Markets don’t reward sustainable borrowers. Here’s a solution.
The weight of research shows that businesses and households with good environmental credentials are also better borrowers. They are less likely to default on their loans and less likely to be late on their repayments.In a well-functioning market where these broader social and economic benefits were properly priced, these borrowers would get lower interest rates. When these loans were securitised and sold on, the bonds would be more favourably priced because the underlying asset was stronger and safer.The PBoC is co-operating with the European Union to achieve convergence of green investment taxonomies across the two markets.
Does West Africa need a single currency?
Over a decade ago, the leaders of the Economic Community of West African States (ECOWAS), a regional trade bloc of 15 countries with a total population of roughly 400 million, committed to establishing a monetary and currency union by the end of 2020. In other words, they agreed to renounce monetary sovereignty and adopt a common currency managed by a single central bank. Eliminating multiple currencies, they believed, would dismantle barriers to the flow of goods, money, and people and lay the foundations for greater prosperity. Ultimately, they hoped their regional monetary organization might blaze a trail to an Africa-wide currency union that could unite the continent and expand its influence on the world stage.But 2020 has come and gone, and the ECOWAS currency union has yet to break ground. Despite the initial rush of enthusiasm around the project, the goal of a currency union has slipped further and further out of reach in recent years. Prior to the 2020 deadline, virtually no ECOWAS country had attained the economic benchmarks the group had established as preconditions for the union. And then came the COVID-19 pandemic, which wreaked economic carnage in West Africa, as it did in much of the world, and sent member states into economic survival mode.
Although the pandemic has set back the goal of a West African currency union, it has also highlighted the need for greater economic integration that could better insulate African countries from the whims of international financial markets. Had ECOWAS had a robust monetary union in 2020, its members might have been able to pool their resources to better protect their currencies and to negotiate more favorable terms with foreign creditors when global markets crashed in March and April, and investors raced toward the safety of the U.S. dollar.
ECOWAS leaders have now set the more realistic goal of establishing a currency union by 2027, but the path there will not be easy. As the experience of the European Union and other currency zones has demonstrated, such projects necessitate difficult tradeoffs that have the potential to divide member states. West African leaders should heed the lessons of these monetary experiments and proceed toward a monetary union of their own with caution—and only once they have built sufficiently strong economic and institutional foundations.
AN UPHILL BATTLE
The ECOWAS currency union faced considerable challenges from the get-go, not least being the very different stages of development of the bloc’s member states. Six of its 15 members are middle-income states, with estimated annual incomes of at least $1,000 per capita. The other nine are low-income states, with per capita incomes falling below $600 in Liberia, Niger, and Sierra Leone. Countries at such divergent economic stages are unlikely to reach a consensus on short-term economic priorities even in the best of times, making it difficult to develop a uniform monetary policy for all of them.
Other economic disparities among ECOWAS states pose similar challenges to a regional currency zone. Nigeria, which is now the largest economy in Africa, accounts for about two-thirds of ECOWAS’s total GDP. By contrast, the bloc’s five smallest economies—Cape Verde, Gambia, Guinea-Bissau, Liberia, and Sierra Leone—together account for less than two percent of the group’s GDP. The disparity in population among these countries is only slightly less stark. Two-thirds of ECOWAS residents live in just three of its member countries: Côte d’Ivoire, Ghana, and Nigeria. These discrepancies in size raise the possibility that large countries could dominate policymaking in a currency union, boxing out smaller member states that have little sway as it is.
The fate of the eurozone is a cautionary tale in moving hastily toward a single currency.
Variations in economic structure add to the challenge of designing a currency union for such a heterogeneous region. Many ECOWAS economies are not well diversified and rely heavily on the sale of raw materials and resources. The result is that commodity price fluctuations have very different effects across the region. Nigeria, for instance, is a major oil exporter, and the other ECOWAS members are net importers. So while an oil price increase might benefit Nigeria, it would likely hurt the rest of the region. GDP growth and inflation also vary widely across ECOWAS countries, adding to the difficulty of managing regional economic fluctuations under a uniform monetary policy.
Existing regional currency arrangements that would overlap with any potential ECOWAS currency zone present yet another challenge. Eight ECOWAS countries—Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo—are already members of a long-standing currency union: the West African Economic and Monetary Union, which in turn is part of the euro-pegged CFA franc zone. Another ECOWAS member, Cape Verde, also has a currency that is pegged to the euro. Although WAEMU countries have begun transitioning away from the euro and toward an independent currency, their economies need time to adapt to the loss of a credible external anchor before they adopt a new currency.
THINKING OUTSIDE THE BOX
Given the array of serious obstacles to an ECOWAS monetary union, West African leaders would do well to look to the successes and failures of other monetary and trade configurations for insight. The fate of the eurozone, for instance, is a cautionary tale in moving hastily toward a single currency. The union’s lack of mechanisms to effectively prevent macroeconomic imbalances, combined with low borrowing costs and the undisciplined budgetary policies of some member states, precipitated the eurozone debt crisis that began in 2009. Poor enforcement of rules meant to bring member states’ monetary policies in line with their commitments to the zone and the subsequently harsh castigation of countries in fiscal and economic distress have likewise fostered economic and political tensions among eurozone countries. These challenges suggest that the eurozone could be fortified by a broader economic union, including a banking union, a unified financial regulatory system, and harmonized institutions underpinning the functioning of labor and product markets. These are certainly long-term considerations for ECOWAS leaders but important ones on their path toward economic integration.
The eurozone does have one critical advantage: it is anchored by Germany and several other relatively wealthy and well-managed states, including Austria, France, and the Netherlands. These economies underpin the credibility of the zone, and their resources effectively provide insurance to other member states when the economic tide is ebbing. An ECOWAS currency union would presumably be anchored by Nigeria. But although Nigeria is wealthier than other countries in the region, it faces profound economic challenges, including dependence on volatile oil prices, high inflation, political instability, and weak public governance. A currency union anchored by an economically unreliable Nigeria would likely face credibility problems from the outset, defeating its very purpose.
If they want their currency union to last, ECOWAS leaders should consider starting small.
One alternative to a monetary union—or a steppingstone to one—that could spur growth and accelerate regional integration without the added political complications of a common currency can be found in Asia. The ten members of the Association of Southeast Asian Nations have established an extensive network of financial and trade arrangements but retained monetary policy autonomy. This has allowed them to foster economic integration and to speak with a more unified voice on important economic and geopolitical issues while avoiding any tensions that might arise from trying to coordinate their monetary and fiscal policies. Should they continue to pursue a currency zone, ECOWAS leaders might consider starting with similar small steps toward trade and financial integration as precursors to a more durable monetary union.
Some such efforts are already slowly underway. The African Continental Free Trade Area, which the African Union brokered in 2018 with the aim of creating the largest free-trade area in the world, promises to substantially reduce barriers to the free movement of commodities, goods, and services across the continent. It will also give Africa the opportunity to speak with a common voice on global trade policy issues in which it has a large stake. In addition, ECOWAS itself has moved to dismantle trade barriers among its member countries—by adopting a common external tariff, for instance. These initiatives have so far had only a limited impact, in part because of lingering disharmony between domestic and regional policies, but they represent important steps toward greater economic collaboration—and they do not preclude the possibility of an ECOWAS monetary union in the future.
Indeed, ECOWAS members could reap enormous rewards from a resilient and carefully crafted currency zone. Done right, such a zone could improve trade and investment flows in the region and shore up member states’ defenses against external shocks. With a strong central bank at its center, a currency union could also serve as an anchor for inflation expectations within the zone. It could impose discipline on fiscal policies, since states would face pressure from other members to avoid reckless government spending that could result in large government budget deficits. And a currency union could facilitate important labor and market reforms by forcing member states to find ways to respond to domestic and external shocks without looking to the exchange rate.
But setting up a currency union is no simple matter. Especially given the range of disparities among member states, the loss of an independent currency and monetary policy as an economic adjustment mechanism could lead to short-term economic pain in some member countries—necessitating initial wage reductions and fiscal belt tightening, for instance. ECOWAS countries should therefore focus on getting their own economic houses in order and putting in place institutional mechanisms to ensure widespread fiscal discipline and accountability before considering a currency union.
An ECOWAS currency zone promises considerable potential payoffs. But it also entails significant costs, operational challenges, and transitional risks that ECOWAS leaders must consider carefully before moving too quickly—or they risk making their currency union an economic straitjacket rather than a foundation for jobs, growth, and prosperity.
Loading…Please enable JavaScript for this site to function properly.
Roundtable on the replenishment of the IDA-20
On Wednesday June 16, the Brookings Africa Growth Initiative convened a consultation with multilateral institution leaders representing Africa in preparation for the IDA-20 replenishment meetings. The purpose of this consultation was to offer recommendations for securing a robust IDA-20 outcome, identify priorities for IDA-20, and discuss approaches for ensuring a common African voice at the replenishment meetings.
The International Development Association (IDA) is a large source of assistance for the world’s 75 poorest countries, 39 of which are in Africa. Annual commitments have averaged around $18 billion over the last three years, with about 54 percent going to Africa. Despite this funding, in the face of the COVID-19 pandemic, many of the resources under IDA have already been depleted. In response, the World Bank is embarking on an accelerated replenishment of the fund, aiming to complete IDA-20 a year ahead of schedule. The first replenishment meetings are planned for the end of June 2021.
The consultation began with participants agreeing that IDA is fit for purpose, and that the framework is suited to address the region’s development challenges. IDA grants and low-to-zero concessional loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives are urgently needed to help countries in their recovery efforts. Speakers emphasized that concessional financing must be maintained to avoid increased, already unsustainable debt burdens made worse by the pandemic. At the same time, participants also noted the need for recipient countries to use all funds wisely to get maximum use out of them—including those not just from replenishment proceeds but overall fiscal revenues, including proceeds from natural resources.
Indeed, under COVID-19, already complex challenges in IDA countries have been exacerbated, and participants agreed that the COVID crisis is putting Africa’s recent socioeconomic gains at risk. Experts predict that, under COVID-19, 18 million to 29 million people in IDA/fragile countries are on the cusp of falling into extreme poverty—an increase of between 3.1 and 3.6 percentage points relative to pre-COVID projections. Before the pandemic, countries like the Seychelles had achieved this goal; however, now, no other country besides Cabo Verde is on track to reach it. The pandemic is not the only threat to these gains: Recent climate events have highlighted the vulnerability of the region: In fact, 34 million people in 17 countries, the majority of whom are in fragile and conflict-afflicted states, are at risk of famine. In some parts of Africa, floods, droughts, and locusts have only exacerbated these challenges.
Participants also noted that the pandemic has revealed the great extent to which African health systems are overstretched and underfunded. Indeed, weaknesses in African health systems have been laid bare: Institutions cannot cope with COVID-19, oxygen shortages persist, and vaccine equity and efficient rollout are both problems. Moreover, despite the massive funding committed to vaccine procurement and distribution, that amount is simply not enough to meet the needs. Furthermore, many participants emphasized that a holistic health response is necessary both now and in the future; leaders should not and cannot let COVID-19 overrun all the other health priorities. Participants thus urged the need for a World Development Report, as soon as possible, that would focus on health systems and financing.
Finally, requirements for resources in Africa already outpaced current financing—even before the pandemic hit. Given that African countries do not have the fiscal space to cover their recovery needs, there is a huge need for external financing. Almost half of IDA-19 financing was reallocated to COVID response, leading to its shortening, and estimates for the rebuild after COVID-19 lay at $112 billion—just as funders themselves are stretched thin. Already, $10.3 billion of IDA resources have been committed for COVID relief. At the same time, countries continue to pursue the Sustainable Development Goals, which require massive investments.
Discussants then posited areas of focus for IDA-20, emphasizing tackling inequality and boosting human capital. Suggested priority areas for the path to recovery included:
Infrastructure, especially energy and digital. The pandemic not only highlighted digital infrastructure gaps, but also emphasized the urgency by which they need to be addressed given their spillovers to all realms of socioeconomic development, especially education and human capital outcomes given the losses in education during the pandemic.
Climate change and related shocks. Increased climate change also threatens agriculture, food security, and nutrition. Donors and policymakers must increase access to climate financing to create climate-smart resilience and support the use of clean and affordable energy. Some participants recommended that African leaders take advantage of COP27, which will be held in Africa in 2022, to push the continent’s climate agenda under a united, common African voice.
Gender. Economic inclusion for women, including better access to child care and increased land rights, will benefit households and economies more broadly. Support to small- and medium-sized enterprises (SMEs) will also boost women’s economic inclusion and overall job creation. Policymakers must also be sensitive to school closures, as those disproportionately impact girls.
Job creation. Policymakers should continue to emphasize job creation policies that will transform and more closely link the informal with the formal sector.
Support to health systems. When the crisis is over, financing to the health sector and investments in health infrastructure must not only be maintained, but increased, to prepare the region for the next pandemic.
Participants agreed that improved governance and strengthened institutions will contribute to a successful tackling of many of the region’s current challenges. They also agreed that a regional approach with support from international partners will be key to success.
In moving forward, participants encouraged African countries to approach the replenishment meetings with the following issues at the forefront:
Sustainable debt must be at the top of the list for decisionmakers as they approach the replenishment.
The African continent saw enhanced and successful cooperation as it tackled the pandemic, thanks to the efforts of the African Union and the Africa Centers for Disease Control and Prevention. This collaborative energy must be harnessed to address other challenges.
African countries must be all-in on the digitalization agenda given its role in boosting economic development, sustaining economies during lockdowns, and guarding socioeconomic gains.
After the replenishment meetings in June, African leaders will be meeting in Cote d’Ivoire in July 2021 and should use that opportunity to determine what the shared African positions on climate change, COVID recovery, and more will be.
To further amplify African voices throughout the replenishment process, the use of eminent Africans as spokespersons is necessary.
Governments must help manage the risks of fintech
The writer’s next book is ‘The Future of Money: How the Digital Revolution is Transforming Currencies and Finance’Financial innovation sometimes brings great rewards. It can make the financial system more accessible to underserved segments of the population and improve lives. But some innovations can lead to disaster, which usually hurts the poor more than others. Governments must find the right balance between promoting innovation and managing risks. As the world economy recovers from the Covid recession, which has exacerbated inequalities, the stakes could hardly be higher. The pace of innovations, including some truly groundbreaking ones, has picked up, heightening the urgency of addressing this question. In the early 2000s, financial innovations took the form of new products that ostensibly made it easier for consumers to get credit and for investors to generate higher returns and better manage risk. The hubristic notions that financial engineering could itself create value, and that the private sector could adequately manage risks on its own, culminated in a spectacular collapse. The latest wave of innovation is underpinned by new technologies that are encapsulated by the term “fintech”. Fintech is putting banking and other services literally in the hands of consumers. We can now make payments, do basic banking and even trade stocks with apps on our mobile phones. The fintech revolution has the potential to democratise finance. Digital banks, robo-advisers and online platforms that directly connect savers and borrowers are transforming financial intermediation. They have made saving and credit products easily available even to low-income households as well as those in rural and remote areas, while encouraging entrepreneurial activity. Digital payments that are cheap, quick and efficient are proving a boon for consumers and businesses. Disruptive change is coming to international payments, which have long been expensive and time-consuming. For economic migrants sending remittances to their home countries and many low-income countries that rely heavily on such flows, this is a blessing. Better payment systems will benefit domestic and international commerce. Technology is not an unqualified blessing, however. Computer algorithms that dispassionately render verdicts on creditworthiness and loan qualifications in principle reduce overt racial and other forms of bias. But algorithms built by humans and benchmarked against historical data can end up reinforcing existing biases. Digital access and financial literacy are still unevenly distributed. As the Gamestop saga showed, naive retail investors are often the last to join the party when speculative frenzies erupt, and they are left nursing losses when the frenzies end. Governments must still work to protect investors and ensure basic financial literacy, so that investors understand the products on offer and risks involved. Moreover, even the relatively low cost of entry into digital markets does not ensure an easy path for new entrants and fair competition. Network effects that benefit incumbents can lead to even greater concentration in the digital realm. China’s government gave Alipay and WeChat Pay free rein, which they used to create innovations that expanded financial access to the masses and helped in the fight against poverty. But these two platforms now dominate the payments landscape, acquiring so much power that the Chinese authorities recently cracked down on them. India’s Unified Payments Interface provides a model for how a government can foster private sector innovation and competition in financial services, without directly intruding in this sector. The Indian government created a public digital infrastructure with open access that provides easy entry for payment providers, ensuring a level playing field for established operators and new entrants.Aadhaar, a biometric identification scheme, makes it easy for even illiterate and poor individuals to establish their identity, facilitating access to the financial system. The government has proposed regulations to give consumers control over use of their data.Fintech regulatory “sandboxes” that allow new products and services to be tested in a controlled environment and in a limited scope can also help balance regulators’ concerns with the inherent riskiness of innovations. Fintech can play a powerful role in democratising finance in advanced and developing economies, but its perils must not be discounted. While the private sector should be left mostly unshackled to do the heavy lifting, governments have an indispensable role in securing the benefits and managing the risks.
Around the halls: The Taliban retakes Afghanistan
Nearly 20 years after the United States intervened in Afghanistan to remove the Taliban from power, and in the wake of President Joe Biden’s withdrawal of U.S. troops, the Taliban’s stunningly rapid reconquest of the country reached its denouement Sunday, August 15 as its fighters entered Kabul and President Ashraf Ghani left the country. Brookings experts reflect on the latest developments and offer recommendations on how the Biden administration should proceed.
MADIHA AFZAL (@MadihaAfzal)David M. Rubenstein Fellow, Center for Middle East Policy and Center for Security, Strategy, and Technology:
This weekend saw a stunning tragedy unfold in Afghanistan, at a staggering speed and scale. Afghanistan’s cities, and ultimately Kabul, fell like dominoes to the Taliban. We have seen haunting images of Afghans flooding Kabul airport, desperate to leave their country, of planes taking off around them. These will endure.
There is plenty of blame to go around, and no doubt we will spend a great deal of time trying to understand who went wrong, where. President Donald Trump negotiated a feckless deal with the Taliban. President Biden insisted on an unconditional withdrawal, which ensured the Taliban had no incentive to talk peace. President Ghani’s corrupt government and his military leaders failed to lead the Afghan security forces. The rapidity of the American withdrawal this summer meant the rug was pulled out from under the Afghan security forces, who depended heavily on U.S. intelligence and air support. And there’s more, including the influence of Afghanistan’s neighbors. What is clear the day after the fall of Kabul is that the world has collectively failed the Afghan people.
Biden, both on the campaign trail and as president, promised a responsible withdrawal. This has been anything but. Throughout the weekend, I looked for a word of reassurance to the Afghan people from the Biden administration — but beyond trying to help those who had worked directly with the U.S., there was nothing, not even a mention of humanitarian support. They’ve been abandoned to an unknown fate, to be ruled by those who terrorized them.
RANJ ALAALDIN (@RanjAlaaldin)Nonresident Fellow, Center for Middle East Policy:
President Biden should establish immediate access and safe havens for the millions of Afghan civilians fleeing Taliban rule. Forming an international coalition dedicated to this effort may offer respite to the most vulnerable, including activists, journalists, and members of civil society who may now be targeted for working with the United States. The Taliban is a violent religious fundamentalist group. It will pay lip service to human rights but its promises should not be taken at face value. In violating the terms and spirit of the Doha peace talks, it has proven to be a dishonest negotiator, exploiting these talks to establish a lull in conflict that allowed it to reinforce its supply lines, organize its fighters, and prepare the staging ground for its offensive. Its atrocities over the coming period, including revenge killings and the violent suppression of women and other vulnerable communities, will require a unified response from the U.S. and its allies. Qatar, which facilitated the peace talks and could now have substantial influence over the Taliban, may be critical to any such strategy focused on pressuring the group and containing its transgressions. The Taliban will see little incentive to establish a peaceful transition, much less an inclusive political order, if the U.S. is unable to convince Pakistan, Russia, and China to isolate the group. Focus will be on how Washington can foster a response in tandem with its allies, but it is also imperative that Biden mobilizes a response in consort with Islamabad, Moscow, and Beijing.
DANIEL L. BYMAN (@dbyman)Senior Fellow, Center for Middle East Policy:
As the Taliban gain control of Afghanistan, one of the most important questions for the United States is whether al-Qaida will again use the country as a base for terrorist attacks, as it did in the pre-9/11 era. The Taliban has not broken with al-Qaida, despite tremendous pressure to do so.
At the same time, however, the risk for the Taliban of a high-profile al-Qaida attack against the United States is high, and the Taliban may prefer al-Qaida focus on what remains of the anti-Taliban resistance and other local enemies. Pakistan, too, has an incentive to push the Taliban to keep al-Qaida on a short leash. The al-Qaida core itself is weak, and in recent years has focused on regional civil wars more than international terrorism.
The United States has prepared to conduct attacks on al-Qaida (and Islamic State affiliate) bases and leaders in Afghanistan from nearby countries. This will be less effective than if the United States had a presence in Afghanistan, but it will still keep terrorist groups off balance. Aggressive intelligence gathering and regular strikes on terrorists using Afghanistan as a base will be even more necessary given the collapse of the Afghan government.
GIOVANNA DE MAIO (@giovDM)Nonresident Fellow, Center on the United States and Europe:
Afghanistan is also a failure of NATO and the European Union. The United States and its allies were aware of the consequences of U.S. withdrawal. Yet the allies left as soon as they could, the result of a lack of basic equipment and logistic capabilities. If Europeans were serious about strategic autonomy they should have shown it there. The U.S. administration should have pushed on its allies to keep protecting the jurisdiction of the government in Kabul, and slowly proceed to a withdrawal. At this point it is too late; the only thing the U.S. could do is attempt a coordinated action with the EU, NATO, or the United Nations, to assist the Afghan population and negotiate arrangements with neighboring countries for anti-terrorism and humanitarian operations.
VANDA FELBAB-BROWN (@vfelbabbrown)Senior Fellow, Center for Security, Strategy, and Technology and Director, Initiative on Nonstate Armed Actors:
The tragedy in Afghanistan has long been in the making. The critical weaknesses in Afghan National Defense and Security Forces and parochial, self-interested governance centered on corruption and politicking instead of the country’s basic interests have been defining characteristics of Afghanistan for a decade and a half but were systematically unaddressed. Pakistan never stopped its multifaceted support for the Taliban. U.S. troops staying several years more would not have averted this moment, even if it would have delayed it.
The most immediate priority now is to maintain control of Kabul airport to assure U.S., international, and Afghan evacuations. The United States and the international community need to be engaging with the Taliban about preventing bloodshed in Kabul, delivering order and humanitarian assistance to internally displaced people without food and shelter, and avoiding purges and executions in months to come.
The United States should press for as much inclusivity in the Taliban government as possible, including of women, ethnic minorities, and technocrats. Washington should demand that women retain access to schooling and health care, at least some jobs, freedom to leave the household without a male guardian, and not be forcibly married off to Taliban fighters.
The U.S. has limited leverage, consisting of conditioning economic aid, recognition of the Taliban government, removal of sanctions from Taliban leadership, and allowing access to international financial systems and international institutions.
What lies ahead is not a happy picture. An Iran-like internal political and social order may be the best to hope for.
MARVIN KALB (@MarvinKalb)Nonresident Senior Fellow, Foreign Policy:
Years ago, during Henry Kissinger’s shuttle diplomacy in the Middle East, then Syrian President Hafez al-Assad told the secretary of state why he was optimistic about the ultimate outcome of the Arab-Israeli confrontation. “You Americans walked out on the South Vietnamese,” he said, according to what Kissinger told reporters on his plane. “You’ll give up on Taiwan, and eventually you’ll give up on the Israelis too.”
President Biden’s decision to “give up” on Afghanistan — apparently, a firm decision, unlikely to be changed, based on many years of disillusionment with Kabul’s ineffectiveness — follows a familiar script delightfully satisfying to despots and deeply troubling to allies everywhere.
Is America any longer a really reliable ally, a leader capable of rallying the world to common, desirable goals?
Presidents and prime ministers from Europe to Asia must now be asking themselves that question, and worrying.
Biden is in a terrible mess, committed to easing the COVID-19 menace and rebuilding the economy but also promoting democracy in its global struggle against authoritarianism. Can he succeed on both the domestic and foreign fronts on roughly the same timetable? The current flight from Kabul strongly suggests no.
Biden has made his choice, the most fateful of his administration. The fallout will be ugly. Polls say the American people are still behind him. When Taliban brutality appears nightly on TV screens, will that support hold? Leading to another question: Are moral considerations any longer a cornerstone of American policy?
SUZANNE MALONEY (@MaloneySuzanne)Vice President and Director, Foreign Policy:
The chaotic, precipitous collapse of the Islamic Republic of Afghanistan marks an ignominious end to the U.S. intervention there, with dangerous implications for the region and for America’s role in the world. That U.S. troops would withdraw was never in doubt — our role in Afghanistan’s conflict had long lost support from both sides of our polarized domestic debate, two previous administrations sought a negotiated denouement with the Taliban, and President Biden himself has been consistent and transparent in seeking to end two decades of American military presence in Afghanistan.
But, as is often the case in foreign policy, the devil is in the details. The Biden administration’s handling of our drawdown has been spectacularly poorly managed, leaving tens of thousands of Afghans who assisted the U.S. effort vulnerable to Taliban reprisals and a pivotal if perennially unstable country in the hands of a vicious religious cult. Biden is right to prioritize the urgent challenges posed by great power competition, the spread of techno-authoritarianism, the climate crisis, and other threats over sustaining a war that lost its purpose long ago. But his claims that “America is back” ring hollow against scenes of desperation as Afghans who put their faith in us scramble for any exit opportunity while Biden remains silent. And the catastrophe in Kabul undermines the central proposition of Biden’s foreign policy — that the U.S. will champion values and allies. Our adversaries are watching and drawing their own conclusions about American will and capacity, just as they did before 9/11.
PATRICK W. QUIRK (@patrickwquirk)Nonresident Fellow, Center for Security, Strategy, and Technology:
The Taliban have penetrated Afghanistan’s halls of power and are on the verge of returning the country to a theocracy run by thugs. Countless more women, men, and children face the prospect of death at the Taliban’s hands or, should they survive, repressive rule.
The White House has limited options for meaningful impact that are also politically feasible. But there are steps it can take to head off even further bloodshed. These include using its skeleton diplomatic staff to evacuate local partners — NGO staff, military personnel, interpreters, and others — that the United States relied on for the past two decades.
More broadly, the Biden team should use Afghanistan’s collapse as a moment to reflect on what it wants to accomplish — rather than say — in standing up for democracy overseas. We have begun to see a gap between the administration’s rhetoric about making democracy central to its foreign policy, and what it has actually done on this front — from the events of the last week in Afghanistan to an insufficient response to Myanmar’s coup.
While the administration parses an invite list for the recently announced Summit for Democracy, authoritarians are making gains the world over. Time would be better spent developing a clear strategy for supporting democracy overseas, complete with goals and metrics for success, and implementing it. Even if Afghanistan’s democratic future is bleak, the administration still can meaningfully support the millions of other people pushing back on authoritarian governments and yearning for a better life.
ITAMAR RABINOVICHDistinguished Fellow, Foreign Policy:
There have been no helicopters picking up refugees from the roof of the U.S. embassy, but the resemblance of the swift collapse of the Afghan army and the humiliating U.S. withdrawal to the end of the war in Vietnam is all too obvious. From a Middle Eastern perspective, there is a widespread concern that the “pivot away” from the region will be sweeping. If the Biden administration wishes to allay the concern of allies and partners in Egypt, Saudi Arabia, and other Middle Eastern countries, it will have to send a powerful signal or take effective action in the Middle Eastern context. It is important to remember that while the U.S. position and investment in Vietnam were collapsing, U.S. diplomacy in the Middle East was at its most successful. In 1975, Saigon was captured by the Viet Cong and the Israeli-Egyptian interim agreement over the Sinai was signed under Washington’s auspices. The Arab-Israeli peace process is not a promising arena right now, but by taking achieving a breakthrough in the stalemated negotiation with Iran or putting together an alternative policy, the U.S. can send a powerful message to all those concerned with the extent of its departure from the Middle East.
DOUGLAS A. REDIKER (@dougrediker)Nonresident Senior Fellow, Center for the United States and Europe and Global Economy and Development Program:
As the Taliban takes control of the Afghan government, next week it will find itself flush with almost half a billion dollars of new financial resources with no strings attached. On August 23, the International Monetary Fund will disburse $650 billion in special drawing rights (SDRs) to all member countries, including Afghanistan. While disputed governments, like that in Venezuela, can be denied access to their SDRs, the Taliban’s swift usurpation of power means that, no matter how distasteful, it will likely be treated as the de facto and de jure government of the country, and thus be entitled to roughly $460 million dollars it can use however it likes. The issuance of SDRs to countries suffering from the COVID-19 pandemic is a worthy effort supported by the Biden administration, but there are consequences of providing “free money.” The U.S. must be clear-eyed that providing new funds without strings attached means that some of those resources will end up in the hands of regimes whose policies we detest. Some new SDRs will provide a respite to suffering. But others will almost certainly be used to line pockets of corrupt regimes, reward China for its debt diplomacy, delay necessary reforms, and ultimately help entrench some bad actors, including the Taliban. The U.S. needs be careful to not overly weaponize the dollar in the global financial system, but if there were ever a time to think twice about the benefits of allowing unfettered access to swapping SDRs for dollars, it might be now.
BRUCE RIEDELSenior Fellow, Center for Middle East Policy and Center for Security, Strategy, and Technology, and Director, The Intelligence Project:
President Biden’s Afghanistan gamble is collapsing on his administration spectacularly. Reckless, hasty, poorly planned, and badly implemented, it was based on a disastrous agreement signed by the Trump administration last year which the Taliban openly flouted. Instead of insisting the Taliban break with al-Qaida, the Biden team kept Trump’s inept negotiator.
Now we need the final act in Kabul to be as peaceful as possible and allow the evacuation of those most at risk. The key to that lies with the Pakistani army. The Taliban’s massive offensive relies on Pakistani support. It is impossible to isolate the Taliban as long as they enjoy that support and sanctuary.
The problem is we have little influence on Pakistan. A nuclear power, it is China’s closest ally, providing a land route to the Persian Gulf. China has already signaled it will support a Taliban Afghanistan. The U.S. has tried without success to sanction Pakistan for decades.
Biden has chosen to ignore Pakistani Prime Minister Imran Khan, a major mistake given Khan’s prickly personality. Khan can place limits on the army; Biden has given him little incentive to do so.
In early 1998, I was among a U.S. delegation that visited Kabul. Arranged by Pakistan, our discussions with the Taliban leadership to rein in Osama bin Laden produced nothing. In a driving tour of the city the only spot the Taliban pointed out was the lamp pole where they had hanged communist dictator Mohammad Najibullah. It was a reflection of their brutality and utter contempt for foreign opinion. That has not changed.
FEDERICA SAINI FASANOTTINonresident Senior Fellow, Center for Security, Strategy, and Technology:
From the moment of its inauguration, the Biden administration promised “America is Back,” ostensibly meaning it had returned to a commitment to a multilateral foreign policy based on strong alliances. Italy has been one of America’s most faithful allies through multiple conflicts, so the message resonated. That said, President Biden’s decision on Afghanistan, one taken largely without consultation with allies, has left Italy’s leaders needing to explain how the country’s years of investment in Herat has any meaning now. Italian and other NATO troops fought and died in Regional Command West, and Italy invested billions of euros in its commitment to the American-led mission in Afghanistan. That’s all gone now. Herat has fallen; the Taliban have taken charge. As Italy’s leadership will have a very difficult time explaining all this to the Italian people, especially the families of Italy’s honored dead and those wounded and maimed, it will likely be a very long time before Rome will be inclined to join Washington on this kind of mission again.
Afghanistan is turning into an unmitigated disaster for the U.S. and for the legacy of the NATO commitment there. The human misery that will result from the Biden decision will be a stain on the alliance for a long time. So, as we consider how the Biden administration will proceed in addressing this crisis, a broader consideration must be what this decision has done to the credibility of the U.S. foreign policy among the allies who bled for this mission and to the idea that “America is Back.”
CONSTANZE STELZENMÜLLER (@ConStelz)Senior Fellow, Center on the United States and Europe and Fritz Stern Chair on Germany and trans-Atlantic Relations:
It is impossible to write dispassionately about the devastating humanitarian disaster unfolding in Afghanistan. Memories from reporting trips intrude: the two proud teenagers in pressed jeans who opened an internet café in Kabul after the rout of the Taliban by Western forces, swirling flocks of chattering schoolgirls in Mazar-i-Sharif, the fiercely hospitable matriarchs of a small village near Kunduz — but also the malevolent looks from vendors in the bazaar in Ghazni. What will become of them? Overambitious and even deluded the West’s two-decade-long effort to bring peace, development, and good governance to the Hindu Kush may have been, many mistakes were made. But much good for the lives of ordinary people was achieved, all of which is now imperiled.
There will have to be many reckonings for this — in Washington, for the disastrous implementation of President Biden’s greatest foreign policy mistake; in Europe, for the shambolic performance by nation states and the complete absence of the European Union. But for now, only one thing matters: saving lives. With Western troops gone from Afghanistan, there is practically no way to prevent atrocities. What is required now is a full-on relief effort coordinated by the United Nations and its refugee agency, the International Red Cross, the EU, and NATO. We owe it to ourselves; but above all, we owe it to the Afghans.
Related Content
Policymaker’s Journal: From New Delhi to Washington DC
This book charts the course of Kaushik Basu’s career over seven years, as he moved out of the cloisters of academe to the frenetic world of policymaking, first in India as Chief Economic Adviser to the Indian Government and after that as Chief Economist at the World Bank in Washington.
The Indian years were a period of high inflation, growth challenges (as the global financial crisis arrived in India), and also a remarkable growth recovery story, with India moving past China’s GDP growth rate. There were corruption scandals breaking, causing widespread street protests, a lot of late-night decision-making, which one knew would rock the stock market the next day, and getting to know politicians who were outstanding as statesmen in the midst of all this, and also many who were not.
The World Bank years weren’t that close to actual policymaking, but nevertheless breath-taking in their scope. They ranged from interacting with policymakers in tiny remote countries like Samoa to gigantic nations with comparable heft, such as China. It entailed sitting down with leading researchers to compute and announce global numbers on extreme poverty and rankings on how easy it is to do business in different countries (fully aware that there would be calls from irate finance ministers as soon as these were published). And there was the handling of politics within the World Bank, which could actually be as enjoyable as any global economic problem!
This book is a revised version of the diary that Kaushik Basu kept for seven years. Revised because he often wrote the diary in a hurry at the day’s or even week’s end. He has now inserted some reflections in retrospect, without altering any descriptions of what actually happened.
Learn more about the book.
Digital technology and African smallholder agriculture: Implications for public policy
COVID-19 has exacerbated challenges to Africa’s food and agriculture sector and to its millions of smallholder farmers. At the same time, the pandemic has accelerated innovative efforts to develop and deploy the transformative power of digital technology to address these problems in ways that leapfrog past practices and traditional solutions. Emerging evidence from Asia and Africa suggests that digital technology holds promise to dramatically enhance smallholder productivity and incomes by increasing on-farm and off-farm efficiency, enhancing traceability, reducing vulnerability to counterfeit products, and improving farmers’ access to output, input, and financial markets. The change is driven by the introduction of new forms of intermediation and the collection, use, and analysis of massive amounts of agriculture data to disrupt existing business models. New strategic partnerships between the public and private sectors are an essential component for reaping the positive impacts of digital technology and avoiding unintended and unwelcome secondary effects.
Digital technology as a transformational force to drive scale
Digital technology is transforming the agricultural sector through the application of innovative tools and new business models. For the first time, many people in the value chain, including smallholder farmers, have access to real-time data and computational power making possible more effective selection and timing of product-to-market decisions, provision of credit, and access to micro-insurance.
Digitized agriculture data is also creating network effects to drive scale. Coupled with the increasing embrace of the sharing economy, digitization and artificial intelligence make possible new business models and e-commerce platforms that connect farmers directly with markets, service providers, and aggregators, thereby shortening the value chain and increasing the profitability of smallholder farming. The sharing economy has also made it possible for smallholder farmers to efficiently access mechanized tools to improve their crop yields.
Importantly, the benefits go beyond increased yields: Given that digital technology holds particular appeal for younger workers, integrating it into agriculture through entry points like precision farming, equipment leasing, service provision, and e-commerce can address the major challenge of attracting job-seeking and entrepreneurial youth. Given that 70 percent of sub-Saharan Africa’s population is under 30 years of age, nowhere is the job creation challenge more acute.
Related Content
Already, Asia has moved ahead quickly on the use of digital innovations in smallholder agriculture. Africa is demonstrating it has the potential to do the same. Digital technologies can provide the following potential benefits in agriculture:
Empower smallholder farmers to leapfrog and harness new business models such as the sharing economy (e.g., HelloTractor, a Nigerian agricultural technology (AgTech) company that offers a farm equipment sharing application similar to Uber) or the fast-paced growth of e-commerce such as Pinduoduo in China (one of the largest e-commerce platforms for agriculture) that has grown to 800 million customers in six years.
Derive value from agriculture data and create the network effect to drive scale. A good example is Twiga in Kenya, a business-to-business, mobile-based, e-commerce marketplace platform that delivers food produce to the mass market by digitizing the supply chain, cutting out layers of middlemen, eliminating food waste, and reducing food prices.
Gain efficiency and reduce transaction costs through the digitalization of different processes to create transparency. Tanihub Group, one of the largest AgTech companies in Indonesia that connects farmers to consumers by removing the middlemen as well as providing financing to smallholder farmers is one example.
Democratize access to market intelligence to create an integrated mobile platform of digital services for farmers. DigiFarm, powered by Safaricom in Kenya and which has expanded to Tanzania, Nigeria, Pakistan, India, and Myanmar, offers farmers one-stop access to lower-priced farm inputs, loans, learning content on farming, as well as access to markets.
Create jobs for the new generation of tech-savvy farmers driving on-farm and off-farm opportunities such as Million Farmers in Kenya and Millennial Farmers in Indonesia. These programs are designed by the ministries of agriculture in their respective countries to encourage the technology-savvy youth to become farmers.
Implications for public policy
One way to understand the process of productivity enhancement is as three interlocking gears: innovation, delivery platforms for goods and services, and the intermediation that results in moving specific innovations into wider use (Figure 1).
Figure 1. Prioritizing “intermediation”—the broken part of the innovation value chain
Source: Authors’ illustration.
Evidence suggests that the most vexing problems limiting smallholder agriculture in Africa—and thus the biggest opportunities for dramatic breakthroughs—concern this middle gear, intermediation, which actually includes a number of different, vital functions (Figure 2).
Figure 2. Functions of intermediation in the innovation value chain
Source: Authors’ illustration.
Here, especially, digital technology can play an important role, but obstacles persist. Indeed, unlike other technology-based markets where these intermediation functions are performed by venture capitalists and equity investors, the financial incentives to intermediation in smallholder agriculture have so far proven elusive in Africa.
At the same time, while public policy has an essential role to play in changing the incentives for transformational intermediation, one of the risks of enhancing the incentives for intermediation through subsidies and licensing agreements is the creation of, or acquiescence to, monopolies and monopsonies with the potential to concentrate power in ways that are politically unacceptable or potentially detrimental to the interests of the smallholders. There are, however, emerging examples of ways to address these issues through a combination of regulatory actions and stimulating enhanced competition from a new generation of innovators.
In addition, while digital technology can provide significant benefits in agriculture, it can potentially deepen the digital divide by excluding those who do not have access to connectivity or mobile phones. Therefore, it is essential to design multistakeholder partnerships between government, academia, and the private sector to support smallholder farmers across the entire agriculture value chain.
The pandemic has raised the urgency of food security for Africa. Simultaneously, there has been the overnight shift toward online digital services such as e-commerce, digital payment, and contactless experience during the COVID-19 lockdown. With the readiness of technology, we could accelerate the adoption of technology to increase the productivity, efficiency, and resilience of agricultural value chains and food systems across the African continent.
Africa in the news: Ethiopia updates, Zambia elections, and Africa’s many Olympic achievements
War in Tigray continues, and Ethiopia rejects Sudan’s mediation attempts
Ethiopia’s conflict in Tigray has escalated after the government, on August 6, warned that it could deploy its “entire defensive capability” in the region. In fact, on August 10, the government called for all capable citizens to join the country’s military to combat resurgent forces in the region, ending the ceasefire declared in June. These announcements come after the Tigray People’s Liberation Front (TPFL) rejected calls to retreat from the Afar and Amhara regions. The Tigray conflict began back in November after fallout between Prime Minister Abiy Ahmed and the leaders of the Tigray region, who had previously dominated the national government.
In recent days, Oromo Liberation Army leader Kumsa Diriba struck a military alliance with the Tigray forces, saying, “We have agreed on a level of understanding to cooperate against the same enemy, especially in military cooperation.” Moreover, Diriba stated, “The only solution now is overthrowing this government militarily, speaking the language they want to be spoken to.” The alliance is notable as, during the TPFL’s decades of control of the federal government, its leaders ostracized and committed violence against the Oromo people.
In related Ethiopia news, tensions between Ethiopia and Sudan, already high over the Grand Ethiopian Renaissance Dam, have continued to rise over the war in Tigray. In fact, early this week, Sudan recalled its ambassador to Ethiopia because the Ethiopian government rejected its efforts to broker a ceasefire in the Tigray region. Meanwhile, Ethiopia stated that trust in Sudan and its leaders has eroded and accused the Sudanese army of invading its territory. In addition to Sudan’s mediation efforts, the United States and other international powers have also called for the withdrawal of Tigray forces from the Amhara and Afar regions in recent months.
Now, according to the World Health Organization, the humanitarian crisis in the Tigray region has become dire, with food and medicine deliveries blocked due to a blockade by Addis Ababa as well as insurgent and militia violence. Meanwhile thousands of refugees have fled to Sudan to escape the war-torn region. According to the Atlantic Council, more than 60,000 Tigrayan refugees have fled to Sudan and 80 percent of the citizens in Ethiopia have been cut off from humanitarian assistance.
For more on U.S. policy on this crisis, see Brookings Foreign Policy Senior Fellow and Africa Security Initiative Co-Director Vanda Felbab-Brown’s recent commentary, “Dangerous trends in Ethiopia: Time for Washington’s tough love.”
Zambia holds presidential elections in tight race
On Thursday, August 12, Zambia held its presidential elections in which incumbent President Edgar Lungu, primary opposition rival Hakainde Hichilema, and 14 other candidates faced off. As of Friday, according to Reuters, the results of the election were too close to call, and the Electoral Commission of Zambia has indicated that it aims to declare a winner by the end of Sunday. Zambia has a runoff system, so the country will return to the polls a second time if no candidate receives a majority of the votes. As of this writing, no winner has been announced.
High voter turnout and long queues at voting stations characterized Thursday’s highly anticipated election. More than half of registered voters are under the age of 35, a demographic that has seen an acute rise in unemployment during the pandemic. Among other issues, Zambia’s recent default on its debt has raised concerns from citizens over the $12 billion that Zambia owes to creditors, as the country now spends 30 to 40 percent of the its revenue on interest payments.
The election has seen some violence: After two members of his party were killed in a rally last week, Lungu, who is seeking his third term (he was first elected in a by-election in 2015 after the death of President Michael Sata), deployed the military in Lusaka and select hotspots in the western, northwestern, and southern provinces of the country. Deployment of the army has drawn criticism from citizens who fear the intimidation and organizations like Amnesty International, stating that the use of force, “is an increasingly brutal crackdown on human rights, characterized by brazen attacks on any form of dissent.”
Six-time presidential candidate Hichilema said on Wednesday that he experienced irregularities during the campaign, including being restricted twice in the past week from campaigning in the populous Copperbelt province. There were also reports from NetBlock of social media blockages on election day across Zambia that included WhatsApp, Twitter, Facebook, and Instagram.
Related Content
African athletes achieve historic wins at the Tokyo 2020 Olympics, despite many COVID-related challenges
African athletes brought home a host of medals and historic firsts from the Tokyo 2020 Summer Olympics, which concluded last Sunday, August 8. This year, 13 African nations won, altogether, 37 gold, silver, and bronze medals.
Notably, the games featured many women who were the first in their nation to win gold in their events—and for some, the first-ever gold for their country as well. Among African countries, Kenya earned the most medals, placing 19th worldwide by winning 10 medals (four gold, four silver, and two bronze), followed by Egypt, which won six medals (one gold, one silver, and four bronze). Highlights from the games include:
Kenya’s Eliud Kipchoge defended his title with another gold medal in the marathon run, finishing the event in 2 hours, 8 minutes, and 38 seconds. He also became the third man to win gold in the marathon in back-to-back games.
Tunisian teenager Ahmed Hafnaoui won gold in the 400 meter men’s freestyle, the country’s first gold in swimming.
Uganda’s Peruth Chemutai became the first woman to win a gold medal for the country, winning the 3,000 meter steeplechase. Joshua Cheptegei won the men’s 500 meter track race, becoming the first Ugandan to win two Olympic gold medals.
Feryal Abdelaziz’s gold medal in women’s karate kumite +61kg event was the first gold won by any Egyptian woman.
Despite these celebrated achievements, COVID-19 continued to loom over the games, as nations like Guinea pulled out of the competitions completely due to safety concerns for their athletes as COVID-19 cases surged in Tokyo. The South African team also faced difficulties during the games, as three members of its soccer team tested positive for the virus after arriving in the Olympic village. The entire team was placed under quarantine before they began to play, and their coach cited issues of stigmatization stating, “when people come across us, you see people running away. I think that’s disrespectful.”
Why it’s harder for American workers to get ahead, and what we can do about it
On this 400th episode of the Brookings Cafeteria podcast, Marcela Escobari, a senior fellow in Global Economy and Development at Brookings, talks about her new report on how to tackle the worker mobility crisis in the U.S. economy. In the face of rising inequality, stagnating wages, a shrinking middle class, and now a global pandemic, many American workers are finding it difficult getting ahead. And today, millions of low-wage workers lack job security and benefits and face the threat of dislocation due to automation and other factors.
Also, in a new Sustainable Development Spotlight, Senior Fellow George Ingram shares his insights on why we need better data quality reporting to track donor funding that advances gender equality. Too often, Ingram says, women and girls are left out of the development process, leading to inequitable societies and less productive economies. Listen to this segment also on SoundCloud.
Related Content
Report
Moving up: Promoting workers’ upward mobility using network analysis
Marcela Escobari, Ian Seyal, and Carlos Daboin Contreras
Monday, June 14, 2021
2021
Jul
8
Past Event
Making progress on gender equality: It’s time for more transparency
10:00 AM –
11:15 AM EDT
Online only
Follow Brookings podcasts here or on Apple Podcasts, send feedback email to BCP@Brookings.edu, and follow us and tweet us at @policypodcasts on Twitter.
The Brookings Cafeteria is part of the Brookings Podcast Network.
Marcela Escobari
Senior Fellow – Global Economy and Development, Center for Sustainable Development
Twitter
MarcelaEscobari
Fred Dews
Managing Editor, Podcasts and Digital Projects
Twitter
publichistory
Remote work wanted? Analyzing online job postings during COVID-19
In early 2020, just as the COVID-19 pandemic started to affect the health of millions around the world, epidemiologists and public health experts pointed to social distancing as the key measure to control the spread of the virus. From an economic perspective, it became immediately clear that the ability to work from home would determine workers’ outcomes.
Indeed, our estimates using Current Population Survey basic monthly samples from 2020 suggest that employment in “teleworkable” occupations (those that don’t require working outdoors, using protective equipment, moving around, or operating machinery ) contracted by 7.3 percent between February and April 2020 compared to an 18.6 percent contraction for “non-teleworkable” occupations. Since then, demand for non-teleworkable occupations surged, and the employment gap between teleworkable and non-teleworkable occupations narrowed to only a 1.7 percentage point difference.
Arguably, social distancing should have also meant greater resilience in hiring efforts for teleworkable occupations during the pandemic. However, this was not the case: By May 2020, postings in teleworkable occupations had dropped by 40 percent, while those for not-remotable had dropped only by 25 percent. As postings for non-teleworkable occupations had recovered to 13 percent below pre-pandemic levels by December 2020, teleworkable postings remained 35 percent behind their February benchmark (Figure 1).
In a new working paper, we use Burning Glass Technologies (BGT) data on online job postings to disentangle this counterintuitive pattern. We find that employers’ hesitation to hire workers for whom on-site experience is crucial to their productivity could be one of the factors behind the slow recovery of postings for teleworkable occupations.
Figure 1. Job postings, employment, and “remotability” of work during 2020
Source: Authors’ analysis of Burning Glass Technologies (BGT) online job postings data and IPUMS CPS.
One plausible explanation for teleworkable occupations’ lagging job postings is that as social distancing disproportionately affected non-teleworkable occupations, the bulk of the hiring efforts focused on that group as the economy reopened. This hypothesis, however, does not explain why non-teleworkable job postings shrank by 30 percent over the first two months of the pandemic, while teleworkable postings did so by 35.8 percent, nor does it explain the persistent lag for teleworkable postings toward the end of 2020. Moreover, our analyses show that even after taking away the effect on employment losses on this trend—drop in postings—remotable occupations show a slower postings recovery than the rest.
Another factor behind the reduced hiring efforts toward teleworkable occupations could be their relatively low presence in “essential” or “critical” industries (e.g., health care, logistics, or food manufacturing), whose demand stayed strong during most of 2020. Indeed, this explains why demand for front-line workers—those in roles that are both non-teleworkable and play a large role in essential industries—surged. However, hiring efforts towards teleworkable occupations were even lower among those often required by essential industries, like administrative assistants and accounting clerks, both occupations with 40 percent fewer job postings in December 2020 than in February 2020. Interestingly, we also find that the robust hiring demand for “front-line” workers did not translate to stronger employment in these occupations during the pandemic.
Related Content
So far, the best explanation for companies’ lackluster demand for teleworkable occupations is that, though employers made special effort to retain employees performing tasks that rely on experience and can be performed from a distance, they disproportionately halted their hiring. For example, employment levels for general and operation managers at the end of 2020 were just 10 percent below February 2020, while their postings lagged by almost 28 percent. Evidently, acquiring much of the experience for—in this case—managing an organization, is challenging without initial in-person interactions.
Something’s got to give. If companies continue to extend their work from home policies, HR managers will need new ways to help workers acquire valuable experience. More generally, as the fraction of workers that will continue working remotely once the economy fully reopens is yet to be seen, our results highlight that the relatively stable employment of teleworkable occupations during the pandemic did not imply better employability for those eager to enter these occupations. In a socially distancing labor market, workers searching for remote jobs may face a more limited hiring demand than expected.