truncated. The digital revolution has been radically accelerated. And the geopolitical
rivalry between America and China has intensified. At the same time, the pandemic has
worsened one of today’s great scourges: inequality. And by showing the toll of being
unprepared for a low-probability, high-impact disaster, it has focused more minds on
the coming century’s inevitable and even higher-impact disaster, that of climate change.
All this means there is no going back to the pre-covid world.
That will not be obvious at the start of the year. Amidst the misery of a resurgent second
wave, attention in many countries will still be focused on controlling the virus. As the
New Year begins a vaccine will be on the horizon, though not yet widely available. Only
as 2021 progresses, and vaccines are rolled out, will it become clear how much has
permanently changed.
And that will turn out to be a lot, particularly in the West. The post-covid world will be
far more digital. From remote working to online retail, the pandemic has compressed
years’ worth of transformation into months, bringing with it a dramatic shake-up in
how people live, what they buy and where they work. Winners from this bout of
creative destruction include the tech giants (whose profits and share prices have surged)
and large companies more broadly (which have the biggest troves of data and the
deepest pockets to invest in digital transformation). Big cities will have to reinvent
themselves. Expect a flood of closures, especially among small businesses and in the
retail, travel and hospitality industries.
Although globalisation will still be about goods and capital crossing borders, people will
travel less. The Asian countries that controlled the virus most effectively were also
those that shut their borders most strictly. Their experience will shape others’ policies.
Border restrictions and quarantines will stay in place long after covid-19 caseloads fall.
And even after tourism restarts, migration will remain much harder. That will dent the
prospects of poor countries that rely on flows of remittances from their migrant
workers abroad, reinforcing the damage done by the pandemic itself. Some 150m
people are likely to fall into extreme poverty by the end of 2021.
Global commerce will be conducted against an inauspicious geopolitical backdrop. Mr
Trump’s mercurial mercantilism will be gone, but America’s suspicion of China will not
end with the departure of “Tariff Man”, as the president was proud to be known. Tariffs,
now levied on two-thirds of imports from China, will remain, as will restrictions on its
technology companies. The splintering of the digital world and its supply chain into two
parts, one Chinese-dominated and the other American-led, will continue. Sino-American
rivalry will not be the only fissiparous influence on globalisation. Chastened by their
reliance on imported medical supplies and other critical goods (often from China),
governments from Europe to India will redefine the scope of “strategic industries” that
must be protected. State aid to support this new industrial policy has become and will
remain ubiquitous.
All this will leave the world economy divided and diminished. The gap between strength
in China (and other post-covid Asian economies) and weakness elsewhere will remain
glaring. China’s was the only big economy to grow in 2020; in 2021 its growth rate will
exceed 7%, substantially faster than the pace of recovery in Europe and America. And
unlike Western economies, its recovery will not be underpinned by gaping budget