Davos economists warn of an increase in inequality due to the pandemic

After the pandemic, "the world will not return to the way it was," Chinese President Xi Jinping warned this Monday in his address to the World Economic Forum (WEF, in its acronym in English).

And the experts seem to agree.

The crisis caused by COVID-19 will accelerate economic inequalities, the dominant position of big technology and remote work, according to economists from Davos.

These trends will usher in a new era in terms of fiscal, monetary and competition policy, as well as a greater presence of the public sector in the economy.

These are the main conclusions of the outlook report of the chief economists consulted by the WEF, published this Monday.

There are other trends that have also been observed in the last year such as a certain deglobalization, which had already started before the pandemic, or the creation of alternative supply chains to reduce dependence, especially from China.

But these, in his opinion, will be temporary changes that are unlikely to last.

Economists are impressed by the speed and scale of the fiscal response to the pandemic, with approximately $ 10 trillion disbursed by G20 governments in stimulus and emergency measures.

"However, as the vaccination campaign picks up pace, the second half of 2021 would be the time to transition from emergency spending to programs with specific growth targets," they point out.

"Most believe that adopting measures to reduce the significant amount of debts accumulated in the last year can wait until 2024 or even beyond," say the experts.

The data, recalls the report, indicate that in many countries public debt has reached levels not seen since the Second World War.

Something similar to what the president of the European Central Bank (ECB), Christine Lagarde, has also defended at the Economic Forum, who predicts a 2021 in two phases, until vaccination generates some immunity.

And although the crisis has brought positive changes, such as the accelerated digitization of the economy or the renewed importance of the fight against climate change, it has also opened a gap in terms of employment for unskilled workers, the consequences of the lockdowns still remain. they are being felt and investment in innovation has plummeted.

Delayed, not derailed

"We still have to cross the bridge of recovery, but the road is slowing down, it has not derailed," he pointed out.

In this context, fiscal policy has to play a dominant role to support the sectors affected by the pandemic and monetary policy must guarantee that financing conditions remain favorable, the ECB president insisted.

From there, the French Minister of the Economy, Bruno Le Maire, has pointed out, we must start thinking about the future and investing in new technologies, which are key to getting out of the crisis.

"We have to think about what type of economy we want to build, an economy that is sustainable and reduces inequalities," he stressed.

Including tax changes, such as the digital rate, to be able to finance those policies.

In the case of the United States, the president of Goldman Sachs, David Solomon, believes that it has not yet reached that point, that the first world economy needs more stimulus, in line with the plans presented by the new administration of Joe Biden, given the high degree of uncertainty surrounding the evolution of the pandemic.

Of course, Solomon, like most of the US businessmen and investors who have participated in the first day of this virtual Davos, has insisted on the importance of the agreements between the two major political parties to carry out the spending programs and settle the Recovery.

"It is important to bet on programs that put money where it is really needed," insisted Solomon.