The Great Divergence?
Besides being the biggest global public-health crisis in a century, the COVID-19 pandemic has triggered a rethink of existing economic growth models. Which major economies will make the structural shifts needed to ensure future prosperity, and which will persist with the status quo?
In this Big Picture, the Rocky Mountain Institute’s Jules Kortenhorst says that Europe and China will be the big winners, and contrasts their investments in competitive clean-energy sectors with America’s continued support for older, carbon-intensive industries. But like it or not, says Dalia Marin of the Technical University of Munich, engineering any post-pandemic recovery will also require targeted stimulus packages for traditional sectors, such as the German automotive industry.
James K. Galbraith of the University of Texas at Austin shows how COVID-19 has exposed the US economy’s overreliance on global demand for advanced goods, debt-fueled consumption, and non-essential services, leaving it in urgent need of radical reform. Likewise, the University of Hong Kong’s Andrew Sheng and Xiao Geng of Peking University are more optimistic about China’s economic prospects than America’s, touting its more resilient and sustainable growth model. But both countries, they argue, will need to develop more inclusive post-pandemic social contracts.
Achieving that, say Harvard’s Dani Rodrik and Stefanie Stantcheva, will require an explicit quid pro quo between governments and private firms. Only by radically reorganizing production and creating more good jobs can societies hope to tackle persistent economic insecurity and inequality.