In May, the world's top risk professionals identified
"prolonged recession of the global economy" as the most feared risk of COVID-19.
This was followed by other economic risks: a surge in bankruptcies and wave of industry consolidation, failure of industries or sectors in certain economies to properly recover, high levels of structural unemployment, and weakening of fiscal positions in major economies, among other significant concerns.
From 25-29 January 2021, The Davos Agenda
will bring global leaders together to discuss these challenges – and how we can drive equitable, sustainable and inclusive economic recovery.
“Facing the ongoing public health crisis of COVID-19 and the pandemic’s lasting effects on the global economy, policy-makers around the world must take this moment to reflect not just on the immediate recovery, but on how this time can be used to transform their economic systems,” wrote Forum Managing Director Saadia Zahidi
“Growth and productivity alone are not enough, without addressing inequality and the environment. There is a need to shift policies so that economies make sustainability and social inclusion central to how they function,” she continued.
“This requires not just policies to manage environmental externalities or to build safety nets for people, but also those to spur investments that create the greener, fairer and people-focused markets of tomorrow.”
Where do we go from here?
Building back better
must include rebuilding the global economy in a way that’s more equitable, sustainable and inclusive – here's how.
1. Reduce inequality and improve social mobility
“Inequality is rising even in those countries that have experienced rapid growth,” said Forum Founder and Executive Chairman Klaus Schwab in the Global Social Mobility Index 2020
And that was before COVID-19.
The pandemic has exacerbated inequality, with the communities most affected by the dual economic and health crises already at a significant disadvantage.
“Businesses must be a core stakeholder in the efforts around social mobility for their own employees, workers in their value chains and their communities broadly,” said the Global Social Mobility Index.
Specific actions include “a focus on promoting a culture of meritocracy in hiring; active participation in vocational and technical education programmes; providing timely and comprehensive reskilling and upskilling curricula to employees; and paying fair wages that allow employees to meet their basic needs,” along with diversity and inclusion initiatives.
2. Invest in a green recovery
“If economic recovery defaults to a reboot of pre-COVID-19 activities, societies will have missed an important window of opportunity to transition to a more inclusive and greener growth path,” said chief economists surveyed by the Forum
“As economic policy interventions are transitioning from economic life-support measures to the stimulus phase, governments have a unique opportunity to influence the direction of economic progress through far-reaching innovation and investment strategies,” continued the report.
“These new frontier markets include a range from green energy, ecotourism and the circular economy.”
For example, upgrading existing buildings to make them more energy efficient can help us tackle the economic and climate crises, explained Kim Fausing, President and CEO of Danfoss
. This will not only reduce carbon emissions in a cost-effective way, but also create local jobs.
“According to the IEA, an estimated 9-30 jobs would be created for every million dollars invested in energy efficiency measures in the building sector and many of these jobs could be created quickly. As much as 60% of expenditure on home energy efficiency retrofits could be allocated to labour, activating local value chains and boosting the economy,” Fausing said.
3. Ensure markets are inclusive and work for all stakeholders
“Despite greater stability since the financial crisis of 2008-2009, even before the effects of the pandemic, the financial system displayed some fragility, with issues including increased corporate debt risk and unequal access to finance,” wrote the Forum’s Zahidi
To ensure markets remain stable in the long term, we must expand access and inclusion, transforming them from a shareholder model to a stakeholder model
“Countries should rethink competition and anti-trust frameworks to lower barriers to entry and enhance competition and vibrant business models," continued Zahidi. “Countries must also prioritize financial stability while introducing incentives for companies to engage in long-term, sustainable and inclusive investments, focusing on new thresholds for ESG standards."
What to watch during Davos Agenda
- Restoring Economic Growth, Monday 25 January 09:00-09:45 and 17:15-18:00
- Advancing a New Social Contract, Monday 25 January 11:00-11:45
- Accelerating a Real Economy-Led Recovery, Wednesday 27 January 12:00-13:00 and 18:00-19:00