The crisis after the crisis

The best-governed industrialised countries were better prepared for the pandemic shock. But even the best are not ready for what is to come.

The pandemic marks a turning point. Its consequences will beset industrialised countries—which in 2020 suffered a recession deeper than that caused by the 2008 financial crash—for years, if not decades. Around the world last year, the virus and its unchecked spread triggered the worst economic crisis since the end of World War II.

How countries cope with, and recover from, Covid-19 largely hinges on how forward-looking their governments are and how well-positioned they are to implement necessary reforms. Yet states are drifting further and further apart on their ability to combine prescient policies with predisposed governance.

Diminished steering

In many places governments’ ability to steer policy has even diminished. Of the 41 industrialised countries we have been studying comparatively for many years,  26 have come to a standstill or deteriorated in this regard.

Take the issue of whether independent experts are regularly involved at an early stage in developing new policies. In 17 countries, this was not systematically the case in the recent past. This is a serious burden in the context of Covid-19, where extremely rapid development of knowledge has demanded quick, evidence-based reactions.

The enormous increase in public debt caused by the pandemic is threatening major future-orientated collaborative projects, including dealing with global warming and managing scarce natural resources. These tasks cannot be postponed and will require economies to transform rapidly towards more sustainable and resource-efficient modes of production and consumption.

Data from our Sustainable Governance Indicators (SGI) show however that before the pandemic only the Nordic countries and Switzerland were ambitious in protecting natural resources—and  even they were not doing enough to meet their climate and environmental goals. In contrast, Israel, Germany and the United States sacrificed their environmental-protection efforts for wealth gains; Poland, the Czech Republic, South Korea and Turkey also presided over a significant fallback in resource conservation. Achieving the much-needed shift toward a sustainable economy in the years ahead will be much more difficult for these countries, given their strained budgets.

Reform urgent

Industrialised countries are also exposed to a range of economic and social problems which were already in urgent need of reform. Failures to digitalise the economy, administration and society have meant that some countries have found it harder to shift work and education online amid the health emergency than their more digitialised counterparts.

The reform backlog for policies on the labour market, education, health and innovation was responsible for fuelling wealth inequalities in richer nations in the pre-pandemic era and has made income distribution increasingly unequal in many countries. Even before the spread of the virus, the risk of poverty among children and the elderly in many democracies had risen, due to patchy social-security systems.

The fight against the pandemic poses the members of the European Union and the Organisation for Economic Co-operation and Development with an almost insurmountable task: they must effectively curtail citizens’ rights to protect their health while not inflicting damage on liberal democracy. Yet ahead of the emergence of Covid-19, the quality of democracy had already declined in no fewer than 24 states, in some cases sharply. These include Turkey, Hungary and Poland but also Japan, Iceland and, particularly markedly, the US.

Polarisation danger

If social and economic problems worsen in the aftermath of the pandemic, it could fuel another trend apparent for some time—the polarisation of political systems, a potential danger for democracies. In many countries, populists have succeeded in greatly widening political and social divides. In 19 countries, it was recently no longer possible to organise sufficient cross-party compromise to produce legislation or adopt and implement necessary reforms. This imposes a heavy burden on management of the coronavirus crisis, which relies on a great deal of social support and trust.

All political and civil-society actors committed to the fundamental values of liberal democracy must now work together. They need to forge viable policy solutions to help bridge the economic and socio-cultural divides. In addition to containing the health crisis, the most important tasks for the future include, above all, a successful and sustainable economic transformation and a cushioning of the social consequences of the crisis. Collective understanding and effective mechanisms are vital to halt anti-democratic tendencies more effectively.

Looking ahead for prosperous democracies after the pandemic, an old adage will prove true: don’t put off until tomorrow what you can do today. The greater a state’s prior ability to develop and implement forward-looking political solutions, the better its prospects for coping with the impact of Covid-19 and leaving a liveable and fair world for future generations.

But not even the longstanding champions, the Nordic countries, can rest on their laurels. And we shall not create a sustainable future if we work in competition—only if we work together.

Translated from German by Jess Smee