Economist
Ten major trends that will shape and influence our economy in 2021
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running the anchor lap for us today is daniel franklin dan has been executive editor of the economist magazine since 2006. that's a a lifetime in the magazine world since 2003 he's edited the publication's annual the world in guide to trends and influences that will affect cultures countries and societies in the upcoming year here to share his insights with us is return guest daniel franklin hello it's a pleasure to be with you i would have loved of course to have been physically present in naples i i know what a great event this is i've attended several times but i'm delighted that we can do this uh remotely with the with the wonders of of technology what i'm going to do today is give you a sense of some of the most important things that i think it's uh worth focusing on for
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the coming year for many years i edited the economist's annual look at the year ahead the world in the world in 2021 i was heavily involved in two and what i'm going to present you is 10 key trends to watch in 2021 um now clearly forecasting is a risky business a lot can change but i think these are broadly themes that are going to i hope they're going to resonate with you and be important ones shaping the year ahead so in the next 20 minutes or so that's what i'll be running through and if you're not interested by one particular trend stay with me because there may be another one that does resonate with you so the first trend is the pandemic and the fight for a vaccine clearly the pandemic is going to continue to dominate all sorts of aspects of life in 2021
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it's vital for the economy it's vital for health it's vital for the way that we all feel about the prospects for the future and i think within that um how much success we have every country has in rolling out the vaccine will be the most important thing in the year ahead that determines how how we are all affected by this pandemic now it's remarkable that we have a number of vaccines to to to spread at all this has happened at amazing speed but speed is going to be the crucial question how quickly can country after country uh get vaccines who to prioritize who gets it first who will actually how many will actually accept to have the vaccine my guess is rather more than than at first seemed likely the people
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will be there will be a sort of stampede uh to get the vaccine but also which countries will um will manage to do this successfully and we've already seen in the in the early weeks and months of of the vaccine rollout that there is great differentiation between countries even between rich countries at how quickly they're able to do this how fast the logistics go and who they prioritize who they choose to uh to to give the inevitably limited supplies to in the first instance and i think increasingly as the year evolves what we're going to see is the question of uh how the less privileged parts of the world get access and and how quickly they get access to the vaccine because essentially unless everybody in the world uh has uh the the opportunity to do this eventually we haven't actually solved the problem
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the pandemic can continue to the virus can continue to circulate and and so the degree to which there is international collaboration to allow some of the poorer countries in the world very very heavily populated countries in in many cases to um to to have access to and on what terms vaccine supplies that's going to be critical it also becomes a highly charged political question uh both for the government's concerned uh how quickly they are able to satisfy uh their own population's demand for the for protection but also geopolitically because uh as we've seen already the vaccine is to some extent a political tool so china we've seen use the pandemic for soft power to to uh to spread the word that it is both handling the the pandemic effectively at home and
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able to help other countries and the rich countries have also um started to see that they have a responsibility to help other countries as well gain gain access so i think the the pandemic and the many questions that surround the rollout of the vaccine is going to be the sort of foundational issue for 2021 now that also plays in very much to the to the second theme to watch which is the economy which will be fun then fundamentally affected by the pandemic and how confident people start to feel about returning to economic activity including in areas that have been most most affected and we've seen already say here that the recovery will be unpredictable and uneven uneven in particular because there are certain sectors which simply can't get back to
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uh to full blast again uh because they are particularly they involve people gathering together and that's that activity for example the hospitality sector um has has been suppressed there's all sorts of ingenuity happening to get around uh those problems this event is a case in point conferences have adapted have gone online uh but it's still not quite the same thing as getting back full-blown uh to the to the world as it was before and so i think we're going to see um particularly in the early months of the year when the uh the pandemic has been going through a revival and we haven't yet got the vaccine roll out as on a sufficient scale to make people confident that that they can get out and about again and there are still lockdowns in place in many countries we're going to see um economic activity repressed but the further we go on to into the year into the spring and summer
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there will be a certain return to normality and and stronger growth and even also uh in terms of how the economic impact has affected different countries around the world perhaps one of the most striking figures that that we had in the world in 2021 publication was the that the economic growth for china by the end of 2021 will probably be roughly where it would have been had the pandemic never existed at all so just stop to think about that for a moment it means that chinese growth although it slowed down china was nevertheless achieved economic growth unlike um most other countries in the world in 2021 but it's also now racing away and growing quite quite strongly in 2021 and and by the end of the year it will be
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more or less where it was going to be anywhere now the rest of the uh the rich world for example is not going to be in that happy situation it's going to be into 2022 perhaps even beyond before we get back even to the levels of economic activity that we had before the pandemic so very uneven depending on which part of the world you're in very uneven depending on which sector of the economy you're in clearly there are certain sectors uh that for example connected to the technology that enables remote working to happen that have been doing very well others where physical meeting physical gatherings is much more important that are held back so very uneven and unpredictable unpredictable in that there can always be at any time setbacks depending on how the pandemic progresses so i'm suggesting that things will
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gradually pick up and perhaps into the middle and certainly in the second half of the year we're going to have some quite vigorous growth but that is vulnerable that's vulnerable to the twists and turns of what happens with the progression of covid19 itself and if we get new mutations that change the outlook that could also adversely affect the economic um prospects as well of course if if things uh develop in a take a really nasty turn for the worse so uh third theme um who runs the world now the the the crumbling of the post uh post uh war uh rules uh and the rules based order we we've clearly had a changing of the guard in the united states it's not the only country though where there's a changing of the guard germany
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um we're approaching the end of the angela merkel era after many many years an election towards the end of the year she will stand down after that so that's the most powerful country the biggest economy in europe we have a new um prime minister in or new ish prime minister in japan uh after many years under shinzo abe um and we therefore have to see i think clearly the most important question is how quickly the international collaboration amongst western uh allies particularly under the bide administration gets back into the groove that uh that it was in before or something more approaching that and in what ways it has by that by in uh adjusted to what is a changed world since the the obama administration was
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in power um a changed world particularly because of china's growing role in all sorts of areas but of course in the economy and it's increasing assertiveness in its region and beyond so i think we're going to see a much greater effort at collaboration led by america president biden has has made it a sort of light motif that america is back that it also wants to work very closely with its allies the allies both in europe and asia are delighted to have america back by and large but also a bit wary i think in two respects wary because they have uh have been hit hard once by the idea that america may may abandon them they can't take america for granted in the way that they had all too often done in the post-war years
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um so how sure can they be that you won't have another uh period in in which um those fundamental assumptions of alliances will be questioned and and secondly wary in some cases particularly parts of asia that is this new administration going to be softer in some ways on for example china and the the the assertiveness of china in its in its neighborhood than um say the obama administration was before president trump came into office i think president trump has has recalibrated things in relation to uh the challenge that china represents um to to the west and to western values but how tough and in what ways will the buyer administration work with its allies to to resist
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the authoritarian tendencies of china and the uh the growing assertiveness of china so those i think are the big uh geopolitical questions that we face uh in 2021 we also have in my part of the world in in europe the new situation of britain fully out of the european union the transition period ended um with the the uh the turn of the year and britain too is trying to find its place in the world as a as a country which stands apart from the european club that was that it was in for for decades previously it has to find a way of of uh influencing or having making its presence felt in the world without the leverage leverage that used to come from being part of that that european club so that's an interesting thing to watch uh in the in the year ahead britain is
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is in the interesting position too of being uh in the presidency and the chair of the g7 uh group of uh of rich countries and also of chairing the the climate conference the cop 26 conference that will be happening towards the end of the year in glasgow so there is an opportunity in 2021 to for britain to play a prominent role on the world stage and one interesting thing to mention i think is that boris johnson british prime minister has invited um india south korea and australia to come along to the g7 meeting so there are the makings there of what is sometimes called a d10 a democratic ten that will be more um assertively perhaps upholding democratic values in the face of the rise of authoritarianism
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um elsewhere china russia and others and so another question about the post-world post-war rules-based order in 2021. i think it's interesting and this is my fourth uh theme to to look at how companies get caught up in these geopolitical tension so i've talked a little bit about the the u.s china tensions i think we have now seen that the um i think we've now seen that the chinese sorry shall i start that again because i was thinking there was a beep in the background i'm not quite sure where that came from but it's not a problem yeah you can start from that you can yeah i'll start from the uh yeah so my my fourth theme it is on increasing u.s china tensions and how um companies as well as countries get caught in the in the
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crossfire of what sometimes been called a new kind of cold war so i i've talked a bit about the questions over um how the bind administration handles china i i think it is now a bipartisan uh position that to recognize the seriousness of the challenge that china represents the to some extent uh the west has become less naive about china but there are still plenty of differences i think between western allies about how exactly you deal with china how where you can cooperate and where to where to be uh where to confront where where to resist and in particular it comes up in the area of trade and investment where many countries are very keen to still have the economic benefits of the relationship with china and there can be a trade-off between
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those economic benefits and the security um vulnerabilities as well so that i think you're going to see in country after country actually the tug of war between um the power of china the attractiveness of of the scale of its market the importance of supply chains that run through china but also the concerns about um security worries about about uh dependence on china and and how uh how well how how far integration uh with china should go particularly in in key sectors and the the the rao over uh 5g telecoms and whether to allow a big chinese player in this huawei into your systems that's sort of been emblematic of where uh where this really becomes a very live and practical issue for country after country but many many countries particularly around the region close to china are caught in this
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dilemma of china is their biggest trading partner america is their biggest most important strategic ally how do you try to avoid the tensions or manage the tensions between between those two and i think companies too find it very hard will find it increasingly hard to escape this they'll increasingly find themselves having to to manage these tensions making decisions about the extent to which they want their supply chains to be involved with china and the extent to which questions of of reputational risk in dealing with china in certain in certain areas uh could affect them too so corporate bosses are having to become not just in in this area but in other areas too uh more and more politically savvy and this is my fifth theme that it's not just on the geopolitics
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it's also in in areas such as um social justice and climate change where companies cannot just leave everything to the politicians their customers their reputations are going to depend increasingly on how they uh behave and where they position themselves on these huge issues so we're going to see an interplay between the new regulations for example on climate change that will no doubt emerge uh uh in country after country and in region after region and where companies are expecting to to take the lead and we're seeing i think more and more companies setting very ambitious targets for um for for becoming carbon neutral or for sourcing their uh supplies sustainably or for upping their game generally on sustainability and also companies becoming much more conscious because their their
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feet are held to the fire on issues of of social justice uh and the way that they uh behave uh in to to to give opportunities to as wide a range of society as possible so i think uh these these increasing questions that we saw uh developing in in 2020 are going to only intensify from the corporate perspective in in 2021. my sixth theme is what you might call the tech celebration the the acceleration of technology also i think a critical question for um just about every company out there and we've seen how the pandemic has has speeded up the adoption of technologies often uh trends that were there already quite strongly such as
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e-commerce even telemedicine video conferencing but has led to far more widespread uh adoption of them and even in countries that were until now relatively um laggards in this respect suddenly there's been a surge in in in a question of a matter of uh uh one year typically we've seen adoption taking place that was only expected after five or even 10 years according to pre-pandemic forecasts so the crucial question uh in 2021 and beyond but especially i think as we start to emerge um from from the restrictions of the pandemic with with vaccinations and hopefully with suppression of the virus itself is how many of these trends stick how much stays
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how much changes and to what extent uh do we simply go back to the world as it was before and my um belief is that we certainly don't go back just to the world as it was before and probably we adopt um a lot more of of what um what has been um quickly put in place uh during the pandemic a lot more than we would have thought right at the outset because simply we've got used to it and a lot of it turns out to be highly efficient so people are going to want to go back in many cases to physical workspaces together where you can collaborate to to to be in offices but perhaps much more flexibly than was the case in the past perhaps not every single day perhaps there'll be more options more flexibility to um to to mix working at home and in the office than there was before
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and the technological tools that that make this possible have been shown to work and furthermore crucially uh often it's shown to be really quite productive to empower people to uh to work in more flexible ways so um i i think we'll see a mix and match depending on the industry depending on the uh the the type of work involved but i think we will see that a lot a surprising amount of the habits that have started to form during the pandemic will stick especially because uh we've now been doing them for for for really for some time so they're not temporary glitches they're in many cases habits that are that are uh deeply set in and even in areas where it's highly desirable to go back and and be physically present education is one example i think we've also seen that remote teaching can also work pretty
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well and those tools will be part of the mix in future much more than we would have expected perhaps until until we were forced to adjust one industry and this is my seventh theme that has been particularly affected by the pandemic has of course been travel and tourism but that also rolls into um travel for education um foreign students traveling around the world to to have experience of of education other countries uh migration of people generally and business travelers now how much of this will come will come back in 2021 clearly it's going to depend uh a lot on the things i talked earlier uh the the pace of vaccination whether in fact we have uh vaccination passports of some sort that facilitate travel and how quickly that comes in
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whether the uh the geopolitical competition that i talked about between china and america uh also continues to to suppress for example the chinese student travel which has been a huge thing in recent years and where the companies decide that the sooner the executives can get back on the road the better i think those those things remain to be seen but again i i i think it's a question of much harder questions being asked than in the past about whether these these these elements of mobility are really necessary and that would apply particularly to business travel i would suggest that the the scrutiny of whether your trip is really necessary will be rather stronger in the future even as travel restrictions are eased there's going to be a great desire to go out and
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and physically get in touch with clients again physically have meetings physically engaging in events and conferences like this one but i think that it will be against the background of knowing that there are alternatives and a much harder headed look at the the costs and benefits of doing it in different ways so i think a desperate desire in many cases to get back and to have the physical uh interaction to have the physical um uh ability to to move across across borders and to travel far and wide but also the constraint of saying is your trip uh really necessary and i think that will mean that this will be a a rather slower return um to quite apart from the constraints of of health and safety um a slower return to the kinds of growth projections that we would have seen
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uh before the pandemic my eighth theme is uh on the theme of of uh climate change and this question of um i suppose building back better is is a phrase that's banded about a lot uh there will be a lot of focus on um how green or how sustainable uh the recovery can be and whether there's an opportunity here uh to to uh adjust fast that would otherwise have been the case and i think there are various forces that push in that direction one is the new administration in america on day one president biden went back into the paris climate agreement signaling that uh the the most powerful economy in the world is going to be taking this more seriously than it has done uh in recent years secondly there's the the fact that at the end of uh towards
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the end of 2021 we do have this cop 26 climate um conference which is the place where um there will be pressure on country after country to set more ambitious targets for for reducing carbon emissions um and the third i suppose pressure point is consuming power which i think there is uh is coming increasingly strongly that this is what this is what customers of businesses expect they expect um uh companies to show that they're behaving responsibly towards the planet but i think the other side of this is the opportunity that there is out there it's not just uh the the the stick there's also carrot the idea that there are um opportunities to take advantage of uh
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tumbling costs of renewable energy for example of consumer demand for sustainable products of um a selling point which which can be found in um setting ambitious targets both as a way to concentrate minds within with within the context of the company and to motivate employees around around a target which in many cases will will be will will resonate with with staff and make the company the sort of company that people want to work for so i think a combination of forces are only going to uh to make the focus on sustainability even stronger uh than it has been in the past in 2021 added to that is the leverage that governments have because of all the money they've been uh they've been lending so they will have control over um over
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the the ways often in which that uh that money is used and a good case in point is the recovery funds in the european union which are in many cases being made conditional upon enough emphasis being put on um building up back better on the sustainability aspect and and making sure that it is helping the long-term um sustainability of of the planet so i think very much a a a a big theme to watch for the year ahead is the focus on sustainability whether it's enough to to really make a meaningful difference in [Music] the climate in the way that uh the the the world's environment is uh is is holding up that's another matter but i think there will be this very big emphasis on it in the year ahead then the ninth uh theme just for
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because it's been such an extraordinary time and so much was cancelled in 2020 there's going to be a sort of sense of deja vu in 2021 where many things that were scheduled for last year actually end up happening in 2021 and whether that's you know the bond movie that was meant to be released then that uh should be released in 2021 or or whether it's the big sporting event that was scheduled for uh 2020 and eventually happens in 2021 there'll be this sense that uh that it's take two that um that uh what you've been gearing up for that then is actually happening now and of course the climate conference i talked about is one case in point where it was meant to happen in 2020 but will be happening in 2021 um often rather confusingly keeping the branding of uh 2020 because
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all the marketing around sorry often keeping the branding that uh was originally for 2020 slightly confusingly so don't be surprised to have deja vu in 2021 and then my final theme is that uh there is a wake-up call for the um foreseeable threats that we haven't been perhaps paying enough attention to i've talked a lot about uh climate change that's the one beyond the pandemic but given that we had a pandemic that some people had been warning about that uh sooner or later was perhaps bound to happen there is a chance in 2021 for those who would like to focus attention on obvious threats that are out there that we know about that perhaps should be taken more seriously early on and to to get
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attention focused on them and i think some of the ones that uh that are are fairly clear are are to do with for example the the the uh trouble that we're creating in the vulnerabilities we're creating in the cybersphere uh and to pay more attention to to the resilience of our systems in that respect to the problems that we're creating to some extent in space where the question of more and more space clutter is something that we should be uh concerned about and the sooner that there is an attention given to that issue the better and then there is one more familiar risk that has been with us for a long time but i think will be um very prominently back with us in 2021 and that is the the question of weapons of mass destruction in particular nuclear weapons i i don't get alarmed i'm not predicting
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nuclear conflagration in 2021 but there is a danger there is a risk that the controls that we've had in place now for many years and the arms control uh agreements that have been placed um will give way to a new nuclear arms race uh and i think that there is a a growing sense of a need to refresh the arms control architecture the arms control engagement at a strategic level not just between the traditional big powers russia and america that negotiated such agreements but involving increasingly china um and trying to make sure that nuclear weapons don't uh proliferate um much beyond the countries that already have them already uh now because uh if if that happens the world is going to look a much scarier and less stable space so i don't want to leave you on a on a overly gloomy thought um i i think
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that this is a a particularly uh tough year to predict because of the pandemic but there is every chance that as we go through the year from the rather difficult beginnings of lockdowns and a virus that in many parts of the world has resisted controls that we will gradually see um a sense of light at the end of the tunnel as vaccines are spread as economic activity starts to come back in in a serious and more sustained way and that are some of the opportunities that that would have been revealed by the pandemic um will will start to to become clear more flexible working technologies that really make a difference we had uh on our cover not so long ago on the economist the idea of the roaring twenties uh uh the the productivity effects from uh from the latest rounds of technology might really be starting to come through
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and that we can look forward to a period of of opportunities and and growth if we play our cards right so that's my hope for 2021 it's not going to be easier it's going to be hard to navigate i do hope that these 10 trends that i've outlined will help to give you some reference points that help you navigate the year ahead thank you very much
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