The Global Conversation speaks to OECD Secretary-General José Ángel Gurría about the economic fallout prompted by the coronavirus pandemic and what the world should be doing to successfully navigate a way out of the crisis.
“U-shaped recovery rather than V-shaped”
Sasha Vakulina, Euronews Business Editor: “Most of the forecasts indicate a recovery starting from the second half of this year. But according to the OECD outlook it might be rather slow. What are those long-lasting economic effects of the COVID-19 pandemic?”
José Ángel Gurría, OECD Secretary-General: “Well, first of all, we’re saying minus six percent for the world economy in 2020, in the case of no recurrence of the pandemic. If we have a second wave, we’re saying it can go to a contraction of seven and a half, maybe even more. And the reason is because, among other things, there’s a question of confidence that has to recover. There’s a question of investment that has to recover. There’s a question of trade tensions that have to disappear. But there’s also the debt that we will be left with. And that’s governments. And that’s corporations and that’s households. And that will make it a little harder to take off. So we’re looking more at the U-shaped recovery rather than a V-shaped recovery.
“Throw everything you’ve got at it!”
Sasha Vakulina, Euronews Business Editor: “When it comes to the issue of debt there are growing concerns that it will be the next generation paying for this debt.”
José Ángel Gurría, OECD Secretary-General: “It’s always the next generation that pays for the debt. That has not changed. The only question is this generation has to spend enough to beat the virus. Throw everything you’ve got at it! Win the battle against the virus! Debt is a consequence of the victory against the virus. But it will have consequences later on. This is why we have to be rather sober about the recovery. It’s going to take longer and it’s going to take more thrust simply because it’s going to be heavy on the wings.
Sasha Vakulina, Euronews Business Editor: “Do you think there should be this shift in terms of the debt perception? To no longer perceive debt as something bad as we saw after, for example, the financial crisis?”
José Ángel Gurría, OECD Secretary-General: “Debt is a tool. Dept is never intrinsically bad or wrong. You can use debt wisely and judiciously to advance your growth, your development. Some programmes provided ideally that the projects that you finance with the debt pay for themselves or that they generate a global good to your society, to your country. That will be worth paying for it. But now is not the time to be looking at the rulebook on the debt question. Right now, we have to give everything we got to beat the virus first, then we’ll have to deal with the consequences.”
“The future of Europe is integration.”
Sasha Vakulina, Euronews Business Editor: “How has the pandemic accelerated the shift from the “great integration” to the “great fragmentation” and has it?”
José Ángel Gurría, OECD Secretary-General: “I think the mere expression of ‘great fragmentation’ is an exaggeration. Just like the ‘great integration’ was because we never achieved a level of integration that we wanted, and we should not let the pandemic stop the process of integration. Europe is going to become more and more integrated. The future of Europe is integration. An integrated Europe will be better off. The level of well-being will be increased. The health systems are not, you know, the responsibility of the European Commission. They are the responsibility of each one of the countries. So you basically are dealing with different policies and different ways of addressing different ways in which you read the numbers and you react to the numbers. But in the end, you’ve had a fairly steady and I would say fairly generalised approach, which is in the absence of a medicine, in the absence of a vaccine, you do what effectively is the second best, which is confinement and then social distancing and controlling the process very, very prudently, very gradually.”
Sasha Vakulina, Euronews Business Editor: “Do you think there might be a threat to the general move towards the globalisation after the pandemic? Because what we saw what happened during the COVID-19 pandemic – there was a massive disruption to supply chains.”
José Ángel Gurría, OECD Secretary-General: “Don’t blame globalisation for the flawed national policies or the lack of international cooperation. Globalisation by definition rests on a very strong foundation of international cooperation. If the international cooperation is not there and you have trade tensions and you have, you know, in some cases literally, you know, military tensions and you have problems of flows and social tensions and you have flare-ups, discontent in many countries, etc. Then, of course, you are lacking that glue that puts the whole thing together. And blaming globalisation can be, well, stylish or voguish, but it’s not going to get you anywhere because it doesn’t get you to a solution.”
“What is the new normal for the global economy?”
Sasha Vakulina, Euronews Business Editor: “We talk a lot about the new normal for us, for people, when it comes to social distancing, testing, tracking, tracing and isolating. What is the new normal for the global economy?”
José Ángel Gurría, OECD Secretary-General: “The new normal, hopefully, will include the fact that we should take the opportunity to remind ourselves, for example, of a single most important intergenerational responsibility, which is dealing with a planet, dealing with climate change. And therefore, bravo to those countries that are now saying in the recovery, I will be supporting greener solutions either in the car industry, or in the airplane industry, or in the shipping industry, etc. So you are combining the support of the hardest hit sectors, you know, the more vulnerable sectors with policies that drive you towards a better future.”