The Global Risks Report 2022, from the World Economic Forum, released on Tuesday 11th January 2022, noted that at the time of publishing its results, half of the world’s population was still unvaccinated, 40% remain offline, and only 35% of the world’s students live in countries where schools and universities are now fully open. The unambiguous differences in vaccination progress among countries now risk leading to even greater economic divergence than countries experienced in the pre-pandemic era. A greater prevalence of COVID-19 contagion in low-vaccination countries as against those with high-vaccination rates will weigh on worker unavailability, supply chains disruptions and weakened consumption patterns.
Overall, by 2024, the WEF, Global Risks Report 2022, forecasts that advanced economies will surpass their pre-pandemic growth path by 0.9%. With the exception of China, developing economies will be 5.5% below it—with Latin America and Sub-Saharan Africa dropping even further behind. The WEF Report further examines the risks of economic decoupling as a barrier to already-limited means to restore growth in developing economies. Decoupling will make it much more difficult to leverage large consumer markets, youthful workforces and competitive costs and risk having less access to capital and talent.
These problems mask the discernibility of budding difficulties including the climate and energy transition disorder, heightened digital vulnerabilities, shifting barriers to international mobility, and crowding in outer space in conjunction with competition to populate the metaverse or the immersive virtual reality version of the internet, where people can interact with digital objects and representations. The lower Post-Coronavirus pandemic risk appetite in the vaccinated world—comprising mostly of Wallerstein’s core economies—could dampen investment inclinations in the non-vaccinated world. The flurry of economic disruptions emanating from the COVID-19 vortex creates incentives in the vaccinated world to prioritize resilience over cost minimization.
Counter to the trends of globalization, these drifts may now drive convergence using resilient supply chains to abate latent disruptions. Polarized connectivity, inflation, debt, and divergent income trajectories risk further fragmentation of the global economy. Divergence is likely to be aggravated by different trends in growth patterns. Supply chain interruptions, labour market skills gaps, citizen developer voids, protectionism and unfinished learning are rewriting the social contract. Considerations that both rapidly and sluggishly recovering countries will need to navigate in order to thrive, restore social cohesiveness and boost productivity.
The WEF, Global Risks Report 2022, notes that across all time spans, short, medium and long, the erosion of social cohesion is the risk that has deteriorated the most during the Coronavirus pandemic. A “Livelihood Crisis” looms as the second most immediate threat and is the most immediate national threat to several economies, including 16 of the G20 countries. Indeed, the world is fast becoming more unequal. For the masses, the labour market remains crucial to their happiness—or restlessness—with life. How individuals contribute their labour, and how they are compensated for it, are motifs that pervade the treatises of Marx and Hayek. The labour market remains an economy’s main instrument to distribute aggregate gains in the population with some degree of fairness. Throughout history, work is a foundational component of the social contract.
Around 400 BC, Plato’s “Crito” examined a jurisprudence that arose from a type of contract between the state and the citizen. Augustine and Aquinas explored the ideas of a just political regime. Thomas Hobbes and John Locke dealt with how best to organize society under a monarch. A century later Rousseau publish: “The Social Contract” with its celebrated first line: “Man is born free, and he is everywhere in chains”. His central thesis was that true freedom is experienced in a civil society that ensures the well-being of its citizens. But being part of such a society involves submitting to the general will – a force that transcends and surpasses individuals and aims to uphold the common good. In our own lifetime, Harvard’s John Rawls in his: “A Theory of Justice” (1971) raised the spectre of “fairness”. For Rawls, the central principle of justice as fairness is that cooperation should be fair to all citizens, irrespective of their ethnic or other heritage. Amartya Sen, Master of Trinity, Cambridge, would stand on the shoulders of Rawls and publish: “Development as Freedom”.
Two decades ago, the gap widened between the top 10 per cent of the world’s largest businesses by economic profit (Superstar firms). Superstar firms have 1.6 times more economic profit on average than superstar firms did twenty years ago. The “Superstar” effects are also visible in Superstar Cities that are globally integrated, the most innovative municipalities, and major financial hubs. They account for eight per cent of the world’s population and twenty-one per cent of global GDP.
Research at McKinsey’s Global Institute suggests that there may be a “superstar ecosystem” with superstar sectors generating increased capital income for superstar firms, which contribute to the increased concentration of wealth in superstar cities. The new year started much in the same way the old one ended: with vaccination progress displaying wide-ranging differences across countries and the associated divergence in economic recovery. This variability in vaccine progress kindles divergent economic recovery that will compound pre-pandemic social cleavages and deleterious consequences for people and the planet.