At last, the United States appears to be entering the recovery phase from the COVID-19 pandemic and its economic effects. A national vaccination drive is already significantly reducing mortality. The administration of President Joe Biden has announced a sweeping infrastructure bill to follow its $1.7 trillion stimulus package, together likely to lift many economic indicators, from gross domestic product to child poverty. And China is even further along: that country had largely controlled viral spread by March 2020, and its output bounced back by the fourth quarter of last year.
Green shoots in the world’s two largest economies are signs that the world as a whole might be poised for a strong recovery from the deepest peacetime recession since the Great Depression. There are many developments that could derail this trajectory—among them, new vaccine-resistant virus variants or a new Cold War. But many indicators suggest that a decade that opened in tragedy could very well conclude on a far happier note.
Economies Are Reviving
The global pandemic is very far from over—indeed, the daily number of new cases reported worldwide is still considerably higher than it was for most of last year, and the true disease burden likely far surpasses the count of confirmed cases. That said, the vaccine rollout is on target to be the fastest ever, and its success will fast-track global recovery in the economy alongside health.
Rapid growth in production should ease the current morally and medically sickening gaps in vaccine coverage across countries. The time between the first COVID-19 vaccinations in the United Kingdom and the first vaccinations in Ghana and Côte d’Ivoire was 11 weeks (the gap for the pneumonia vaccine was 15 years). COVID-19 Vaccine Global Access (COVAX), a vaccine distribution facility largely supported by Western donors, delivered those vaccines and is forecast to deliver 1.8 billion more doses to developing countries this year. The producer of Russia’s Sputnik V vaccine has deals to set up manufacturing in Europe and India and may supply at least 300 million doses in the next 12 months. The Serum Institute of India should be producing 100 million doses per month of the Oxford-AstraZeneca vaccine. India will also make one billion doses of the Johnson & Johnson vaccine under a deal with the United States. China may be able to create about five billion doses of its three vaccines this year—enough to inoculate 2.5 billion people. The Duke University Global Health Innovation Center has estimated that enough vaccines will be produced in 2021 to cover 70 percent of the world’s population.
Many indicators suggest that a decade that opened in tragedy could very well conclude on a far happier note.
As infection rates decline, the recovery of the world’s two largest economies will help drive growth elsewhere. World trade and industrial production began to revive last summer. Global trade fell less than feared during the pandemic: by the third quarter of last year, it was only about six percent below the level of the year before. The World Trade Organization tracks leading indicators of trade volumes that pointed to a full recovery by the end of 2020. Similarly, remittance flows in 2020 fell closer to seven percent than the 20 percent earlier feared by the World Bank, and they, too, may rebound in 2021. All in all, the International Monetary Fund (IMF) predicts that the global economy will grow 5.5 percent in 2021 (more than making up for the 3.5 percent contraction in 2020) and 4.2 percent in 2022.
Rich countries are not the only ones that will benefit in this upturn. For two decades, country incomes have been converging globally, with poorer nations beginning to close the gap on wealthier ones. The Princeton University economist Angus Deaton reported in January that most poor countries have seen pandemic-related economic contractions smaller than those of rich countries, such that the crisis has largely reinforced the global trend, and the IMF forecasts that this will continue to be the case for the next two years. Moreover, labor markets are rebounding. In the second quarter of last year, according to the International Labor Organization, the world lost 18.2 percent of pre-COVID-19 working hours to pandemic-related closures and restrictions. By the fourth quarter, that loss was 4.6 percent. The optimistic forecast is for the employment loss to be down to 1.3 percent in 2021.
The global economy could soon get an extra boost from the IMF. Just as a central bank can print its own currency, the IMF can print “special drawing rights,” which countries can exchange for dollars, euros, and yen. The administration of former President Donald Trump opposed a proposal for a $500 billion SDR allocation in 2020, but Janet Yellen, secretary of the treasury under Biden, has reversed that position (and may accept an even larger package). Low- and middle-income countries would get about $165 billion in additional external financing from this allocation—possibly more, if rich countries reallocate or lend some of their new SDRs. For example, the G-7 and China could free up $37 billion to support the poorest countries if they reallocated 15 percent of their share.
Some Innovations Will Last
The response to COVID-19 has fostered technologies and innovations that could underpin increased global welfare and productivity. The messenger RNA technology behind the Moderna and Pfizer-BioNTech shots is being used to develop vaccines to combat such widespread and lethal pathogens as those that cause AIDS, tuberculosis, and malaria. A phase one trial of an AIDS vaccine technology that will utilize mRNA reported positive results in February. Such immunizations—together with the vaccine production and distribution capacities that have stepped up in response to the pandemic—could permanently transform the health environment in many of the world’s poorest countries.
By the end of 2020, 166 countries had introduced or scaled up cash transfers in response to the pandemic. These programs reached 1.1 billion people, and not just in high-income countries: Pakistan’s Ehsaas program reached 45 percent of the population, and the Philippines’ Social Amelioration Program reached 78 percent. When the pandemic has passed, these cash transfer mechanisms could replace their complex, leak-prone predecessors to considerably improve the effects of subsidies and other welfare provisions on poverty.
In the United States, many employers have offered their employees the ability to work remotely during the pandemic. To the extent that remote work becomes a global phenomenon, it could encourage growth in trade in services, including business services, because working from home can take place down the street from the office or around the world. And a new generation of global entrepreneurs could emerge from the present crisis. In the United States in the last year, a shocking number of firms have collapsed, but new firm creation was also considerably higher than in the year before. Perhaps some of those new entrepreneurs will take advantage of growing opportunities to provide services remotely.
The pandemic has also made abundantly clear how much and how many countries rely on migrants to pick and package crops, deliver goods, and provide health care. A newfound appreciation of their role might reverse a declining global trend in acceptance of migrants reported by Gallup last year, following the recent dramatic improvement in attitudes toward immigrants in the United States.
Ultimately, COVID-19 may help knit the globe together by demonstrating the inescapability of a shared destiny. The pandemic broke out in China, spread through ill-traced and uncontrolled infection in Europe and the United States, and spawned variants in South Africa, Brazil, and the United Kingdom: the experience of the last year has made abundantly clear that everyone’s well-being relies on the capacities and responses of others. Already, the pandemic has spurred global action on public health and climate change. A raft of reform proposals promises to empower the World Health Organization and the legally binding International Health Regulations it oversees, and the number of country commitments to net-zero carbon emissions by midcentury has increased. In 2019, net-zero pledges covered about 16 percent of the global economy; by March 2021, the number had reached 68 percent.
A Return to the Progress Before
A robust rebound is still very far from certain. New variants of COVID-19 are spreading, and more may emerge as states and countries reopen before getting the pandemic under control. The IMF suggests that 110 economies worldwide may still see income per head lower in 2022 than in 2019. The International Labor Organization reports that income losses were relatively larger for young workers, women, the self-employed, and low- and medium-skilled workers. Women worldwide lost an average of 5.0 percent of their employed working hours in 2020 compared with a 3.9 percent loss for men. The evidence suggests that as public health measures including school closings and lockdowns became more severe, women were increasingly likely to lose employment compared with men. School closures in particular took an unequal toll on women entrepreneurs: in June 2020, a global survey suggested 23 percent of women business owners were spending six or more hours per day on care work compared with 11 percent of men.
Many of the world’s children spent much of last year out of school, and the World Bank estimated that ten million children might fail to return to basic education after schools reopen. Thankfully, available evidence suggests that the overwhelming majority of parents will return their kids to the classroom. In South Africa, for example, average weekly attendance fully recovered to pre-lockdown levels, from 37 percent in July to 98 percent by November (although daily attendance was still below that). And past experience from school closures around Hurricane Katrina, foot-and-mouth disease outbreaks, and SARS suggests the learning impact of missing school largely fades over time. But in many countries, time out of school has been far longer than these previous episodes, and the burden of lost learning will fall hardest on groups already further behind: minorities and poor families. Without strong support, lost time in the workplace and classrooms could translate into permanently higher inequality.
Before COVID-19 struck, the world was rapidly progressing toward greater quality of life.
Some destructive economic trends could fester in the aftermath of last year’s crisis: the trade conflicts around medical goods could lead to demands for self-sufficiency that will increase prices, risks, and global inequality in access, for example. Some poor countries took on potentially unsustainable debt to finance their pandemic responses. A year and a half of lost travel will come at a cost to innovation, with the silent weight of billions of missed connections a burden on recovery for years to come. And the pandemic has given rise to the sickening concept of “vaccine diplomacy”: lifesaving medicines should not be used as a trinket to curry favor.
Many of these developments are avoidable or reversible, however. The measures necessary to control the virus’s spread are by now universally familiar. Providing assistance to those groups disadvantaged by the pandemic—and disadvantaged before it—can help ensure a more equal recovery. And COVID-19 may have supported a return to reason in national and international policymaking: from the exit of a potentially superspreading U.S. president, to the death of Tanzania’s populist authoritarian leader possibly from an infection he claimed didn’t even exist in his country, to the crumbling popularity of Brazil’s strongman in the face of COVID-19 variants that rage out of control.
Before COVID-19 struck, the world was rapidly progressing toward greater quality of life. One measure of that progress is that the seismic economic shock of last year was predicted to increase global extreme poverty by 60 million—which would bring it back to its level of 2015 or 2016, only five years before. U.S. life expectancy dropped by a year at the start of last year because of COVID-19: global life expectancy climbed the same amount between 2013 and 2018. In 2021, if it so chooses, the world can exit the miseries of the last year and return to the progress of the recent past.
