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COVID-19: Chance to reset world economy

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We can emerge from the COVID-19 crisis a better world, if we act quickly and jointly, writes the Founder and Executive Chairman of the World Economic Forum, Professor Klaus Schwab. It’s time for capitalism’s great reset. The changes we have already seen in response to the coronavirus pandemic prove that a reset of our economic and social foundations is possible. This is our best chance to instigate stakeholder capitalism and here is how it can be achieved. COVID-19 lockdowns may be gradually easing but anxiety about the world’s social and economic prospects is only intensifying. There is good reason to worry: a sharp economic downturn has already begun and we could be facing the worst depression since 1930. But while this outcome is likely, it is not unavoidable.
   
To achieve a better outcome, the world must act jointly and swiftly to revamp all aspects of our societies and economies; from education to social contracts and working conditions. Every country from the United States to China, must participate and every industry, from oil and gas to the technologies, must be transformed. In short, there must be a great reset of capitalism. There are many reasons to pursue a Great Reset, but the most urgent is COVID-19. Having already led to thousands of deaths, the pandemic represents one of the worst public health crises in recent history. And with casualties still mounting all over the world, it is far from over.
   
This will have serious long-term consequences for economic growth, public debt, debt repayment, employment and human wellbeing. According to the London Financial Times, global government debt has already reached its highest level in peacetime. Moreover, unemployment is skyrocketing in many countries, particularly in Nigeria. In the United States for example, one in four workers has filed for unemployment since March, with new weekly claims far above historic highs. The International Monetary Fund expects the World Economy to shrink by three per cent this year- a downgrade of 6.3 percentage points in just four months. All this will exacerbate the climate and social crises that were already underway.
   
Some countries have already used COVID-19 crisis as an excuse to weaken environmental protections and enforcement. And frustrations over social ills like rising inequality- U.S. billionaires’ combined wealth has increased during the crisis- are intensifying. Left unaddressed, these crises, together with Coronavirus disease, will deepen and leave the world even less sustainable, less equal, and more fragile. Incremental measures and ad hoc fixes will not suffice to prevent stagnation. In entirety, we must build new foundations for our economic and social systems. The level of cooperation and ambition this implies is unprecedented. But this isn’t some impossible dream. In fact, one silver lining of the pandemic is that it has shown how quickly we can make radical changes to our lifestyles.
   
However, upon the decay and widespread suffering in Nigeria came the report that 39.4 million people may lose jobs. According to Vice President Yemi Osinbajo, while delivering the report of his Committee on Economic Sustainability Plan, millions of Nigerians might fall into extreme poverty before COVID-19 ends, as our Gross Domestic Product slides from minus 4.40 per cent to minus 8.91 per cent. Accordingly, the panel said the severity of the situation will depend on the strength of Nigeria’s response to the economic downturn. The committee recommended a strategy hinged on President Muhammadu Buhari’s mantra, produce what we eat and consume what we produce. Further, the panel recommended the creation of new jobs, focusing on local production of our goods and services and the use of local materials.

   
Sadly, COVID-19 pandemic forced businesses and individuals to abandon practices long claimed to be essential – from frequent air travel to working in an office. Likewise, people have shown a willingness to make sacrifices for the sake of health care. In Europe, companies have stepped up to help their workers, customers and local communities, in a shift towards a kind of stakeholder capitalism to which they had previously paid lip service. Clearly, the will to build a better society does exist. We must use it to secure the Great Reset: a reset of capitalism for a more sustainable and resilient world.  Each country must recognise there are essential services that must be provided in terms of healthcare, education, good governance and social safety that cannot be compromised through immunity for marauding herdsmen.
   
The great reset agenda would have three main components. The first will steer the market towards fairer outcomes. To this end, government should improve the coordination of tax, regulatory and fiscal policy. It would upgrade trade arrangements and create the conditions for a stakeholder economy. The second component of the reset agenda would ensure that investments advance shared goals, such as equality and sustainability. Thus, large scale spending programmes governments are implementing represent major opportunities for progress. The final priority of a great reset agenda is to harness the innovations of the Fourth Industrial Revolution to support the public good especially by addressing social challenges. Rather than using funds, loans and investments from various entities and pension funds, to fill cracks in the old system, we should use them to create new ones that are more resilient, equitable and sustainable in the long run.


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