Decentralisation is a key tool for economic development - WorldMonitor

Decentralisation is a key tool for economic development

Prof. Christopher A. Hartwell, first of all we would like to congratulate you with a new position. Would you be so kind as to tell us about your tasks and duties, do you have a specific plan and strategy? Which program and projects are you planning to work on? You can read or watch a...

Prof. Christopher A. Hartwell, Head of the International Management Institute at ZHAW School of Management and Law in Zurich, Professor at Kozminski University (Warsaw)

Prof. Christopher A. Hartwell, first of all we would like to congratulate you with a new position. Would you be so kind as to tell us about your tasks and duties, do you have a specific plan and strategy? Which program and projects are you planning to work on?

You can read or watch a video of the online interview at the link below.

Thank you for having me, it is always a pleasure.

I was brought into the Zurich University of Applied Sciences (ZHAW) to really make their International Management Institute into a world-class research institute. Previously, I worked as the president of CASE-Center for Social and Economic Research in Poland and helped them to get back to the top in terms of the league rankings; they are the top think tank in Central and Eastern Europe and top internationally in terms of social policy. ZHAW is hoping that I have some more magic left in my bag, to be able to build their research functions, increase publications and impact, and also to increase collaboration with Central Asia, with the former Soviet Union, and with Central and Eastern Europe, because my expertise is here. The purpose is to drive this Swiss, Kazakh, Uzbek, and other types of joint ventures in research and in teaching with exchanges of students to build a world-class research institution.

Taking into consideration your international experience and knowledge of many countries’ economies, could you give a forecast of which countries will be among the first to overcome the consequences of the pandemic and what, in your opinion, is the criteria for a rapid response to the consequences of the global crisis that affected all countries?

Yes, I think the important thing to remember here is that we are looking at two things. We are looking first at the effect of the virus and what it has done in terms of the way we all live our daily lives and the way we think about value chains and travel and things like that. And the other thing, the second thing, is the response to the crisis, whether or not we lockdown, whether we continue locking down or whether we say “Okay, we will not have a lockdown, then we will have a lockdown,” and the policy uncertainty that comes around with that.

I think the one thing we know is that nothing works…and perhaps everything works. There are countries that locked down very stringently and still had high levels of cases. Countries that did not lock down at all or had a very light lockdown like Switzerland and Sweden, often used as examples, also had high rates of cases. And then you can say that nobody really knows what the policy approaches should be and what is going to be better. I think what really matters in going forward is how severe the country was hit by COVID-19. You look at some countries in emerging markets, and a country like Turkey has been growing economically, it hasn’t seen any kind of contraction like across the EU and it will continue to grow. And it has been hit by COVID-19, but it did not impose a really stringent lockdown in terms of closing down its businesses across the country (the government delegated that authority to both the provinces and businesses, but the country itself did not undergo a stringent lockdown which shuttered all businesses). The United States was hit very hard by COVID-19 although covering an expanse that’s geographically differentiated.

But the issue is that it seems we’ve thrown out the idea of risk management in order to completely eradicate all risk, and I think that is the real issue, which simply comes down to politics, not economics.

In 2020, all governments faced an unprecedented event affecting the entire population of the planet Earth. What do you think we can learn from 2020 now and what needs to be done to minimize the impact of such large-scale disasters?

I think the key issue is that decentralisation works, that you can’t run this coordinated massive response from a central level because it is in local areas where the virus hits (and hits different areas differently). Viruses are striking locally and there has to be a local capacity and ability to handle it, for each community, if it is going to lockdown or isolate, to have the ability to operate independently from the centre. A paper that I’ve just written with two Russian colleagues, just published in the journal Ecological Economics, looks at this in the context of Russia and how the environment and decentralisation helped the Russian environment get cleaner during COVID-19, because now the policies are with the people who are the closest to it. The policies and responses were not being implemented from the Kremlin, but individually by each mayor of the cities or even private individuals. The same thing applies to health policies. Of course, you can say for something like a vaccine, a concerted effort is needed, a centralised push so we can get the vaccines out, which is important as well. However, we need to realise that we can’t just keep centralising everything. Decentralisation is necessary to build the resilience that can absorb a blow like a virus and then keep going.

What sectors of the economy have the pandemic caused the greatest damage and what tools can gradually affect the renewed growth of these sectors?

Without a doubt, travel and hospitality have taken the greatest hit. My family and I flew from the UK to Switzerland and didn’t know if we were actually able to get out of the UK with its light switch lockdowns: “We are locked down, no we’re not, yes we are, no we’re not.” We went through many hurdles in terms of paperwork and then when we got to Heathrow, it was a ghost town, the busiest airport in the world and very few people there. So even if you have proper documentation to travel, people are still going to be very wary of doing it in the future. Normally, I traveled a hundred thousand miles a year, but this was the first time I had travelled in a year. So, travel is definitely going to continue to be harmed.

Hospitality is the other one even though restaurants are being allowed to open. “When are we going to go back? Oh, I would like to catch dinner, go out to someplace;” when will things actually be normal again. In terms of the ways we can support restaurants staying open, perhaps restaurants will need to have more outdoor seating or provide more social distancing inside, but they will need to focus on making money on quicker turnover, which means having many people come in and cycle out, so it may be very difficult for them. For the travel industry, they may need this shock to the system, to rethink business models and rethink pricing. Mainly because we have seen for far too long, especially in the United States, where I am from, the minute the airline industry suffers, any kind of recession or any kind of decline in numbers, they run to the government with their hat in hand and say: “We need money, bail us out.” And we do, for some odd reason. I am sure it’s the same here in Switzerland and elsewhere in Europe. So, airlines really need to rethink their business models and maybe this will help with it. But I fear it is going to be more about just throwing cash at the problem.

What industries will change?

Well, pharmaceuticals are going to be fantastic, I think. You see what everybody needs is a vaccine. But we’ve all been in our homes, we’ve all been wearing masks, so the common cold is down, flu is down, and we are not actually buying as much of our other pharmaceuticals, so this could be a counterbalancing trend. Retail in general is also trying to figure out how to roll with this massive disruption of the pandemic. Do we need to shift more online? I mean, how many times have we ordered online since the pandemic began? I think also the kinds of industries that really rely on international supply chains have held up very good during the pandemic, surprisingly well. But we may find impact that is in line with what I was saying about the centralisation; you might find supply chains becoming more localised. “What can I get here, in this country, what can I get locally?” rather than necessarily going to China, going elsewhere. I think that will be consequences as well, and that will also cause disruption.

Taking into account your experience as the president of CASE – Centre for Social and Economic Research in Warsaw, Poland – let’s talk about milestones in the transition economy, which, as we think, will come in the coming years.

The “transition economy” as a concept still singles out very different countries a full 30 years after the fact. It’s like when I mentioned the former Soviet Union – you know, the Soviet Union has been gone as long as I have been an adult (the USSR fell when I was 18). Of course, this was one of the brightest examples in the history of the world economy so far for improving economic outcomes. But all economies are transitioning, whether they are transitioning well or they are transitioning badly, which really depends on politicians.

If we think in terms of Central and Eastern Europe and the CIS states, the real milestone is now what happens with political transition? Can there be a political transition away from the first generation of leaders in Central Asia, the holdovers from the last days of the Soviet Union? In Central and Eastern Europe, we see the transition to having a liberal democracy being entrenched but we also see the waves of populism in Poland and in Hungary. The question is whether or not we can get back to a more pluralistic society in terms of the way policies are made. I am not the one who thinks that just because a populist party won, there is a flaw in democracy; the actual feature of democracy is that you get to elect who you want, whether or not they are good, and if they behave like idiots when they are there, “well you know that is really on you, because you voted for them.” But, in terms of a milestone, it’s where they go from here. Can we balance representation and sometimes valid concerns with overarching protection of the important liberal democratic institutions which got us here? And what lessons are there for Central Asia?

In your opinion, what disciplines now need to be given special attention in education, what needs to simplify, and which require the immediate introduction for undergraduate and master’s degrees into the curriculum?

This is a good question, especially thinking about what is happening with online education and the fact that most of us, if we have been teaching, we have been teaching on the computer into a void, because many students never turn on their cameras. Students still do not want to be seen, which is just like in class when they sit back and keep their eyes down, so it seems like we are just talking into a void. And then if you are a student, you know, you pay a lot of money, depending on where you are, for this kind of experience, but the university experience should be more than just the lectures you receive. Understanding this, that students learn in different ways, helps us grasp how difficult this has been for them and this isolation that comes with lockdowns.

I would say the educational system definitely needs a kind of rethink, but it’s always been that way, the tension between how different people learn, how we get the most amount of information to most people, knowing that some specific people might be left behind. I think one thing that can come out of this is how important research and science (scientists) are to be able to do something like the vaccine in such a short amount of time. I mean, look at what happened yesterday – the United States landed the a rover “Perseverance” on Mars; in the middle of a pandemic we can still go to Mars. I think it shows science – how we need to have these advances, how we need to keep pushing forward and keep pushing the limits of what humans can do, and human resilience. Once again, we need to look at the best practices that come out of this. The problem of course is that we all got shoved into this educational scenario at the last minute and we all had to reorient ourselves. And I think we’ve had enough time that we can understand the best practices and what works and what doesn’t. But there has to be a rethink, and I think there needs to be an emphasis on much more tailored, much more personalized, much more flexible approaches towards education and education delivery.

Christopher, what do you think of the current situation in the world? What is your view of all that is happening?

When can we get back to normal is the key question, and I think we will never get back to normal in the way we once knew and it is fine; again, there are some things that need to change in terms of risk management. My worry is that we have given policy makers and politicians a taste of what they can do in a crisis, and if you give them the power to, we now see what they can do. Suddenly everything is a crisis. Now all of a sudden we need to shut down here, now we need to do this or we’re all going to die – you see it with climate change. So that is my worry – whether or not we can actually move to decentralisation, whether we can actually keep our economy democratized where it cannot be shut down by a button from a far-flung capital. So that is a big thought now, and also, as I said, risk management, can we get back to it?

What do you think of how Zoom and Teams help to solve productivity issues?

Overall, the use of technology in the past year and the fact that we have been relying so much on Zoom and Teams and other kinds of platforms is great, but its consequences aren’t going to show up in the short term, in terms of productivity. Economists say in the short term that we vastly overestimate the effects of new technology, and in the long term we vastly underestimate it. The internet can become an excellent tool of decentralisation, moving from our lives spent in travel to and from work, adding to our time spent with family. There are going to be far-reaching consequences in terms of this, but they are far out in the future as we absorb these new ideas and procedures and processes and ways of doing business.

What effect do you think vaccines will have on countries’ economies?

There is always still a chance that I could catch COVID-19 in the future, or even now, with a vaccine, as they are not 100% effective. But you know, widespread dissemination of the vaccine needs to be done so the economy can come back. It is interesting to consider whether or not the rolled-out vaccines will be tied to the economic recovery, because again, if you look over the past year, with a variety of responses, you haven’t seen a consistent economic evolution, depending on who was hit by COVID-19 the hardest, what approaches they took. European countries are going to be helped more by this shift, by this necessary shift towards technology and transformation. The American companies have been doing this for years, and now European companies have been poked in the bum and forced to transform themselves as well. So, I wonder if this will also help with productivity and competitiveness in what has really been old-school and far behind.

Is the best approach for education an individual approach? Or something else?

This is something that academics, and especially academic administrators, have been pushing for very hard. What we can do via Zoom. What we can do via recordings. What we can do in the classroom and how we could better integrate all these separate issues. I think there was a push beforehand toward some innovation, but at some point, you have older lecturers who just like to stand behind the podium. In some lectures though, you have innovative thinkers who are trying to provide more teamwork and more interactive classrooms that they call reverse classrooms, where you are putting the onus on the students. I think this is situationally and contextually specific. This works well, perhaps, in political science or in a law class especially. But you can’t do this in engineering where you have to learn the fundamentals, you have to learn a lot of physics otherwise it just does not work. So I think this is also an issue of stratification, but I think it too has been given this push. Especially since, it seems like the past year has been an academic administrator’s dream experiment, when it comes to education. The school would be great if it weren’t for all of the students, so let’s get rid of the students and have us just talk to the computer! And what we are realizing is that we can’t do this technological shift and expect immediate results on productivity and you can’t expect immediate results in the education system. Therefore, we have seen that we can’t go 100% now, even though we do know now that we can. We can live 10% online, but the rest should be live, we need face-to-face interaction.

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