Box 3.1: Four major shocks facing the global economy

However, the long-term impact on the economy is still unknown: even with massive vaccination, the possibility of a major global recession remains very real as countries contend with multiple waves and new variants of the virus.

In the meantime, governments are incurring massive public debts as they seek to mitigate the devastation inflicted on the economy. This legacy of the pandemic will profoundly shape long-term growth and development. Global recovery and the reconstruction of the productive economy will need to be supported by trade, investment and innovation, but these may be undermined by protectionism and the reshoring of global supply chains. And across the developing world, particularly in less developed countries that were already suffering from financial instability and debt before the pandemic began, special multilateral support may be required in the coming years to ensure their economic revival.

Nevertheless, despite the enormity of these challenges, the integration of territorial and spatial responses to the new economic realities brought on by the pandemic is also an opportunity for transformative sustainable development. As discussed in the previous chapters, the economic consequences of the current health crisis are very much place-based, with important variations through the urban-rural continuum, but also between and within cities. In this context, bearing in mind the Sustainable Development Goals and the New Urban Agenda as global policy guidance, a “new normal” in the urban economy is needed that reformulates the role of the state, social systems, welfare and their spatial relations. This will require a combination of practical and aspirational ideas to reorder our economies.

This chapter details why a new urban economy approach to urban planning and management is necessary, and argues that policies must integrate the local, national and multilateral scales for it to succeed. This will require decisive multilateral action, changes in the relationship between central and local governments, as well as between the public, private and the people.

Box 3.1: Four major shocks facing the global economy

The pandemic cannot be treated as an isolated event, but must instead be understood in the context of four powerful underlying forces. These are:

• Climate change: A long time in the making, anthropogenic global warming poses unique threats to national and urban economies, particularly in developing world regions. Natural disasters, increased temperatures and other extreme weather patterns could prove devastating for many cities, particularly those situated in low-lying or coastal areas with a large proportion of poorly serviced informal settlements. Recent trends suggest this problem is getting steadily worse: 2016, 2019 and 2020 were the three hottest years globally on record.1

• Extreme poverty and inequality: The combined effects not only undermine the wellbeing, dignity and rights of poor communities, but also heighten the risk of political instability. Although the contexts are different, the protests that have erupted across the world in recent years have been linked to poverty, inequality, with spontaneous large-scale political mobilization taking place, strongly denouncing social issues.2 Studies on the adverse effects of inequality3 in societies indicate that its most perverse effects are in urban segregation, since people have limited opportunities and basic services.

• The Fourth Industrial Revolution (4IR): The 4IR introduced an array of disruptive frontier technologies, spanning artificial intelligence, robotics, the Internet of Things, 3D printing, genetic engineering, quantum computing and other innovations. The 4IR technologies are impacting jobs and employment, economic growth, and fiscal and monetary policies and resetting industries and activities, redefining value chains and supply chains.