With the arrival of more competent and steady leadership in the U.S., the rollout of COVID-19 vaccines, and momentum behind policies to address climate change, there are certainly grounds for hope at the start of the new year. But if 2020 taught us anything, it is that we still have a lot to learn about risk in a globalized world.
With all due caveats after a year that upended so many earlier predictions, Project Syndicate commentators have offered suggestions for what to watch out for in the 12 months ahead. Uncertainty may be an abiding fact of life, but that is no reason to throw up our hands and let the future wash over us. As many of the contributions show, the arrival of COVID-19 vaccines and prospects of an economic recovery in 2021 offer grounds for hope. We should also expect renewed momentum behind efforts to address climate change. Similarly, the eagerly awaited change of political leadership in the United States will bring new opportunities for global cooperation, but only to those who are ready to seize them. The task, as always, will be to leverage what we do know while remaining ever mindful of our own epistemic limits.
YUEN YUEN ANG
I expect 2021 to be a year of slow recovery, sowing the seeds of further disruption. Across post-pandemic economies, the rich will have become richer and the poor poorer, preparing the ground for even more populist pressure in the coming years. The U.S. and China will behave less confrontationally toward each other, but their competition will intensify nonetheless.
HELMUT K. ANHEIER
As U.S. president, Joe Biden will confront a Republican Party that has lost its moral compass and stands in grave danger of succumbing to the temptations of an authoritarian movement. Complicating matters further, Biden’s own Democratic Party has misread the electorate once again (although it retook the Senate, it lost seats in the House of Representatives), and may now be wishing for quick fixes and a fast return to pre-Trumpian times. As such, it has offered only a partial vision of how to heal a divided country. Completing that picture will be essential, because America’s problems are too deep and longstanding to be wished away. One hopes that civic unrest and violence will not drag down American society even more while the COVID-19 pandemic continues to take its terrible toll.
With the exception of California, the U.S. is about five years behind Europe and China in the electric-vehicle (EV) race. Cognizant of this, the Biden administration will advance bold federal EV policies, and these will be met with growing support from auto industry CEOs, power utilities, EV infrastructure players, unions, climate organizations, and communities fighting air pollution. Even some Republicans might support EVs, given the success of “made in America” Tesla. More broadly, a shift toward EVs in the US could have ripple effects throughout the Americas, especially in Canada and Mexico, and may represent the most tangible measure the U.S. government brings to the United Nations climate conference in Glasgow (COP26) in November.
This will be the year when action to mitigate climate change ramps up – if not dramatically then at least at a quicker rate than in the past, setting a trajectory for faster progress in the years ahead. The market is finally beginning to reflect the growing risk of investments in dirty energy, as well as the declining costs of renewables. Tesla’s high stock price, even if bubbly, reflects investors’ faith in improved battery technology and consumers’ rising demand for cleaner and greener options.
Moreover, the climate movement is building, with activists like Greta Thunberg mobilizing young people around the world. In the US, the world’s leading per capita polluter, elected officials’ political calculus is shifting in a greener direction, and the media now consistently refers to climate change when reporting on wildfires in western states and hurricane flooding in the south. In Washington, D.C., proposals for a Green New Deal, though controversial, have moved the policy needle. At the state level, more Democrat-led governments will consider carbon taxes or trading systems, and will look to attach “green strings” to public infrastructure spending. This will remain the case whether or not COVID-19 is beaten back.
WILLEM H. BUITER
There will be a robust global economic recovery, driven by additional expansionary fiscal and monetary policy measures in economies with the capacity to provide them (the U.S., the eurozone, the United Kingdom, Japan, and China), and by more modest stimulus in emerging markets. The recovery will withstand ongoing second or third waves of the COVID-19 pandemic, and private effective demand will continue to receive a boost from the delivery of reasonably effective vaccines. The single largest contribution to global demand will come from China, followed by the US and then Europe.
JORGE G. CASTAÑEDA
In 2021, U.S.-China tensions will intensify or escalate, either bilaterally on issues such as trade, Taiwan, the South China Sea, and Chinese tech giants, or by proxy, through third parties in Africa, Latin America, India, and Japan. Even with Biden in the White House, the US cannot simply walk back all of Trump’s aggressive policies and rhetoric toward China. And China, for its part, will continue to pursue increasingly nationalistic policies in many domains. There will be a mutual effort to improve the atmospherics of the Sino-American relationship, but the trend will be toward an aggravation of tensions, and possibly a crisis.
In 2021, GDP growth – globally and in most countries – will be stronger than most recent projections have indicated, owing to the rollout of vaccines. At the same time, it will become clear that inequality has increased during the pandemic, posing severe political and social challenges. Alongside that issue, climate change will take center stage as the world prepares for COP26, where carbon border taxes will be a leading – and highly controversial – topic of debate.
Biden’s election as U.S. president has already brought a collective sigh of relief in many parts of the world. For four years, the U.S. has ripped away at the global order, dismissing the threat of climate change, undermining international cooperation, violating international law and norms, pursuing xenophobic immigration policies, and turning a blind eye to ruthless dictators’ egregious violations of human rights.
The incoming administration will seek to initiate a process of healing at home, through efforts to reduce economic and racial inequality, and abroad, through re-engagement. The U.S. will rejoin institutions such as the World Health Organization and UNESCO, return to the Paris climate agreement and possibly some version of the Iran nuclear deal, and resume its past advocacy for democracy and human rights, placing some constraints on authoritarian regimes.
The real challenge, however, is not only to overturn Trump’s malign policies but also to alter the mindset that supports them in the U.S. and abroad. This will require an examination of not just symptoms but causes – namely, the sense of alienation, angst, and resentment that comes with globalization, rising inequality, and the capture of democratic institutions by elites or interest groups. Governance paradigms will need to be reset. It remains to be seen whether we have learned the hard lessons from this era of discord and polarization, or whether we will go back to our old habits.
PINELOPI KOUJIANOU GOLDBERG
This is likely to be a year of low aspirations, rising economic pain and frustration, and increasing international tension. COVID-19 will continue to dominate headlines at least until the summer, when the availability of vaccines hopefully will have pushed it into retreat. On the economic front, pent-up demand will boost growth, with Asian economies leading the charge. But the aggregate recovery statistics will mask considerable suffering among those hit hardest by the pandemic. These include workers whose jobs are not coming back, students from disadvantaged socio-economic backgrounds who have missed a year of education, women who dropped out of the labor force or reduced their working hours to care for family, and all those who rely on public services that will inevitably be curtailed as state and local governments confront enormous budget deficits.
Meanwhile, barring a change in monetary policy, a booming stock market will continue to increase wealth inequality. Remote work and flexible work hours will gain popularity, with important implications for the nature of work, inequality, real estate, and the future of cities. Though the international environment will be more civil, it will remain contentious as countries turn inward to focus on domestic issues. Governments will consider tariffs, digital taxes, and other mechanisms for generating revenues, fueling international tensions. Globalism will give way to regionalism. But these are not foregone conclusions; policy can still make a difference.
North Korea will conduct missile tests in an effort to pressure the Biden administration to resume negotiations over its nuclear program. With the North Korean economy under severe strain as a result of the COVID-induced lockdown and sanctions, Kim Jong-un will agree to accept limits on his country’s nuclear program in exchange for a measure of sanctions relief.
This is a year to be practical. The need for a recovery will force countries to put their differences and past grievances aside, and focus instead on collaboration and the search for common ground. A divided Europe and US may meet China halfway in the interests of pragmatism. Longer-term trials of strength, hopefully, will be put on hold.
The great expectations for COVID-19 vaccines may actually be greatly exaggerated. Not only will the pandemic not end in 2021, but third and fourth waves will sweep many countries. Citizens of various political persuasions may start to rethink the perceived merits and flaws of their own political systems, liberal democracies included.
With Biden in office, the U.S. can be expected to re-establish ties with the Palestinians, starting with the appointment of a new peace envoy. The U.S. will allow the Palestine Liberation Organization to reopen its office in Washington, D.C., while it re-establishes a US consulate (that reports to the Department of State) in Jerusalem. Although the US embassy in Jerusalem will continue to serve a symbolic function, the main U.S. embassy in Israel will return to operating out of Tel Aviv. Beyond that, the new administration most likely will not apply serious pressure on Israel or make any significant changes to US commitments of annual military and civilian funding.
As for the wider Middle East, the Iran nuclear deal will be renegotiated with some amendments, resulting in something not unlike the original Joint Comprehensive Plan of Action between the P5+1 (China, France, Russia, the U.K., and the U.S., plus Germany). The U.N.’s international role will be revived, and US funding for the WHO will be restored. NATO will be pulled back from the brink and re-energized.
This will be a difficult year for the international community to tackle the daunting challenges posed by epidemics, inequalities, and conflicts around the world. One hopes that Biden’s presidency will enable the US to restore its global leadership role so that it can help the world move in solidarity toward a better future.
On January 2, 2021, more than 100 villagers were murdered in Niger, one of the world’s lowest-income countries, and similar killings have occurred in Mali, Burkina Faso, Cameroon, Nigeria, Chad, and other countries where the state has become either vacant or criminal. None of these tragedies commanded international attention; the perpetrators enjoy impunity. The global media are busy obsessing over U.S. politics or celebrity gossip. The poor, it is assumed, are guilty of poverty and thus accustomed to suffering. Their stories do not “sell,” so why bother reporting on their unprofitable, dark, supposedly meaningless lives of pain?
These recent events suggest that 2021 will be another year of empty slogans and global indifference in the face of injustice and despair. If the death toll in Syria’s civil war (at least 387,000) has not shaken humanity’s conscience, it is not clear what will. Wealthy industrialized countries will maintain a safe moral distance from the rest of the world as they rush to monopolize COVID-19 vaccines. African countries, many of them run by illegitimate leaders backed by influential outside powers, will keep extracting oil, gas, diamonds, gold, and other raw commodities to feed the world’s greed.
And yet, there is a straightforward “win-win” solution to many of the world’s problems. “Poor” countries could create the conditions to retain their own savings, rather than exporting their capital to “rich” countries with negative real interest rates. If the latter were to direct a small portion of their capital, equipment, and expertise to the developing world, the resulting uptick in global demand would more than cover the upfront expense of such wise investments. With guarantees from international financial organizations, the ensuing returns to domestic and foreign investors would be substantial. In fact, societal transformations across the African continent would yield incalculable benefits for the rest of the world. But don’t count on this happening in 2021.
The new year brings hope of an economic recovery, owing to the promising efficacy of the various COVID-19 vaccines that are coming online. But the pandemic will leave lasting scars, with increased levels of poverty and inequality. Nearly 40 million more Africans are likely to be pushed into extreme poverty in 2021, and debt vulnerabilities are rising for a large number of African countries. It is already clear that international support for debt resolution and restructuring will be needed to preserve the hard-won development gains of the past two decades.
The global green transition will accelerate – and not a moment too soon. Yes, geopolitical tensions, rampant misinformation and polarization, and deepening inequalities could derail efforts to ramp up climate action. But the arrival of the Biden administration (with former Secretary of State John Kerry as climate envoy) and COVID-19 vaccines offers some reassurance that the wind will be blowing in a greener direction.
After all, renewable energies are already cheaper than fossil fuels, which is why solar and wind now account for 95% of new energy capacity in the U.S. The world’s largest financial investors and pension funds are divesting rapidly from fossil fuels and scaling up impact investments in green energy. Dozens of countries are moving ahead with aggressive emissions caps and subsidies for the green economy.
Some early movers are on track to achieve net-zero emissions by 2030. Under its Green Deal, the European Union wants to reduce emissions by 55% by 2030, and is introducing incentives for investments in the circular economy, biodiversity, and sustainable agriculture. For the first time in years, there is hope that the UN climate conference will deliver real progress toward keeping average global warming below two degrees Celsius and ramping up investment in climate finance. Activists will grumble that these moves are insufficiently bold, and conservatives will strengthen their political opposition to such measures. But the shift toward a greener world will continue.
I am hesitantly hopeful that 2021 will be a year of healing – both with regard to the pandemic and the economy. With vaccines on the market, everyday life will begin to go back to normal (even if it is a new normal), the economy will start to recover, and the technological change brought about by the pandemic will accelerate. On the negative side, there is a risk that recent terror attacks, growing religious divisions, and a historically fraught U.S. election and transition will set the tone not just for this year but for the coming decade.
I predict that food insecurity will continue to affect people in developed and developing countries alike. Because they already have the means, developed countries urgently need to adopt measures to address this problem. We know from research in developing countries that food insecurity is not just some transient issue. It has serious long-term physical, physiological, and economic consequences with far-reaching implications for the health and well-being of the broader society.
We can also be quite sure that this year will bring more extreme weather events linked to climate change, such as droughts, floods, wildfires, and heat waves. That said, I, for one, am excited to see the inauguration of President-elect Biden and Vice President-elect Kamala Harris. The new administration will immediately recommit the US to the Paris climate agreement, taking a necessary first step to address the collective challenge of tackling climate change.
Biden’s arrival in the White House is obviously important for the U.S. and the world, though the scope of what he can accomplish will be determined by what he can pass through a sharply divided U.S. Senate. The Democratic victories in Georgia’s two run-off elections, giving the party control of the Senate, certainly help. And either way, the U.S. president has some room to maneuver without Congress when it comes to trade policy and international cooperation. On both of these fronts, Biden’s victory over Trump is good news, promising a return to normal dialogue between the US and the rest of the world, and an end to Trump’s transactional bilateral (and chaotic) approach.
Still, Trump’s substantial level of support means that the new administration will need to stay sharp as it re-engages with the world. With Biden and his advisers indicating that they will place a stronger emphasis on human rights, the rule of international law, and aspects of trade rules, U.S. relations with China are likely to remain complicated. More broadly, under Biden, multilateral institutions from the U.N. and the World Bank to the World Trade Organization and the G20 will once again play an important role in global governance, and this in itself should please financial markets.
For its part, the U.S. Federal Reserve will probably maintain its generously loose monetary policy, producing an outcome that is negative for the dollar but bullish for many global markets, especially so-called emerging markets that track closely with commodity prices.
Biden’s presidency offers the hope of a return to normal diplomatic forms, predictability, and direction. But the US election showed just how troubled the “American experiment” has become. The issue is not just that the election was bumpy, with delays in the announcement of results and last-gasp legal challenges. The problem is much deeper. Far from a rejection of Trumpism, the defeated president’s strong showing – receiving 11 million more votes than he did in 2016 – indicated that his influence will extend beyond his presidency.
There are now two Americas with sharply different visions of the country’s place in the world and the values it represents. In the short term, we can expect the Biden administration to reassert America’s multilateral role, mostly because that is its only option. Although the U.S. remains the foremost military, economic, and cultural force globally, it no longer has the hegemonic wherewithal to dictate the world’s direction. America’s unique strength now lies in its ability to marshal international coalitions to address common challenges. The Biden administration can be expected to use this convening power in highly visible ways: rejoining the Paris climate agreement, pursuing constructive diplomacy on Iran, and shoring up multilateral trade rules and institutions.
But in the medium to long term, the election foretells a further erosion of even this more modest form of U.S. authority. The question now is whether a country so fractured can continue to be the exponent of international liberalism. If not, there will be no ready replacements waiting in the wings (regardless of what Europe would like to think). The U.S. election may have opened up an easier path for the next four years, but it has also raised profound questions about international relations thereafter.
Welcome back, America! With Trump’s defeat, the world has regained its balance and will now settle fairly comfortably onto its old foundations. The West will be re-founded on a new bargain, with America being slightly more protectionist, and Europe contributing more to its own defense and acting more independently. Nationalists and populists will remain on the back foot across the West. But while Poland’s de facto leader, Jarosław Kaczyński, will likely fall this year, his partner in populism, Hungarian Prime Minister Viktor Orbán, seems solidly entrenched.
The longer that populists have ruled a country, the harder it will be to repair the damage to institutions there. This applies no less to the U.S., where the growing divergence between the national popular vote on the one hand, and the Electoral College and Senate on the other, has become a major political fault line. Can more states be added to the union to correct an imbalance that privileges white, rural areas over everyone else, or will the U.S. have to wait for demography to do the job, as is happening in Georgia?
Finally, with Brexit now a fact, Britain in 2021 will find itself “sovereign,” which in this case means rudderless and flailing without direction.
With the start of the Biden presidency and the arrival of COVID-19 vaccines, the outlook for the U.S. economy in 2021 is reasonably favorable, provided that the vaccines are as effective as promised and the government is able to cajole enough people into taking them. Lacking a resounding electoral mandate, the Democrats are likely to delay attempts to enact sweeping tax changes and regulatory measures that will hamper growth. Instead, they – and the Republicans – will probably focus their immediate efforts on widely popular stimulus measures to support households. Radical income redistribution and norm-destroying political projects like court packing and adding new states will almost certainly be put off, as will the reckoning for an unsustainable fiscal policy.
HUW VAN STEENIS
In 2021, there will be good news in climate finance when 18 central banks conduct their first-ever “climate stress tests” of financial institutions, creating a catalyst for the widespread repricing of the cost of capital for high- and low-carbon companies. More broadly, the winner-takes-most dynamic seen in digital markets will continue to become evident in the financial sector, too, owing to the pandemic. Banks will grow ever larger, and Big Tech giants will leverage their large user networks to muscle their way into the banking industry.
At the same time, there will be a new monetary order emerging around digital-payment platforms and currencies, all of which could fundamentally change who controls and profits from money. We can expect a heated three-horse race between private tokens, central bank digital currencies, and efforts to upgrade the current system.
On the likely chance that there is a post-pandemic boom, the biggest macroeconomic risk will be a return of inflation. With central banks’ quantitative-easing purchases now so embedded in asset prices, that would trigger a profound shift in markets.
This article was reprinted with permission from Project Syndicate.