GAURAV DALMIA
ladmir Lenin’s observation—“There are decades when nothing happens and weeks when decades happen” —has become a cliché in 2020. The world drastically changed with the onset of the COVID-19 pandemic, many of the global trends reached tipping point and the shelf life of some of the world-shaping forces got over. If there was a turbulence index, this would be a peak year for it.
On a regular day, we channelise our attention to things that directly affect our lives in the here and now. However, there are forces at play that will profoundly shape our futures, some below the radar, others visible but with unintended consequences. Here are five such things that I believe stand out as the events of 2020.
he COVID-19 wave was not entirely unpredicted. In 2018, Bill Gates, who had been studying the spread of contagious diseases for more than twenty years, predicted the possibility that a pandemic caused by an alien pathogen spreading across the globe sooner or later. His doomsday view was based on the emergence of infectious diseases such as the Severe Acute Respiratory Syndrome (SARS) in 2003, the Swine Flu in 2009, the Middle East Respiratory Syndrome (MERS) in 2012, and Ebola in 2014. These outbreaks made him pay closer attention to infectious diseases and cemented his view that pandemics were not getting enough attention because they largely occurred outside rich countries, so it was easier to underestimate them.
Then, in December 2019, COVID-19 was first identified in Wuhan, China. By end January 2020, the World Health Organisation (WHO) had declared it a public health emergency of international concern. I remember being in Davos, and opinion leaders there had not really understood the ramifications of this novel coronavirus. By March 2020, however, COVID-19 was officially declared a pandemic. By the end of November, it had led to 62 million infections and 1.4 million deaths worldwide. [i]
Along the way, it changed our lives; some aspects have been changed forever. Work-from-home became not just a short-term reality, but the long-term stated position for many
ALONG THE WAY, THE PANDEMIC CHANGED OUR LIVES; SOME ASPECTS HAVE BEEN CHANGED FOREVER. WORK-FROMHOME BECAME NOT JUST A SHORT-TERM REALITY, BUT THE LONG-TERM STATED POSITION FOR MANY COMPANIES AND EVEN AS A LEGISLATED RIGHT IN SOME COUNTRIES
companies and even as a legislated right in some countries[ii]. COVID-19 shifted society’s Overton Window; new ideas became acceptable to the general population. For instance, state capacity came back into debate. Asian countries have given up their long-standing small government stance and committed US $7 trillion—the largest in Asian history.
Most of all, COVID-19 brought to attention the complex trade-offs facing world leaders. Should the world take a Rawlsian view and focus on those at the bottom of the pyramid? Should leaders take a utilitarian stance and seek to benefit the largest number of people? The answers to the two questions would certainly be different. Should societies be more libertarian, resisting imposition from above, or should societies be more accepting of a more authoritarian approach in the hope of greater efficiency? Such political philosophy debates became more explicit in 2020. Indeed, the contest for legitimacy in the years to come will be fought on the narrative as to which country best handled the pandemic.
he rise of China seems like a phenomenon of the last two decades, but it is not. Lafcadio Hearn—a Japan-based journalist known for his writings on East Asian culture—predicted in an essay in The Atlantic in 1896 that China will one day pose a formidable economic threat to the West.[iii] By the 1950s, China had become an important factor in the western world’s assessment of global power plays. By the late ’70s, China’s economic forces were clearly visible to strategists, even though it would take a few decades for it to seep into the popular consciousness. The same lag is happening to China’s plateauing.
The world’s experience with Japan is very indicative. In the 1980s and early ’90s, few questioned that Japan would dominate the world. It was estimated that the 1.5 sq km of land housing the Imperial Palace in Tokyo was worth as much as all the land in California. Japanese companies were buying Hollywood studios, and Japanese cars and consumer electronics brands were dominant worldwide. We read Kenichi Ohmae’s management tome on Japanese management practices—The Mind of the Strategist—in business school. Many of the companies celebrated in the book have since faltered. Another book, The Japan That Can Say No, by Tokyo governor Shintaro Ishihara and Sony Chairman Akio Morita, was an expression of Japan’s ambitions, and in hindsight, its hubris. Japan went on to stumble and even though it remains a formidable economy, the inevitability of its one-way rise was over. Nothing significant happened globally that changed Japan’s course. It got bogged down by its own internal challenges. Indeed, forts decay from the inside.
China’s meteoric rise echoes Japan’s path. Growth rate differentials compound over time and the results are often counterintuitive. Since 1989, the Chinese economy has grown 14.12x, as compared to 2.32x for the world as whole.[iv] It is now not just a factory to the world, but also the biggest consumption driver. China also has the best poverty alleviation record in history: from 1978 to 2018, the number of China’s rural poor decreased by more than 700 million.[v] China has some of the world’s biggest banks, its companies dominate pharmaceutical ingredients and technology, and its productivity growth is unparalleled. Yet, its current picture looks less dynamic: the debt overhang is pulling back the economy, the regional imbalance between the coastal areas and the interiors is creating massive friction, the ageing population and the demographic drain is staring China in the face, and China’s increased global ambitions are prompting it towards classic over-reach even as government finances are getting tight.
It seems China has peaked. Not just stark economic facts are getting worrying, a muscular China’s engagement with the world is changing as well. A recent 14 country poll by Pew Research shows that views of China have been growing negative in recent years, and a majority in each of the surveyed countries have an unfavourable opinion of China. And in Australia, the United Kingdom, Germany, the Netherlands, Sweden, the United States, South Korea, Spain and Canada, negative views have reached their highest points since polling began on this topic more than a decade ago.
I agree with views propounded by Gregory Mitrovich, a leading scholar at the Arnold A. Saltzman Institute of War and Peace Studies at Columbia University, when he says that China has not learnt from the US path of global leadership. The US rose in the aftermath of World War II, amidst a power vacuum. This gave it an unprecedented opening and the success of its plans to help Europe and Japan rebuild gave it unparalleled legitimacy as it consolidated power. China lacks both. Under the Marshall Plan for reviving Europe, the US allocated US $3.2 billion in 1945 just for food relief. Contrast that to China’s “wolf warrior” diplomacy, where programmes under China’s Belt and Road Initiative (BRI) seem overly transactional and one sided. The blinkers on Chinese leadership were further exposed when, as the world’s leading manufacturer of medical products, it failed to act in common interest to further its diplomatic efforts and soft power. The cumulative effect of China’s postures is that its legitimacy is now in question and will remain so even when globalisation gains favour again. All this put together will temper China’s rise and might even reverse some gains of the past decade.
he environment movement officially turned 50 this year. The first Earth Day was celebrated on 22 April 1970 and the US Environmental Protection Agency was also created later that year. The Earth Day started with saving polar bears and other endangered species; over the next half century, it took on the challenge of saving communities via sustainable development. Earlier initiatives of policymakers were to curb pollution; it grew in the ’90s to address the broader forces of climate change. The term “Climate Change” itself was coined by oceanographer Wallace Smith Broecker way back in 1975, but the absorption of the idea took a full generation. The mission creep would go on to shape public consciousness. What started as a fringe idea has now caught the imagination of people at large.
A quick survey of history shows that human activity can permanently hurt ecosystems. The earliest civilisations—whether in the Indus Valley, Mesopotamia, or Central America—were along the most fertile riverbeds of those times. All of these areas are now arid or semi-arid lands. Man’s long-term impact on the environment has not been good.
At the same time, extreme weather events are increasing in number. Particle pollution, droughts, extreme temperatures, and tornadoes amplified by oceanic warming have become a phenomenon for all of us to see. Soil salination, coastal erosion and oceanic acidification are creeping upon us, slowly but surely. According to the Internal Displacement Monitoring Centre, 17.2 million people were forced to leave their homes because of climate-related economic pressures last year.[vi] Further, the World Bank projects that internal climate migration would touch 143 million people by 2050. Clearly, planet earth is telling us, “You are my guests, not my masters”.
All change is messy. The Global Carbon Project reported that carbon emissions worldwide, which were largely flat from 2014 to 2016, had increased 1.6% in 2017, 2.7% in 2018, and 0.6% in 2019. Experts believe 2020 will reverse this negative trend, even after adjusting for the effects of the global slowdown. If this is a test of will, society is demonstrating it has it!
The challenge is being attacked from all sides. On the demand side, consumers are voting with their feet and are increasingly buying Teslas and its equivalents. Data from the International Energy Agency shows that sales of electric cars topped 2.1 million globally in 2019 to boost the stock in use to 7.2 million[vii]. Electric cars, which accounted for 2.6 percent of global car sales and about 1 percent of global car stock in 2019, registered a 40 percent year-on-year increase. This trend will accelerate as charging networks proliferate and governments mandate adoption. For instance, the UK government’s current policy states that by 2040, all new cars sold in the UK should be zero emissions capable—that means battery electric, plug-in hybrid electric or hydrogen.
Forces from the supply side are active as well. Increasingly, pension funds and money managers are getting into the act. Earlier this year, Blackrock, the world’s largest money manager, joined Climate Action 100+, an investor network that pushes fossil fuel companies to make new disclosures and carbon emissions commitments. The group’s combined assets
RENEWABLES WILL REPRESENT 95 PERCENT OF THE NET INCREASE IN GLOBAL POWER CAPACITY THROUGH 2025, AND TOTAL INSTALLED WIND AND SOLAR CAPACITY WILL SURPASS NATURAL GAS IN 2023 AND COAL IN 2024
under management are now US $41 trillion and includes heavyweights like Calpers, Allianz, and UBS. The group’s collective pressure has already won concessions from companies such as Shell and BP. Not surprisingly, the International Energy Agency’s estimates show that 200 gigawatts of renewable power will be added in 2020, led by China and the US, and that renewables will represent close to 90 percent of all new power capacity. While some of this may be triggered by sunset clauses in tax benefit announcements, it projects that renewables will represent 95 percent of the net increase in global power capacity through 2025, and total installed wind and solar capacity will surpass natural gas in 2023 and coal in 2024. These statistics would have been mere conjecture at the beginning of the decade.
My personal hope is that the climate change movement will broaden to encompass food supply. About a quarter of all global emissions come from feeding the world’s 7.8 billion people. A large part of that comes from the consumption of meat. Bill Gates acknowledged in a blog several years ago that traditional meat production for the world population was not sustainable.[viii] The movement to lab-grown meat has heated up in the past few years. This has ramifications both for personal and public health. While technology solutions take their course, perhaps citizens can take ownership of the problems meat is creating—climate change, economic inefficiency and health risks—and go vegetarian a few days a week. We truly need to be good guests of planet earth.
t used to be that space was the domain of countries. And, that too, rich countries. Now increasingly, private companies are entering the game and are poised to dominate. Plus, space was an expensive and wasteful business. Space X broke the traditional paradigm that rockets could not be reused. In November this year, it was successful in breaking its own record by rescuing a Falcon 9 first stage rocket booster for a seventh trip[ix]. Its latest launch was also the first operational commercial crew mission with four astronauts on board to go to the International Space Station. NASA’s initial estimate was that each launch by Space X would cost US $95 million. Space X is currently running at a cost of US $30 million per launch. Think of this as the new Moore’s Law for space exploration. Based on these trends, one should expect serious disruption to follow.
These days it’s getting hard to distinguish between science fiction and reality. Nokia just won the bid from NASA to build a cellular network on the moon. Nokia’s LTE/4G technology was a precursor to the current 5G technology and will be implemented on the lunar surface by end 2022 and will revolutionise lunar surface communications by delivering reliable, high data rates while containing power, size and cost. Communications will be a crucial component for NASA’s Artemis program, which plans to establish a sustainable presence on the Moon by the end of the coming decade.
Several years ago, I had seen a presentation for a technology that could generate solar energy in outer space efficiently because of the much higher intensity of solar radiation, and then beam it down to earth. It was estimated that such technologies could service the entire energy needs of our planet by mid-century. Added to this, the 2015 “Space Law” allows companies to prospect for minerals on near-earth asteroids or even generate energy sources in outer space to power further space exploration. Companies like Planetary Resources, funded by Google’s founders, are already in the race. We’ll get used to more such new names.
Elon Musk has predicted how colonisation of outer space might look like[x]. “Life in glass domes at first. Eventually, terraformed to support life, like Earth.[xi]” He believes science can master the process of altering the atmosphere and physical features of the moon or any other planet to make it habitable. These ideas were first postulated by Carl Sagan in the early 1960s. Needless to say, such approaches will raise questions beyond science. Issues related to ethics, economics, and geopolitics will play an important role. However, if one follows Cynthia Stokes Brown’s thrilling narrative on how life came into being on earth 3.5 billion years ago and how it led to the modern world, there is enough science, creativity and ambition in the world to see how many of these conditions might be replicated and accelerated for human settlements on other planets. In many respects, Mars is the most Earth-like planet in the Solar System. Scientists believe Mars once had a more Earth-like environment early in its history, with a thicker atmosphere and abundant water that was lost over the course of hundreds of millions of years. Studies are on the way on how to achieve this again. Meanwhile, people interested in space travel can book seats with Virgin Galactic.
t has been “two speed world” for years but 2020 brought it to the forefront. It’s everywhere you look. Globally, unemployment figures are soaring. So is the stock market. A large part of worldwide stimulus packages did not find their way into the real economy but ended up creating liquidity-driven asset bubbles.
Traditionally, the two speed world referred to divergences in growth rates between the rich but slow growing developed world on the one hand, and the poor but fast growing emerging markets on the other. Over time, these fault lines are being seen within societies—between the rich and the poor, between geographies within countries, between the educated and the uneducated. The paradox of the prosperity of the last few decades has been that even as the Gini Coefficient – the standard measure of inequality — is reducing between countries, it is rising within many countries. The US currently has a Gini coefficient of 0.48. This was 0.43 in 1990, and 0.37 in 1970, indicating an overall increase in income inequality over the last 50 years. Europe has a similar story. At the same time, driven by the very same forces, for the world as a whole, the Gini Coefficient has fallen from 0.71 in 2000 to 0.63 today, indicating cross-border income conversions. Naturally, a “flat world” and the reality behind these statistics do not seem fair to many.
And to many, our current social and political constructs seem inadequate, too ponderous and prone to elite capture. The Brexit vote in the UK in 2016 and Trump’s victory later that year were driven by such economic anxieties. In the western world, as intergenerational mobility declined significantly, relative standards of living fell and the social contract broke.
TO MANY, OUR CURRENT SOCIAL AND POLITICAL CONSTRUCTS SEEM INADEQUATE, TOO PONDEROUS AND PRONE TO ELITE CAPTURE. THE BREXIT VOTE IN THE UK IN 2016 AND TRUMP’S VICTORY LATER THAT YEAR WERE DRIVEN BY SUCH ECONOMIC ANXIETIES
Naturally, resentments against economic orthodoxy gained ground. The visible aspects of a globalised world—immigrants, trade, and financial markets—all came under scrutiny and criticism. Worse, the elite, those in charge of running the world, which included not just the rich but also the intelligentsia and part of the upper middle class, displayed complete ignorance about the undercurrent of sentiment building in society at large—which was the reason that Brexit and Trump waves caught everyone by surprise.
Consider some facts from this year: The IMF warned that the number of people in extreme poverty was likely to rise substantially this year, for the first time in 20 years, while income inequality across emerging and developing economies could rise to levels last seen in 2008, reversing all the gains made since the global financial crisis.[xii] In the aftermath of COVID-19 pandemic, the divides became stark: those unable to work remotely — disproportionately likely to be low paid, young or from an ethnic minority — have been far harder hit by the virus, both in health outcomes and in job and income losses. The US government’s data shows that the week before Thanksgiving—America’s biggest feast day—5.6 million households struggled to put enough food on the table.[xiii] At the same time, as 21 percent of all US dollars ever printed were printed in 2020, America’s top 644 billionaires saw their wealth skyrocket by a collective US $1 trillion. Not surprisingly, in spite of his inept record, Donald Trump got 8.3 million more votes in 2020 than in 2016.
This K-shaped recovery is showing up in business data as well. India’s small businesses are struggling while the Indian stock market is the most expensive in the world. Brokerage house Motilal Oswal pointed out that 34 out of 50 companies in the Nifty50 index have seen an expansion in EBITDA margin in the July-September quarter, even though volumes have declined, while smaller companies have struggled with cash flow. In the July-September quarter, ex-financials, Nifty reported 310 basis point EBITDA margin expansion on a year-on-year basis. Sajjid Chinoy of JP Morgan, one of Asia’s most prominent economists, and a member of the Prime Minister’s Economic Advisory Council, recently wrote an Op Ed citing that the Indian economic recovery is led by profits at the expense of wages and has implications for demand, inequality and policy.[xiv]
Such inequities are not a one-time aberration. A recent investor memo from Marcellus Investments reported a rather scary statistic: The share of profit of the largest 20 Indian companies in proportion to the total profit of all companies has moved from 15% to 70% in the last 30 years. It’s a steep curve.
A Harvard Business Review article last year by Vijay Govindrajan and others exposed what they called the small size trap.[xv] Over the last two decades, it has become harder for small companies in the US to “escape” their class: “Whereas, until 2000, 15% to 20% of small companies became medium-sized or even large companies each year, this percentage was cut in half by 2017. We find similar evidence in the large size category. Until 2000, 75% to 80% of large companies remained in their group next year, but that percentage increased to 89% recently.” Entrepreneurship, start-ups and disruption are nearly not enough to spread the evenly spread the spoils of capitalism!
All this is making Thomas Piketty mainline again. If Piketty is too left-wing for you, try Harvard’s Michael Sandel, whose course titled “Justice” has been taken by more than 15,000 students, making it one of the most highly attended in Harvard’s history. His latest book, The Tyranny of Merit, was published a few months ago and highlights the hubris a meritocracy generates amongst the winners and the harsh judgement it imposes on those left behind. The meritocratic ideology would not be so much of a problem, Sandel notes, if we didn’t see a connection between success, remuneration, merit and a person’s value to society. Something to think about over the holidays!
n a lighter note, two headlines from earlier this month stand out. First: Adolf Hitler wins election. Second: William Shakespeare gets COVID vaccine. Go figure! I believe there are other developments from 2020 that will shape the world in the years to come. Biden’s victory is a landmark event, not just for the US, but also for the world. However, it will be constrained by the current Republican control of the Senate. And, if one thinks of The Trump era as an outlier, the Biden administration will return the US to its “normal” course that is expected from a centrist Democrat in the White House. As Boris & Co are diverted by the UK’s fishing quotas and the like, a “No-Deal” Brexit, which has already swallowed two British prime ministers, will become a reality starting January 1st next year.
As the world moves from bilateralism to multilateralism, it will have profound changes in geopolitics. Alignments will be more issue-based and tactical. The ability of the Middle Powers like India to shape the world will increase. The world will probably get used to “westlessness”, a term from the annual Munich Security Conference earlier this year.
Every once in a while, the impossible will happen, as it did when the crown prince of Saudi Arabia and the prime minister of Israel met secretly to discuss how to contain the Iran threat. On the flip side, we are already seeing that businesses will be drawn into geopolitical confrontations and will be used as pawns.
The forces will intersect: global warming and the resulting opening up of the Arctic sea routes will revive Russia’s geopolitical importance. Happy accidents will continue to propel us forward, as they have often done: In phase 3 of the COVID-19 vaccine trials, when Oxford/AstraZeneca researchers accidently gave a wrong dose to a volunteer, they found that the vaccine was 90 percent effective if administered at a half dose and then at a full dose, and only 62 percent effective if administered in two full doses.
Even though the seductive appeal of nationalism, populism and protectionism will prevail in the near term, ultimately the pendulum of globalisation will swing again towards integration. In the meantime, the world is likely to suffer from what mathematician and culture expert Peter Turchin has called “elite overproduction”, as reported in an eerily prophetic essay in The Atlantic earlier this month, and many will convert into counter-elites and the rising insecurity will become expensive for society.[xvi]
Until this year, outside of the pharma world, few knew that India has the largest vaccine manufacturing capacity in the world, accounting for 60 percent of global production. Just one city, Hyderabad, the “vaccine capital of the world”, has the medical infrastructure to meet one-third of global vaccine demand.
At a personal level, the year 2020 reinforced Coco Chanel’s perspective that in life, the best things are actually free and the second best things are the ones that are very expensive!
To sum up, noted physicist Robert Oppenheimer’s world view was possibly the most prescient: “The optimist thinks this is the best of all possible worlds. The pessimist fears it is true.” Folks, take your pick.
[i] World Health Organization, Weekly Operational Update on COVID-19, November 2020, Geneva, WHO,
[ii] David Elliot, “Germany drafting law to give people the legal right to work from home,” World Economic Forum, October 2020.
[iii] Lafcadio Hearn, “China and the Western World,” The Atlantic, April,1896,
[iv] Juan Carlos, “Visualizing China’s Economic Growth in the Past 30 Years,” Howmuch.net.
[v] Gebremichael Kibreab Habtom et al., “China’s path of rural poverty alleviation through health care financing: The case of Taijiang County-Guizhou Province,” Journal of Public Administration and Policy Research, 2019.
[vi] Internal Displacement Monitoring Centre, Global Report on Internal Displacement, Geneva, May 2019.
[vii] International Energy Agency, Global EV Outlook 2019, Paris, June 2019.
[viii] Bill Gates, “Future of Food,” Gates Notes, 2013.
[ix] Shashank Raj, “SpaceX breaks its own record, reuses a Falcon 9 for a seventh time for a Starlink launch,” The Techportal, November 25, 2020.
[x] Nadia Drake, “Elon Musk: A Million Humans Could Live on Mars By the 2060s,” National Geographic, September 27, 2016.
[xi] Elon Musk (@elonmusk), November 18, 2020.
[xii] World Economic Outlook, A Long and Difficult Ascent, International Monetary Fund, Washington DC, October 2020, pp 34.
[xiii] Joseph Llobrera, “As Thanksgiving Approaches, Fewer Than Half of Households With Kids Very Confident About Affording Needed Food,” Center on Budget and Policy Priorities, November 18, 2020.
[xiv] Sajjid Chinoy, “Making sense of the recovery,” Business Standard, November 18, 2020.
[xv] Vijay Govindarajan et al., “The Gap Between Large and Small Companies Is Growing. Why?,” Harvard Business Review, August 2019.
[xvi] Graeme Wood, “The Next Decade Could Be Even Worse,” The Atlantic, December 2020.
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