How 2022 could be the springboard to a more equal, sustainable world

Back in January 2020, I wrote about how globalization’s winners hadn’t compensated its losers . And issues including soaring income inequality and climate inaction were fueling mass protests and populist movements around the world.

In other words, a trio of interlocking challenges – globalization, inequality and climate change – were converging to create a huge headache for governments.

Two years and one global pandemic later, the situation has only intensified. But with COVID-19 vaccines and treatments now available (albeit unevenly), governments have an opportunity to address these long-standing challenges in 2022 and beyond. Here’s how.

Making globalization work better

In the early 19th century, the British economist David Ricardo devised the theory of comparative advantage, whereby countries trade in the goods they can produce at a lower opportunity cost.

As a foundational principle of globalization, the theory has served the world well. But focusing on growth and profitability has also fueled inequality within and between countries, depleted the world’s finite resources, and come at an immense cost to our planet (because countries have relied on fossil fuels to enable their rapid growth).

A trio of interlocking challenges – globalization, inequality and climate change – were converging to create a huge headache for governments.

Recognizing that globalization as we know it isn’t delivering for society, in 2015, the UN launched its 2030 Agenda for Sustainable Development. This consists of 17 Sustainable Development Goals (SDGs) to promote prosperity for all while protecting the planet . But according to the UN’s latest SDG Report , the pandemic is halting or even reversing decades of progress.

With just eight years left until 2030, governments now need to rethink how to make future growth sustainable and inclusive. Domestic policies could include:

• Taxing economic activities that are bad for the environment
• Incentivizing businesses to invest their assets in more sustainable ways
• Actively encouraging businesses to pursue ESG goals and report on progress
• Investing in education to create a skilled workforce that can compete globally

On the international front, strong partnerships and cooperation will be needed to make sure all countries have the support they need to recover from the pandemic and achieve their SDGs. Governments could also consider if multilateral institutions such as the World Trade Organization and World Health Organization could be strengthened to spread the benefits of globalization more evenly, improve global public health responses and speed the transition to net zero.

Tackling inequality

Inequality is intimately bound up with globalization: when employment shifts to low-cost areas, it leaves many workers either unprepared or unemployed.

Despite massive stimulus spending, the gap between the haves and have-nots has only widened during the pandemic. A “K-shaped recovery” has seen knowledge workers maintain their incomes and increase their savings, while many lower-skilled workers have lost their jobs and stayed unemployed for longer. Huge government support packages to help nurture a strong recovery have also caused global stock markets to rebound strongly. This, along with investors hedging against rising inflation, has created asset bubbles that have made the rich even richer. Meanwhile, those without the wealth to invest face growing debts, the erosion of the value of their assets and financial insecurity.

Inequality is intimately bound up with globalization: when employment shifts to low-cost areas, it leaves many workers either unprepared or unemployed.

At the same time, as of 13 January 2022, only 9.5% of citizens in low-income countries have received at least one dose of the COVID-19 vaccine , and hundreds of millions of children in low- and middle-income countries have lost at least a full year of schooling. The latter will have long-term implications: a 2020 OECD paper calculated that school-aged students affected by COVID-19 closures “might expect some 3% lower income over their entire lifetimes.” Annual economic output in affected countries could also fall by 1.5% for the rest of the century.

Governments can address inequality at home by strengthening any existing “leveling up” agendas through effective economic policy interventions. These could include:

• Diversifying the economy in regions where jobs or livelihoods have been affected
• Helping to provide re- or up-skilling opportunities for hard-hit sectors
• Improving the supply of “good” jobs – stable jobs in growth sectors that enable a reasonable living standard, protect workers and offer opportunities to progress
• Strengthening social protection systems?

Governments can also take this opportunity to think more boldly about how they define a responsible economy, both domestically and globally. Could they measure levels of inequality, living standards and well-being alongside GDP, for example? And in today’s interconnected world, shouldn’t initiatives that put countries on a more even playing field – such as rolling out vaccines globally –?be an economic imperative?

Treating climate change as an existential threat

Finally, there’s the specter of climate change. We know from the Intergovernmental Panel on Climate Change (IPCC)’ most recent report that this is undeniably caused by human activity. We also know that climate tipping points , beyond which changes may be irreversible, are worryingly close.?

COP26 clearly showed that governments are putting their faith in a combination of technology and policy solutions such as carbon tax, caps, trading and offsets to “fix” the problem. But as climate change presents an existential threat, our only option is to make a wholesale shift in our production and consumption patterns. To quote a recent article in Nature magazine , we need to “pivot from a reactive market-failure-fixing approach towards a proactive market-shaping one,” supported by the right finance, corporate governance and government policies.

A recent report I authored for EY, Six ways that governments can drive the green transition, offers some suggestions for how to achieve the scale of change we need. In it, I argue that a massive injection of investment will, of course, be key; according to Citi , the gap between actual and necessary climate crisis spending is US$3 trillion–US$5 trillion+ per year. But governments will also need to be much bolder in delivering on their climate pledges in the long term.

This will mean using a mix of incentives and mandates to help businesses achieve radical change, influencing citizens to change their behavior, and enabling a just transition. And, as ever, governments won’t be able do it alone. A “whole of society” approach, with collaboration, coordination and investment across sectors and countries, will be crucial.

A chance to change the world for the better

The past two years have shown what’s possible when human ingenuity, scientific knowledge, digital connectivity, government funding and international cooperation combine to solve a seemingly intractable crisis.

I hope that 2022 will mark the start of a similar convergence of positive forces to tackle the trio of challenges I’ve described – which the pandemic has made more pressing. Governments are well placed to set us on the right track.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.