Mohamed A. El-Erian writes that ensuring a Stronger and Fairer Global Recovery is required for a better and more satisfactory tomorrow. The two ginormous economies of the World would lead it that way. Here is what he says about that.
Ensuring a Stronger and Fairer Global Recovery
2 April 2021
Although tough trade-offs are sometimes unavoidable, there is a way for policymakers to maintain a robust global economic recovery in 2021 and beyond while simultaneously pulling up disadvantaged countries, groups, and regions. But it will require both national and international policy adaptations.
CAMBRIDGE – An old joke about tricky trade-offs asks you to imagine your worst enemy driving over a cliff in your brand-new car. Would you be happy about the demise of your enemy or sad about the destruction of your car?
For many, the shape of this year’s hoped-for and much-needed global economic recovery poses a similar dilemma. Absent a revamp of both national policies and international coordination, the significant pickup in growth expected in 2021 will be very uneven, both across and within countries. With that comes a host of risks that could make growth in subsequent years less robust than it can and should be.
Based on current information, I expect rapid growth in China and the United States to drive a global expansion of 6% or more this year, compared to a 3.5% contraction in 2020. But while Europe should exit its double-dip recession, the recovery there will likely be more subdued. Parts of the emerging world are in an even tougher position.
Much of this divergence, both actual and anticipated, stems from variations in one or more of five factors. Controlling COVID-19 infections, including the spread of new coronavirus variants, is clearly crucial. So is distributing and administering vaccines (which includes securing supplies, overcoming institutional obstacles, and ensuring public uptake). A third factor is financial resilience, which in some developing countries involves preemptively managing difficulties from the recent debt surge. Then come the quality and flexibility of policymaking, and finally whatever is left in the reservoirs of social capital and human resilience.
The bigger the differences between and within countries, the greater the challenges to the sustainability of this year’s recovery. This reflects a broad range of health, economic, financial, and socio-political factors.
In a recent commentary, I explained why more uniform global progress on COVID-19 vaccination is important even for countries whose national immunization programs are far ahead of the pack. Without universal progress, leading vaccinators face a difficult choice between risking the importation of new variants from abroad and running a fortress economy with governments, households, and firms adopting a bunker-like mindset.
Uneven economic recoveries deprive individual countries of the tailwind of synchronized expansion, in which simultaneous output and income growth fuels a virtuous cycle of generalized economic well-being. They also increase the risks of trade and investment protectionism, as well as disruptions to supply chains.
Then there is the financial angle. Buoyant US growth, together with higher inflation expectations, has pushed market interest rates higher, with spillovers for the rest of the world. And there is more to come.
European Central Bank officials have already complained about “undue tightening” of financial conditions in the eurozone. Rising interest rates could also undermine the dominant paradigm in financial markets – namely, investors’ high confidence in ample, predictable, and effective liquidity injections by systemically important central banks, which has encouraged many to venture well beyond their natural habitat, taking considerable if not excessive and irresponsible risks. In the short term, high liquidity has pushed cheap funding to many countries and companies. But sudden reversals in fund flows, as well as the growing risk of cumulative market accidents and policy mistakes, could cause severe disruptions.
Finally, uneven economic recovery risks aggravating the income, wealth, and opportunity gaps that the COVID-19 crisis has already widened enormously. The greater the inequality, particularly with respect to opportunity, the sharper the sense of alienation and marginalization, and the more likely political polarization will impede good and timely policymaking.
But, whereas the old joke hinges on the unavoidability of tough trade-offs, there is a middle way for the global economy in 2021 and beyond – one that maintains a robust recovery and simultaneously lifts disadvantaged countries, groups, and regions. This requires both national and international policy adaptations.
National policies need to accelerate reforms that combine economic relief with measures to foster much more inclusive growth. This is not just about improving human productivity (through labor reskilling, education reforms, and better childcare) and the productivity of capital and technology (through major upgrades to infrastructure and coverage). To build back better and fairer, policymakers must now also consider climate resilience as a critical input for more comprehensive decision-making.Sign up for our weekly newsletter, PS on Sunday
Global policy alignment also is vital. The world is fortunate to have benefited initially from correlated (as opposed to coordinated) national policies in response to the COVID-19 crisis, with the vast majority of countries opting upfront for an all-in, whatever-it-takes, whole-of-government approach. But without coordination, policy stances will increasingly diverge, as less robust economies confront additional external headwinds at a time of declining aid flows, incomplete debt relief, and hesitant foreign direct investment.
With the US and China leading a significant pickup in growth, the global economy has an opportunity to spring out of a pandemic shock that has harmed many people and, in some cases, erased a decade of progress on poverty reduction and other important socio-economic objectives. But without policy adaptations at home and internationally, this rebound could be so uneven that it prematurely exhausts the prolonged period of faster and much more inclusive and sustainable growth that the global economy so desperately needs.
ARAB NEWS‘ article on the MENA countries weighed down by pandemic debts as these have already registered the advent of this pandemic inadvertently hit some declines in real GDP growth from their oil exports reduction. Since the beginning, these had difficulty coping with COVID 19 pandemic prevention for many reasons that are of a logistics nature but structural.
MENA countries weighed down by pandemic debts will struggle to grow – World Bank
Average MENA debt to GDP rose 9 points since 2019 to 55% in 2021
Countries with low external debt can still borrow cheaply
WASHINGTON, D.C.: The outlook for the Middle East and North Africa has worsened considerably over the past year as countries accumulated debt to pay for pandemic relief measures, leaving them with less to invest in post-pandemic economic recovery, according to the World Bank.
Average debt to GDP in the MENA region rose by 9 percentage points since the end of 2019 to 55 percent in 2021, the World Bank said in a report Living with Debt: How Institutions Can Chart a Path to Recovery in the Middle East and North Africa released on Friday. Debt among the region’s oil importers is expected to average about 93 percent of GDP this year, it said.
MENA economic growth will rebound by 2.2 percent in 2021 after contracting 3.8 percent in 2020, but will be 7.2 percentage points, or $227 billion, lower by the end of this year than it would have been had the pandemic not happened, the World Bank estimates. Real GDP per capita will be 4.7 percent lower in 2021 than in 2019.
“The MENA region remains in crisis, but we can see hopeful signs of light through the tunnel, especially with the deployment of vaccines,” said Ferid BelHajj, World Bank vice president for the Middle East and North Africa. “We have seen the extent to which MENA governments borrowed to finance critical health care and social protection measures, which saved lives and livelihoods, but also boosted debt.”
As of the first week of March, the UAE had the highest percentage of its population vaccinated, at 63.5%, followed by Bahrain at 30% and Morocco at 12.2%, then Qatar at 11.4%, World Bank data shows. Saudi Arabia had a 2.2% vaccination rate.
MENA countries will need to keep on borrowing this year to prop up their citizens’ finances but will face high borrowing costs, particularly those with high debt and low growth, the bank said. However, those with low levels of public external debt, such as Saudi Arabia, Qatar and Morocco, could issue debt at lower rates, it said.
The remedy for the increasingly precarious situation of many of the region’s economies is faster growth that makes it easier to roll over existing debt, the World Bank said. Those that cannot roll over debt face potentially painful restructurings and should enter into negotiations before they hit crisis point, the report advised.
Of benefit to the whole region would be enhanced debt reporting transparency and financial market vulnerability monitoring, it said. MENA countries should reveal all their borrowing, including those from China, as should debt become exposed during periods of distress it will be added to the public tally just as they are negotiating with lenders, the report said.
“Economic growth remains the most sustainable way to reduce debt,” the report said. “Boosting economic growth requires deep structural reforms to raise the productivity of the existing workforce and to put idle working-age people in jobs. Many MENA countries that have characteristics associated with ineffective fiscal stimulus, such as high public debt and poor governance, could consider fiscal reforms early in the recovery from the pandemic.”
Reportlinker.com announces the release of the report “Construction Global Market Report 2021: COVID 19 Impact and Recovery to 2030”.
Construction Global Market Report 2021: COVID 19 Impact and Recovery to 2030
Major companies in the construction market include China State Construction Engineering Co Ltd; China Railway Group Ltd; China Railway Construction Corporation Limited; China Communications Construction Group Ltd and Vinci SA.
New York, Feb. 01, 2021 (GLOBE NEWSWIRE) — The global construction market is expected to grow from $11491.42 billion in 2020 to $12526.4 billion in 2021 at a compound annual growth rate (CAGR) of 9%. The growth is mainly due to the companies rearranging their operations and recovering from the COVID-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges. The market is expected to reach $16614.18 billion in 2025 at a CAGR of 7%.
The construction market consists of sales of construction services and related goods by entities (organizations, sole traders and partnerships) that construct buildings or engineering projects (e.g., highways and utility systems). Establishments that prepare sites for new construction and those that subdivide land for sale as building sites are included in this market. The construction market includes new work, additions, alterations, maintenance, and repairs. The construction market is segmented into buildings construction; heavy and civil engineering construction; specialty trade contractors and land planning and development.
Asia Pacific was the largest region in the global construction market, accounting for 42% of the market in 2020. North America was the second largest region accounting for 26% of the global construction market. Africa was the smallest region in the global construction market.
Building construction companies are increasingly using green construction techniques to build energy efficient buildings and reduce construction costs. Green construction refers to the practice of using sustainable building materials and construction processes to create energy-efficient buildings with minimal environmental impact. According to World Green Building Trends Survey 2015, about 51% of construction firms in the UK were involved in green construction projects. Certifications such as Leadership in Energy and Environmental Design (LEED) help construction companies to develop high-performance, sustainable residential and commercial buildings, and also offer a variety of benefits, from tax deductions to marketing opportunities. Sustainable construction materials such as natural paints and steel beams made from recycled material are being widely used in the UK. Other green construction techniques such as cross-ventilation for more natural environment, green construction software such as Construction Suite to ensure green compliance, and Green Globes management tool are also being used in the construction industry. For instance, some, Major companies using green construction techniques include Turner Construction Co, Clark Group, AECOM, Hensel Phelps and Holder Construction.
Construction costs have increased steadily due to rising material costs in the historic period. Companies in the industry experienced subdued growth in their profits with rising prices of materials such as crude oil, a key component of asphalt increased by 49%, softwood lumber, a major component used for buildings construction, which rose by 23% during historic period. In 2018, cement prices rose 2.5% and plumbing and fixtures increased by 3% in the US. High material prices adversely affected the construction market during historic period.
The construction market growth in the historic period was mainly driven by the increase in construction activity in emerging markets. Emerging markets which registered robust construction activity included China, Brazil, India, Saudi Arabia and Indonesia. For instance, China’s construction market grew from $1,653 billion in 2016 to $2,279 billion in 2019. This rapid growth in construction activity contributed to the growth of the construction market.
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Michael Young in an interview, with David Linfield who argues that international donors are benefiting existing power structures in the Middle East. It is all about Colluding With the Corrupters.
Corruption spread deep and for some time in the MENA region with social, political, and economic implications, but with differing penetrations rates. All because the area can divide into two types of governance. The autocratic monarchies live with side by side with the so-called republics. Few of these latter countries know a higher degree of corruption than the first-mentioned countries. In any case, all have made the fight against corruption a priority by passing laws and adopting strategies to combat crime. But in vain. Colluding with the Corrupters could quickly summarise a situation where such deviant behavioural attitudes originators can be traced back out of the region.
January 29, 2021
David Linfield is a visiting scholar in Carnegie’s Middle East Program. He is on sabbatical from the U.S. Department of State, where he is a career foreign service officer. Linfield recently wrote a commentary for Carnegie, titled “International Donors Are Complicit in Middle Eastern Elites’ Game.” In mid-January, Diwan interviewed him to discuss his article, and more generally to examine the anti-elite feeling that has permeated protests throughout the Middle East in the past year, notably in Iraq, Jordan, and Lebanon. The views expressed by Linfield are his own and not necessarily those of the U.S. government.
Michael Young (MY): You’ve just written a commentary for Carnegie, titled “International Donors Are Complicit in Middle Eastern Elites’ Game.” What is your argument in the piece?
David Linfield (DL): My argument is that the United States and other international donors have put significant clout and resources behind promoting economic liberalization in the Middle East, while they have been hesitant to put similar emphasis on political reforms. By political reforms I mean boosting transparency, combating corruption, and empowering elected officials. International actors have partly justified this approach by suggesting that economic reforms are a better way of promoting stability and less risky than political changes. But I contend that recent events in the region suggest that these policies are making violent, sudden change in the region more likely, not less so.
When adopted in the context of authoritarian political systems, economic reforms such as privatization have tended to benefit existing power structures, exacerbating economic inequality and citizen-state tensions. The World Inequality Database now ranks the Middle East as the most unequal region in the world. While economic inequality has decreased worldwide since the 1990s, it has remained constant in the Middle East.
By supporting policies that have inadvertently led to such entrenched inequality, while neglecting political reforms, international donors have contributed to citizens’ frustrations with their relative economic status while leaving them without peaceful institutional means of expressing their grievances. This is all a recipe for instability, which is the opposite of what donors want.
MY: You write that “[e]merging solidarity among previously competing groups, grounded in [economic inequality]” is a feature of the growing resentment of elites in the Middle East. Are you suggesting, to borrow from Marxist jargon, that we are seeing the emergence of a sort of class consciousness in certain countries that may have revolutionary potential?
DL: Most of the protests in the Middle East since 2018 have focused on economic inequality and corruption. Whereas previous demonstrations in the region tended to consist of a homogeneous ethnic group—whether from a particular religious sect, region, or group of tribes—these recent protests have been more diverse.
Common frustrations with inequality appear to have led people from lower-income communities to demonstrate in common cause—albeit sporadically and tentatively—against what they see as a corrupt and multisectarian elite that has failed them. We have seen this happen most explicitly in Iraq, Jordan, and Lebanon.
Some of the slogans used in recent protests in these countries do indicate the emergence of class consciousness. When the Jordanian Teachers Union threatened to strike in summer 2020, they framed their plight as a class struggle against those who had “looted the country.” The 2019 Lebanese protests included slogans like “down with the rule of the thieves.” Iraqi protestors in 2019 and 2020 told media outlets that their struggle was about taking the country back from “thieves.”
MY: In light of your assessment, how have the traditional fault lines among Middle Eastern populations that regimes have manipulated to retain power—things such as sectarian, tribal, or regional divisions—fared in what you describe as a changing environment?
DL: The traditional fault lines in Middle Eastern societies are still very much present. Emerging class-based tensions have not fully supplanted preexisting divisions based on ethnicity, religion, and tribalism, but rather now coexist alongside them more than before. That said, the trendlines I described earlier suggest that class-based divisions will continue to grow in relative importance and have the potential to reshape existing political alliances and divisions.
In addition to the demonstrations I mentioned earlier, another indicator of the power of class solidarity is a 2019 experiment by researchers from the University of Pittsburgh and the Lebanese Center for Policy Studies. The study, which assigned hundreds of Lebanese people into different conversation groups having varying compositions based on sect and class, found that when Lebanese people gathered with other members of the same class, they exhibited markedly less support for sectarian politics.
It’s too early to craft a comprehensive assessment of how emerging class-based tensions will interact with longer-standing societal divisions in the Middle East. One reason that we’ll have to observe for a longer period is that Covid-19 shifted the focus dramatically from political and economic challenges to the health crisis. But given that the pandemic exacerbated economic inequality, with lower-income communities bearing the brunt of related economic disruptions, we probably won’t have to wait long before class discussions reemerge.
MY: If the problem is that economic liberalization has reinforced elites, what are you recommending as an alternative approach by Western donors? And what makes you think that such an approach would have any chance of working?
DL: The alternative approach I’m recommending is for international donors to incorporate measures to promote transparency and combat corruption into existing economic liberalization efforts. These political reforms are also good for business and economic growth—as noted by the International Monetary Fund (IMF) and World Bank reports I cite in my article. The IMF’s recent insistence that Lebanon address corruption before receiving additional loans is a positive step to putting teeth behind their analysis.
Other helpful steps would include pushing to empower the many weak legislatures across the region beyond their current rubber-stamp roles, which would provide an alternative to protests for frustrated publics. If international donors put the same clout behind good governance that they have behind economic liberalization, they’ll make peaceful and durable progress more likely in the Middle East.
MY: Are you not reading too much into anti-elite solidarity? Ultimately, states in the region have shown that they will resort to violence in order to survive and societies have often gone back to being silent. Why will this change?
DL: Ruling elites in the region have demonstrated that they are willing to go to extreme measures to maintain their benefits. I am not suggesting that elites will somehow decide that they should altruistically begin to share resources with the rest of society. Rather, as your question implies, I am arguing that the elite behavior of concentrating power and resources is an unsustainable strategy that will ultimately foment violence and harm everyone’s interests, including those of the elite.
Autocratic regimes tend to resort to violence when they feel they have run out of other options, but rely more often on nonviolent coercion and intimidation to maintain daily control. By the time regimes turn to violence, it tends to be a prelude to their loss of control—or a stage where they are nearing that.
The strategy of international donors focusing their influence and resources on economic liberalization instead of good governance has not succeeded in bolstering stability and strengthening citizen-state relations. Instead, the policy has exacerbated class-based tensions and increased the prospects of unrest.
These trends are not linear: demonstrations in the region against economic inequality and corruption have ebbed and flowed. Ruling elites remain intent on doing everything they can to outmaneuver these latest challenges to their vested interests. Longer-standing societal tensions based on sect, region, and tribe also continue to simmer and remain exploitable by elites. But the overall direction of the region is still toward economic liberalization in the midst of authoritarian entrenchment. As long as that remains the case anti-elite solidarity is likely to build. International donors are inadvertently contributing to these increasing citizen-state tensions. Instead, they could be fostering more durable change that would make the region more stable and prosperous for everyone.
An Organisation for Economic Co-operation and Development (OECD) article advises the world about Protecting migrant workers in the Gulf: don’t build back better over a poor foundation
By Vani Saraswathi, Editor-at-Large and Director of Projects, Migrant-Rights.Org
The Gulf Co-operation Council (GCC) states need to completely revamp past policies, and not merely attempt to bridge gaps or provide a salve to deep wounds.
As of February 2020, millions of migrants –– primarily from South and Southeast Asia and increasingly from East African countries –– were holding up Gulf economies, working in sectors and for wages unappealing to the more affluent citizens. In countries with per capita GDP of US$62,000 or more, minimum wages ranged as low as US$200 per month.
Men were packed into portacabins and decrepit buildings, six to a room if lucky, hidden behind screens of dust and grime, away from the smart buildings they built and shiny glasses they cleaned. The women were trapped 24/7 in homes that are their workplaces, every movement monitored. It is accepted and normalised without question that these men and women will leave behind their families in the hopes of building a better future for themselves. That they may live all their productive life in a strange country, excluded from social security benefits and denied all rights of belonging, is seen as a small price to pay for the supposed fiscal benefits. The fact that the price is too steep is rarely discussed.
“Why did able-bodied, productive individuals struggle for food and shelter in some of the richest countries in the world?” #DevMattersTweet
Then came March, and a worldwide upheaval as the COVID-19 pandemic struck nations indiscriminately. The official response across the board ranged from well-meaning but knee-jerk, to discriminatory and short-sighted. Some of the strictest lockdowns were implemented in the most congested areas of Gulf cities, where migrants live. However, their labour was considered essential, as the process of nation-building could not be paused. Attempts to decongest were hopeful at best, but the majority continued to live in cramped quarters, were bussed into construction sites, and remained vulnerable to this new infection, as they had been to other infections and health perils.
The women, hundreds of thousands employed as domestic workers, have been invisible at the best of times because their ability to leave home and enjoy an off day or free time has always been at the discretion of their employers. The pandemic guidelines prevented even this thin leeway, with some countries explicitly prohibiting domestic workers from socialising, even when their employers were allowed to. Domestic workers, like a lot of other poorly-paid and badly-treated workers, were considered essential workers. With entire families working and studying from home, their workload increased exponentially. They were also exposed to strong chemical cleaning agents without proper protective gear. While their services were essential, even critical, the individual was considered dispensable and replaceable.
Force majeure rules allowed companies to reduce pay, terminate workers, or put them on leave without pay. Measures were introduced to ensure business continuity even if these measures infringed on workers’ rights. The lack of civil society and trade unions and inability to negotiate collectively –– all disempowering conditions that preceded the pandemic –– meant workers’ voices and representation were limited and muted. No mechanisms were established to challenge the unfair implementation of the measures. Access to justice was riddled with even more problems than before, as wage theft and other labour abuses from the pre-COVID era were yet to be resolved. This post is not even attempting to explore the vulnerabilities and exclusion of undocumented workers –– many of whom are forced into irregularity by the sponsorship or Kafala system.
“When a population has been dehumanised and othered for so long –– as being temporary, their labour merely transactional –– a pandemic will not magically correct decades of poor policies.” #DevMattersTweet
In the plethora of webinars that consumed the early months of the pandemic, human rights advocates and activists repeatedly spoke of the lessons being learnt, the new normal that awaited us at the end of the dark tunnel, with ‘building back better’ punctuating every discourse. What they failed to recognise is that when a population has been dehumanised and othered for so long –– as being temporary, their labour merely transactional –– a pandemic will not magically correct decades of poor policies.
In fact, we saw the opposite, with migrant workers being blamed for spreading infections, because of their living conditions over which they had no control over. Ten months into the pandemic, it is almost back to business as usual, with malls, offices, schools and even tourism, opening up in stages. Vaccination drives have begun, with a promise to include migrants in all of the Gulf Co-operation Council countries. But the most marginalised are still housed in deplorable conditions, their temporariness being reinforced. And the first sector that re-opened for recruitment was domestic work bringing in more women from impoverished countries reeling from the impact of the pandemic.
If there is one takeaway for human rights advocates it is that a socio-economic environment devastated by the pandemic is not fertile ground for righteous policies. If anything, origin and destination countries may go lax on due diligence over corporations in the name of business continuity and impose tighter controls over migrants under the pretext of protection.
“The last year has seen an increase in wage theft, and there is an urgent need for transnational mechanisms to deal with this.”#DevMattersTweet
There are key questions we need to ask ourselves and the governments:
Why did able-bodied, productive individuals struggle for food and shelter in some of the richest countries in the world? What combination of policies and prejudices leads to this situation?
With so little public investment made in social welfare, the dependence on live-in domestic workers is only likely to increase. How do we ensure recognition of domestic work as work, and domestic workers as workers, formalising their status in the labour market?
How do we then break the monopoly of live-in domestic work that is inherently exploitative?
The ghettoisation of migrant labour is both the root cause and the result of discrimination. In many Gulf Co-operation Council states, migrants constitute the majority of the population and their needs are deliberately neglected in urban planning.
In the coming years, climate change, population imbalances and economic distress will increase migrants’ vulnerabilities, and solutions cannot be rooted in the current environment of inequity and discrimination.
Farmers near a seaside lagoon in northern Tunisia are fighting to preserve a unique, traditional irrigation system that has sparked renewed interest as North Africa’s water shortages intensify.
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