Anxious societies

At the time of the launch of the “Angry societies” Supertrend a few years ago, a disgruntled middle class was shaking up politics in many developed countries, leading to the rise of political populism and protectionism in an increasingly multipolar world. Three years later, anger is ceding to anxiety. Faced with the coronavirus pandemic, governments and companies are facing a unique time of social responsibility. Investors can and will play an increasing role in enabling solutions that address the key concerns of citizens around the world, including inequality, rapidly changing work environments, old age funding, housing affordability, healthcare and education. Now is the time for inclusive capitalism.

Affordability

Times are tight

In January 2020, poverty and social inequality, as well as unemployment topped the list of people’s worries, followed by crime and violence, financial/political corruption and healthcare, according to Ipsos Public Affairs. The coronavirus pandemic is likely to have shifted up public health and job security as the world struggles with containment of the virus and its broad-based economic implications. The core of the anxiety of middle-class families lies in the rising cost of living. In the most recent Credit Suisse Progress Barometer, which surveyed more than 16,000 people in 16 countries, 71% of the surveyed participants agreed that only a small minority gets richer while the majority does not benefit.

^{Source
Ipsos Public Affairs, What Worries The World, January 2020 (interviews conducted between 20 December 2019 and 3 January 2020, international sample of 19,508 adults, Ipsos Online Panel system).}

According to the Credit Suisse Anxiety Index, which tracks whether the level of societal discontent is rising or falling, popular discontent continues on average to rise in the six countries included in the index, especially in Germany and China, and more recently in France. The index reflects changes in specific socioeconomic, equally weighted indicators that are often the target of protests and rage when popular anxieties are not addressed. These include the crime rate, corruption, housing prices, healthcare costs, inequality (measured by gross domestic product [GDP] per capita), as well as social progress (measured by life expectancy at birth). Macroeconomic policies will continue to support the economy through fiscal and monetary tools, as we have seen in the economic crisis triggered by the measures to contain the coronavirus pandemic. However, elected governments will also likely focus on providing solutions through a mix of public and private efforts. As high levels of public debt may constrain government spending, investors will play an increasingly important role in such efforts. Key areas include solutions that make housing, education and healthcare more affordable, that ensure individual old-age funding, and that enable employment amid a fast-changing labor market.

A recent World Economic Forum (WEF) Insight Report, Making Affordable Housing a Reality in Cities, summarized various measures to lower housing costs, including land-use strategies such as transit-oriented development or measures to fund affordable housing, such as tax incentives or governmentguaranteed bonds. Innovation in construction techniques such as 3D-printed homes or digital tools such as building information modeling (BIM) could also lower costs.

There are various possible approaches to lower healthcare costs. One is the use of cheaper alternatives of innovative products such as generics or biosimilars. According to the US Food & Drug Administration (FDA), generic drugs cost, on average, 80%–85% less in the USA than brand-name products. Technology also offers opportunities to reduce healthcare costs. According to a McKinsey & Company report in 2019, innovation in technology could enable USD 350–410 billion in annual value by 2025. We believe this will be catalyzed by the current public health crisis.

Pensions under pressure

The risk to future pension benefits is another area of concern. An aging population and lower interest rates are putting many public and private pension schemes under pressure. According to a G30 report, Fixing the Pensions Crisis, the global lifetime financial security gap is forecast to widen to USD 15.8 trillion by 2050 from USD 1.1 trillion in 2017. The pension issue must be solved – the sooner, the better. The most acute problem is funding retirees without excessively penalizing younger generations. A mix of measures that amount to nothing short of a complete rethinking of the lifecycle as we know it will be necessary to respond to these challenges. This will likely include prolonging workers’ time in the active workforce through more individual work-life models, reforming the pension system by attributing greater weight to individual savings, and potentially more widespread individual management of retirement funds.

Employment

A fit workforce

The world of work is changing rapidly. Technological progress and climate change are going to render millions of jobs obsolete while simultaneously creating new opportunities, albeit with a radically different skill set, while pandemics require increased work flexibility. According to a McKinsey & Company report from 2017, automation could displace between 400 million and 800 million people by 2030, forcing them to look for new jobs. Similarly, the International Labour Organization (ILO) estimates that while efforts to achieve energy sustainability will lead to the loss of 6 million jobs, another 24 million jobs will be created. According to the ILO, increased investment in people’s capabilities is one of the “three pillars of action,” which in combination would drive growth, equity and sustainability for future generations. A crucial step in that direction is the endorsement of lifelong learning, with a focus on skilling, reskilling and upskilling amid the so-called Fourth Industrial Revolution. In addition, the coronavirus pandemic may have long-lasting effects on labor markets.

Within the security subtheme, cyber security remains our key topic. After public outrage about data breaches and the misuse of data, governments are beginning to take action. The California Consumer Privacy Act (CCPA), which contains new consumer rights related to the access, deletion and sharing of personal information, became effective at the beginning of this year. Despite such regulatory efforts, the number of data breaches continues to increase, offering a lot of potential for companies selling end-to-end solutions, as well as specialized next-generation security software companies.

Footnotes

For more information about the Awards, please visit PWM/The Banker Global Private Banking Awards, Euromoney Awards for Excellence 2020, Euromoney Awards for Excellence 2019.