Gabriela Ramos delivered a keynote speech at this year’s virtual 2020 Global Solutions Summit.
Dear colleagues and my dear friend Dennis Snower,
Thank you for convening the Global Solutions Summit virtually at this critical moment where countries can either take action to boost and safeguard global cooperation or fall into a “me first” kind of globalism.
First and foremost, I want to take this opportunity to commend the work of frontline essential workers, nurses and doctors and care-workers, that are fighting the Covid-19 pandemic and to save lives. And my deepest condolences to those who have suffered and lost on account of the virus or by trying to save others.
Indeed, Covid-19 is causing large-scale loss of life and severe human suffering. The crisis has shaken our interconnected health, social, economic, and political systems. The pandemic has taken away so many lives, put the global economy in recession, and with unfortunately high social costs. It is stressing financial markets that were already characterized by excessive leverage; affecting an international trading system ridden with tensions; and requiring fiscal and monetary action at a juncture where levels of public debt are historically high and monetary policy is already very soft. Not to mention that it comes on top of another crisis: climate change.
This is a wake-up call that we really need to change the way our entire systems operate and to change what they deliver.
But what failure are we talking about?
First, this crisis has showed us how unprepared we were to face these kinds of “systemic shocks”.
- Our health and social protection systems are stretched to the limits, even in the most advanced economies. We are seeing that governments now have to foot the bill for market failures by subsidizing vaccine production and providing provide health care for all for example.
- We have to accept that we cannot simply optimize and maximize efficiency and profit in our systems. Rather, we must make the necessary efforts to understand our systems through resilience approaches, risk management frameworks, systems thinking. Only this way, we can better understand the true function of the systems that govern our lives and how to best ensure that they deliver for people in normal times and when put under stress.
Secondly, of course, containment and lockdown are vital to save lives during this health crisis but we face grave economic risks as a result.
- OECD projects a decline in annual GDP growth of 2 ppt for each month of confinement.
- Global trade is now contracting, global production and retail sales are falling, global air traffic has also fallen rapidly because of the complex value chain linkages.
But, these shocks are not happening in a vacuum! Rather, the health and economic crises come at a moment where we are already experiencing high levels of inequality between regions, socioeconomic groups, generations, and genders. The impact of the crisis will fall asymmetrically on our societies, and while containment for some means just staying home, others will see their chances to succeed evaporate.
- Even prior to the crisis, the bottom 40% of the population have already been disproportionately affected by economic hardship for decades. They were “financially insecure”, meaning they are in greater risk of falling into poverty after 3 months of income loss.
- And there are many disadvantages that these groups are facing, and now we have COVID.
- Here, we are talking about the young people without tertiary education. We are talking about low-income couples with children. We are talking about essential workers that now struggle to find affordable and accessible child care. We are talking about single mothers. And we are talking about those in informal employment. We are talking about those in plain poverty and we are talking about developing countries.
- COVID-19 is hitting these vulnerable populations much harder.
How much more inequality can we take?
- Take the examples of the asymmetrically negative impact of the crisis on women. Nurses and care-workers, most of those fighting the virus are women, but their pay and visibility are limited. They provide the majority of care outside and inside homes, but the social recognition of these efforts is limited.
- Women are overrepresented in informal employment lacking adequate social protection.
- Women-owned businesses normally struggle to access credit.
- They are concentrated in the industries most affected by the crisis such as tourism, retail, food and beverages, accommodation services.
- They are more at risk of becoming victims of domestic violence. Prior to the crisis, more than 1 in 3 women had experienced violence by intimate partners. Since the crisis, these rates have increased by 30% in some countries. This is really unacceptable.
The dynamics generating today’s economic crises are deeply embedded in the structure of our economies. So we need to give serious priority to putting the wellbeing of people at the centre of our discussions, reducing inequalities, and achieving sustainability and resilience to build back much better. This will demand more than a minor adjustment to current economic policies.
Thirdly, this crisis has revealed how incredibly interconnected the world is. This is perhaps the biggest difference from the 2008 crisis. We already thought we were interconnected, but now all the systems are coming together to show that we need to bring our efforts together.
- Just as the virus spread quickly across the globe through social, travel, and transport networks, so did it impact the supply chains, systems, trade and financial markets that interconnect our economies.
- Today, 70% of international trade is for production in global value chains, where services, raw materials, parts, and components are exchanged across countries before being incorporated into final products. This means that a drop in demand for a good in France can have almost immediate impact on workers in other regions integral to that particular supply chain.
If we really want to rebuild a different, more sustainable, more inclusive economy and society, we really need to understand better how our markets, individuals and systems interact. We need to identify the vulnerabilities and address them.
We have been saying that loud and clear for years at the OECD with our NAEC initiative and also through our Inclusive Growth initiative. We don’t have any other option. We need to move forward to build back stronger with the right decisions this time. We cannot go back to normality, because normality was no good. We must build back better.
- First and foremost, we must ensure that government interventions and stimulus packages are more sustainable and inclusive.
- Priority should be placed on supporting low-income groups that are hardest hit. Also, immediate action will be required to help disadvantaged students make up for what they missed during school closures to avoid a lost generation of youth. They will also need to bebetter connected to the labour markets.
And let’s fully think about the longer term impact of the policy responses we implement today.
- This means that the recovery, and any additional support, must be aligned with our environmental and climate goals.
- We must also ensure that reforms of our tax systems, which will sustain the recovery efforts, will need to be progressive and also incentivise a low-carbon future, indeed inclusive and sustainable.
More than ever, we need a new narrative the puts people at the centre, ensuring they are better protected and empowered. Private and public sectors must come together to ensure the well-being of all people, particularly those that have been left behind. We really need to go beyond using GDP per capita and stop maximizing shareholder value as the only metrics for success. They are no good. They do not capture the essence of what we are and what we need.
Fortunately, we are seeing more and more governments and organisations embrace this goal. Let me share with you, just yesterday the B4IG initiative that the OECD empowers, met virtually, and all these multinational companies that came together to reduce inequalities are also stepping up and putting a package of 2.4B to support people in this current context and to maintain their workers and maintain business continuity. So at the OECD, we have the well-being framework to ensure that we measure what we treasure. But we are doing all these efforts and partnerships to build a better world going forward.
We need to know how people are faring in education, health, quality of life, social connections, the quality of environment they live in. We need to build public trust to ensure we prioritize policies that deliver for people. Such agendas not only benefit people but also boost trust in institutions, avoiding political backlash that we have been witnessing or the emergence of populist agendas that only serve to tear our societies apart. This is the way we recouple social and economic progress as Dennis has always been promoting in these conferences.
And such narratives have to be driven by international cooperation, advancing the idea that we are all part of one planet whose people and ecosystems need to be preserved for today and the future.
This crisis is bringing to light the weaknesses and vulnerabilities of our current economic, social, political systems. Let’s make sure we turn this challenge into an opportunity to finally make our economies, our health and epidemiologic systems, our global value chains, more resilient, better prepared, for the next, unavoidable shock. The last big recession brought the world a New Deal and a new commitment to international cooperation through the Marshall Plan, that gave birth to the OECD. Let’s learn from these lessons and, as leaders and decision-makers, come with ambitious answers for a better world!
It will not be easy, but if COVID has shown us anything, it is that the time for such a narrative is long overdue. Let’s build it together.
 OECD Trade Policy Brief: Trade Policy Implications of Global Value Chains 2020