The takeaway, says Brunswick’s Michael Wedell, is that society could better exploit the upsides of this viral terror.
The coronavirus showed us its terrible power for the first time over a year ago: the devastating impact in Italy made the extent of the crisis clear and marked the beginning of the pandemic in Europe and many other countries. In an article at that time for a German newspaper, I outlined four ways that this pandemic, horrible as it was, could be a springboard for real progress: 1) Our economy could become more sustainable, 2) digital could become normal, 3) strengthening local ties could strengthen the economy and 4) global cooperation could increase to combat a global crisis.
Today, 60% of all Germans have received at least one vaccination dose—an important milestone and a glimmer of hope that the virus will soon no longer dominate our everyday lives. In the last year, much has happened—opportunities were taken and opportunities were missed. Looking at those four expectations from 2020, in each case, some progress was made, but much more is required.
1. Our economy has indeed become more sustainable. Last year saw a record decline in CO2 emissions. Carbon dioxide emissions from the burning of coal, gas and oil fell by around seven percent compared to 2019, according to the Global Carbon Project research network. Unfortunately, this has proven to be only a superficial, short-term effect. Since December, CO2 emissions have again exceeded those of the previous year. The virus effect is fizzling out in the renewed demand for energy, especially in the large economies. The urge for normality is too great, the return to our comfortable habits too tempting.
Our recklessness is becoming dangerous. Stronger steps, even radical steps, need to be taken. The head of the International Energy Agency, Fatih Birol, recently warned that the lack of action in the global transformation toward clean energy jeopardizes the historic opportunity to make 2019 the final peak in global emissions. The climate ruling of Germany’s Federal Constitutional Court further underlines the urgency. And a civil court in The Hague recently ruled against Shell, saying that by 2030, the oil company must reduce CO2 emissions by 45 percent. The ruling applies only to the Netherlands but has global implications for Shell and the entire energy sector.
A more aggressive price for carbon is needed with graduated increases to discourage climate-damaging behavior while limiting the impact of the added expense on energy bills. More than 250 companies in Europe and some 1,600 around the world have already introduced an internal CO2 price in order to make better strategic decisions. Internal pricing allows for a pressured shift within the business, toward investment in clean energy outcomes. This is a credible economic commitment to climate protection.
2. Digital is the new normal. There is still a long way to go before true digitalization is achieved, however home office and video conferencing have become part of the everyday life of millions of workers in the past year. Yet not everyone can participate in this development. Digital teaching in schools is a disaster in many cases; digital administration is far behind its possibilities and politicians have not yet taken up the cause to envision a better future.
The rocky road toward more digitalization can be seen here in Germany in the failures of digital options created to fight the pandemic itself. Bavaria’s Minister President Markus Söder called Germany’s COVID-19 track and trace app a “toothless tiger;” digital appointment scheduling led to vaccination chaos and the digital vaccination certificate is causing excessive demands in all areas. A recently published McKinsey study shows Germany at the bottom of the league in Europe when it comes to the use of digital services. This has to do with a culture of privacy that discourages robust development and adoption of widely available, high-speed internet access.
Such problems—some cultural and some economic—are played out to varying degrees around the world. Politicians have a duty to accelerate the expansion of broadband in order to give everyone access to fast internet. The most developed economies have a responsibility to nations struggling with that effort. Only then will the acceptance and usability of digital solutions increase to the advantage of the global community and global economy.
3. Local ties did help the economy remain resilient. This was impressively illustrated by the performance of the food trade, especially at the beginning of the crisis. Despite the strain of emptying shelves due to hoarding, grocers and restaurateurs were able to adapt to conditions and keep the flow of basic supplies going. Many local clothing shops have also creatively maintained ties with their customers and clients.
At the same time, the parcel trade prospered. It was too cozy to order cheaply from home—and highly efficient. A joke that circulated for weeks: Local parcel delivery drivers equipped with vaccine doses could vaccinate the population faster than thousands of vaccination centres.
The other side of that coin, however, is our suddenly revealed dependency on fragile international supply chains. The pandemic led to an ongoing global semiconductor shortage for example. Sales of chips, used in cars, cell phones and other common consumer products, rose sharply in 2020, depleting supplies. With chip manufacturing now increasingly moved to Asia, local governments in Europe and the US found themselves unable to quickly address the shortage. As a result, dozens of factories used by German carmakers are at a standstill, leaving thousands of employees idle.
The EU’s initiative to become more sovereign in the area of key technologies is therefore urgently needed. It is also worthwhile to look at existing trade barriers in the sense of crisis prevention. A rapid build-up of additional capacities for vaccine production was made harder as a result of a lack of necessary raw materials, for example. Without being embedded in a global context, we are still too dependent on international supply chains.
4. Nation states struggled where international cooperation was lacking. A global crisis can only be solved internationally. Contrary to this truism, the former American president ended his cooperation with the World Health Organization in the midst of the pandemic. His successor has since reversed that, yet it remains clear that we need a strengthening of multilateral institutions such as the World Trade Organization (WTO) and the WHO. Ordering and stockpiling vaccines at the national level is no substitute for developing global solutions.
The German government’s early step to order vaccines at the European level was not appreciated enough in this regard. Such cooperation is the only way to sustainably avert the dangers of a global crisis and enable a rapid economic recovery.
The pandemic has shown us more than ever the complexity of our world. At the same time, we see clearly that we can achieve much more if only we are determined to do so. Never before were vaccines developed and approved as quickly. Let us not be lulled by the return to the much longed-for daily routine, but retain our entrepreneurial spirit, joy in innovation and the will to cooperate internationally.
Michael Wedell is a Partner at Brunswick based in Berlin.