This time last year, no one could have foreseen the dramatic way in which 2020’s challenges would alter people’s lives around the world. The COVID-19 pandemic introduced new complications to people everywhere, but among those battered most by its economic impact were those living in emerging economies where prosperity was already struggling to take hold.
As we tailored our research to offer innovators, policymakers, and development practitioners a practical roadmap for building back better, we uncovered powerful lessons that, if learned from as a global community, can accelerate our collective progress in the quest for global prosperity. Here are three of our biggest takeaways from 2020.
Lesson one: Global progress against poverty during the past several decades has been fragile, if not misleading.
The aftermath of the pandemic has pushed hundreds of millions into poverty, with some estimates suggesting as many as half a billion people could fall below the poverty line. The UN estimated that the pandemic could wipe away 30 years of progress in moving people out of poverty.
Though reports of successfully eliminating poverty during recent decades are valid, COVID-19 revealed how fragile that progress has been. Before the pandemic, even though many people had recently climbed out of extreme poverty, nearly half the global population—3.4 billion people—still lived on less than $5.50 a day. People counted in this population, though technically living above a minimum poverty threshold, face extremely challenging day-to-day lives. They often have no access to financial safety nets in the event of an economic shock, whether it be caused by a family member getting sick, or in this case, a global pandemic.
The pandemic’s ability to wipe away decades of progress in one fell swoop highlights a simple, undeniable truth: simply lifting people above a poverty threshold is not enough. Economic resilience requires prosperity.
Lesson 2: Wealthy countries are better able to weather economic storms.
After the onset of the pandemic, governments moved quickly to mitigate its fallout. Wealthy countries enacted stimulus bills worth anywhere from about 5% of annual GDP in countries like Germany and France to more than 20% of GDP in Japan. On the other hand, emerging economies were only able to spend amounts averaging just 0.8% of their much more meager annual GDPs.
This fact perhaps isn’t very surprising, but it does highlight the importance of building economic resilience to ride out good times and bad. In my colleagues’ report, Avoiding the prosperity paradox: How to build economic resilience in a post-COVID world, they explain that countries can develop a strong economic foundation by supporting market-creating innovators. It’s how Japan recovered from World War II and went on to become one of the wealthiest—and most resilient—countries today.
Lesson 3: Private sector actors—specifically market-creating innovators—play a critical role for societies in crisis.
The onset of COVID-19 put many emerging-market governments in a difficult position. Few of these countries had the ability to produce their own medical supplies, such as testing kits and personal protective equipment. Governments had to look to foreign suppliers, but lacking resources and commercial clout, found themselves at the back of the line when it came to getting needed supplies. In the midst of this predicament, private sector players have stepped up to the plate.
Consider, for example, how mPharma, a Ghanaian healthcare startup, has helped countries throughout Africa obtain needed COVID-19 tests. When local governments were unable to find suppliers for COVID-19 testing kits, mPharma founder Gregory Rockson leveraged his investors’ networks to find and form a long-term partnership with a Chinese biotech firm to supply testing kits and reading machines. Since then, mPharma has distributed tests to eight countries in Africa and become one of the continent’s largest suppliers for materials to battle COVID-19.
mPharma hasn’t acted alone. Flour Mills of Nigeria, one of the largest companies in Nigeria, has facilitated the arrival of testing kits in the country by leveraging the supply chain networks it’s created to ship food. Likewise, South Africa’s Right ePharmacy has used its platform to improve accessibility to medications and lift burdens off of traditional healthcare facilities during the pandemic. In emerging economies around the world, there’s been a clear trend of innovators stepping up to fill the gap where overburdened governments cannot.
All three of these lessons point in the same direction going forward in the new year. For countries to build a more prosperous and resilient future, they must invest in more innovation—and specifically market-creating innovation. As described in Avoiding the prosperity paradox, market-creating innovation provides the solid foundation upon which nations can build to avoid being left in such desperate circumstances when future crises hit.