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Saadia Zahidi
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This week in Say More, PS talks with Saadia Zahidi, Managing Director and Head of the Center for the New Economy and Society at the World Economic Forum.

Project Syndicate: In June 2020, you heralded the arrival of “an era of bigger – and perhaps bolder – government” policies in the wake of their responses to the COVID-19 pandemic. More than two years later, do you think the pandemic’s potential to catalyze a “Great Reset” – closer “collaboration between businesses, public and government institutions, and workers” – has been realized, wasted, or something in between? What else can be done to accelerate it?

Saadia Zahidi: Government spending over the last two years has been higher than before the pandemic, owing to the need to support households and businesses. But it has not always been accompanied by visionary thinking about how public resources can best be used to build resilience and open new growth paths for the future. Some countries have made investments in green-transition (decarbonization) strategies and traditional infrastructure, but few have invested in transforming their social infrastructure, even though the pandemic exposed weaknesses in social safety nets and across the care, health, and education sectors.

In a rapidly evolving job market, much bolder action could be brought to bear to improve human-capital development, including upskilling and support for job transitions through collaboration between government, business, and workers. This mindset of investing in the future – even in the face of short-term crises – will determine the long-term systemic health of our societies for generations to come.

PS: One area where “bigger” and “bolder” government might make a difference today is in tackling a cost-of-living crisis that, as you recently pointed out, is hitting the most vulnerable hardest and calls for “specific support to those who need it most.” While recognizing that there is no one-size-fits-all solution, which approaches show promise? Do you see potential in proposals to cap prices on essential goods like energy?

SZ: With real wages and purchasing power falling amid soaring food and energy prices, the young and the vulnerable in our societies are bearing the brunt of the cost-of-living crisis. But policymakers face a delicate balancing act: They must protect the vulnerable while also managing public debt and ensuring that fiscal policies remain aligned with monetary-policy objectives.

Social safety nets – enhanced unemployment support, direct cash transfers, caregiving support, energy and food subsidies – must be not only strengthened but also customized and targeted to ensure efficiency. That is how you address the needs of the most vulnerable while minimizing these programs’ inflationary effects and eliminating wasteful spending. In advanced economies and in large emerging markets with good digital infrastructure, governments already have the data and technology to ensure that these forms of support are better targeted.

PS: In 2014, you and Laura Tyson highlighted an often-overlooked remedy to low growth: increase the economic participation and advancement of women. Four years later, you published your book Fifty Million Rising: The New Generation of Working Women Transforming the Muslim World, which focuses on the changing nature of work and employment for Muslim women. What structural factors enabled this revolution? What impact are ongoing crises, from the COVID-19 pandemic to food- and energy-price shocks, likely to have on it?

SZ: A rapid increase in access to education for girls was the key to strengthening women’s human capital across many Muslim countries. In parallel, globalization and the digital revolution vastly expanded the opportunities available to young women. Together, these developments drove an increase in the number of working women across these economies and seeded an economic revolution. Across the 30 largest predominantly Muslim emerging-market countries, 100 million women were working in 2002. By 2018, that number was 155 million, equivalent to a trillion-dollar market.

The disruptions of the last two years are likely to produce a mixed outcome. On one hand, there will be a greater need for dual incomes in households during the cost-of-living crunch. On the other hand, women shouldered a greater caregiving burden during the pandemic, and are also more likely to feel the impact of a food crisis. In oil-rich economies, the trend toward women’s economic integration is likely to accelerate further.

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BY THE WAY . . . 

PS: The World Economic Forum’s latest Chief Economists Outlook warns that debt defaults are becoming increasingly likely. As monetary-policy tightening raises the costs of debt service for sovereign borrowers, a looming recession threatens to weaken revenues and increase their debt burdens further. What interventions are most urgently needed to support debt-distressed countries?

SZ: The International Monetary Fund is projecting global government debt to reach 91% of GDP in 2022, around 7.5 percentage points above pre-pandemic levels, while around 60% of low-income countries are at high risk of, or are already in, debt distress. In the context of significant monetary tightening, we need a more responsible approach to deficit reduction and fiscal consolidation.

The existing G20 Common Framework for Debt Treatment could support debt-distressed countries, but only if there is greater coordination and uptake by all the relevant stakeholders. Closer coordination, and a bolder vision for future growth, is also needed to increase the flows of climate-related finance that developing countries need to advance their mitigation and adaptation efforts.

PS: In a 2019 interview, you describe the moment when you, as a young girl growing up in Pakistan, realized the breadth of opportunities that were available to you. How does that experience illustrate the “role-model effect,” which you say has contributed to the phenomenon you describe in Fifty Million Rising? How can the role-model effect be strengthened or harnessed to help countries reap the economic and social benefits of greater female labor-force participation?

SZ: Global digital connectivity for half of the world’s population means that information is ubiquitous, and that role models can come from a global community, rather than just one’s family or neighborhood. But role models alone are not enough if local conditions do not allow inspiration to be converted into action. The recipe for helping countries reap the economic and social benefits of greater female labor-force participation is complex. It includes more education, especially in STEM (science, technology, engineering, mathematics) and digital skills; expanded digital connectivity and care-economy infrastructure; safe public transportation; more finance for women-owned businesses; and workplaces that ensure work-life balance and opportunity for all.

PS: Fifty Million Rising upends many widely held assumptions about Muslim countries, including Iran. At a time when Iranian women are leading the biggest protests the country has seen in years, are there stories, trends, or statistics that offer insight into women’s changing role there?

SZ: Female gross university enrollment shot up in Iran from under 20% in 2000 to nearly 70% by 2015. In Iran, 34% of students in STEM fields are women, compared to just 30% in the United States. I have met many inspiring women and girls across the country – entrepreneurs, students, engineers, architects – who are determining their economic future despite restrictions.

In the Muslim world, the fight for equality, so far, has unfolded through battles that are quietly won in the workplace rather than loudly in the streets. But even as the economy trumps culture, it then shapes culture. Educational ambitions and growing economic agency provide the foundation for young women to demand their social rights. This, in part, explains what we are seeing in Iran today.

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