Covid-19 has accelerated the world into the future. Here are five powerful forces that were at work before Covid-19, which intensified during the pandemic and will again affect the world in 2025, and far beyond.
First, the technology. The advance of computer and communications technology continues to reshape life and the economy. Now broadband communications, combined with Zoom and similar video conferencing software, have made it possible for a large number of people to work from home.
By 2025, it is likely that some, perhaps most, of this office shift will have reversed. But he won’t do it completely. People will be able (and will be able) to work outside the office. Inevitably, this will not only include workers from their home country, but also workers from overseas, usually with lower wages. This will likely result in a destabilizing increase in what one might call “virtual immigration”.
Second, inequality. Many well-paid office workers were able to work from home, while most others could not. In Western countries, many of those most affected are also members of ethnic minorities. During this time, many of those who have already succeeded and who are powerful have prospered mightily.
It is likely that the inequalities exacerbated by the pandemic will not have reduced by 2025. The forces that have anchored it are too powerful. A modest improvement is what one can most hope for. This in turn suggests that the populist politics of the recent past will continue to shape politics in 2025.
Third, debt. Global debt has grown almost everywhere over the past four decades. Whenever crises have disrupted the borrowing capacity of the private sector, governments have taken over. This happened after the global financial crisis and again during Covid-19.
The pandemic has dramatically increased borrowing from the private and public sectors. According to the Institute for International Finance, the ratio of global gross debt to global output rose from an already high level of 321% at the end of 2019 to 362% at the end of June 2020. Such a huge jump and suddenly has never happened before. occurred in peacetime.
Fortunately, public debt is now extremely cheap, with nominal and real interest rates on the sovereign debt of high-income economies at low levels. But their over-indebtedness can paralyze part of the private sector for years.
Fourth, de-globalization. The plausible future is not that international trade will die. But it is likely to become more regional and more virtual.
After the global financial crisis, trade stopped growing faster than world production, as it had done in previous decades, but instead grew at roughly the same rate as world production. This slowdown was due to the exhaustion of opportunities, the lack of liberalization of world trade and the rise of protectionism. Covid-19 has reinforced these trends. A marked result has been the desire to move supply chains home, or at least out of China.
The crisis is also strengthening regionalism, particularly in Asia. The agreement on the comprehensive regional economic partnership, which brings together the 10 members of ASEAN with Australia, China, Japan, New Zealand and South Korea, is a recent example.
Finally, political tensions. One dimension has been the decline in the credibility of liberal democracy, the rise of demagogic authoritarianism in many countries, and the rise of Chinese bureaucratic despotism. Another is the rise of populism in major Western countries and in particular in the United States. If Joseph Biden’s victory represents a defeat for populism, President Donald Trump’s large part of the vote shows that it has not disappeared.
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Yet perhaps the most significant of the geopolitical developments has been the rising tensions between the United States and China. It forces countries to take sides. Once again, Covid-19 has accelerated the drift. Mr. Trump blamed China for the pandemic. Even though he’s gone, many in the United States share this point of view.
So where, given all of this, could the world be in 2025? With luck, the economies will have largely recovered from the pandemic. But most will be poorer than they otherwise would have been.
Yet perhaps the greatest challenge will require global cooperation that will not exist. Supporting a vibrant global economy, preserving peace and managing the global commons was always going to be difficult. But an era of populism and great power conflict will make this much more difficult.
We are in an era of turmoil. The pandemic underlined it, but did not create it. We must live up to this opportunity. Donald Trump’s defeat gives the world a break. But the challenges are enormous. In 2025, many of them will still be there and, in all likelihood, even more.
