Covid-19 has shaken the foundations of the global system, creating monumental changes that will leave indelible marks on the structure and functioning of the global economy. Scholars have started to explore the far-reaching implications of the pandemic, including a recent book entitled “COVID-19: The Great Reset” by Klaus Schwab and Thierry Malleret. This emerging debate reveals at least six core trends that were evident prior to covid-19, and yet are highly shaped and influenced by the pandemic.
- A battered economy. Covid-19 is likely to induce a persistent “80% economy” that will potentially depress wages, raise unemployment, and exacerbate inequalities. The pandemic has hit millions of businesses hard, many of which are likely to face bankruptcy once the life support provided by government subsidies is removed.
- Inequalities and a weakening social contract. Covid-19 will reinforce the trend of stagnant low-skill wages and rising inequalities by fostering automation and digitization. The potential widespread application of emerging technologies such as telemedicine, AI, and telerobotics is likely to jeopardize millions of jobs. The pandemic has also hit societies at their fault lines, weakening already fractured societal trust. The Black Lives Matter movement in the US has arguably been fueled by covid-19, which exposed and reinforced existing racial inequities.
- Big but ineffective governments. In an effort to contain the economic cost of covid-19, governments around the world have launched multi-trillion-dollar interventions, often with the backing of central banks. However, the ability of big government to channel its energy toward productive ends such as a Green New Deal or new social protection programs will be inhibited by a legitimacy deficit, a huge debt burden, and sociopolitical instabilities and polarization.
- An even bigger tech industry. Covid-19 has helped fortify the vast empires of big tech firms as lockdowns created a massive shift toward e-commerce and teleworking. Technology firms are entering new value-adding activities such as digital payment systems while also investing heavily in cost-effective solutions for internet connectivity in the developing world. The pandemic has also revealed the potential tradeoffs between efficiency and data privacy, a major dilemma that will require novel and trustworthy governance systems.
- Geopolitical tensions. The ongoing economic decoupling of the US and China could take the world into yet another Cold War, which is likely to reinforce global anarchy and potentially undermine neoliberal values globally. The ensuing multipolar world will complicate global collective action as it will undermine multilateral institutions that coordinate global governance.
- Stakeholder capitalism. On the positive side, covid-19 is likely to speed up the traction of sustainable corporate models that address the interests of all stakeholders through stakeholder capitalism. However, universal adoption of stakeholder capitalism will require institutional reforms that internalize societal costs (for example, pricing CO2 emissions) and reward long-term corporate performance.
These shifts are complex, interrelated, and unpredictable, making it hard to articulate and design appropriate social, economic, and political policy responses. But the Great Reset also contains valuable seeds of change that can be mobilized to overcome some of the challenges it brings. Today, citizens are highly interconnected and informed, governments are armed with big data, and corporations are teeming with ever-powerful technologies that are getting better at simulating human intelligence. They contain the right ingredients for local and global leaders and institutional entrepreneurs to craft radically agile forms of governance that can match the complex challenges of the day.
Agile governance is “adaptive, human-centered, inclusive, and sustainable policymaking, which acknowledges that policy development is … an increasingly multi-stakeholder effort. It is the continual readiness to rapidly navigate change, proactively or reactively embrace change, and learn from change.” Agile governance involves new rules of decision-making that are flexible, responsive, human-centric, data-driven and results-oriented while remaining fair, transparent, and accountable. It thus entails a novel form of governance that can radically beef up the capacity of societal institutions to meet challenges posed by the great reset, be it at the level of local and national government or corporate entities, including with tools such as co-creation, crowdsourcing, regulatory sandboxes, design thinking, public-private dialogues, and partnerships.
For example, the UK CareQuality Commission has used regulatory sandboxes to test digital triage (instead of traditional clinical triage) in health-care services to assess its impact prior to a potential widespread rollout. A regulatory sandbox allows to test a new innovation, technology, or service which is not yet generally authorized (given the velocity of technological innovation), by working with a broad variety of stakeholders to test and explore its potential impact before a broader authorization. Such regulatory sandboxes allow big tech industries to continue to innovate at a faster speed without the preoccupation of going too fast compared to policymaking and government regulation.
An agile governance approach to the problem of big but inefficient governments could involve using real-time data to provide adaptive and human-centered policy support for mitigating poverty, reducing inequality, and advancing inclusive growth. Leaders can also better use social media to coordinate global engagement (for example, direct giving and crowdfunding), strengthen inclusive governance, and rehabilitate societal capital, while tackling the dissemination of misleading information. Crowdsourcing and AI can also be used for early detection of public health emergencies like covid-19 or social crises, wars, and violent conflict, allowing timely reactions from proactive governments. Blockchain technologies are set to power new central bank digital currencies that will create a more efficient, flexible, and inclusive monetary policy and payment systems.
Local, national, and global institutions of today need to be reinvented in order to navigate the great reset and build more prosperous and inclusive societies. It is about time to start experimenting with novel and agile forms of governance to underpin resilient social, political, and economic systems that are suited to a changing world.
Landry Signé (@LandrySigne) is a professor and senior director at the Thunderbird School of Global Management. He is a senior fellow at the Brookings Institution, a distinguished fellow at Stanford University, a World Economic Forum young global leader, and the author of Unlocking Africa’s Business Potential.
Addisu Lashitew (@AddisuLashitew) is a Rubenstein fellow at the Global Economy and Development Program at the Brookings Institution.
Sanjeev Khagram (@deankhagram) is the director general and dean of the Thunderbird School of Global Management.