…The New Social Contract … The Post-Pandemic Urgent Agenda
Article Latin Trade ABRIL 2021
…The New Social Contract …
The Post-Pandemic Urgent Agenda
Brazilian Entrepreneur, President CEAL Brazilian Chapter
We are seeing the third wave of Covid Pandemic that is much worse than the first.
Not only are the effects of contamination more virulent, but the population’s exhaustion, due to social distance, and its power of personal and economic resilience has reached its limit. I have rarely seen hunger and misery so close to us in my life.
The speed with which we vaccinated is below the rate of contagion, with the consequence of hospital exhaustion, and collapses in intensive care, and with astonishing scenarios, of possible funerary collapses. Local administrators take measures to reduce contagion, and thus avoid extreme situations, but the economic consequences for the low-income population, without formal employment, or micro companies are devastating. Small businesses, which bring together up to 9 people, with a family profile, represent 2/3 of businesses in our Region. There is no reasonable nor sufficient economic support that can mitigate the risk of surviving economically. Nevertheless, this incredibly negative, but possible, scenario will last as long as the pandemic is at its peak, and in our case in Latin America throughout the year 2021. Scenarios from several financial institutions foresee a resumption of the economy in the 3rd Quarter 3Q21, others for the fourth quarter 4QT21, where consumption will react vigorously again. This is good news, and 2022 will be even better, if we know how to prevent ourselves with permanent vaccinations.
Consequently, our problem reduces to 6 months. After that period, are we going into recovery mode?
At first glance, this appears to be it. However, structurally, this will not be the consequence of the post-pandemic. We will come out much poorer, with a greater concentration of wealth, less global and more digitalized.
Absolute world poverty will rise brutally after 2021. The world hunger rate will be much higher, and social structures, the fragile social network for many, will break down in many ways.
Economic instability, and especially social instability, will bring political radicalization and the possibility of social upheavals with it. It is no wonder that this year we will have some Summits of Heads of State, debating the issue of Food (2021 World Food System Summit, Tokyo Nutrition for Growth), the economic recovery and the issue of Climate (COP26) 1).
In this Latin Trade panel we already raised the issue of resetting the mindset in 2020 2), and we had the virtual meeting in Davos, exactly with this focus. Klaus Schwab, a keen observer of trends, in his opening address at the World Economic Forum WEF, said that we must quickly seek a New Social Contract in the world 3). Notes that the concentration of capital and poverty at the same time, even before the pandemic already deserved strong attention, in the post-pandemic it then becomes a Critical Global Development Factor.
The Great Social Contracts that we had in history, started, by disruptive events. In the pre-industrial era, around 1870-1900 and later with communism spreading in the world from 1920-1950. With the fall of the Berlin Wall, global improvements began, but in a very tenuous way. With the arrival of the Digital Revolution 4.0, the work system substantially changed the relationship between work, income and capital, but they were not sufficient for the formulation of a New Social Contract. Nevertheless, the pandemic is a shock, at the global level, of profound impacts, which puts the issues of poverty and wealth on extreme sides. The pandemic world, more digital, has changed the way we work, life together, study, have fun and finally live. The post-pandemic world will not be the same. Now, we are just improvising. Although we had all the conditions to modernize and update the relationship of work, income, accelerated education, digital innovation and new management in health, business, small or large,
– the mental rooting of old solutions and standards, –
will make these transformations very painful, and difficult.
We think that the old way of solving problems will be sufficient for new situations.
Severe impoverishment will be located in developing countries, and developed countries will have greater comparative advantages to overcome this scourge 4). The recent IMF meeting shows this disparity, which is making Central Bank presidents very concerned 5). The US agenda, now, is to streamline the vaccine in a spectacular way and then resume normal life of economy and social coexistence. The United States will be the first to do very well this year. On the other hand, the European Union will leave later, due to its bureaucracy and lack of pragmatism in managing effective solutions, but they will be fine. China, Japan and Korea, due to the inherent discipline and different regimes, will achieve very satisfactory solutions.
India, Africa and Latin America will be the last to leave.
Smaller countries will leave late, not because they cannot afford to pay, but because they do not have access to vaccines in time. This shows how little international solidarity actually worked. Each thought of their domestic solution. From the beginning, global solutions could be thought of, but there was no leadership with these qualities.
We entrepreneurs know that without a New Social Contract, in which we have a relevant role, we will have major problems in the future.
Nevertheless, whom will a New Social Contract come from? Those who did better or worse from the crisis?
Economically speaking, we will have a much higher global indebtedness, which makes economists very worried, due to instability, which will translate into inflation, interest, debt payments, and assumption of losses, among others. For those who continue to carry out Monetary Easing (USA and Europe) their currencies will weaken and that of other countries will appreciate, like us in Latin America, reducing their competitive capacity, and thus they will have to tighten their belts a little more …
Therefore, the solutions for a New Social Contract should come out of these more fragile countries, but…
…. will they be heard? Will they have shared solutions? …
I don’t think so, and therefore the clashes will be much more pronounced, more difficult, and as long as we have democratic institutions operating well, these clashes will be tough, but with the great risk of political radicalization, anywhere. In a recent CEAL webinar, the general opinion was that we did have democratic institutions strengthened, but leaders unprepared for the current situation. Therefore, it will be difficult for political leadership to initiate this process, which puts civil society at the forefront of the debate for a New Social Contract.
It is not surprising that in the Latin American Region, several countries are under pressure from constitutional revision, which gives them the opportunity to move from a country of privileges to a nation of opportunities. This is the call of a book recently launched in Brazil by one of the greatest renowned and respected jurists Modesto Carvalhosa 6).
This New Social Contract should contemplate a revision of the political, social and economic order, bringing the people closer to their leaders, strengthening through digitalization the decision-making processes in the parties, in the public and private administrations, for freedom, insertion, transparency and flexibility. We will have however controversial it may be to rethink the minimum income, to resolve the hunger and misery of our continent. Increase civil and private participation and limit State action. Redefine the central issue of sovereignty, to increase solidarity and regional integration. The new way of working, flexible, digital and face-to-face, to strengthen small businesses, initiatives and innovations in all fields. More interconnected currencies and strengthening for investment integration, the most agile, fair and easy commercial relationship. Having the digital world in our favor, in social, educational, environmental and legal innovation, providing transparency, agility and access.
This debate needs to be started as soon as possible, and the greater its representativeness, the less its wear and tear and the lower the long-term social cost.
It should not be just a debate by developing countries, but the involvement of developed countries will be of great relevance. We need to involve our supranational institutions, the IDB, CAF, OAS, among others. Especially because these transformations, the more shared, the less unfair they will be, in market access and social justice and solidarity. It is an institutional debate of the international organizations and of the democratic institutions of the countries, of us executives and of the Latin American citizen, finally of YOU!
we need to start now!
Food Systems Summit | United Nations, Postponement of the Tokyo Nutrition for Growth Summit 2020 – Nutrition For Growth, HOME – UN Climate Change Conference (COP26) at the SEC – Glasgow 2021 (ukcop26.org)
Reset the Mindset, https://latintrade.com/2020/04/28/stop-reset-your-mindset-before-you-continue/
WEF, The Global Risk Report 2021, 16th Edition. And Klaus Schwab , https://youtu.be/LJTnkzl3K64
Worldometer – real time world statistics (worldometers.info)
Uma nova Constituição para o Brasil, Modesto Carvalhosa, 2021, LVM Ed