Reasons for optimism in 2021

The journalists at The Economist had their work cut out for them when producing their most recent annual forecast of the year to come. Even the savviest prognosticators might have been reluctant to place bets on 2021, perhaps the least predictable year in recent history.

But Deputy Editor Tom Standage and his colleagues rose to the challenge in putting together “The World in 2021.” Standage discussed the publication’s analysis with Professor Jose Toribio at an IESE Alumni online session this week.

To bring order to an exceptionally complex time and assignment, The Economist built the issue around three themes: the pandemic, the economic recovery and geopolitics.

A Light at the End of the Tunnel

 “The pre-pandemic world is not coming back,” Standage said. “But we’ll see something more normal than what we have now.”

The success of vaccination campaigns is vital to regaining a semblance of normality. And while effective vaccines were developed with impressive speed, Standage said that complications in manufacturing and distributing them, as well as widespread vaccine hesitancy in countries like France, prevented their being silver bullets in vanquishing the health crisis.

Vaccine diplomacy and politicization is another concern that’s caused bickering and delayed rollouts in Europe and has seen China and Russia offering its vaccines at no or low cost to countries with which they want to build alliances. Vaccination rates have varied widely by country and region. And areas where they’ve lagged could lose the race against time as new variants spread.

“We still don’t really know how much these variants can invade the vaccines,” Standage said. “The pessimistic view is that we’ll need the vaccine every year like with the flu. A more optimistic assessment is that several variants seems to have arrived at the same mutation independently, meaning there may not be a large range of variants.”

Rebuilding the Economy

As with vaccination success, economic recoveries have diverged from country to country. But an encouraging and common sign is that economies have bounced back faster than expected once lockdowns are lifted.

The increased willingness of governments to push through big stimulus measures is another piece of good news. Standage said that the immense size of the American stimulus package (President Biden signed the $1.9 trillion plan yesterday) could have a substantial positive impact on global GDP.

Still, a recovery is uncertain. And Standage pointed out that government supports have hidden the scope of suffering. Inflation is another potential problem to look out for.

“This year, there will be good economic news based on the vaccines followed by bad news, particularly regarding unemployment numbers that will shoot up when public aid is withdrawn,” he said.

A New World Order

The biggest geopolitical development since The Economist sat down to craft the World in 2021 issue was Biden’s election. Standage made clear that a new American president doesn’t mean the US or the world are in for quick fixes. But his assessment of the Biden administration so far was positive.

“This is an all-star team of familiar faces, but also rising stars,” he said. “This is meant to reassure the markets and America’s allies that we have competent, and predictable, people back in charge. I don’t think Biden could have done a better job at elevating new talent and diversity.”

Some people will be surprised by certain consistencies between Biden and his predecessor Donald Trump, particularly a continued tough stance on China, whose economy grew last year despite the pandemic and whose strong-armed trade tactics are seen with growing wariness around the world.

No Going Back

As an end to the pandemic comes into sight, Standage had some other predictions regarding its permanent effects.

Business travel may not rebound to above half of its previous levels. And the loss of that money, which historically subsidized other forms of travel, will likely lead to much more expensive long-haul flights forcing people to travel closer to home.

The success of tech companies during the pandemic might make regulators less eager to bash them or break them up. And the “metaverse,” or “fusion of social media, gaming and entertainment” (e.g. virtual concerts) is likely to stick around even after people can gather again.

The pandemic also hastened the decline of globalization that began with the Great Recession, a fact lamented by Standage and his colleagues.

Yet there are solid reasons for hope despite this year’s unpredictability.

“I’m not being gloomy when I say we’re not going back to the way things were,” Standage said. “There are many opportunities here to come back better.”