Following the 2008 financial crisis, many policymakers failed to focus sufficiently on securing robust, inclusive, and sustainable long-term growth. To avoid repeating this mistake in 2021 as the world emerges from the COVID-19 pandemic, governments must act early and decisively in three areas.
CAMBRIDGE – For people around the world, arguably the greatest hope is that 2021 will be a year of beneficial transformation: rapidly recovering economies, firms eager to pivot to offense with “resized” business models, and governments talking about “building back better.” The risk, as yet insufficiently appreciated, is that decision-makers will end up spending most (and too much) of the year dealing with both existing and new damage from the COVID-19 shock.
There are four good reasons to be optimistic about 2021. First and foremost, scientists and pharmaceutical companies have been working furiously to develop a COVID-19 vaccine, often supported by sizeable direct and indirect government funding. There are signs that a handful of vaccines may soon be approved, thus opening the way to the herd immunity needed for economic and social interactions to return to normal.
Second, a substantial part of the private sector – supported by wide-open capital markets providing ample low-cost financing – has been busy thinking and planning for the post-pandemic world. Firms are looking to emerge from the crisis with a better balance between resilience and efficiency, as well as with the increased operational agility and open-mindedness that they were able to acquire only when forced into a highly uncertain and uneven crisis-management paradigm.
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