The global economy has been severely affected by the coronavirus pandemic with policy makers under pressure to ensure recovery is swift and enduring. But what kinds of places are well placed to do so? What are the key features that can determine economic resilience post-pandemic?
These issues were tackled in GENN’s recent first report Economic Resilience in the Face of the Coronavirus Challenge which I, Daniel A. Gottschald and Lars Karlsson co-wrote, and which has been widely welcomed.
Those key features we identified as the pillars of economic resilience were entrepreneurship and competitive markets; effective governance with a commitment to property rights; openness and creativity; and use of prosperity zones (advanced special economic zones). The report argues that if those pillars are established then the prospects for global recovery are greatly enhanced. Combined, these factors create excellent conditions for new trade opportunities and the economic innovation that drives future growth.
Some of the existing locations we can look to as examples of being highly interconnected and having those characteristics firmly established include London, New York, Singapore, the UAE, South Korea and Hong Kong. These places act as nodes on a global interconnected hub of trade, technology and talent.
The old premier league cities like London and New York are still important, of course, but they have been joined by places which have seen massive rapid development. Countries and cities around the world hoping to reach the premier league of nodes can look at how the UAE embraced a transition to a knowledge-based economy, or how Singapore has distinguished itself as creating excellent conditions for trade and inward investment.
Yet with the continued global pandemic, globalisation itself – and governments that pursue an open approach to trade – will come under pressure like never before to give in to protectionist instincts and erect barriers to the free movement of labour, free and competitive markets and free trade.
They must resist.
Not only will giving into this economic blindness reduce output and hinder growth. It will hurt poorer countries who benefit from trade agreements which deliver a pathway towards a more prosperous future. Now is the worst possible time to retreat inwards and those that do so will just see economic stagnation.
One practical measure that interconnected nodes can introduce now to assist recovery is the establishment of corridors for essential business travel. We have seen in the EU and UK air travel restrictions that are blunt instruments which hamper exactly the kind of business travel that can add value to economies and get the recovery moving again.
Clearly public health needs to be at the front of peoples’ minds. Airports will require effective testing as is already seen in places like Hong Kong, Singapore and Dubai. I covered this recently in a piece for The Telegraph. I am not alone in this view, as Steve Baker MP recently also wrote in The Telegraph on the same lines, citing the GENN report.
Those governments that understand that they have to maintain openness in the face of public and political panic will far better placed to take advantage of the forthcoming recovery. Good governments will not just help manage a way out of the pandemic: they will continue to innovate and support the structure of global nodes that has helped build prosperity for millions.