The private sector alone cannot make the investments necessary to achieve a carbon-neutral future and hold societies together during the crises of the 21st century. For governments to be able to do this, policy makers must avoid austerity measures and hire highly-skilled staff.
Policy makers around the world will have to deal in 2023 with a confluence of economic, political and climate crises. While governments cannot solve these crises on their own, skillful political leadership will be crucial to holding societies together and enabling communities and businesses to step up and do their part. What the world desperately needs are officials and politicians willing and able to innovate.
As the United Nations Climate Change Conference (COP27) in Egypt ended in November, world leaders agreed that climate change endangers communities around the world and demands urgent measures. Companies, in particular, must transform their way of using energy and transportation. But even companies that have made ambitious promises of net zero emissions have difficulty presenting credible plans to achieve this goal.
The lack of clear and durable regulatory frameworks has made it even more difficult for companies to reach net zero emissions. Only governments can put the necessary mechanisms in place, and they must seek innovative ways to ensure regulatory stability. There is little point in passing climate legislation today if voters and businesses believe it will likely be repealed after the next election.
Any effective climate framework requires broad social support. To build trust, politicians must reach out to communities and businesses, and build coalitions across the political spectrum. While bridging today’s political divisions will certainly require leaders with extraordinary ability and vision, it is not impossible. Germany is divided, but is currently governed by a coalition made up of the center-left Social Democrats, the left Greens and the liberal Free Democrats. In a deeply divided Brazil, the left-wing president-elect, Luiz Inacio Lula da Silvahas recently seized power with his center-right vice president-elect, Geraldo Alckmin.
In addition to polarization, governments will have no shortage of economic problems in 2023. A global recession is, according to the International Monetary Fund and the World Bank, inevitable. The effectiveness of governments will be crucial, but as one recent IMF reportif policy makers are too aggressive in their efforts to combat inflation, they could cause the US dollar to appreciate and trigger a debt crisis around the world.
In short, what is at stake is life or death, especially for lower income countries. According to the last Report on Poverty and Shared Prosperity of the World Bank, the pandemic has plunged some 70 million people around the world into extreme poverty, with the poorest countries being the most affected. To offset the enormous social costs of the pandemic, governments must invest massively in health and education.
Addressing these economic disparities could save the lives and livelihoods of millions of people, but it would require governments to take actions that are not politically expedient. Targeted cash transfers, for example, could effectively mitigate the cost of living crisis. Although large subsidies are more popular, they often benefit the wealthy. According to the World Bank, half of spending on energy subsidies in low- and middle-income countries “goes to the richest 20% of the population, which consumes more energy”.
High-return investments, especially in education, research and development, and infrastructure, could also help address both the climate crisis and rising inequality. But these investments require careful planning and execution, as well as high taxes to pay for them, which could further hurt the poor if not executed correctly. To avoid this outcome, political leaders need to focus on property taxes and carbon taxes (although this is unlikely to be unpopular with their campaign donors).
During the pandemic, some governments managed to offset the impact of Covid on poverty through various emergency support measures. Governments must now adopt the same crisis mitigation approach to improve the education and health of their citizens and restore economic growth. Simply cutting public services across the board would be a disastrous return to the 2010 austerity playbook.
At the same time, no budget items have been cut at all. On the contrary, with the Russian invasion of Ukraine deepening the fault lines of today’s increasingly fractured geopolitical order, global military spending exceeded 2 trillion dollars for the first time this year. To mitigate these costs, policy makers must address the perennial problems of waste and corruption in military procurement and arms sales.
In addition, the increase in military capacity often produces unintended consequences. We learned this in the 1980s, another decade characterized by rapidly growing defense spending. At the time, the United States armed the Taliban to fight the Soviet Union in Afghanistan, and Israel covertly supported Hamas to help it fight the Palestine Liberation Organization.
In an ideal world, the magnitude of humanity’s current challenges would attract some of the most creative and motivated citizens to public service. In many countries, however, public sector salaries have plunged to levels that make it increasingly difficult to attract top talent. In the UK, as points Martin Wolf of the Financial Times, while real wages in the private sector have increased by 5.5% since 2010, those in the public sector have fallen by 5.9%, and much of that decline has occurred in the last two years. The result is a staff deficit at all levels. Recent data from England’s National Health Service show a huge shortage of nursing professionals. Other data shows that teacher recruitment is well below targets.
Too often, the public sector falls into a vicious cycle of spending cuts and resignations. UK nurses are overworked and many are likely to succumb to burnout soon, leaving colleagues even more overburdened and demoralized. Another wave of austerity will make it even harder to retain quality workers.
Proactive contracting must be part of the mindset of governments. Over the past ten years, as dean of a school of government, I have had the privilege of identifying and training some of the best current and future public sector leaders from more than 80 countries. Every week, global management consultancies, financial institutions and technology companies approach our students with job offers. In the last decade, however, not a single public sector body has done so. That is not the way to face the challenges of the 21st century.
© Project Syndicate, 2022. www.project-syndicate.org
