Five Growth Drivers for the Post-Coronavirus Economy

ByDr. Ahmed Daifullah Algarni

Throughout history, intellectuals, especially strategists and humanists, very often succeed in rescuing their nations from a whirling chaos; changing the course of events to achieve sustainable development. By the end of the coronavirus tornado, some nations will hit rock-bottom while others will rise from the coronavirus ashes. In this regard, the Chinese do not convey the word ‘crisis’ without ‘opportunity;’ whenever there is a crisis, there is indeed an opportunity. Wars, many times, helped victorious nations achieve prosperity and development, such as Britain after World War I (WWI) and the United States after World War II (WWII).  Conversely, some defeated nations were able to recover quickly, with their governments    healing  their inner woes — such as Germany and Japan after WWII. However, this is not always the case; it is not taken for granted that countries will bounce back after crises and pandemics. When reading economic history, we realize that it is essential to trigger five vital factors for economic growth: technological advancement; development of thought; political will; economic awareness; and economic and intellectual openness.

The first factor, technological advancement, requires research and infrastructure development but the rest of the factors are not difficult to attain. When these factors were absent in Europe during the Middle Ages, it was woefully backward, and the Islamic World was rising — because the five factors were present to varying degrees.   Some fair-minded Orientalists confessed, in their writings, that the shining era of Islamic Andalusia helped them [Europeans] move from the Dark Ages to the Enlightenment — indeed, by basing revival on the five factors mentioned. However, some nations, despite the absence of one factor, managed to achieve real development. For example, during the Chou or the Zhou Dynasty, the longest ruling Chinese dynasty, which lasted from 1122-216 BC, feudalism flourished, and the country witnessed fast-paced development —faster than Greece though China had no communication with the outside world back then. Now, China is no longer the same. Since it joined the World Trade Organization (WTO), China has  embraced globalization and has managed  to control and adjust the WTO for its benefit. Today, it is the WTO’s  top beneficiary. More than 50 million Chinese work in Africa.

Without any doubt, technological development has been the main factor driving economic growth throughout  history. Nowadays, cognitive economics, which  studies the distinct role of the intellect in creating new values,  is a hot topic. Historically, all phases of profound economic growth were based on knowledge.  Nations are defined by their ability to generate ideas and transfer their knowledge and intelligence to others. Advancement is not necessarily based on innovation; it can be achieved through imitation — as has been the case with Japan and now China. According to the International Monetary Fund’s (IMF) latest statistics — which considers  an old innovation to be  an invention — China has filed more patents than the United States and Japan. The United States was not pleased by these statistics, accusing China of stealing its intellectual property. And Trump has vowed  to crack down on China.

 Political will is the motor which infuses life into a country’s economy. If ‘political thought’ is combined with ‘economic rationality,’ prosperity will be the  natural outcome. They are both critical pillars  to move from economic stagnation to economic vitality.  Rational economic decisions — based on authentic data, performance indicators, future forecasting, and the avoidance of opacity and falsification of facts, shortsightedness, and the interests of a particular group — will usually lead to sustainable development.  In addition, it will help  a country to endure economic shocks and deal with sudden crises. The stronger economic growth a country achieves, the more social satisfaction it will create. This consequently leads to growth in the middle class, which is a safety valve for society. This does not mean social discontent will disappear as a result.

Economic awareness is also significant. A country’s keenness to diversify its economic sources reflects its awareness. A country with one economic path does not progress or progresses slowly.  Raw materials, such as oil and metals, help in accelerating  economic progress. But the problem is that these materials are often depleted. Thus, if a country is rich, it does not necessarily mean that it has a strong economy. The solution here is that such a country should appropriately invest the revenues obtained from the sale of raw materials and carry out structural and institutional reforms to achieve technological and economic progress. This is what we have learnt  from Saudi Vision 2030. Wealth accumulation is not the driving force behind a country’s macroeconomy, its development nor its history. Nigeria is one of the world’s largest oil producers, yet it is one of the world’s poorest countries at the same time.

As part of its economic awareness, a country should build its own economic model that is suitable for its conditions. Copying other models does not always work. Economic growth in the neoliberal age has maintained a sluggish pace. Many Western analysts have intensely criticized neoliberalism’s performance before and during the coronavirus crisis, calling for its reformation. Why? They argue that it has made the rich richer and the poor poorer. Its impact has become clear during the coronavirus crisis when the free market economy stagnated  within less than two months. The private sector collapsed and could not help governments maintain market stability. Pre-coronavirus, economic neoliberalism failed more than once in stabilizing crises and prolonging social and financial stability. In a nutshell, it has not achieved real development.  Following the launch of the Dow Jones Industrial Average (DJIA), people were convinced by neoliberalism’s view that the best choice is ‘let it work,’ i.e., let everything be managed by private capital and the ‘invisible hand.’ Adam Smith, the godfather of neoliberalism, in his book “The Wealth of Nations” warned that the free market does not automatically guarantee an effective economic balance via its own forces.  The United States’ financial crisis started from 2007 and the economic ramifications of the coronavirus pandemic is the tip of the iceberg. The harshest blows to neoliberalism have not come yet. China, which built its own economic system ‘liberal socialism,’ succeeded to a great extent to achieve a balanced integration. It has carefully managed market institutions by adopting rigorous studies and maintaining control because they are the means to achieve social and economic reform. China’s economic model has been adopted by  many Asian countries. The coronavirus crisis has shown that the semi-central economy has performed better than the free market economy. At least, it is seemingly under control and impregnable.

Nevertheless, to recover from the stagnation due to the coronavirus pandemic requires countries to develop strategic paths with the aforementioned five vital factors. Strategic human capital based on intellect is the core driver of these factors. It helps economies overcome stagnation and inflation to achieve sustainable cultural development.  Despite their rare natural resources, education is still the main factor  in  Scandinavian countries enjoying high levels of  economic income and stability.  Norway, for many years, has ranked number one on the UN Human Development Index. A question arises here, taking into consideration the coronavirus pandemic’s fallout – how many Arab countries have actually planned to revive their economies? Which country is sufficiently far-sighted to plan for long-term economic recovery?

Opinions in this article reflect the writer’s point of view, not necessarily the view of Rasanah

Dr. Ahmed Daifullah Algarni
Dr. Ahmed Daifullah Algarni
Vice President of the International Institute for Iranian Studies (Rasanah)