"How we articulate the profound changes and what lies ahead for each and every member of society will be the true test of leadership in this age of distrust.”
What will unfold after the pandemic? As countries busy themselves with the vaccine rollout, some economists are beginning to think that we may go back to the normal, pre-Covid-19 days. The latest Organisation for Economic Co-operation and Development Economic Outlook 2021 preliminary report suggested that global growth patterns will be divergent.
With the Biden administration’s US$1.9 trillion stimulus package passed this month, on top of the Trump administration’s exit stimulus of US$900 billion passed last December, the US is receiving a huge stimulus to get the economy going again. The Biden administration is looking at another US$3 trillion worth of infrastructure spending, which will be a game changer, stopping the decline in US productivity and getting domestic jobs and manufacturing back to better days. Stock markets and the US Treasuries market are signalling this important shift.
China, on the other hand, is well into recovery with all numbers in positive territory, although consumer confidence has not yet fully recovered. However, the country’s 14th Five-Year Plan has clear ambitions of stimulating domestic consumption with a whole array of transfers to the household sector.
Europe, on the other hand, is facing a third wave of Covid-19 infections and possible lockdowns, and with Brexit, the gap between northern and southern Europe is getting wider. Estimates show that Spain (an 11% decline in gross domestic product in 2020) and Italy (-8.9%) may be the slowest to recover but the problem is that with German Chancellor Angela Merkel retiring later this year, there will be a vacuum in the political leadership of the European Union that French President Emmanuel Macron will not fill completely.
The UK (-9.9%) is still struggling to cope with the double trauma of Brexit and the pandemic, and amazingly, thinking of a revived role in the Indo-Pacific region and picking quarrels with China at the same time.
In the meantime, the emerging market economies (EMEs) have suffered considerably, with serious problems in Latin America and Africa. The leading G20 EMEs all suffered badly in 2020 — Mexico (8.5% drop in GDP), India (-7.4%), South Africa (-7.2%) and Argentina (-10.5%). The International Monetary Fund will have its hands full sorting out a number of EMEs in debt distress in the coming months.
What are the big trends that can be identified so far?
The AT Kearney Global Trends 2020-2025 report suggested five big trends: (1) embattled governments, (2) push to self-sufficiency, (3) stranded segments of society, (4) rise in food insecurity and inflation, and (5) industry consolidations, mergers and acquisitions.
Kearney’s three lessons to be drawn from Covid-19 for the climate crisis are (1) environmental problems have intensified, (2) everyone needs to do more on cutting carbon emissions, and (3) technology will drive the response to climate change.
All this makes sense, but governments are being asked to do more and more with less and less public support and resources.
First, governments are getting bigger as social demands for more healthcare and looking after the bottom half of society and calls for intervention in unfair markets mean more spending, inability to tax, more debt and less capacity to perform. Sovereign debt is higher than ever, and if inflation and interest rates rise, many countries would be in huge debt distress.
Second, technology, media, big pharma and finance are all getting more concentrated in fewer and fewer hands. The Europeans are looking seriously into whether to tax Google and other tech platforms. The Australians are now debating whether to call a Royal Commission to look into the Murdoch family’s 70% control of the country’s print media. Everyone is concerned that the big pharmaceutical companies are making huge profits from the vaccines and that the demand for health services is growing. Can these winners be taxed to pay for the pandemic?
That is the big political question.
Third, the internet is both a boon and bane. It was seen as the great leveller, bringing information and opportunities to the masses. Instead, what we have seen is a greater fragmentation of society. The former CIA information analyst, Martin Gurri, in his 2016 book, The Revolt of the Public, showed how, with information overload, the public fragmented into tribes or echo bubbles of people who thought alike, reinforced by algorithms that gave them what they liked, and ignored what they did not like.
Gurri saw information as the glue between the elites that governed and the masses. For millennia, elites ruled by controlling the information flow. If the plutocracy (the ruling elite) delivered on what they promised, most of the masses (loosely called the public or silent majority) went along with the status quo.
But the internet created what is known as the Fifth Wave of information disruption. The first discovery of writing created a mandarin or priesthood; the second use of alphabets widened the information network; then printing spread knowledge to new elites that created the scientific and industrial revolution. The fourth wave of mass media was still the top-down “I talk-you listen” of radio, TV and print.
But the fifth wave is very different. Information now interacts with power in ways that have become very open, unpredictable and mysterious. Because individuals think they can get everything on Google, they no longer trust experts or governments. Rebels on the internet can destroy reputations through insinuations, fake news and trolls, and start protests and revolutions with very little cost.
Thus, the traditional top-down social hierarchy of the centre (or establishment ruled by elites, elected or otherwise) cannot manage the periphery because the masses have fragmented into digital tribes on a global network that is “egalitarian to the brink of dysfunction”. For every government invention of social control, there is a viral response that is organic and almost immediate, like mutations of Covid-19.
Mainstream analysts who think that we can “reset” the system are still thinking in the linear, mechanical mode that is basically failing. Society and the planet are not computers or machines that you can switch off and “reset” or “reboot”. They are organic complex living systems that change right before your eyes, in ways that the mainstream thought models have not adjusted to.
We already see this in the Alaska talks between the US-China counterparties. The US can no longer dictate terms to the Chinese, Russians, or even their own allies, because four years of Trumpian “America First” policies destroyed global trust in the US to look after anybody else’s interests.
The US so far seems to have looked after the interests of the 1% better than the rest because, according to the UBS-PWC Billionaires 2020 Report, the rich have done far better in the pandemic than the rest.
The centre in each country still envisages the future to be a continuation of the status quo. You still see this in every government or large corporation concentrating power in smaller inner circles, while existing institutional checks and balances are breaking down on how to cope with the periphery of digital tribes who protest against authority, but have no vision on how to govern or establish order.
Small wonder then that there are more and more articles about failing democracy and growing autocracy, but it is not that simple.
There is little doubt that technology in the form of science, skills and knowledge will be the key tools out of our current malaise. Gurri has brilliantly diagnosed our present quandary, but has few answers except hope that the American democratic process will generate another leader who can grasp the implications of the post-pandemic age and organically reform the system.
He quite rightly made the analogy that we are in an era not unlike the 16th century Reformation, when there were religious wars between Catholics and Protestants about who and how society should be governed. Before the Reformation, Western Europe was intellectually dominated by the Catholic (by definition conservative) Church, which had a say in state affairs. No king could be divorced without the blessing of Rome. The Protestants (protesters by definition) railed against such authority, and eventually, Britain, Holland, Prussia and the Scandinavian countries created their own churches, splitting forever the power from the centre.
Today, unipolarity with the US at the centre has fragmented into multipolarity, in which major powers, including non-state players like religious movements, all strive to expand power through digital tribes. This digitisation has been accelerated by the pandemic, so society is faced with fragmentation by identity and ideology.
For the last half century, talk without walking the talk has destroyed trust. Every society is bound by trust. Rebuilding that trust can only happen when everyone gets out of their social bubbles and communicates once again as families, communities and nations. This is not about revolution, but evolution or organic change. A mental change can only happen with an emotional change, but what will bind us rather than break us?
If the Reformation is any guide, the process of change will take much longer than we think. Mental and emotional transformations have to occur at the family, community and local levels before they change at the national and global levels. What is more complicated is that digital tribes are now cross-border, making the building of social consensus at the national level much more difficult, while making disruptions easier.
An organic view of social healing is therefore more about building up immunities or self-healing, rather than external surgery or intervention. How we articulate the profound changes and what lies ahead for each and every member of society will be the true test of leadership in this age of distrust.
Andrew Sheng writes on global affairs from an Asian perspective. The views expressed are his own.