: Technology, Economy, Society Sber Panel Session
KEY CONCLUSIONS
The world was not ready for a pandemic: it began as a healthcare crisis, but then affected the entire global economy
“Pandemics occur every so often. We were unprepared, and one thing that we ought to see is a global network to monitor emerging pandemics,” Steven Pinker, Professor of Psychology, Harvard University.
“This particular crisis is unique. It started in the health area and it showed itself in the economic area. So, the origin was not economic, the ‘solution’ was economic,” Jacob Frenkel, Governor, Bank of Israel (1991–2000); Chairman, JPMorgan Chase International (2009–2019).
Digitalization will in large part define the architecture of the post-COVID world
“If you look at 1918, the Spanish flu, which is the closest comparison, I suppose. What is notable about the Spanish flu, is that after the Spanish flu, after the end of the pandemic, societies really snapped back and went back to business as usual, life as usual. The Spanish influenza is followed by the Roaring 20s – the Jazz Age. By 1921 in New York City, there were one thousand of what were called speakeasies. These were essentially illegal bars, because of course there was still prohibition of alcohol in the United States in 1920, ‘21, ‘22. Though, imagine how many bars there would've been if it had been legal. So, what you saw was the return of normal life with a ferociousness. I think we will see something different this time. Because the single biggest difference between this pandemic and every other one is the rise of the Digital Economy. It has been possible for large parts of the economy to function without physical contact. That is new,” Fareed Zakaria, Journalist, Political Commentator.
“Everyone calls what we are seeing happen with the economy ‘digitalization,’ but I think we are seeing a deeper trend. I would call it an ecosystem revolution. The old model of the economy was built around industries, around concrete goods or services. Markets were separate. Now we're seeing a profound transformation around the world, one that will continue globally for decades. This is an ecosystem revolution – towards an economy constructed around consumers, around people. No longer is some sort of product at the centre of the economy – that is secondary. People and their needs are in first place,” Maxim Oreshkin, Aide to the President of the Russian Federation.
PROBLEMS
Income stratification inter- and intra-nationally
“We are seeing a number of global tendencies that are currently considered challenges for the global economy. <...> The first tendency is stratification between states and income stratification in practically every country, with rare exceptions. Technology has accelerated this tendency,” Herman Gref, Chief Executive Officer, Chairman of the Executive Board, Sberbank.
“Inequality has increased during the pandemic. However, I think that, now, especially developed countries, will hit peak inequality in the next few years. And the turn that has been noted, I call it the ‘left turn’ in economic policy, it is going to stay with us, and for a long time. Which means we are going to see growing social spending, environmental spending, healthcare spending and infrastructure spending. One part of this will be covered by increasing deficits, while the second part will be covered by increasing taxes on the rich and on corporations. That is approximately what’ll be happening in the United States. It is what Biden is currently proposing and it looks a lot like the approach proposed by Roosevelt as a reaction to the Great Depression,” Maxim Oreshkin, Aide to the President of the Russian Federation.
The pandemic has exacerbated internal contradictions in all countries
“In my opinion, the pandemic has really exacerbated the contradictions that we have watched build up over the past decades in governments – that is, in the capitalist world. Many have spoken of competition between autocratic and democratic regimes and that autocratic regimes had their advantages at certain times. <...> There is a new idea that technology and technological breakthroughs have opened up brand new opportunities for structuring the government. There was a very popular idea in its day that socialism or communism collapsed for two reasons: an inability to properly plan everything in an economy, and a lack of stimulation – a lack of competition. New technologies and big data give us the opportunity to plan things far more effectively than we could previously, or than capitalism can currently. <...> The main contradiction of socialism can be overcome. Today, there is a new term – techno-communism – the return of an old idea in a new form, allowing for far more effective planning of social resources and a significantly fairer distribution of those resources between social strata, thereby liquidating intra-social conflict,” Herman Gref, Chief Executive Officer, Chairman of the Executive Board, Sberbank.
“The old globalization meant that there are many boats in the ocean. Each one goes its own way, but they are all in the same ocean and therefore, if there is a big storm, all the boats recognize it, but at the end of the day, everyone goes their own way. They interact, they differ. I believe that the current, new globalization will be different. It's not that we are going have many boats in the ocean. We are going to have, in a big boat, many cabins. And each cabin will be what used to be the one single nation, but they are still all in the same big boat. Each cabin can be organized by its own rules. They will have their own game, but they cannot navigate the boat. The boat is navigated through the global big machine,” Jacob Frenkel, Governor, Bank of Israel (1991–2000); Chairman, JPMorgan Chase International (2009–2019).
“The success was found not in the quantity of government, but in the quality of government. So, if you look at the places that handled the pandemic the best: Taiwan, Singapore, South Korea, they have actually a smaller share of government than the European countries. State spending, if you want to take it by that measure, is, in some cases, almost half as high as in some European countries. <...> Taiwan only quarantined 1% of the population, keeping the other 99% totally free all the time. No lockdowns, no shutdowns for businesses. The US couldn't quarantine 1% of its population. But it shut down the entire economy. It threw 40 million people out of work. It put hundreds of thousands of businesses out of business, causing massive bankruptcies on a scale never seen since the Great Depression. And that, somehow, is not seen as an infringement of liberty. So, we have to get this balance right, in the future, between risk and reward. Because my final point is, we can’t do this again. If there is another pandemic, <...> we will not be able to respond to it the way we have this time: which is shut down vast parts of the global economy, shut down travel indefinitely, issue vast amounts, trillions and trillions of dollars of debt, and then spend the money to make up the difference. This is a one-shot deal. If this pandemic happens six years from now, ten years from now, fifteen years from now, we are out of money, we will not be able to do this again,” Fareed Zakaria, Journalist, Political Commentator.
SOLUTIONS
Creating a global healthcare crisis warning system
“We have yet to overcome the pandemic, which is why it is important to create some sort of service, capable of swiftly reacting to these types of situations. We should learn from all of this and create a mechanism to quickly react to similar situations,” Herman Gref, Chief Executive Officer, Chairman of the Executive Board, Sberbank.
“President of the Russian Federation Vladimir Putin set forth the following goal in his address: to create a national system so that there is a method of quickly reacting to similar situations: rapid tests over set periods of time and rapid vaccinations, so that the system is able to react. This is a goal that we will start working towards in the near future,” Maxim Oreshkin, Aide to the President of the Russian Federation.
Growth of countries’ social spending
“Every affluent democracy already has an enormous amount of social spending. Something that people often don't appreciate when they worry about socialism. Every OECD country distributes between 20 and 30% of its GDP already in social spending. That has increased even in a conservative administration, like the Trump administration. Everyone recognized the need for massive government spending. Now that that precedent was set, our new President, Biden, has undertaken an unprecedented amount of government spending,” Steven Pinker, Professor of Psychology, Harvard University.
“The significant growth of the role of the government, with no return to be seen. We're seeing a higher level of government spending on a systemic level, primarily in developed, but also in developing countries over the next decade. The first reason is macroeconomic policy: currently, all developed economies have a very high level of government debt and the effectiveness of monetary policy in this situation has plummeted. We did not see such a sizable fiscal response in 2008–2009 and had a long recovery following that crisis. We have seen a significant fiscal response this year, and are seeing a rapid recovery after a very serious crisis,” Maxim Oreshkin, Aide to the President of the Russian Federation.
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