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Horizons Talks: Building back better: Trends and future possibilities in the post-COVID Economy

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The Horizons Talks speaker series brings experts from Canada and around the world to share their forward-looking research and ideas with public servants.

How can countries leverage global transformations for achieving higher and better quality growth? Margareta’s presentation will build on her work on the UN’s Future Possibilities Report 2020, and present a practical approach to how countries can reap opportunities created by global transformations to achieve higher growth and societal objectives in the post-COVID economy.



Dr Margareta Drzeniek

Dr Margareta Drzeniek is Managing Partner of Horizon Group and a globally recognized expert on economic development, innovation, competitiveness, international trade, and global risks.

For many years she led the economics team of the World Economic Forum as member of the Executive Committee and was lead author of The Global Competitiveness Report, The Global Risks Report in addition to other benchmarking reports of the World Economic Forum. She advised government agencies, ministers, national competitiveness councils and the private sector worldwide (e.g. Brazil, Colombia, Mexico, Russia, Ukraine, Kazakhstan, Switzerland) on how to improve competitiveness and innovation performance, boost exports and investment, assess risks, or measure impact. She holds a PhD in Economics and is a regular speaker at high level conferences and events, including World Economic Forum Annual Meeting in Davos, IMF/WB Annual Meetings in Washington DC, sessions of the UN General Assembly in NY and serves as an expert for media (BBC, CNBC, CNN, Bloomberg, etc.). Margareta is Polish, German and Swiss.


MARGARETA DRZENIEK:  Thank you, Kristel, for the invitation and thank you for the kind words.  Indeed, we have been working together a while ago and it was a pleasure to have you outside the process of the development of the Future Possibilities Report.  

Let’s maybe jump in pretty directly in the — into the heart of the matter, and I have slides, so I will share my screen.  And we can start delving into the contents.  

When Kristel asked me to do this talk, I thought, you know, what would make sense right now is to look at this narrative of building back better.  There is a very strong narrative that we should be building back better promoted by the U.N. and by many other institutions of the Great Reset.  Many other — many institutions are promoting the idea that we should change things in the crisis.  

How do we do this, you know?  It’s much more difficult to change things in a crisis than it is in normal times, at least from an economic perspective and from many other perspectives as well.  

So you know, I thought it would make sense to just give my contribution to the debate to see how we could — how can the crisis be used to build back better, to change things in a fundamental way to reset the systems that we’re looking at?  

And because one of these recent workstreams we have been working on with Future Possibilities Report actually provides one of the potential solutions.

So this is the topic of the talk, how do we — what are the trends and the possibilities in the post-COVID economy, and how can we use those to build back better?  

It’s not offering any policy advice.  It’s really just one potential and one point of view on those issues, but — and the idea off the top is really to keep everybody thinking and continue the dialogue on how to do it.  These are very complex issues where a 30-minute talk cannot solve all of those, so please keep this in mind as we move on.

There are, as you know very well, and I’m sure you have been exposed to the foresight thinking and to the global mega-trends as well, there are a number of global transformations that are ongoing, and this list is not exhaustive, but they are the ones that — you know, from my perspective, are very relevant right now.  And they are the ones that were most well received (inaudible) of COVID most immediately, right?  

So and where the impact would be the greatest as well and what it could have the (inaudible) of those follow-on effects, so not just immediately.  

Like, on the health sector, we, of course, see the immediate effects on the health sector, but on the social sector, the effects could be much more far reaching and much longer to (inaudible).  

So let me just jump to that.  The usual categories that we look at — and I have added the health category to this one — are social, geopolitical, technology, economic, and environmental.  It’s just the usual categorization of the global transformation.  And it captures, actually, much of the global transformations around.  

And the social, the one that is important in the current context is an acceleration of income inequality that could also lead to the next generation of crisis, the physical crisis, social unrest, or migration.  

On the economic side, we are — I go into details on each of those things.  We are watching — looking at a two-speed recovery with a slowdown in some sectors versus others and in some countries versus others.  

Geopolitical, very difficult to foresee right now, and so I put it in gray.  So the ones in gray, I’m not going to talk into more detail because they are somewhat less relevant immediately.  But in geopolitical, it’s very difficult to see this, but there’s the sense that there is an accelerated move towards a bipolar world with the power distribution in the U.S., China, right?  There’s a strong (inaudible) of Asia because Asia is perceived  — China is perceived as emerging from the crisis stronger than many other countries.  There’s a different model in optimalization that is emerging that is helping at the local, regional, and global levels.  It could be potentially less movement of people as (inaudible) so this — it could be a very different geopolitical situation (inaudible).  

But this is not so relevant for building back better, so that’s why I leave it aside for now.  

Technological, of course, you know, digital transformation and automation are accelerating.  You see this very much in the data from the business sector.  But over the longer term, we could actually see a slowdown in innovations now, so this is an important element (inaudible) as well.  

And the environmental, the direction here is not threatening.  There has been a lot of talk about using the stimulus packages in the (inaudible) and the recovery programs to improve the environmental performance of countries in the context of building back in a different way, of creating a different economy.  When you look at the data — we can now confirm this — so for me, this is really a question mark.  It may (inaudible).  

And then, of course, there is health, where we clearly are expecting additional investments and additional (inaudible) investment in terms of both healthcare and health — you know, health pharmaceuticals as well, but also more focus on preparedness and (inaudible).  

Okay.  Let’s look at those trends in a little bit more detail and how they are, in particular, impacted by COVID, by the COVID crisis.  

Income inequality is a trend that we have seen over the past years.  The income inequalities have been decreasing globally, but increasing within countries, right?  So you know, there were just (inaudible) — and the poorest person in the world are closer together, independently of where they live, but within each of the countries, it has been — the income inequalities have been increasing.  It’s mainly due to globalization and to the technological (inaudible), right?  

So the COVID crisis is accelerating the gap in inequality and within countries because many of the low-income workers are much more affected by the pandemic so layoffs which is what now is exposure to COVID and (inaudible) health risks.  

Globally as well, because the low income in poor countries are even more affected than the low-income workers in advanced countries.  Like, for those, an estimate done by the UN that there are going to be 49 million people in extreme poverty in addition to what we had before the COVID crisis.  These are going to go — many people are going to go into extreme poverty due to COVID.  

It is also less of a priority for companies.  The D&I is diversity and inclusion.  This is a (inaudible) policies that companies have been promoting (inaudible) for quite a while, actually, but we have actually recently run a survey that shows that it could become less of a priority because they are focusing more on the short term and the long-term issues such as diversity and inclusion could become less of a priority.

And of course, the digitization and automation, so one of the factors that has been driving income inequality will accelerate.

So on the right-hand side you can see actually a — some data on this.  And this is (inaudible) International Monetary Fund.  It’s some research done by economists there who looked at past pandemic and looked at how it has increased income inequality, so it’s the increase — the percentage change in Gini, in the Gini coefficient, if you know the Gini coefficient.

It doesn’t seem like — and this is from the past pandemic — and this pandemic is particular because it affects — because of the inability to work remotely because of the lockdown, it affects low-income workers in a very particular way.  So it’s much — it’s the pandemic that has overall a much stronger effect on the economy than previous pandemics, and so we can expect a higher (inaudible).  This has historically come between 1961 and 2017.  

The second element, economic transformation, and there are many economic transformations going on right now, right?  In the workforce, there is sectoral transitions as well.  It’s a lot of technological change that’s ongoing, so there are many, many economic transformations going on (inaudible), and that’s (inaudible), so that’s (inaudible) many of them, right?  

When we look at the effects of the pandemic, what we saw in the data and what’s relevant as well is that it creates a two-speed recovery, and it’s — by two speeds, we mean that the two elements and two speeds within and across countries.  We see in our data that we have produced, it most recently from a study on how countries are going to recover from the crisis, and we saw in our study that developing countries are likely to recover more slowly than developed countries.  If you want to check it’s out on the COVID recovery (inaudible).  

But those — so this is a very worrying, actually, finding, right, because if developing countries develop more slowly, then it would take longer for them to catch up, and then it could lead to follow-on effects of migration, being in Europe, close to Africa with a lot of migration and refugee (inaudible) in recent years with various (inaudible) increased migration (inaudible) from Africa, here, for example, from Latin America to North America.  

And the second element — so this is between countries.  And then the second element is within countries, and there is a significant shift in terms of both employment and GDP.  This is what you see on the right-hand side of the chart.  And this chart shows, actually, stock market performance for — on the upper lines are Pharmaceutical, Biotechnology, and Life Sciences, and the lower lines are Retail and — oh sorry, it’s Life Sciences and Information Technology, IT.  And the lower lines are Retail and Travel and — or Tourism, I think.

So we see that Biotechnology on the (inaudible), IT, it’s all going up quite significantly and quite  rapidly as well, whereas there’s going to be a significant shrinking effect in terms of Retail and Travel and Tourism.  

And these are just a few sectors that we’re looking at.  

What this will mean in practice is that people will have to relocate from this sector, because some of this will recover and some of it won’t, right?  Not all the physical retail and the travel will recover fast enough for people to go back to employment and go back to the previous life.  

But some people will have to relocate from the sectors that are shrinking to the sectors that are expanding.  There’s a significant transition in terms of (inaudible), significant structural transitions in the economy because some sectors will be shrinking and some sectors will be expanding as well.  And this may — this effect may be — you know, in many years, this effect may not be that visible any more, but for quite a while, this is what experts think it will recover.  It will recover rather slowly (inaudible).  

And then, of course, from one of the elements that we have seen at the enterprise level, many enter companies surveys have been done to support these points is the PWCC (inaudible) survey digitization and automization are accelerating in (inaudible).  This is really the thing.  It has just become prohibitively expensive for people on the shop floor because of the (inaudible) measures, and because nobody wants to go.  It’s physical environment for shop (inaudible) in the public sector or to interact physically, everybody is in that same digital automated communication (inaudible).  So there’s going to be a significant digitized accelerations of this trend that will displace multi-million (inaudible) jobs.  

After every crisis, the jobs never come back to the level we had before because always — you know, in a crisis, you always let go of the people — or companies let go of the people who are less productive and they recover to a level, but they have a high level of productivity with their lower staff, so they never — and this — you know, this model data that shows this for the 2007 -2008 crisis that this has never recovered to the same level (inaudible).  

Environmental transformations, as I said earlier, there’s a potential for — in the — there are two forces.  There are positive forces, there could be a positive outcome so COVID could have a positive impact on the environment or a negative impact on the environment.  It really depends on policies.  But then to the positive forces, there is a green stimulus, but if you look at the (inaudible) at the right-hand side, this is the Green Stimulus Index which was done by an outfit that’s called (Inaudible) Economics.  It uses a variety of sources, and the red is actually the brown stimulus and the blue is the green stimulus.  So you see that actually, there is not that much of a green stimulus except for the countries like, you know, the (inaudible) commission with the Green Deal, which has a huge — it’s (inaudible) here.  France has some (inaudible) Green Stimulus, U.K, Germany as well, and South Korea but it also has a brown (inaudible).  

And there is another maybe smaller and so temporary effect which is more pollution (inaudible) of plastics, such as masks and you know, bottles with sanitizers and you know, other unique usage products in hospitals as well and in healthcare.  

Technological transformation.  So technologically — technological transformations have been ongoing at an exponential pace.  What you see here, essentially, it’s the gap around the year 2000 and the systems going up, very, very rapidly, very exponential.  

The technology development went ahead very rapidly.  The use of technology was always lagging behind.  What COVID has done, it has accelerated the adoption of technology.  So many — the adoption of technology in a company is very difficult.  It’s very difficult because it requires changes in a lot of the processes.  It’s always a project that encompasses all the different aspects of the company, the different business units, very complex (inaudible).  It requires behavioural change in people to change the way they work.  There are very threatened and very risk-averse about it.  So it’s a very difficult project to do in (inaudible) time, and the COVID, there was no choice, as many companies have accelerated (inaudible) this for accelerated change as well.  And there is — as I said, there is some — there is a lot of data that’s showing that there’s significant acceleration with the rollout of technology, so just (inaudible) transformation in particular.  

And at the same time, a lot of the — there’s a lot of alarm bells that have been sounded by (inaudible) ecosystems that public and private funding for new, more advanced technologies and (inaudible) that are using those technologies could be drying up temporarily, so over a short-term time horizon just because funding will go into other places and you know, we are in a crisis.  Funding will be (inaudible) next few years.  But this is the experience from the past crisis.

What does it mean, what do those trends mean for building back better?  It’s a crisis like no other, for sure, and it’s happening, and there’s the increasing pressure.  And it has increased the pressure, actually, on countries and companies to deliver financial returns and positive (inaudible) of the environment (inaudible).  

This has been ongoing for quite a while, right?  There has been increasing pressure on countries and companies, and some countries did very well, and there’s some companies that have been doing — you know reporting on this geometric Gini level, it’s always cited as an example.  But a number of companies have been doing very good things to deliver positive social and environmental impacts as well, or at least to reduce the negative social and environmental impact.  

ESG (phonetic) investments have been — they have been gaining ground as well from an investment perspective.  This has been a key trend.  But we see as well this — it’s very difficult to get data on all this yet.  I haven’t seen any convincing data on this yet, but it’s just anecdotal evidence that the pressure on countries and companies has — it’s increasing.  

Probably should have, you know, looked for the Google mentions of ESG.  It would have probably coming out very strongly in the last (inaudible) few months.  

Another aspect to keep in mind, so there is certainly a willingness in the countries and amongst the companies as well to build back better, to build back in (inaudible).  But at the same time, there is this huge financial pressure which forces them to look at their activities much more shorter term.  And in crisis mode, they just react from one day to the other, and this is very difficult (inaudible) long term.  And this is also visible in the (inaudible) the recovery packages of countries.  Well, they’re getting to this only now, but it’s very difficult to see a longer-term plan horizon (inaudible).  Some countries have (inaudible).  The European Union, France, I know that they have taken on a longer-term horizon.  

But overall, it is very difficult.  Because of the impact already of the crisis of the economy, it is very difficult to restructure sectors.  And you know, when you go back, for example, to a country like South Korea or a country like China here, you see that most of the stimulus is down stimulus because this is where the jobs are, right?  

So countries follow want to maintain the jobs.  The priority is to maintain the jobs, to maintain income within the economy.  

And very, very short-term way of thinking that this is what’s necessary in a crisis, in this crisis system, whereas longer term time horizon is very difficult.  

And I think one of the aspects that is coming back in the economic discussion is the transformations, and in particular, when they happen in a crisis, made many aspects of work and you know, with many (inaudible) of systemic transformations that we’re talking about here, they need not only new approaches, but they also need politically calm considerations to work.  And by “politically calm considerations”, I mean, you need to create a positive momentum for those things to work, and particularly in a crisis, because the priority is, as I found in the priority is income security for the population.  So longer-term transformations that may be costly for business and that may lead to a temporary job loss, this is not the time to do any of those right now.  So those transformations really need politically calm considerations to work with.  

A number of methodologies how (inaudible) calculated.  It has gone somewhat out of fashion in the recent years, but look at the problem.  The problem (inaudible) who are the winners and who are the losers, and how do we really make this work between the winners and the losers, right?  How do we make sure that we have sufficient support at the beginning of the process to make sure that the process goes (inaudible), that not only the political decision making, but also that it’s successful and that there is a unified vision in the country that supports (inaudible), and how do we put them to compensate losers (inaudible)?  

So let me just maybe transfer something, go over to the Future Possibilities Report with a citation by Mariana Mazzucato, who is a professor of economics at University College London, and she has been actually very — an early thinker about what we call mission-driven innovation, mission-driven innovation and (inaudible) policies.  And this is kind of the same family of things that we’re talking about here for the future (inaudible).  

But she said, actually, what drives (inaudible) investment is the perception of future growth opportunities, right, so this is really important right now because in a crisis, this is what drives also, not only private investments, but this is what should be guiding also the public intervention system.  And (inaudible) have defined opportunities in an ambitious way.  

Let’s — I’ll leave you with this statement for now, and let’s delve into the concepts behind the Future Possibilities Report, if one of the solutions or one approach could be working in this context of building back better.  

The Future Possibilities Report, as Kristel said, it was developed together with the UN75, which is the initiative for the United Nations 75th anniversary and the Government of the Emirates, of the United Arab Emirates as a contribution to the debate essentially.  It looks — and the premise was that it was built pre- COVID, right?  It’s (inaudible) COVID but it was developed pre-COVID so please keep this in mind as we go ahead.  Some of the things may be (inaudible) at a difficult scale right now, but most of it works in the overall projects (inaudible).  

So first of all, you know, it’s recognized that boosting productivity of the economy as a whole is not (inaudible) countries want to grow and meet those transformations that we just talked about.  And this is even more difficult if there’s a crisis going on and the transformations (inaudible).  

Countries need to identify specific societal goals.  This is what Mariana Mazzucato calls (inaudible).  And those are societal goals that are non-economic.  They could be health, they can be improved food security, they could be better connectivity for everyone, or they could be greater use of the new energy resources.  They could be being Net Zero by 2030 (inaudible).  So but large-scale challenge-driven societal goal.  It could be better aging for some.  So there are many possibilities for this goal.  They generally differ from one country to the other, and every country is different.  

And then as a — in a second step, it’s important that transformational public policies are defined to create conditions that they can — (inaudible) to innovate and lead globally in finding solutions to those societal challenges (inaudible).  And the Future Possibilities approach is one way of doing that, one way of doing this.  Systemic transformations can be leveraged for sustained and inclusive growth over the long term.  So we’re looking essentially at the opportunities that the systemic transformations are creating and how they can be leveraged for growth in the country, for employment in the country that is sustainable and (inaudible), because it has this double objective of (inaudible).  

We have identified six transformation trends in the process of this research, and those are identified based on expert consultations, essentially, but also, we reviewed quite a number of data sources about where future market possibilities in this — in those six transformation trends are, right?  

So — and I’ll talk about this a little bit later, but I just wanted to start with an overview.  So the Exabyte Economy is about the advanced digital economy, so hyperconnected devices, data, and people, and these are not digital economy as we currently know it, but really, you know, Internet of Things such as AI, which is data driven, and the connection between devices and people as well.  

The second one is the BioTech Economy.  New agriculture and biomaterials, there’s a lot of progress that should be made, undertaken, in the biotech economy, as we know it.  It really looks at new approaches to agriculture, new organizational approaches also of agriculture but also vertical farming, precision farming as well.  So there are many, many new approaches to that (inaudible) and biomaterials such as (inaudible).  

The Net Zero Economy looks at scalable low-carbon solutions.  It may be one of the more difficult ones in terms of identifying opportunities here, because there is also a significant element of regulation that is necessary to get this going.  

And there is another one which is the Wellbeing and Health Economy, which is the health and wellbeing aspects of the economy so that there’s a huge market, actually, not just around health, but around the wellbeing, (inaudible) the softer elements of health and looks at mental health, but also the wellness aspects of life.

Oh, actually, this is (inaudible) — The Experience Economy — and this is actually the one which is from ownership to usership; it’s not waste not, want not — from ownership to usership, which looks at owning less but experiencing more things, using more things, and experiencing things rather than accumulating and consuming goods.  So it is consuming experiences using these goods rather than owning these goods.  

And then the Circular Economy, which is the waste not, want not looks at the circular economy, essentially, at recycling and opportunities associated with it.  

We tried to identify what are the global opportunities in the world for this.  It is — of course, it is an impossible exercise.  I need to say this up front, right?  And there is some — and don’t — no, the numbers are — the whole idea behind this was to say there are significant estimates to it, serious estimates about the potential size of this market in future, and this is by 2025, so in the next five years.  

That points to a significant market for control in each of those areas, right?  It’s not about the absolute number, whether it’s correct or wrong, because it’s very difficult to identify this and this was essentially done by reviewing the different estimates and detecting the serious institutions that were working on (inaudible).  

So this is ranging really between one trillion USD to the highest in the BioGrowth Economy to the highest which is the Exabyte Economy which could exceed eight trillion USD.  Just in comparison, you know, the stimulus packages were 11 trillion USD in the context of the COVID pandemic.   So this is a significant portion of global (inaudible) and a significant market.  That’s all that we want to say here.  

I don’t really want to go into the numbers in more detail up to the point I (inaudible).  And you know, also, there is an idea of what each of those economies contains.  

There are also significant opportunities to create jobs, and those jobs can be created in — across different number of sectors, across all the sectors, right?  You can see here — so all we were able to do — we didn’t want to be too precise about the (inaudible).  Of course, as I said earlier, it’s very difficult (inaudible).  This is based on survey data, so we ran a survey of business leaders in some of the countries to identify what could be the best possibilities in which countries and in which regions.  And those are — we were able to combine this with the data on sectors, depending on where the — which sectors the business leader was from, so we can see that a number of sectors, in the majority of the (inaudible) sectors has increased from them.  In some, there is going to be a stable employment here and in some it is going to be  reduction in the (inaudible).  

And maybe a few more words about each of those economies.  

So the Exabyte Economy — and you know, you see here also data from the survey that shows how — that shows the sectoral or the regional distribution, the sectoral or the regional potential of those — of each of those economies.  

So the Exabyte Economy is looking really at 5G technology and what it can do, you know, future rises in connectivity that will be driven more by devices rather than people as well as Internet of Things, and the flow of data which can improve Artificial Intelligence algorithms and the related implementation opportunities that are associated with it.

So here on this — you know, we essentially asked the business leaders in the survey where are the highest opportunities associated with the Exabyte Economy, and you see, you know, that — and this is the share of the leaders that said that there is very high potential, and the difference between the highest and the lowest country, like.  So the highest country is on top and the lowest country is here.  

We can see that in — well, of course, in North America, there’s a very high potential for the Exabyte Economy.  There is — in Europe and Central Asia, there’s significant differences as business leaders (inaudible) as a very different — in different ways.  

I think this is way too detailed to go into this in detail right now, to explain it in detail right now, but the report is online if you want to take a look at it and make your own — draw your own conclusions on it.  

The BioGrowth Economy, so this is essentially that agriculture, in bio-materials, so life sciences — and this is in the progress in the plant science, synthetic biology, biodegradable materials, resilient crops, fuel refining from agriculture waste, and animal protein substitutes, so lots of potential here in this area and this is around food and agriculture.  

Some — the sectors that will be most affected are the potential (inaudible) advanced materials and bio-technology; chemicals and petrochemicals as well; financial services and investors.  They benefit from (inaudible) but also consumer goods; and energy, oil, and gas, because of bio-fuel (inaudible).  

Net Zero Economy is the next one, scalable low-carbon solutions.  I said earlier, you know this is probably the one that is most difficult to track.  There is — what is interesting is that there is an increasing demand for energy, very significant increases, and actually, in fact, if you have the data process, includes digital economy.  The digital economy drives a lot of the new demand for energy, and imagine markets as they grow, they are very far from having reached a level where they don’t need additional energy, but it can be (inaudible).  So this is — there is some indication that maybe advanced economies have recovered their growth from additional stuff;  (inaudible) more research about this, but in developing markets, it’s clearly not the case that emerging market (inaudible).  

So a lot of innovation will happen here and this can be, to a large extent, very much driven by opportunities, while in particular, around battery technologies, around electric vehicles, energy-efficient building as well, and on hydrogen-fuel cells — powered fuel cells.  There’s a lot of possible technological (inaudible) as well that may just need some incentives from the governments and from the public.

The Wellbeing Economy is, in particular, looking at physical, mental wellbeing.  It’s already huge, of course.  It was propelled into a new level by the COVID pandemic with focus on the mental wellbeing in particular, as well, which was somewhat lower.  But it is set to grow considerably.  All the predictions of — in this state actually show that as population ages that the stress level increases as lifestyle changing.  This is not going to be fixed any time soon.  

The health consciousness of people’s behaviours are changing as well, so those — this is an area that continues to grow, continues to create opportunities in this sector, in particular in higher income but more also in middle and lower income economy.  And when you look at the data here (inaudible) that there is significant opportunity in North America for 74 percent of the respondents was the highest response.  There’s a great growth potential in that sector, in that country, and 74 percent that there’s a demand potentially in the country as well.  

And in Europe, you know, 77, the highest and 76.  And significant disparities in Europe as well, so in some of the countries (inaudible) at just 40 percent.  In some of the countries, it’s 40 percent of (inaudible) potential and to grow, and 36, there is a demand potential.  

Experience Economy is another one, from ownership to usership, so there’s — so behaviour on the consumer trend, essentially, but it’s been very much (inaudible) for services personalization, which is one element, 3D printing, which you can print yourself, right, and adapt a tailored product, expand those opportunities to customer’s products, experience tourism as well.  It’s a little bit more difficult right now, but there is also, you know, some of the virtual reality trends also are becoming more sophisticated and affordable and more real as well, so the technology (inaudible) as well.  And it affects a number of sectors, of course, travel and tourism and financial services (inaudible) consumer goods (inaudible) from ownership to (inaudible).  And this has been extended from and going very strongly in investment groups, but it’s moving also very quickly to consumer groups.  And with COVID, it was accelerated as well, that we don’t necessarily own and buy things that have been (inaudible) or shared.  

Information and communication technologies enable this to (inaudible) so they will benefit from (inaudible).  

And then the Circular Economy, which is another big (inaudible), there is, of course, growing public awareness about the need to reduce environmental impact, plastics in ocean, we all know, you know, know about the impacts.  And we are — it is a — it’s a difficult subject to tackle because change is also difficult.  It is the changes, systemic changes that are necessary for the (inaudible) make progress.  But this opens some new possibilities across the different value (inaudible) to optimize resources and you know, to recycling and upcycling is going to become more mainstream in the next years.  And technology will play a significant role in this as well.  

And interestingly, the biggest — where we see the biggest potential, we see this in Latin America and we see it also in some countries in Asia, the bigger potential than in North America and Europe, for example, because this is where a lot of this has happened already, so some countries are much more advanced.  

And in emerging economies, the challenges are just much more visible.  That’s because there was no efficient public service or no efficient utilities to deal with waste many times and you see the health effects very often are much more directed as well of waste that’s not managed (inaudible) low capacity to manage the waste.  So recycling and upcycling, that’s definitely a huge opportunity as well.  

These are the — you know, these are the six that we have selected, and essentially, you know, they are, of course, big topics.  They may not be all the topics that countries will be looking at, but they are six that we focused on and that we can talk about.  

But what can countries do to advance into those (inaudible) or in one of those, or in a subset of three, like, the countries may choose just some of those and may choose slightly different ones.  

I think what is common to all these approaches, they are all huge, systemic transformational changes that are necessary, right?  When you change an entire system, it’s a different way of going about it than just promoting a certain industry as they did in the past, the traditional industry policy.  

But it needs some — it needs a similar approach.  It needs an approach where the government has a different role.  It cannot be the laissez faire capitalism any more as we have seen in the past; it must be a government that’s more — that’s creating a specific frame of conditions so that the different stakeholders can go together in a different direction.  

It’s going back to the approach of Mariana Mazzucato.  If the government sets the ambition to resolve a certain challenge, this drives a lot of the private investment, and you know, there is a — and then in addition, it can align also different players, because very — what happens very often is (inaudible) ecosystem because systems, they actually align towards this (inaudible).  And let me just give you a few examples.  

So this is a short — a small table that shows you the difference between traditional industrial policy and transformational public policy.  So we’re not talking about, you know, protection for selected champions; we’re not picking champions.  We’re not talking about support the business sector to increasing efficiency or to, you know, picking one sector and then supporting that one.  

We’re also not talking necessarily on building on the current strengths of the country.  Each country has a specific sort of strength.  We know that this is going to be changing very significantly going forward, and that maybe those strengths are not the ones that you want to have in the future.  

So if you look forward, look into the future, you see — you need to identify where you want to be, first of all, and then apply that transformational public policy.

So what does it mean?  And it necessitates a very different way of thinking.  There’s a number of — there’s actually (inaudible) on this issue (inaudible) around challenge based innovation policies (inaudible) and a lot of this has been written by the (inaudible) and highlighted by the (inaudible).  And I’ll talk about a few examples, country examples later on.  

So it needs to take into — so first of all, it needs to take, you know, focus on dynamic co-investment between public and private place.  It’s really not just about subsidizing, and (inaudible).  It needs to take the entire value chain into account because you cannot just — the way sectors are organized  right now, the production, it spans across a number of countries so if you just did something in your country and you don’t take the value chain into account the effect will be minor (inaudible).  

It necessitates — because this issues a complex and they necessitate change at a number of levels.  Like, when you think about food security or — you know, improved nutrition.  

Let’s take an example of improved nutrition.  Improved nutrition necessitates actually not only focus on the producers of nutrition or it includes, you know, you need to take the entire value chain into account where you often (inaudible) included (inaudible) a lot of trade (inaudible).  So you take — first of all, take the entire value chain into account.  

But it also needs consumer associations to be on board; it also needs the labelling system to be on board; it also needs education to be on board; it also needs to be — healthcare and professionals to be on board.  So it really affects a number of areas that need to be effective, that need to be on board, and that need to be fully in the same direction and addressing the same challenge for this to be (inaudible); otherwise, the effects will just not go very far.  

You know, there are a number of differences also with the transformation public policy.  Six solutions that benefit society more broadly rather than purely focusing on commercial potential.  

There’s an interesting element around experimentation and risk taking, which is very difficult for the public sector to (inaudible), and you all are in the public sector, right, so you know this much better than I do, but it is very difficult to set up public sector decision making in a way that empowers risk taking, because risk taking means that you have a chance to fail, and usually this is not something that is easy to be accepted in the — especially in public sector context, right, in business sector context as well.  But I think the businesses come — have come around to it slightly more, at least because the (inaudible) is both cross-sectoral and cross (inaudible); why because, you know, the different sectors are involved, right?  

As I said earlier, if I use this nutrition example, it’s not just the food producers who are involved, it’s also the healthcare sector.  It is the not-for-profit sector as well that’s involved, so different actors and sectors and different researchers obviously as well.  

And it needs very flexible approaches as well.  And here, as well, there is — when you think about the strategic approaches of this as well, the next one is clear direction (inaudible) and measurable, and those points go together.  What is important about them that they need to have this balance between having a clear direction, but also reversibility, meaning if you see that there is — if you’re — that you’re going in the wrong direction, you can be able to reverse the approach.  And this is also a very difficult thing to do.  So it requires, simply, a very different way of thinking around policies more generally.  

And then, of course, you know, transformation of public policy should be based on broad societal support whether it’s industrial policy (inaudible).  

How can governments — and this is — you know, we didn’t go into much detail about how governments can use this because very practically, right, because it’s just — this is from a country that they have their governments set up in very different ways, and there are many, many different approaches that can be taken here.  I’ll show a few examples of what countries have done.  

But I think, there are those four elements that (inaudible) case studies that we looked at were common, and they have actually — you know, first of all, it’s important that this is based on a societally adopted and widely supported decisions for where the country wants to be, right?  And it may be a thing that’s very clear for Canada, but for most of the countries (inaudible), and especially to go out to countries that are — even in Europe.  Most of the countries in Europe (inaudible) advanced countries, similar to Sweden and to Canada, they have it, you know?  I know, but in many countries it is not (inaudible).  

Then, you know, select focus trends or focus challenges that the country wants to focus on.  And you know, what you’re doing, (inaudible) exercise is actually the perfect way of doing it.  And actually, all the countries that are doing this type of exercises are under — are — have been successful (inaudible).  They have an exclusively — they have very, very strong (inaudible), so yeah, in Finland, Sweden, that’s where examples (inaudible) European Union as well.  

Then, develop action plans, including stakeholder (inaudible).  You know, and this is a very difficult step to do, to analyze the selected trends and sectors that are — that provide the most potential, and who are the stakeholders involved?  How can they create those systemic change?  So the players and the trends are really two key elements in — to identify (inaudible) — you know, those pivotal points that you need to — that you want to focus on, right?  Identifying obstacles enables systemic considerations to interlinkages between the players, between the issues as well.  That’s very important.  There’s some — there’s significant literature that I’m just scratching on the (inaudible).

And then, of course, implementation is a key element.  This needs to be an ongoing process that needs a high level of reflexivity.  It means you need constant feedback for pieces of the process because you’re doing something new, and institutional structures that are flexible enough so that they can adjust plans to provide for regular checks that the plan is on track, whatever, they’re already defining what “on track” means (inaudible) but discuss obstacles and so they can discuss and remove obstacles and see approaches that (inaudible).  

And the tools here, in particular (inaudible) very important tools in the implementation.  

None of this is easy.  I didn’t (inaudible).

Case studies, a few countries have actually done this quite successfully, mainly in the context of innovation policies.  This is where a lot of thinking is coming from.  Sweden is an example, so Swedish innovation policies fully mission driven.  They selected (inaudible) that they want to achieve.  And they (inaudible) want to achieve and they would go after them.  So it varies.  And they have advanced very much the thinking about how to create the systemic change in the country as well, what are the systemic elements behind it (inaudible) feedback loop on the measurement as well, so (inaudible) case in Sweden.  

Finland as well.  Finland is very similar.  So Finland has identified actually key elements and (inaudible) work and they’re looking at natural resources, (inaudible) efficiency, digitalization, wellbeing, and health.  So they have contracted those three, and they really push very strongly in those three, the elements, those three, on opportunities created by those three (inaudible).

And in the U.K., which is a slightly different approach because it is looking at — explicitly at the challenge (inaudible) strategy and this is actually going back to the Mariana Mazzucato work, and the link is in the presentation, if you are interested in looking into more detail on it.

Three takeaways, and this is my last slide, so please prepare your questions.  

So you know, in the three takeaways, if you just (inaudible), right, new policies, there are some new policy approaches needed, and this is something that’s evolving and Canada has been actually at the forefront of some of those approaches as well, and policy experimentation as well, and policy innovation as well.  But the key for this one is that it’s holistic and systemic, and it’s a very different approach (inaudible).

Opportunity focus — it’s actually — if transformations are done in a way that opportunity focus and opportunities becoming a key element that’s going to make them much easier to implement also in a crisis because it takes into account further economic considerations and (inaudible).  

And then, you know, the last element is more for developing country or this in emerging country audience.  And the good news for those countries is that in the past, their traditional advice on economic growth was always, “You need to improve government skills, the business environment.”  It was like, some things, right, that you have to work on, huge (inaudible).  So it provided this unsurmountable number of reforms that countries had to introduce at the same time in order to improve the growth.  

Those areas, because they are not for focus, they can provide opportunities for (inaudible) if done well because you can change regulations, you can change your policies in one specific area (inaudible) and then you’d (inaudible) in this particular area (inaudible) creates also again, opportunities in this one particular area and shows that this is possible, which many, many emerging markets (inaudible).

And I think this is my last slide, yes.  I will stop here and I look forward to hearing your questions.

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Policy Horizons | Horizons de politiques

Policy Horizons Canada, also referred to as Policy Horizons, is an organization within the federal public service that conducts strategic foresight on cross-cutting issues that informs public servants today about the possible public policy implications over the next 10-15 years.

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