Tag Archives global economy

The East African Community’s regional economic integration efforts are starting to pay off – here’s why to take note

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Good news about Africa always seems to travel slowly. The East African Community has successfully been pushing for regional economic integration in East Africa, but not everyone has gotten wind of it. ISS researchers Peter van Bergeijk and Binyam Demena in their recently published book called ‘Trade and Investment in East Africa’ show how the EAC’s many successes and failures can provide several opportunities – and lessons – for the Netherlands and other countries seeking to further strengthen regional economic integration.

Uhuru Monument by Arthur Buliva

For the past few years, the seven member states of the East African Community (EAC) – the Democratic Republic of the Congo (DRC), Burundi, Kenya, Rwanda, South Sudan, Uganda, and Tanzania – have been working hard on furthering regional economic integration. The group of countries recognize the importance of foreign trade and investment (FTI) for their economic development and have started to reap the benefits: Kenya and Tanzania have already been reclassified as Middle Income Countries (MICs) by the World Bank.

Yet not much is known about these efforts in the Netherlands. Our recently published book, Trade and Investment in East Africa, is an attempt to showcase the EAC’s efforts by analysing these developments, identifying possible bottlenecks, and thereby also outlining perspectives that are important for the Dutch trade and development policy. We summarise some of book’s the key takeaways below to show why countries seeking to improve their regional economic integration should take note of the book.

 

Increased trade bring benefits, but it’s no free lunch

Economically, the EAC is a remarkable success. Africa is a patchwork of overlapping regional organizations that are all working towards economic integration, which is somewhat inevitable (just as the Netherlands is a member both of the EU and the Benelux). This leads to inconsistency and inefficiency in trade between countries but, as one of the studies in the book shows, the EAC suffers relatively little from this.

One possible reason for its success could be its sectoral productivity. In the book chapter, the authors using microdata on firms show that sectoral productivity patterns differ between EAC members: the countries differ in their strengths and weaknesses (what economists call their comparative advantage). Because of the different comparative advantages, it pays to specialize in what you are good at, also to increase intra-regional trade. Uganda can specialize in food where it has a comparative advantage and in the same vein we find different candidates for different countries: Kenya can specialize in furniture, Rwanda in non-metallic manufacturing, and Tanzania in printing and publishing.

That fertile base for specialization and increased trade is good news because the export premium (the higher productivity of internationally operating firms) is substantial for EAC member states and greater than the average for sub-Saharan countries. Higher productivity can be translated into higher per capita income, which is considered necessary for economic growth. Incidentally, this is not a free lunch and requires related policies (training, income support), because amongst the high-productivity winners there are also clear losers in low-productivity sectors.

 

More investment, less bureaucratic red tape needed

Beyond dealing with those sectors that are lagging, the area faces several policy challenges. The book contains some five case studies[1] that reveal some of the main challenges, which include a lack of institutional support and private sector investments. Many sectors, such as rice farming, seaweed fishing and leather production, lack investments by firms that can help these countries position themselves higher up in international value chains. State institutions on the other hand are important both for ensuring the quality of export products and for funding research and development into product-specific improvements.

Another challenge relates to a lack of investment by firms in primary sectors. For example, while Tanzania is one of the largest regional exporters of live cattle, its lack of formal slaughterhouses and leather processing facilities prevents it from expanding its leather production sector. As a result, it needs to import shoes and other simple leather products, and the upscaling of the sector is hardly possible.

When it comes to trade with the EAC region, the main bottlenecks are related to difficulties getting import and export products across borders without delay. One study contained in the book reveals bottlenecks that impede trade both within and outside of the EAC. The challenges include inadequate (air)port management and excessive bureaucratic red tape, which are compounded by the lack of a one-stop-shop approach; in principle, these are factors that could be resolved without having to make major financial investments but require a change in practices and training to implement newly developed systems.

 

Offering aid in addition to trade

The Dutch Ministry of Foreign Trade and Development Cooperation can learn several things from the EAC in doing trade and investment better. One important finding that can be considered in the Netherlands is that trade cannot work without a certain amount of aid. An empirical study by Sylvanus Afesorgbor of European trade with the African, Caribbean and Pacific countries with which Europe has a special development aid relationship shows that trade promotion appears to lead to economic development only if it is complemented by development aid. One reason is that additional policies are necessary to help individuals that work in sectors with low productivity that lose due to international specialization.

However, the similarities have been somewhat overlooked. From this perspective alone, it is unfortunate that the Dutch Ministry of Foreign Trade and Development Cooperation’s new strategic policy paper, ‘Doen waar Nederland goed is in’ (‘Do what the Netherlands does best’), does not consider the EAC as an economic community of nations. While some individual EAC countries are mentioned, the emphasis is on the Netherlands’ long-standing foreign policy strategy focused on the Horn of Africa.

This leaves the opportunities that lie in the EAC out of the policy picture. For example, the Netherlands can play an important role in helping the EAC address the logistical challenges hampering trade, in particular with regard to (air)port management. It also has much to offer African policy makers through its own regional economic integration experiences, from Benelux to the EU. Moreover, several large Dutch companies also have a foothold in Tanzania, which illustrates that this is already recognized as an interesting market.

Our book brings together economists from the Global South that provide a relevant multidimensional analysis of how sensible policies can be designed that move trade and development in the same direction.

 

[1] The case studies are a comparative analysis of the leather industry by Fauzul Muna, a survey of common bean smallholder farmers in Arusha by Eliaza Mkuna, an econometric analysis of Tanzanian horticultural export by William Georde, a survey of the seaweed sector in Zanzibar by Wahida Makame, and a structured review of cross-border cooperatives in the EAC by Gerard Dushimimana.

Opinions expressed in Bliss posts reflect solely the views of the author of the post in question.

About the authors:

Peter van Bergeijk is Professor of International Economic Relations and Macroeconomics at the Hague-based Institute of Social Studies at Erasmus University (ISS); one of the leading educational and research institutes in the field of development cooperation in Europe.

 

 

 

 

 

Binyam Afewerk Demena is an empirical economist with expertise across economic disciplines focusing on the area of development, environment, and health. He is an Assistant professor the Hague-based Institute of Social Studies at Erasmus University (ISS).

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Rebuilding the economy one home-office at a time: the pros and cons of working from the office

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Are we sure we still need to be in the office 40+ hours a week? The economy may suffer in the short term if we continue flexible working, but society suffers in the long term if we force a return to the office So, do we really need to return to full time work-from-office? I say no. Hear me out.

It’s 2022, and now that COVID-19 is not as serious a threat, we are collectively looking at figuring out how to move forwards (or backwards) to a post-pandemic reality. This includes the slew of opinion pieces we are bombarded with extolling both the perils and virtues of continued hybrid working (Hsu, 2022; Duncan, 2022; Sherman, 2022). It is time, therefore, to look at both the merits and consequences of not returning to the office.

 

https://www.newyorker.com/cartoons/daily-cartoon/tuesday-june-8th-work-home
https://www.newyorker.com/cartoons/daily-cartoon/tuesday-june-8th-work-home

Before doing my master’s degree, I was working in a large multi-national corporation in Singapore. As someone who had to work from home from November 2019 (read: before the global pandemic) because of a broken leg, but whose job required her to personally connect with as many colleagues as she could, let me tell you that working from an office is not the end-all solution. Before November 2019 I had been going in every day, and not once did I underestimate the power of working face to face in an office environment. However, working entirely from home didn’t stall my productivity either. If anything, the more flexible schedules allowed me to take better care of local and global relationships because I could catch colleagues at all hours of the day based on their own disparate schedules, and take proper breaks in between to deal with personal needs like physio and doctor’s visits, cooking, cleaning, or other household needs for myself and my family without scheduling set office hours or the pressure of commuting. The lack of travel to and from office, as well as huge savings on professionally mandated socialising via lunches, coffees, and drinks meant saving enough money that I was able to pay for my degree almost in full!

 

We saw during the height of the pandemic that our biggest collective fear is facing the consequences of the unknown, which is why the urgency we see from governments and companies in having people return to the office is understandable (Franklin, 2022; Lim, 2022; Forrest, 2021; Gordon and McGregor, 2022). It is far more comforting to revert to the familiar, and in this case, those in charge – from companies to governments, to university administrators – are keen to go back to what they know: physical attendance.

 

Let us give them credit: in-person connectivity has immeasurable benefits. To start with, an influx of staff back to office buildings will certainly help those businesses that rely on office spaces (think cleaners, the food and beverage industry [F&B], real estate), and by extension the families who depend on these businesses. In addition, it is undeniable that team rapports and knowledge sharing are built more effectively through face-to-face interactions. However, this is where the fallacy fails: it is misguided to assume office jobs are only truly effective when conducted from an office. Indeed, the pandemic has taught us otherwise, and forgetting this lesson will result in regressive consequences (Choudhry, 2020).

To be clear, no one questions the need to rebuild economies. This is a feat that takes both manpower and brainpower, but I would argue that the more of both we have, the faster and more efficiently we can rebuild. Working from an office once again limits brainpower to those who are able enough to reach the office in the first place (usually men, the able-bodied, youth, and for instance those who can afford or do not need childcare). In considering this state of affairs, we exclude hugely talented swathes of the community who, during COVID-19 were actually being given the opportunity to find employment through remote-working opportunities, including fully educated but full-time mothers, the retired and the elderly, and those with disabilities. Inherently, in forcing staff back to the office, we once again exclude these groups: fundamentally counter-productive to rebuilding.

 

It is true that maintaining a permanent hybrid working environment does pose risks, but inherently they are all short-term. The most obvious has already been mentioned – the financial strain on the office-dependent businesses and the families who depend on those businesses. By extension, businesses that have depended on in-person connectivity will also be affected, like the airline business. Just recently, British Airways announced the cancellation of 30,000 flights in 2022 alone (BBC, 2022). F&B and hotels are equally affected, as are their related supply chains (Jagt, 2022; Mijnke, Obermann and Hammers, 2022). But people and businesses are creative and resilient. They will find ways to reinvent the wheel and make it work for them. Indeed, considering the tenacity of human nature, we will endure – for instance, an option to convert existing unutilised office spaces into public utility spaces such as schools, day-cares, or temporary shelters with related shops to protect housing and living costs.

 

But for any of these to happen, governments and companies need to stop thinking short-term, and start considering the long-term effects of their actions. A full-time return to office spaces will result in an undoing of all the effort that went into repairing what this neoliberal, profit-centric, exclusionary, high-pressure system progressively broke in the past: from the strengthened family relationships (hello two-year lockdown!) to the healthier diets and more socio-environmentally conscious purchasing and living (home-cooking, supporting local shops, gardening, the upsurge in second-hand markets, a reduction in carbon footprint from reduced traveling). Talent from forgotten resources like mothers, the less-physically-abled and retirees can be reinstated in new forms, and the subsequent intellectual discrimination that has, until now, been a detriment to the economy can be renewed and utilised. The cost, therefore, of forcing a return to the white-light corridors, communal coffee machines, recycled air, and open plan desks will far outweigh the benefits of corporate camaraderie, social capital, and political protection. As important as it is to recognise the value of in-person work, it appears that, once again, companies like LinkedIn and Twitter appear ahead of the curve by suggesting long-term work-from-home options (Kay, 2021; Kelly, 2022). Perhaps the time has come for other institutions to follow their lead and see the value they derive in it. And perhaps in changing what an ‘office’ looks like, corporations can gain back some of the trust they have lost by putting profit over people for so long.

 

British Broadcasting Corporation (6 July 2022) ‘British Airways to Cancel 10,300 More Flights’, British Broadcasting Corporation, accessed 19 July 2022

Choudhry P (2020) ‘Our Work-From-Anywhere Future’, Harvard Business Review, accessed 19 July 2022

Duncan E (18 February 2022) ‘COVID has Changed the Way We Work and There’s No Going Back’, The Times UK, accessed 19 July 2022

Forrest A (3 August 2021) ‘Government Urges Businesses to ‘Ramp Up’ Return to Office this Summer’, The Independent UK, accessed 19 July 2022

Franklin J (1 June 2022) ‘Elon Musk Tells Employees to Return to the Office 40 Hours a Week – or Quit’, NPR, accessed 19 July 2022

Gordon N and McGregor G (29 June 2022) ‘As the Return-to-Office Debate Rages in the U.S. and Europe, the Matter is Already Settled in Asia’, Fortune, accessed 19 July 2022

Hsu A (5 June 2022) ‘The Idea of Working in the Office, All Day Every Day? No Thanks, Say Workers’, NPR, accessed 19 July 2022  

Jagt R (2022) ‘COVID-19 and the Food Industry’, Deloitte, accessed 19 July 2022. www.deloitte.com/nl

Kay D (29 July 2021) ‘LinkedIn Allows Employees to Work Fully Remote, Removes In-office Expectation’, Reuters, accessed 19 July 2022

Kelly J (5 March 2022) ‘Twitter Employees Can Work from Home ‘Forever’ or ‘Wherever You Feel Most Productive and Creative’, Forbes Magazine, accessed 19 July 2022

Lim J (25 April 2022) ‘Some Firms Want Staff Back at Workplace, but Experts Warn Against Rushing Into It’, The Straits Times, accessed 19 July 2022

Mijnke F, Obermann W, and Hammers T (2022) ‘Impact of COVID-19 on the Hospitality Industry’, Deloitte, accessed 19 July 2022. www.deloitte.com/nl

Sherman A (8 March 2022) ‘Making Sense of Why Executives are Eager to get Employees Back in the Office’, CNBC, accessed 19 July 2022

Opinions expressed in Bliss posts reflect solely the views of the author of the post in question.

About the authors:

Niyati Pingali is currently completing her MA in Development Studies at the International Institute of Social Studies (ISS), focusing on governance and development policy. As a former corporate employee, she knows the cost and the benefits of capitalism and plans to dedicate her life to changing the narrative to ensure both people and the economy benefit equally: a feat that sounds impossible, but she knows can happen.

 

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COVID-19: the disease of inequality, not of globalization

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Binyam Afewerk Demena is one of the authors of several chapters of the recently published book ‘COVID-19 and International Development’. In this blog, he and his colleagues elaborate on their contributions to this book. We welcome you to join us for the book launch on March 17 (3:30-5:00 CET) at Pakhuis de Zwijger. Registration is now open.

The COVID-19 outbreak has posed a threat to both lives and livelihood. Because of the strong and interdependent global production value and linkages, coupled with the closure of international borders, businesses, and factories, the economic expectations and forecasts in the early months of the pandemic were generally pessimistic.

The prospect of the world plunging into another major and long-term economic recession comparable to the Great Depression in 1930s and the Great Recession of 2008/9 was on the minds of many economists, governments, international organizations, and citizens worldwide. The attacks on supranational governance and international cooperation were a symptom of an underlying disease – inequality – that has been illuminated by the pandemic. The de-globalization process was driven by increasing inequality, and a dreary lack of trickle-down of the benefits of internationalization.

COVID-19 and globalization

Globalization is a multifaceted concept that describes the process of creating networks of connections among actors at intra- or multi-continental distances. This emphasizes that globalization captures the increased interdependence of national economies, and the trend towards greater integration of different varieties of flows such as information, goods, labour, and capital.

More recently, however, there has been growing discontent and increase in negative sentiments about the impact of globalization. These negative sentiments have manifested in different ways, including through the election of the former U.S. President Donald Trump in 2016, Brexit, and criticism of the World Trade Organization. For instance, Afesorgbor and Beaulieu (2021) argue that the Trump presidency strained diplomatic relationships with close allies, and undermined the rule-based global system, creating uncertainty for the global economic system.

These occurrences constitute a major setback to the pace of globalization, and have set the stage for growing protectionism and nationalism around the world. As van Bergeijk (2019) highlighted, these actors were political. More recently, the principal actor was a virus. The outbreak of the COVID-19 pandemic introduced new health threats to globalization (see van Bergeijk, 2021 for details), emanating from the health risk posed by the contagious nature of COVID-19. In a sense, the pandemic clearly reflects globalization — the virus went global in a few weeks’ time due to the high level of globalization and interconnectedness. COVID-19, however, also relates to de-globalization — the breakdown of international co-operation, and the re-emergence of zero-sum thinking and raw beggar-thy-neighbour polices on the markets for medical productive gear, medical machinery, and vaccines.

We* set out to explore the impact of COVID-19 on the global economic system by looking at three components of globalization: economic, social, and political globalization. The pandemic and the economic policy response to the crisis have impacted these three aspects to different degrees.

  1. Economic globalization

Economic globalization has been conceptualized by means of flows of goods, services, capital, and information in connection to long distance market transactions. Although the pandemic is global, regions and countries have experienced differential effects on various indicators of the economic dimension of globalization. For instance, merchandise trade contracted for the global economy, but the rate of decline was more pronounced in advanced economies  compared to in developing and emerging economies. Moreover, not only were trade flows hit, but the impact of COVID-19 on foreign direct investment (FDI) was also immediate, as global FDI flows declined by nearly half in 2020.

  1. Social globalization

COVID-19 was also impactful, in particular, on social globalization, an aspect which involves interaction with foreign nationals through events such as migration, or actions such as international phone calls and international remittances paid or received by citizens.

Linking COVID-19 to social globalization is important since the former reduced interpersonal globalization, as many countries imposed travel restriction on both residents and foreign travellers. Border closures hindered temporary migration, especially tourists’ and foreign students’ movements in and out of countries. Migrant remittances were also affected, not because of any formal restrictions on remittances, but mainly because of a negative labour market shock on immigrant employment. Demena et al. (2022) found that the pandemic, overall, negatively affected various labour market outcomes. The impact has been most pronounced, in particular, in developed countries, reducing the number of remittances that could be repatriated to developing countries.

  1. Political globalization

Political globalization captures the ability of countries to engage in international political co-operation, as well as the diffusion or implementation of government policies.

The initial outbreak of the COVID-19 pandemic negatively affected international co-operation, mainly because of the blame game between the two largest economies in the world, the US and China. Although global co-operation to fight the virus did not begin immediately with the outbreak of COVID-19, there were many efforts later by different countries to co-operate in fighting the pandemic. China, for example, supported countries like Italy, which became the epicentre of the COVID-19 pandemic in Europe in April 2020. Politically, the outbreak of the coronavirus could, therefore, be used as a building block in the future to reinforce international co-operation and strengthen the pillars of political globalization.

Optimistic outlook for the global economy

There are, in fact, reasons to be optimistic about the COVID-19 economic recovery, as well as about the future of globalization. The main reason for optimism is the noteworthy resilience of world merchandise trade and investment during previous global crises. Multinational enterprises have already had their stress test during the 2008 – 2009 collapse of world trade. That collapse kick-started the process of de-globalization. However, global merchandise trade and industrial production recovered to previous peaks quickly, and this recovery has occurred even quicker during the COVID-19 crisis.

This is the big and fundamental difference with the Great Depression of the 1930s, and it may be related to the fact that world trade is governed and supported by the multilateral trading system. The shock of the pandemic was sharp and immediate, but so has been the recovery. The so-called invisible flows (FDI, remittances, tourism, official development cooperation) have been hit harder compared to the two major historical economic crises during the Great Recession and the Great Depression, and a full recovery of these invisible flows is not to be expected before vaccination is ‘sufficiently global’ in scope. Yet, the expectation of a speedy recovery is realistic at the time of writing. For instance, global FDI has shown full recovery in the last quarter of 2021, although recovery has been highly uneven regionally, and was concentrated in developed economies. Recovery efforts, therefore, took hold early, compared to the two major historical episodes of economic crises. This suggests stronger resilience of the global economic system than anticipated.

The disease of inequality

The prediction and reports of the expected “death” of globalization, however, were, with hindsight, grossly exaggerated. Yet, the pandemic has taught us that inequalities are the breeding ground for the spread of disease and the suffering that follows. Reducing epidemic vulnerabilities, therefore, requires tackling those inequalities. The fight against next potential pandemics, however, implies that we cannot limit ourselves to domestic developments only. Inequalities around the world – within and between countries – provide the breeding grounds and disease pools from which new variants, viruses, and other contagious diseases emerge. Adhering to the United Nations Sustainable Development Goals (SDGs) is a high-return investment project, in particular SDG 10 (reduced inequalities). A recent study by Fantu et al. (2022) pointed out that the COVID-19 pandemic exacerbates the inequalities between migrants (in particular Eritrean and Ethiopian migrants) and ordinary citizens in the Netherlands. Likewise, Murshed (2022) highlighted that the COVID-19 pandemic is likely to accelerate the various forms of inequality.

And last but not least, the outlook for openness of the world economy is still much better than in the 1930s. Yes, de-globalization exists. Yes, overall globalization will probably be lower for the foreseeable future. Our societies will, however, remain much more open than at the start of the globalization wave in 1990. We are now connected via the internet with an intensity that has never been observed before in history. Even though the push towards de-globalization certainly still exists, economies are now digitally connected in ways they have never been before.

Conclusions and recommendations

In conclusion, the eradication of the spread of the virus will require international co-operation, and a global effort to make sure that no single country is left behind. A pool will be forged to prevent new variants and potential future outbreaks. Vaccines must be made available to all countries and must be affordable, something that has been reiterated by the promise of the leaders of the G7 nations as a ‘big step towards vaccinating the world’ – to supply one billion doses of vaccine to poorer nations. A global initiative recently called for urgent further funding to supply a minimum of 600 million additional doses.  Just as globalization has ramifications for all countries, the health of different nations is intertwined. The health of one nation affects the health of the other, as the pandemic has demonstrated. The implication, therefore, is that fighting a pandemic requires us to tackle inequalities, as the latter determine pandemic vulnerability to a large extent. Moreover, it requires a global approach to ensure equality for all the world’s citizens.

References:

*Afesorgbor, S.K., van Bergeijk, P. and Demena, B.A., 2022. COVID-19 and the Threat to Globalization: An optimistic note. In E. Papyrakis (Ed.) Covid-19 and International Development, Springer.

Demena, B.A., Floridi, A. and Wagner, N., 2022. The short-term impact of COVID-19 on labour market outcomes: Comparative systematic evidence. In E. Papyrakis (Ed.), Covid-19 and International Development, Springer.

Fantu, B., Haile, G., Tekle, Y.L., Sathi, S., Demen, B.A., and Shigute, Z., 2022. Experiences of Eritrean and Ethiopian Migrants during COVID-19 in the Netherlands. In E. Papyrakis (Ed.), Covid-19 and International Development, Springer.

Murshed, S.M., 2022. Consequences of the Covid-19 pandemic for economic inequality. In E. Papyrakis (Ed.), Covid-19 and International Development, Springer.

van Bergeijk, P.A.G., 2021. Pandemic Economics, Edward Elgar: Cheltenham.

Related articles:

The Conversation – Academic rigor, journalistic flair.

Devdiscourse – Discourse on Development

 (NEWS) – the Canadian National Post

(NEWS) – NEWSBREAK

Opinions expressed in Bliss posts reflect solely the views of the author of the post in question.

About the contributors:

Binyam Afewerk Demena: International Institute of Social Studies, Erasmus University

Peter A.G. van Bergeijk: International Institute of Social Studies, Erasmus University

Sylvanus Kwaku Afesorgbor: Agri-Food Trade and Policy, University of Guelph

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Positioning Academia | Reducing inequality should be our top priority during the COVID-19 pandemic—but it isn’t

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The COVID-19 pandemic has exacerbated income inequality all over the world. The UN’s Sustainable Development Goal of reducing inequality (SDG 10) is getting more and more off track. How are countries reacting to this worrying trend? This blog reviews how governments report on reducing income inequality to the UN, showing  that although attention to income inequality is increasing, strong policy measures to tackle the underlying structural factors that cause income inequality are often not reported and are still found wanting.

Through this series we are celebrating the legacy of Linda Johnson, former Executive Secretary of the ISS who retired in December last year. Having served the ISS in various capacities, Linda was also one of the founding editors of Bliss. She spearheaded many institutional partnerships, promoted collaboration, and organised numerous events, always unified in the theme of bringing people in conversation with each other across divides. This blog series about academics in the big world of politics, policy, and practice recognises and appreciates Linda’s contribution to the vitality of the ISS.

COVID-19 has been with us for around a year, and we can finally see what it’s doing based on the results of ongoing research. Such research on the dynamics of the COVID-19 pandemic clearly shows that income inequality in low-, middle- and high-income countries is increasing: according to the ILO, poor workers are becoming poorer as some 600 million people work in sectors which are hardest hit and that pay poorly, while the informal sector where many of the poor work and lack any protection and public support is also severely affected. On top of that, the generation gap is increasing, with a greater number of younger workers being excluded from the labour market and having to work under precarious conditions, while relatively privileged workers are better sheltered from the COVID-19 economic outfall. Furthermore, as the value of global stocks has soared after an initial brief dip, the rich, and especially the super-rich, are getting richer during the pandemic.

It is in light of these worrying developments that a lack of progress in meeting the SDGs requires greater attention. The UN’s Voluntary National Reviews (VNRs) discussed at its annual High-Level Political Forum (HLPF) can help shed light on how countries have been doing in meeting the SDGs during the pandemic. Every year a batch of 40-50 different countries provide the forum with an extensive report on progress on the SDGs in their country—the so-called Voluntary National Reviews (VNRs). I have been involved in these discussions and in shaping an analysis discussed below.

According to a UN-CDP analysis published in 2019, SDG 10 (Reduced Inequalities) was the most underreported SDG in 2019 VNRs. However, a preliminary analysis of last year’s reviews shows that attention to this SDG has increased. This is a positive sign, as reducing income inequality, which is growing as mentioned above, is needed more than ever in a post-COVID-19 world.

But we also observe that those SDGs that echo the MDGs, such as the ones on health, education, and gender, still dominate in most of these reviews. The MDGs were concentrated almost exclusively on social issues, while the SDGs seek to include broader issues of economic, social, and environmental issues and the structural changes required to address these, which are necessary for real progress in reaching the social targets and in reducing income inequality.

The UN reports that increasing income inequality ironically not only moves the world further away from reaching SDG 10, but equally importantly also affects many other SDGs. Thus, that inequality still gets insufficient attention in the reviews remains worrying, especially in the gruesome times of the COVID-19 pandemic, which is exacerbating social and economic inequalities due to the far-reaching effects of national lockdowns. The effect of inequality on efforts to address it now requires our attention.

Some 2020 VNR country reports do refer to the COVID-19 pandemic and its economic and social consequences, including its effect on income inequality, but fewer refer to policies on how to structurally redress increasing income inequality. In this respect, it is useful to recollect what happened to income inequality after the 2008 recession.[1] A striking factor of the 2008 global recession and its aftermath was that poor and unorganized groups both in developing and developed countries were thrice affected—firstly because they did not profit from the economic boom preceding the crisis, secondly because they profited less from income support provided after the crisis, and thirdly because they suffered more from an economic slowdown when restrictive monetary and fiscal policies were prematurely introduced in 2011.

So, in order to not to repeat the mistake in the form of economic policies introduced after the 2008 recession, governments must foster structural changes to redress the growing inequality between incomes from capital and labour and to stimulate sustainable growth. Do we see in the 2020 batch of VNRs a strong tendency to undertake such policies?

Of the 40 reviews of last year mentioning SDG 10 explicitly, only 22 refer to Target 10.1 (increasing growth of the poorest 40% of the population faster than the rest[2]), while even fewer countries (19 and 12 respectively) refer to targets which have a bearing on fostering structural changes, such as Target 10.4 (improving fiscal, wage, and social protection policies) and Target 10.5 (regulation of national and global financial markets)[3]. And of these countries that report on these targets, less than half give sufficient details to gauge important changes in budget outlays and explicit policies. It therefore also comes as no surprise that special schemes and projects (including those to reduce gender inequality) dominate actions related to SDG 10 in the overview report of the 2020 VNRs.

Some 40 to 50 countries are now starting to prepare their reviews for this year’s High-Level Political Forum that will take place in July this year. One might hope and even assume that the continuous onslaught of the pandemic will result in greater attention to income inequality and to the necessary structural changes that are called for to achieve that. But policy change does not come automatically. It needs continuous efforts from progressive and concerned scholars and from civil society to push for structural changes.

Foot Notes

[1] van der Hoeven, R. 2019.  ‘Income Inequality in Developing Countries, Past and Present’, Chapter 10 in Nissanke, M. and J. A. Ocampo (eds.), The Palgrave Handbook of Development Economics, Palgrave McMillan, https://doi.org/10.1007/978-3-030-14000-7_10

[2] Target 10.1 is in itself a rather weak target. See van der Hoeven, R. 2019.  ‘Income Inequality in Developing Countries, Past and Present’, Chapter 10 in Nissanke, M. and J. A. Ocampo (eds.), The Palgrave Handbook of Development Economics, Palgrave McMillan, https://doi.org/10.1007/978-3-030-14000-7_10

[3] Some countries addressed income inequality and SDG 10 in the context of other SDGs, but as such did not focus on structural changes needed to reduce income inequality.

About the author:

Rolph van der Hoeven is Professor Emeritus in Employment and Development Economics at the ISS and a member of the UN Committee for Development Policy (UN-CDP).

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Deglobalisation Series | Deglobalisation 2.0: Trump and Brexit are but symptoms by Peter A.G. van Bergeijk

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We live in strange and usual times. Actually, this is what people always do. And all people always think that their era is unique. We seem to live in the times of Trumpism, Brexitism and deglobalisation. It definitely feels like something unique. But it is not.

Our grandparents have been here before. Of course, the voices and characters on the world stage are different. But the stories of the Great Depression of the 1930s and the Great Recession that we are still living today are similar.

The start is a financial crisis. Then follows a collapse of world trade and world investment that marks the end of decades of intensifying globalisation characterised by increasingly free international trade and capital flows. This collapse starts a period of deglobalisation that at first is hidden under the veil of recovery, but later becomes clear as a reduction of the share of international trade in production. This happened in the 1930s and it is happening now.

Graph Deglobalization 2.0
Deglobalisation 1.0 (in the 1930s) and 2.0 (today)—these two periods are shown in red. Index numbers 2007=100.

Many observers make the error of blaming Trump and Brexit for deglobalisation. They are wrong and confuse the symptoms and the causes of the disease. Why are Trump and Brexit only symptoms? Because the virus of deglobalisation is widespread: the Dutch referendum opposing the treaty with the Ukraine, and the Belgian opposition of the trade agreement between the EU and Canada, are just two examples. And in other countries such as Austria, Germany and France, anti-globalist election platforms have gained significant strength. An interesting observation is that anti-globalism now has a strong foothold in the Global North, with much different attitudes in the Global South, particular among the BRICS countries.

Déjà Vu: The 1930s (and today)

Although deglobalisation is a recurring phenomenon, scientists have so far treated the different periods of deglobalisation as isolated cases, limiting our knowledge of deglobalisation to a hermeneutic understanding of this real-world phenomenon. In science “one” is typically not enough, but economists and political scientists have unfortunately limited their research to the most recent manmade trade disaster at hand.

The problem is that we therefore do not learn from history, do not compare it with other occurrences of the phenomenon, and cannot correctly understand our current situation.

Of course, the two major phases of deglobalisation are not identical twins. I would like to add: fortunately so. One can only learn if both similarities and differences occur. The two phases of deglobalisation were equally triggered by a demand shock in the wake of a financial crisis. Both in the 1930s and in the 2000s the composition of trade was a second key determinant: manufacturing trade bore the brunt of the contraction.

Before the start of deglobalisation, income inequality increased significantly, and the recent rise in inequality has been linked to international trade. And as in the 1930s, the political institutions are key for understanding where and when deglobalisation of economies occurred. Unlike is often assumed, a “world” trade collapse and its deglobalisation aftermath is characterised by significant heterogeneity of country experiences and practices, implying that a one-size-fits-all approach to deglobalisation will be deemed to fail.

Democracy and deglobalisation

The differences, however, are equally important. In the 1930s, democracies supported free trade, and deglobalisation was driven by autocratic decisions to strengthen self-sufficiency. In the 2010s, political institutions are just as significant, but now democratic decisions drive the deglobalisation process worldwide. Indeed, while the industrialised countries this time avoided the pitfalls of protectionism and deflation, they have experienced different political dynamics.

It is important that their significance measurably and significantly occurs well before the presidential elections in the US or the Brexit referendum. Trump and Brexit are consequences of the underlying political dynamics. These manifestations have a self-reinforcing character, but fighting them will not cure the world economy from the deglobalisation virus.

This raises an important question regarding the concept of the liberal peace (trade between democracies reduces the probability of war by increasing the cost of conflict) that underpins the Bretton Woods institutions. Now that the 19th and 20th Century hegemons are repositioning towards lesser integration into the world economy, the maintenance of the multilateral rules for trade and investment are under threat; thus the very concept of the liberal peace may be eroding. It is interesting to see that the developing and emerging economies understand the importance of these rules and regulations against the power play of economic world leaders. China, the emerging hegemon of the 21st Century , is one of those important voices. In the era of Trump and Brexit, it is essential that this voice is heard.

 This contribution is the first of a series of blog articles on deglobalisation. It is based on a peer reviewed journal article that econometrically investigates the deglobalisations of the 1930s and the 2000s:
van Bergeijk, P.A.G. (2018) ‘On the brink of deglobalisation…again’, Cambridge Journal of Regions, Economy and Society rsx023. DOI: https://doi.org/10.1093/cjres/rsx023

pag van bergeijkPeter van Bergeijk is Professor of International Economics at the Institute of Social Studies (of Erasmus University Rotterdam), one of Europe’s leading development studies institutes. He is author of On the Brink of Deglobalization: An Alternative Perspective on the Causes of the World Trade Collapse, Edward Elgar 2010. His latest book, Deglobalisation 2.0, is to appear in 2018.