Global Corporations and Economy
Addressing Gaps in Human Capital Development in the Post-COVID World

Crises are opportunities to grow, to develop, to emerge from chaos with a new, more complex and responsive order. However, crises, whether individual or social, do not in themselves guarantee progress and learning; there must be a conscious effort to identify lessons and a strong determination to make adjustments to unhelpful patterns of behaviour and institutional dynamics, writes Augusto Lopez-Claros, Chair of the Global Governance Forum.

The COVID-19 crisis is the largest shock to the global economy since the 2008-09 global financial crisis, maybe since the Great Depression of the early 1930s. To avoid overwhelming their health care systems governments have sought to slow down the spread of the virus by implementing various suppression policies. They have made the case that social distancing measures are central to these efforts, as shown by the experience of Finland, Norway, Iceland, New Zealand, South Korea, Singapore, Uruguay, and Taiwan where various combinations of lockdowns, testing and contact tracing appear to have slowed down—sometimes dramatically—the rate of infections.

Some lessons

What are some of the early lessons that can be drawn from the various country experiences thus far? The list that follows is an attempt to identify some key issues; how we internalise in coming years the ramifications of this crisis is tremendously important for prosperity and human development.

Improving public health systems. It is evident that COVID-19 has found most countries with woefully unprepared public health facilities: not enough hospital beds, not enough respirators and other vital equipment forcing painful rationing choices. Some would argue that it will never be possible to be fully prepared for a highly contagious air-borne virus. But this misses the point. Some such pandemic has been widely anticipated, with some scientists arguing that it was only a matter of time before EBOLA, SARS and MERS were followed by something like the coronavirus. Highly unprepared public health systems raises the question of budgetary priorities and whether governments are doing enough to take a hard look at the structure of public spending and ask themselves whether it is consistent with adequate levels of public health and the overall needs of the economy. 

Furthermore, the fact that individual country experiences have sharply differed in terms of health outcomes suggests the need for a thorough assessment of the state of the health care systems across the world and what needs to be done to empower them to deal more effectively with the next crisis. The Spanish government has announced the establishment of a commission to do precisely this and a strong case can be made for the World Health Organization (WHO) to take the lead role in this area, given the global nature of the pandemic. 



Expanding the scope of social protection. COVID-19 strengthens the case for increasing the coverage of health insurance and paid sick leave. People respond to incentives, and in a country in the middle of a public health crisis where social distancing measures and quickly identifying those infected and isolating them are part of the solution, the uninsured and those without paid sick leave benefits will have a powerful incentive to continue to work, because they cannot afford not to do so. This will endanger others and ultimately boost mortality rates and heighten the overall economic impact of the crisis. There is increasing talk—in the media, among political and business leaders—of the need for “solidarity” in moments of crisis, that the global nature of the pandemic calls for tapping into our reservoirs of altruism and a concern for the well-being of others. One important lesson from COVID-19 may be that, in a fully integrated world, solidarity and altruism are not just luxuries but, in fact, are indispensable conditions for survival. 

One characteristic of coronaviruses and similar pathogens in a globalised world is that they pose risks to the entire human species.
Smallpox, which until 1967 infected 15 million people annually and was fatal to 2 million of them, was eventually eradicated in 1980 following the WHO´s declaration that almost all of the world's population had been vaccinated.

Closing borders does not guarantee the elimination of the risk of contagion, in addition to being an inefficient measure, given the high degrees of integration of the world's economies. A more realistic solution—and certainly less harmful to human prosperity than deglobalizing by retreating behind national borders—is to expand access to health and basic social protections to a much larger percentage of the world's population. Not only would this demonstrate solidarity, but also minimize the systemic risk from unprotected populations that are especially vulnerable to pandemics: vulnerable people must be protected to protect everyone.

It is necessary to redefine the meaning of national security. In the minds of the vast majority, this concept evokes images of well-equipped military establishments with armed forces ready to defend national interests against possible real or imaginary attacks by potential adversaries, while absorbing a significant share of national budgets. But COVID-19 has shown us that, in the midst of a pandemic, the most sophisticated and destructive weapons are totally useless: an atomic bomb is not effective in the fight against a virus. Perhaps national security will now have to be seen from the perspective of human well-being, from the ability of governments to have well-prepared health infrastructures, a clean environment, a social safety-net, and the resources to continue to educate children and young people in preparation for an increasingly complex world and economy, thus boosting our human capital endowments.

Restoring public spending priorities. COVID-19 has found the vast majority of countries totally unprepared to deal effectively with its devastating consequences. Even high-income countries have seen their hospitals and public health systems come under heavy strain. However, in the midst of the pandemic, according to IMF data, we continue to spend the equivalent of 6.3% of global GDP in subsidising gasoline, electricity, natural gas and coal, thus worsening climate change and also economic inequality, as 60% of the benefits of these subsidies end up in the hands of the richest 20% of the population. Faced with the high levels of extreme poverty, malnutrition and illiteracy in the world, this represents a massive waste of resources. There should be a broad, serious debate about the priorities of public spending, against the background of other future claims on public resources linked to population aging, climate change mitigation and adaptation, and the challenges associated with budgets already under heavy strain as a result of the consequences of the pandemic.

Global Corporations and Economy
Fighting the COVID-19 Pandemic: Economic Dilemmas and Choices
Marek Dabrowski
Since the beginning of 2020, the entire world is fighting the COVID-19 pandemic. At the end of November 2020 this is an unfinished story and nobody knows when and how exactly this very dramatic threat to human health and life will be defeated. Meanwhile the pandemic has also had serious economic and social consequences.
Expert Opinions



Investing in our educational infrastructures. Education is of course absolutely critical for development and for nurturing a capacity for innovation. Despite progress in recent decades much remains to be done, as illiteracy is still a fact of life in many developing nations. For example, according to UNESCO, well over 30 percent of India’s population still cannot read or write. Lack of such basic skills severely limits the possibilities of citizens to participate in the development process, and to be gainfully employed, to be well-informed judges of government policies and politicians. From a business perspective, without access to workers with a basic education, companies are limited to resource- or basic labor-intensive industries and constrained in their ability to grow and to move up the value chain. As the global economy has become more complex, it has become evident that to compete and maintain a presence in global markets it is essential to boost the human capital endowments of the labor force, whose members must have access to new knowledge, be constantly trained in new processes and in the operation of the latest technologies. As coverage of primary education has expanded rapidly in the developing world, higher education has gained importance. Thus, countries which have invested heavily in creating a well-developed infrastructure for higher education have reaped enormous benefits in terms of growth.

Education has been a particularly important driver in the development of the capacity for technological innovation, as the experience of Finland, Korea, Taiwan, and Israel clearly shows.

Facilitating the integration of women in the economy. A number of studies have shown that there is a close connection between national economic performance and the degree to which societies have succeeded in integrating women into the economy and have allowed her to increasingly participate in decision making, particularly in the case of representation in parliaments, cabinets and other executive bodies, and have made it possible for her to avail herself of opportunities for education and the building up of her human capital. 

The promotion of female education leads to lower births per women. Lower fertility levels help reduce child mortality and expand the range of educational opportunities available to the next generation. All of these factors combine to boost economic growth. Yet another avenue of influence has to do with growing evidence that women workers are less prone to corruption and nepotism than men workers. The evidence comes from a number of sources. The criminology literature, for instance, has long established that male criminal participation in serious crimes at any age greatly exceeds that of females. More recently, a survey of 6,500 companies carried out in the United Kingdom looking at the gender composition of company boards showed clear evidence that companies with greater female participation in boards were less likely to be hit by governance scandals involving bribery, fraud and other factors likely to depress business confidence. So, boosting the employment of women is likely to be beneficial for economic growth through improvements in the quality of governance. 

Crises are opportunities to grow, to develop, to emerge from chaos with a new, more complex and responsive order. However, crises, whether individual or social, do not in themselves guarantee progress and learning; there must be a conscious effort to identify lessons and a strong determination to make adjustments to unhelpful patterns of behavior and institutional dynamics. Let us hope that COVID-19 will lead to learning and the reforms that come from it.

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04.03.2021
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.