Considering the impacts of COVID-19 on the political economy as we greet 2021

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We are at the end of 2020, a year when the coronavirus epidemic has affected us all in one way or another. It created a global health crisis and led to sharp declines in economic activity. Governments around the world have struggled to reduce the economic impact of the pandemic.

Of course, the impacts of the virus are not limited to the economy. Our social life and our work habits have changed. Thanks to the global vaccination campaigns, our social life will gradually return to normal in 2021, but our increased reliance on telecommunication technologies for work and our increased use of online shopping sites, online banking services and others. remote services are here to stay.

Digitization in the workplace will continue to increase. The technological transformation of the production of goods and services, the delivery of products and the methods of payment will continue with greater intensity.

While some sectors of the economy have benefited from the new social and working conditions created by the pandemic, other sectors have suffered huge losses. Online shopping sites are among the big winners.

For example, Amazon’s revenue grew 37% in the third quarter of 2020. Some businesses were not significantly affected by COVID-19 measures and continued to operate normally as their production and supply of goods and services did not do not require the presence of groups of people. physically.

The general economic decline may have initially reduced their sales, but when various government economic stimulus packages resulted in increased spending, these companies profited from the increased sales, or at least suffered no losses. . For example, automakers did not have to suffer too many losses during this period.

However, service industries where customer presence is required, such as tourism, air travel, offline retailing and restaurants, suffered big losses.

So while some businesses prospered during this time, some lost and even went bankrupt. For example, UK retail company Arcadia Group has filed for bankruptcy.

Shareholders and employees of companies that declined in 2020 suffered revenue losses, but some companies prospered and their revenues increased.

The coronavirus epidemic has had a huge impact on the distribution of income within countries, as it has caused some to become poorer than before while improving the situation for others. With the return to normal in 2021, businesses that lost revenue in 2020 will recover.

The COVID-19 health crisis and deteriorating economic conditions have led to political changes in some countries. For example, the loss of the presidential election by US President Donald Trump is at least partially linked to his handling of the pandemic. Pandemic conditions have led to an increase in protests in France. Other social and political impacts of COVID-19 will become apparent in 2021.

The virus outbreak has also influenced global economic activity and the global distribution of income. Measures to prevent the spread of the pandemic included closing borders, which halted international trade for a few months.

Export sectors, and tradable goods sectors as a whole, saw their income decline in 2020.

In 2021, international trade will gradually reach previous levels, but many countries are reconsidering their international supply chains after experiencing disruptions in the supply of some crucial food and medical supplies and rethinking inputs for their industries in 2020. global supply chains are being restructured.

The global distribution of income has also been affected. Low-income and developing countries, which depend on exports, have seen their national income decline.

Global income inequality has also increased because, while developed countries and some developing countries have been able to prevent economic decline through expansionary monetary and fiscal policies, many low-income countries did not have the financial resources to do the same.

In June 2020, the World Bank reported that COVID-19 was pushing the global economy into the worst recession since World War II. “The blow strikes hardest in countries where the pandemic has been most severe and where there is a heavy reliance on world trade, tourism, commodity exports and external financing,” he said.

Vaccination process

The savings that first return to normal in 2021 depend on their ability to control the pandemic and the availability of vaccines.

Approved vaccines are in mass production in the United States, the United Kingdom and the European Union, Germany, and mass vaccination campaigns in Russia and China are underway.

Many other countries are also looking to get vaccinated from these countries, while working to develop their own vaccinations.

For example, Turkey is getting vaccines from China and Germany, while its locally made vaccine is still being tested. Countries that fall behind in stopping the pandemic will experience a delay in their economic recovery, which means loss of production and national income with social and political consequences.

The budget deficits of many governments worsened and public debts increased during this period. After the return to normal, governments must face the reduction of the public debt accumulated in the years to come.

COVID-19 has also shown that pandemics do not stay local but turn into global problems. Countries must now cooperate more to prevent the spread of future pandemics, just as they should cooperate on other global issues.

It looks like Joe Biden’s next administration will use multilateralism in U.S. foreign policy more than the Trump administration would have. This multilateral approach will create a better environment for international cooperation in addressing global issues.

Hopefully 2021 will be a better year for everyone.

* Associate Professor and Chairman, Department of Business Administration, American University of Iraq, Sulaimaniyah

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