An effective recovery will address the fallout of the crisis, ensure financial institutions are able to lend to the economy, and support companies and individuals through a new business cycle. There will be trade-offs in this transformation, and those who are left behind will need to be supported.
We detail six areas of collaboration critical for generating the overarching objectives for a sustainable recovery: more resilient and productive economies, a greener future and a fairer society.
Objective 1: More resilient, productive economies
The crisis has exposed economic weaknesses in even the most advanced economies. The lockdowns have resulted in a slump in consumer demand and supply chain disruptions. Businesses have responded by cutting wages, furloughing or laying off workers. Widespread liquidity shortages have increased the risk of defaults and bankruptcies.
Coupled with this, growth in global productivity – a key driver of growth in incomes and prosperity – has been slowing over the past decade. The actions that are implemented to increase economic resilience and generate employment may further impact measurable productivity.
The crisis has also revealed weaknesses in public service provision, with struggling healthcare systems and inadequate social safety nets in some countries. Such issues exacerbate inequality and lead to social destabilization.
Efforts to achieve economic growth must address all these challenges. We need to combine investment, market reforms, higher skills and new technologies to create jobs, while boosting productivity and rebuild more resilient public and private sectors. We have the opportunity to reframe the global economy in ways that make it smarter, less wasteful and more efficient to underpin a better future.
Objective 2: A greener future
The case for a green recovery is clear. More than half of the world’s total GDP is moderately or highly dependent on a stable environment and is therefore vulnerable to disruption due to climate change.⁴ Without action to address climate change, an additional 100 million people could be pushed into poverty by 2030 and 143 million in just three regions could be displaced.⁵
Not only would action on climate help to mitigate these dire predictions, but the United Nations estimates that a move to low-carbon, resilient economies could create, 65 million new jobs between now and 2030⁶.
The pandemic has brought environmental concerns to the fore in the public consciousness too, as the enforced pause on industrial output and travel have resulted in cleaner air and CO2 emissions (not atmospheric levels) are estimated to be at the lowest level in 14 years⁷.
The need for action is clear to institutional investors. In Q1 of 2020 we have seen an increase in climate change resolutions backed by shareholders⁸. Far from the COVID-19 crisis putting the brakes on environmental progress, it has accelerated it. Climate change is a transnational issue that requires a globally collaborative policy response. Governments, businesses and society urgently need to collaborate to develop and adopt solutions to head off the worst consequences of this truly global risk.
Objective 3: A fairer society
In the aftermath of the GFC, recovery in many markets was uneven; it failed to address social divides and, in some cases, deepened them. These issues have been thrust into the spotlight in the current crisis. Increasing numbers of workers are in poorly paid jobs, or are self-employed or on zero hours contracts, making them more vulnerable to layoffs during the economic downturn and with less access to social security safety nets. Health inequality has also been one of the crucial issues of the pandemic. Moreover, the recent wave of protests that has spread from the US across Europe to Australia, although not a direct consequence of the pandemic, nevertheless demonstrates the urgent need for inequality to be addressed.
The opportunity to address social inequality, improve outcomes for all citizens, including fairer access to employment must not be missed this time. A sustainable recovery is not just about creating jobs, it’s about creating good quality, accessible jobs that improve peoples’ lives, which in turn creates more stable societies.
Social inclusion is a priority that underpins sustainable economic prosperity. This is supported by an independent Global Commission on the Future of Work, which recently concluded that it is by upgrading their social contracts and better equipping their citizens to navigate the world of work that countries can most effectively boost their economic growth and development.⁹
Every country and region will have different priorities and starting points, but the starting principle for all governments should seek to build more productive resilient economies while tackling climate change and social inequalities.
“Returning to growth involves making intentional choices about the kind of economy we want to build; the kind of society we want to create,” says George Atalla, EY Global Government and Public Sector Leader. “It is about deciding the kind of world we want to live in.”