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After the pandemic: the challenges of the world economy

Digital format, 09/11/2021, Aspen Corporate Initiative

The definition of America’s as a “boom” economy is amply justified by the 21 months of growth confirmed by the prestigious National Bureau of Economic Research. A historic fact comparable perhaps only to the 1960s of Presidents Kennedy and Johnson and the early Reagan years. Current fiscal stimulus amounting to nearly 6 trillion dollars is far more substantial than the New Deal or post-Second World War measures.

Moreover, with quantitative easing keeping taxes low for a long time and liquidity being injected into the system, banks and their budgets will be able to count on additional protection. Finally, assistance from central banks to businesses has been, and will remain, at unprecedented levels. Thus, over the medium term it is going to be necessary to keep a close eye on two major risk factors: inflation and mounting debt.

The overall eurozone growth rate of 3.9% is encouraging, but the data are far from homogeneous. Worrisome is a Germany struggling to reach 2.5%, in contrast for example with France’s 3.3%. The difference is owed mainly to the deep supply chain crisis stemming essentially – but not only – from the pandemic. Uneven growth is generating macroeconomic policies that differ from country to country; indeed, despite comprising a single macroeconomic framework, in reality individual European member strategies can vary widely. It must not be forgotten that Europe too is at risk of inflation, which averages around 4.4% overall, with noteworthy differences among individual member states, ranging from Malta’s 1.4% to Lithuania’s 8.2%, with Germany remaining a concern at approximate 4.1% (Italy stands at 3.1%).

China, for its part, is likely to stay its present course: a state capitalism controlled by the Party in accordance with the approach developed over recent years by Xi Jin Ping. The Chinese economy’s growth prospects are unlike any previously recorded – 2% against a previous 6-6.5% – and are low enough to impact considerably on the international economy. Such sluggish growth will likely shrink the size of the Chinese economy’s contribution to the expansion of the international economy as compared with the past. Yet, spurred by a desire for greater geopolitical prominence, China is taking a more assertive stance vis-à-vis international equilibria.

The trend appears, however, not to be leading to a convergence of major world economies, but rather to increasingly marked divergences. Beijing is convinced that the United States is in inexorable decline; America and Europe, having discovered the weak points in global value chains, have chosen to defend themselves by concentrating on the control of sensitive technologies. Indeed, technology is playing a growing role in the economy, with an increasing number of companies turning to the use of artificial intelligence. The numbers are still low for the most part, and many opportunities remain to be tapped. The burgeoning use of Cloud, 5G and Wi-Fi technologies has ushered in a democratization of data analysis, and whoever chooses to pursue this path in the future will undoubtedly reap the benefits. Neither will the use of artificial intelligence affect manual labor alone. Indeed, for the first time ever, higher-skilled professions are going be at risk, threatening the survival of middle management and flattening business structures.

Artificial intelligence still faces numerous barriers and widespread diffidence. It should be pointed out that trust must depart from the assumption that, in any case, data analysis performed with artificial intelligence is going to be extremely useful. The trust deficit in business is compounded by obstacles linked with the perceived lack of skills in what a recent study estimates at 33% of employees.

Nevertheless, the world of work continues to evolve at a rapid rate, such that technology-related legislation risks being obsolete by the time it goes into effect. In the early stages of the pandemic, companies’ use of teleworking skyrocketed from 5% to 37%; at the same time, a new “digital divide” opened up between skilled (50%) and unskilled workers (19%). From April to August 2021, more than 20 million US workers quit their jobs due to the pandemic; an enormous shift in the labor force that this time concerned not only low-level workers but highly educated ones as well, with the consequent risk of an unexpected shortage in the availability of workers to do all sorts of tasks.