In an exclusive interview, influential economist and writer Dambisa Moyo analyzes the challenges that countries will need to overcome in order to resume economic growth in the wake of the global Covid-19 crisis. Moyo highlights the most important characteristics companies need to remain competitive in the present, while also commenting on possible business and investment opportunities in the coming years.

During the conversation, Moyo also describes the challenges that different countries are facing in resuming economic growth, in addition to highlighting key business and investment opportunities for companies across different sectors.

The interview was conducted by Vanessa Fiusa, partner in Capital Markets. The main conversation is outlined below. To listen to the interview in full, access your favorite podcast platform: Spotify, Deezer, Apple podcasts and Google podcasts.

Dambisa Moyo
With a solid international reputation as a consultant and trusted advisor in several companies in the scope of macroeconomics, geopolitics and technology, Dambisa Moyo is known for her ability to influence important decision-makers on strategic investments and the development of public policies. She holds a doctorate (DPhil) in economics from the University of Oxford and was named one of the 100 most influential people in the world by Time magazine in 2009.
Vanessa Fiusa
A specialist in capital and financial markets, Fiusa provides legal assistance to companies, financial institutions and investors. She is regularly involved in public and private capital and debt security offerings, as well as other financing operations in both Brazil and abroad. Fiusa also advises publicly-held companies in regard to regulatory concerns, especially those linked to the Brazilian Securities and Exchange Commission (CVM), BM&FBovespa and the Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais (ANBIMA).

Vanessa Fiusa: What is your assessment of the global macroeconomic outlook more than a year after the start of the Covid-19 pandemic? And which countries do you expect to lead global economic recovery, and what do you see as the main business and investment opportunities for an emerging economy such as Brazil?

Dambisa Moyo: Thank you so much for the opportunity to be here today and thank you also for that important question. Your question is around the current outlook for economic growth and, obviously, given the fact that last year aggregate demand was shut down globally because we were essentially all sent home to stay home in quarantine, means that now that we have the vaccines, and that the aggregate demand will come back online as we start to go back to work, vacation, etc. This means that we should expect a strong recovery in this economic environment. But I think it is very important to be clear about a couple of things.

First of all, when I say recovery, I am talking about a rebound from a very low economic base. If you look at the International Monetary Fund (IMF) forecast, we are expecting growth to pick up to around 6% this year — which is consistent with the reversal of the economic shutdown from last year. However, we are talking about a rebound, not an economic recovery. What do I mean by that? Before Covid hit in earnest in 2020, we were already very worried about a lot of economic challenges and economic headwinds which were already threatening economic growth. Things like technology – which has been a drag by creating an underclass of jobless employees – risk of income inequalities, the changes in the demographic shift, climate change, and the sheer amount of debt that the globe was carrying pre-Covid were already threatening to create a drag on economic growth. None of those things have been addressed. In that sense, they continue to provide a big structural drag to economic growth moving forward. In fact, if you look out in 2022 and 2023, the IMF is producing data showing that longer-term forecasts start to show a weakening environment in terms of economic growth. 

You asked me also which countries we expect to lead in terms of global economic recovery. These are those countries which not only had enormous stimulus – mainly developed economies – where monetary stimulus has been on average around 20%, versus more emerging economies across South America, Africa, and parts of Asia where economic stimulus has been only around 3% to 5%. One thing that is going to drive that economic recovery is definitely the ability to rely on that stimulus. But the other piece is the ability to gain access to vaccination so that you can reach herd immunity in the population. If you look at most forecasts now, places like India may not reach herd immunity until the early part of 2023. So the structural drag in many countries, including India, but also in other places around the world where we are not even seeing good testing — let alone a vaccine rollout — means that there will continue, to my mind, to be a big drag on economic recovery in those places.

Your last question is about really looking at opportunities for emerging economies such as Brazil. The emerging economy situation is quite challenging, as you well know. It is partly because of what I have already described – the economic growth picture remains quite precarious, particularly for countries that do not have access to testing or to vaccination programs. And the fact that the world is becoming more deglobalized and trade may continue to be hampered — all of these things lead to softening prospects for countries in the emerging world. Add to that the fact that many emerging countries are also sitting on a lot of debt — particularly government debt. This also creates a less strong recovery for emerging markets. And all of this confluence of concerns has led many multilateral institutions to caution that we might see a bifurcated or much more “K-shaped” recovery where developed economies such as the United States and the UK could see a strong recovery coming out of this, but many emerging countries could continue to struggle for many years out.

The structural drag in many countries where we are not even seeing good testing – let alone a vaccine rollout – means that there will continue, to my mind, to be a big drag on economic recovery in those places.”

Vanessa Fiusa: In your view, which sectors of the economy should bounce back more easily from the shock of the present health crisis? And which ones will still be suffering the impacts in 2021 and in the coming years?

Dambisa Moyo: There are three key scenes that are going to drive economic success in the generations to come — by that, I mean the next 25 years. I am looking at the long-term trends here, and then I’ll comment more on the short-term trends that you are talking about. With respect to long-term structural trends, I do believe that the most successful portfolios are betting on China being a very big scene for success and they are betting on technology being an important piece of this success. When I say technology — just to be absolutely clear — I’m not just talking just about consumerism, like Amazon or social networks, like Facebook. I am talking about the revolution that technology will provide in areas such as healthcare and education that we have not yet seen. The third area is really about the energy transition and the green economy. When I think of sectors and opportunities for bouncing back after this massive diminution in growth, these are the three things I am playing for the longer-term success.

With respect to which sectors will be suffering these impacts, I think any sector that does not transition into a much more digitized world will be incredibly challenged. Bricks-and-mortar companies that are not appreciating and embedding those changes, or becoming more platform-based, or much more digitized — and of course much more sensitive to ESG issues. I strongly believe those will lag.

I did promise I would comment on the short-term. I think a lot of what we’ve seen in the stock market in the United States – almost every day hitting new highs. So, I think pretty much everyone is bound to benefit from the massive stimulus and the continued low-rate environment. Assuming we don’t see an uptick on inflation anytime soon, but there is this groundswell of support for the stock market on a general basis. However, I am focused quite a bit on the values sector, which has underperformed for over a decade now.

Vanessa Fiusa: One of the main impacts of the pandemic has been the accelerated digitalization of work around the world. In a wide range of sectors, companies have intensified efforts to adopt cutting-edge technology in the hope of gaining a competitive advantage in the market. Yet, adopting this technology is only the first step. In your view, what paths should company managers take in order to reach the finish line?

Dambisa Moyo: The question around digitization is only one piece of the pressure that corporations are dealing with at the moment. The competitive advantage — as I see it — for corporations of the 21st century and moving forward really is about digitization but also about embracing a lot of the ESG agenda. That is critically important. Aspects around the environment, income inequality and inequality in general, healthcare, education, access, and opportunity have become incredibly challenging and are getting worse. And then the “G” obviously pertaining to “Governance”.

All of these aspects are not only important, but they are incredibly difficult to implement over time. I think what people may not have a good appreciation for is that there are these trade-offs for each of these things. For example, you don’t want to fight injustice with injustice. You want to make sure that not just women and people of color have opportunities, we don’t want to lose talented white guys in terms of their participation in the organizations. So all of these areas, whether data privacy, racial and gender justice, issues around climate change, as well as pay equity, are going to define success versus failure of corporations over time, in addition to the digitized world. So yes, I agree with you that technology is the first step, but if you want to remain viable and competitive over the next period, you’re going to have to become much more innovative a much more adroit at adapting to the new ESG world. I will just end up by quoting something that Jeff Bezos has talked about. He has said publicly that he doesn’t think Amazon will exist in 30 years. I think that having that frame of mind about how a company can survive over a long period of time should really be a driver for modernity, to make sure that companies remain competitive.

The competitive advantage for corporations of the 21st century and moving forward really is about digitization, but also about embracing a lot of the ESG agenda.”

Vanessa Fiusa: And to remain competitive and innovative, do you think companies will have different jobs to offer? Do you see jobs of the future as different from what we have today? Do you see expressive unemployment in the future? Or will people become more specialized in digital and other technological fields?

Dambisa Moyo: That’s a fait accompli, it’s not even up for debate. We’re living in a world of immense digitization and rapid technological change. This is not the first time the world has experienced this. To give you some data and some context, in the 1900s at the turn of the last century, 60% of the American workforce was working in agriculture. Today that number is less than 2%. Historically, we know what the data shows. People moved out of agriculture into manufacturing, then out of manufacturing, subsequently, into services. Today, about 80% of Americans are working in the service sector, and about 18% are working in the manufacturing sector. What that tells us is that we do see the ebb and flow and diminution of jobs as the underlining economy itself changes.

All studies by multilaterals, academics, and business people are forecasting a move from a service sector into one that is much more heavily skewed towards R&D — by that I mean science, technology, engineering, and mathematics-type skills will be much more on-demand in the world that is coming. If you look back in history, back in the 1930s, the great British economist John Maynard Keynes had already predicted that by 2030 we would have a 15-hour workweek. He was already expecting that the advent of technology would break down the workweek in much of the way we are starting to see today. So, I do expect that change is already afoot. There have been some recent studies, one from the Oxford Martin School, that argued that in the United States you will see 47 to 49% of job losses because of technology.

Vanessa Fiusa: In this sense, Dambisa, in terms of short-term economic recovery, what should the public authorities’ priorities be in developing human capital for this new era?

Dambisa Moyo: That is a very good question, and it gets to an even deeper question about what the role of the corporation is in the 21st century. I can assure you that in my conversations – being on boards and talking to a number of corporations and investors –, companies are now managing for the rebound coming out of the Covid-19 pandemic, but also really managing two very fundamental changes in the business landscape: one is digitalization, which impacts job losses. The second is deglobalization, and the fact that in all areas of deglobalization — and by that I mean trade, movement of capital, movement of people, the ability to agree to global standards, like intellectual protocols on technology, and of course just global cooperation. We’ve seen that all these elements have been under threat and have been breaking down. With respect to global cooperation, as an example, we have seen the world has not been able to come together, not just to fight Covid-19 but also to design policies to steer away from the pandemic.

These two areas – deglobalization and digitization – are absolutely top-of-mind with respect to companies thinking about survivability over the next period. Your question is about the role of corporations in a world that is becoming much less worker-focused because of these risks of digitization and deglobalization and there is no doubt in my mind that this is top of mind for many corporations today. I published an article in the Harvard Business Review not too long ago, talking about how companies are starting to reshape the discussion around what constitutes an employee. We’re starting to think about the costs of mental health, which traditionally were left to government or to private individuals to sort. But we are also starting to look at how to create the workforce of the future, where we end up with not just automation in its entirety, but automation with human workers and what that might look like in a more diffused work environment.

Those are some of the things that are being debated; it is a very challenging environment from a public policy perspective, because this means that the threat of high unemployment rates — including for young people — is a big risk for governments and to public policy in the short term.

Companies are now managing the rebound coming out of the Covid-19 pandemic, but also really managing two very fundamental changes in the business landscape: one is digitalization, which impacts job losses. The second is deglobalization.”

Vanessa Fiusa: Do you believe that this deglobalization process has a different impact in emerging countries in comparison to the US and the European countries?

Dambisa Moyo: I do not. The matter of the fact is that in these five pillars: (i) trade of goods and services, (ii) movement of capital across border to repatriate profit, (iii) movement of people allowing companies to win the war for talents, (iv) global standards, and (v) global cooperation, every country and every business for the past fifty years has benefited from an extremely globalized world. To my mind, there are only losers from a world that is becoming more deglobalized.

Now, if your question is about countries who will more hurt by this process: Yes, of course. If you are a small open economy where the bulk of your imports and the bulk of your capital investment money is coming from abroad, then you will obviously be unbalanced, in a disadvantaged place compared to countries such as the United States which, for all the challenges it has, is a country that relies on its own food supply by and large, it has its own energy sources and it is energy independent — by most accounts — it has clean air, and has developed its own innovation-based sectors such as Silicon Valley, it has capital — and in that sense, it is quite ring-fenced. And it will be in a very different situation in the world of deglobalization than a small open economy in South America, Africa, and Asia, or even Europe, which is very reliant upon on the different pillars, as I mentioned. In a broad sense, everybody is going to feel the pain, and some countries will definitely feel it more painfully than others.

Vanessa Fiusa: Would you say that your analysis on small open countries would also apply to small and mid-sized businesses? We’ve seen a significant impact from the pandemic on smaller businesses, and I wonder if the forewarning on small economies would apply to small and mid-sized businesses, and if those would struggle more to get back on their feet.

Dambisa Moyo: Small and mid-sized companies represent, in many cases, 85% of an economy’s economic backbone. Whether businesses are in developed or developing countries, we have seen the ravages and the breakdown of economic success for small and mid-sized countries based on what has happened with Covid. Nobody has been safe in one country versus another. It is true that in some countries, governments have been able to provide support, and we talked about this earlier. Places like the United States have provided immense amounts of support in terms of stimulus packages, which has helped tide over these economies in challenging economic environment. But you could make the argument that a more deglobalized world, one that is actually turning inwards for many nation-states, is very supportive for small and medium countries. It’s the classic imports substitution model, where there might be an uptick post-Covid to be more supportive for local big businesses as well as small and mid-sized enterprises. There is no doubt in my mind that economic success in the longer term will have to make sure that small and medium enterprises are part of the equation.

But I think the question is a little bit blurry, because there could be real opportunity for a comeback for small businesses in a world that becomes much more balkanized and broken down.

Vanessa Fiusa: You mentioned that since the beginning of the pandemic a range of fiscal monetary and regulatory policy measures have provided many families and businesses with emergency cash. As these measures begin to be phased out in some countries, what do you see as the most important structural reforms that governments must adopt in order to transition into a more sustainable recovery?

Dambisa Moyo: To get back to success, you need governments to be functioning at a high level. The world has seen a bifurcation: those governments that have been very efficient and have had very clear plans, have ended up with the least challenged economic and health outcomes after this pandemic. But when we think about structural reforms, I don’t think there is a magical formula. I think everybody knows what needs to be done. The challenge is whether or not people are willing to do it. To me, no economy is going to survive or rebound in a sustainable way without considerable investment in infrastructure. As an example, in the US, according to the American Society of Civil Engineers, infrastructure is graded D+. That is a failing grade. We are talking about roads, railways, airports, but also future digital competitiveness, which is failing. The ability for the economy to come back, in terms of structural reforms, is about making sure that not only the investments being made are sustainable in the long term, but those investments are being made in a way that is generating constructive, productive returns to the economy.

Another aspect, it’s not just that the governments need reforms, but governments will need to be much more visionary. If we look back at the history of the United States, the country’s success in the past several decades was largely driven by governments that were incredibly visionary. If you look at the development of Silicon Valley, the Manhattan Project and DARPA [Defense Advanced Research Projects Agency]. All these elements were key inputs into the economic success of the United States, but that requires a government that is not trapped in “short-termism”, but rather is focused on long-term economic sustainability in a way that is planning and mapping for future generations and not just for the here and now.

The ability for the economy to come back, in terms of structural reforms, is about making sure that not only the investments being made are sustainable in the long term, but those investments are being made in a way that is generating constructive, productive returns to the economy.”

Vanessa Fiusa: This leads me to our final question: do you think the world is going through a period of anemic economic growth, and if so, which countries are suffering the most and how long should we expect this cycle to endure?

Dambisa Moyo: I think a good way of answering that question is to look back in history. If you look back into what is called the Gilded Age of the United States — the period from 1870-1900 — we had a similar economic environment to what we have just seen from 1950-2008. We had high economic growth, intense globalization, big corporations that became global, as well as a relatively laissez-faire government. Unfortunately, these were two periods of massive widening in income inequality. In the 1900s, after the Gilded Age, three things happened to puncture the story: firstly, we have World War I from 1914 to 1918. Second, the Spanish Flu, which killed at least 50 million people around the world — that was from 1918-1920. The last thing that happened was in 1929, we had the economic stock market crash and the economic depression that followed. We also know what happened after that 1929 crash; the world flipped in terms of: instead of high economic growth, we entered a period of 25 years of low economic growth – this is called the Progressive Era in the early 1930s, in the United States. Instead of having globalization we had deglobalization. We had things like Smoot-Hawley, where targets were placed on trade. Instead of small government, we had a big government and the establishment of the FDIC and social security, Medicare, Medicaid, and many of the public policy initiatives that were heavily government-led, at the expense of private sector.

To put this into context, from 1929 until 1954 the stock market did not move. The peak Dow Jones industrial index in 1929 was 381 points. The next time the Dow Jones industrial average hit 381 points was in 1954. During that time, there was a lot of high unemployment, low growth, and a stock market that did not move for 25 years. If we draw on that history and think about where we are now, we had an economic crash in 2008, we’ve had a global pandemic in 2020 — which, as I said, I don’t think it’s going to be resolved for another two years, from a global perspective — and God willing we don’t have a war. But looking at the world, more to the outer years, we are moving into a much more deglobalized world and a much more progressive public policy stance, where the risk is that we will see low economic growth which had been already forecasted before Covid.

My last point is that fortunes will still be made. If we think back to the 1930s, the economy also produced Howard Hughes, Henry Ford, the Wright brothers who invented the airplane – all those innovations were made during this period. So even though the economic forecasts are quite dismal and there could be much more aggressive public policy, in terms of taxes and regulations and breaking up oligopolies and monopolies. Fortunes will be made, and it is very important to figure out where those fortunes will be made for long-term success.