Jerome Jean Haegeli, Group Chief Economist at Swiss Re, has argued that the COVID-19 pandemic has exposed the need for “more long-term vision” from both governments and corporations around the world.
Haegeli called the crisis a “wake-up call” that has brought to light fundamental deficits in sustainable and resilience-driven ways of doing business.
As a result of the pandemic, income inequality has grown, both between the richest and poorest and by gender, and the fiscal stimulus responses have fuelled an already massive debt overhang that is sustainable only as long as interest rates stay low.
“The huge stimulus deployed to fight COVID-19 economic shutdowns has hit many countries’ fiscal and monetary firepower and is weakening their economic shock-absorbing capacity, or resilience,” Haegeli explained.
“This threatens the sustainability of their long-term recovery. We know that large-scale fiscal spending, while helpful today, will only support long-term growth if it is directed to productive use. Yet I do not see governments setting out ambitious plans for bold fiscal spending on infrastructure investment or other transformational change.”
In response, Haegeli says that governments must play a more active role in systemic crises like the COVID-19 pandemic, and urged more multinational cooperations.
“Governments’ challenge is not only to rebuild economies today, but to build back better for sustainable long-term economic growth and better preparation for the next crisis,” he said. “We must not confuse the current economic bounceback with a structural recovery. It isn’t.”
With the prospect of a global vaccine rollout, economic recovery should come swiftly over 2021, but the biggest challenge could be how to tackle the structural shifts that are accelerating due to the pandemic.
“Vaccines will not cure the economic and societal imbalances that have intensified in this crisis. My hope is that policymakers will not waste this crisis and instead will use it to bring about a policy reset,” Haegeli continued. “We have an opportunity to choose a policy direction that prioritises more inclusive and sustainable economic growth through redistributive policies and greener investment.”