The Progressive Post Fri, 07 May 2021 14:16:15 +0000 en-US hourly 1 The Progressive Post 32 32 European fiscal rules: reform urgently needed Thu, 06 May 2021 10:30:05 +0000 European fiscal rules: reform urgently needed Read More »

The EU’s fiscal rules are currently deactivated due to the Covid-19 crisis. However, returning to the pre-Corona rules would be counterproductive. The first priority of reform efforts should be to ensure that applying the rules will not deepen economic crises and hold back recovery. The second priority should be to allow for more public investment.

Budget deficits and public debt ratios have risen massively in all EU countries in the wake of the Covid-19 crisis. The question of how European economic policymakers should deal with this will keep us busy for many years.

The fiscal rules are currently not applied as the general escape clause was activated when the Corona crisis hit. The Commission has recently clarified that the rules should remain suspended for 2022 as well. As an intermediate step, prolonging the deactivation makes sense, as one thing is already clear: a return to applying the EU’s fiscal rules as before the pandemic started would be counterproductive due to the changed realities caused by the crisis. It would force the governments of numerous countries onto an austerity path that undermines economic recovery – and thus also negatively affects debt sustainability. However, simply using the escape clause for another year or two will not be enough, because uncertainty about the future path of fiscal policy for national governments remains as long as effective reform efforts are not undertaken to avoid that applying the rules will hold back recovery from crisis.

If policymakers were to repeat the mistakes they made in the aftermath of the financial crisis – when, from 2010 onwards, excessive fiscal consolidation undermined the economic recovery – the Eurozone would be torn apart in the foreseeable future. Negative domino effects would be all but certain for all member states, including Germany and so-called ‘frugals’, such as Austria and the Netherlands, which rely heavily on export and which, due to their industrial structures, are strongly linked to the other EU member states.

In early 2020, the European Commission initiated a review process for the existing EU governance framework – including the fiscal rules –, but the review was put on hold when the Covid-19 crisis hit. Soon, this discussion on whether and how to reform the rules framework will gain traction again.

However, simply starting by discussing pros and cons of specific reform proposals is potentially misleading. It is necessary to be clear about the main objectives first. What should a reform achieve? What should the main political priorities be? Two objectives should be focussed on when it comes to reforming the EU’s fiscal rules: 1) countering the current pro-cyclical bias and ensuring that all countries can recover swiftly from the crisis, and 2) making space for public-led investment initiatives.

No more pro-cyclical rules

The current fiscal rules are characterised by a pro-cyclical bias, which was particularly clear during the years of fiscal austerity from 2010 onwards. In several member states, applying the fiscal rules has contributed to unnecessarily deepening and prolonging economic downturns, leading to avoidable social hardship. However, the rules have also failed to ensure countercyclical fiscal policies during the ‘good times’ before the financial crisis.

This pro-cyclical bias has triggered unintended political consequences: in several member states, political polarisation has increased in the aftermath of the financial crisis against the background of excessively tight fiscal policies, which have produced rising anti-EU sentiment in several member countries. Strictly applying the EU fiscal rules demands government spending cuts and tax increases from crisis-ridden countries at the wrong time, stifling the economy, holding back recovery and, by consequence, undermining a reduction of crisis-related increases in public-debt-to-GDP ratios via higher economic growth.

Against the background of low interest rates, fiscal policy has become the prime tool for macroeconomic stabilisation. The macroeconomic environment has changed in profound ways, indicated by persistently low inflation and interest rates, and this must be accounted for when thinking about the future fiscal stance in member countries. A main focus of reforming the fiscal rules should be to eliminate the pro-cyclical bias, which has caused large economic and social costs across Europe.

In this context, the technical details of the rules are of high political relevance: cyclically-adjusted fiscal variables – which are based on the idea of correcting headline fiscal balances for the effect of the business cycle on government revenues and spending – are currently crucial for medium-term budgetary objectives of member states. Biases in estimating these cyclically-adjusted fiscal variables have promoted counterproductive pro-cyclical fiscal policies. Whatever the final reforms look like in detail, we urgently need to solve the underlying technical problems, which imply a tendency of revising downwards the fiscal space of member states in times of economic stress.

Making space for public investment initiatives

The second major objective in reforming the EU’s fiscal rules should be to allow for more public investment. This is essential for governments to stabilise the economy in the short, and in the medium run. And it is vital for successfully addressing major long-term challenges such as climate change and digitalisation.

Unfortunately, the current fiscal rules do not adequately distinguish between investment and non-investment spending. Therefore, they have also failed to shield public investment from being cut in times of economic stress. Public investment has fallen drastically over the last decade in many European countries. This is related to the pro-cyclical bias of the fiscal rules described above: governments can quickly cancel investment projects or put them on the back burner as the austerity pressure mounts.

Source: AMECO (Autumn 2020); own calculations.

This is exactly what has happened in large parts of the Eurozone over the last ten years. Net public investment (which accounts for depreciation) was negative in the years before the Covid-19 pandemic in large parts of the Eurozone, especially in Southern Europe. This means that the public capital stock has been decaying. Given the large needs for public investment (in areas such as transport, communication networks and decarbonisation) that are still unmet, recent public investment outcomes in Europe are policy disasters with negative consequences in the long run.

If the fiscal rules allowed more public investment, this would, on the one hand, help strengthening the basis for prosperous long-term economic development. On the other hand, implementing the European Commission’s agenda for promoting a “green and digital transformation” requires massive public investment over the decades to come. A reform of the EU budget rules should therefore ensure that relevant public investments can be debt-financed without violating the fiscal rules.

Different proposals on reforming the EU’s fiscal rules should be discussed over the months to come. But the one question that needs to be kept in mind is: how much they contribute to achieving these two major objectives of getting rid of damaging pro-cyclical fiscal policies and allowing for more public investment.

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Speeding up the reform of EU fiscal rules – back to work, by Anni Marttinen

Changing the debt rule would miss the point, by David Rinaldi

Speeding up the reform of EU fiscal rules – back to work Thu, 06 May 2021 12:02:04 +0000 Speeding up the reform of EU fiscal rules – back to work Read More »

The work on revising the fiscal rules of the European Union had started long before Covid-19. The global pandemic had put the work on hold, for good reasons. Now that the EU debt levels have risen to new highs the past year, there is a strong need to speed up the process to ensure the EU’s legitimacy and credibility.

Already before the Covid-19 crisis, a working group of the Economic and financial committee under the EU’s Economic and Financial Affairs Council had started to review the bloc’s fiscal rules. Even in the beginning of 2020, when the Commission adopted the Communication on the economic governance review, a majority of member states had returned to sound budgetary positions, and with some exceptions (France and Italy), government debt ratios had been put on a firm downward path. The effort to renew the deficit and debt rules in addition to Medium-Term Budgetary Objectives and structural balance was undertaken after a wide analysis of the EU’s fiscal rules indicating that the rules maintained a trend of procyclical policies, which enforced economic fluctuations, when instead they should act as countercyclical buffers. Not only have the fiscal rules been counterproductive in economic terms, but their complexity and arbitrary nature has made it difficult to understand their aim and purpose, which does not sit well in modern-day policy targets such as the fight against climate change. The greying of the population of Europe, and its resulting need for increased social and healthcare services, does not make it any easier to cut expenses or increase public income without restructuring the tax base.

A few months after the announcement of the Communication, the situation and the outlook were completely different. The massive shock caused by the Covid-19 health crisis and the valiant attempt to mitigate its social and economic impact have led to an unprecedented increase in government deficits and debt levels in all Member States. For the euro area as a whole debt is expected to jump to above 100 per cent of GDP in 2020, after having declined to 86 per cent in the preceding years.

The Covid-19 health crisis has radically changed the perspective on the future of the EU fiscal framework. The public consultation launched by the Commission with the publication of its economic governance review was organised in a context where most, if not all, observers were critical of the way the EU fiscal rules had been implemented; and where a few saw a need for radical changes. 

Due to the pandemic, going back to the old fiscal rules and 60 per cent debt levels is unrealistic. Not only would achieving these levels require inhumane austerity measures, but for the member states to continue disobeying the rules would also continue to decrease the credibility of the EU as a whole. It is crucial to review the rules to ensure adequate fiscal capacity for wellbeing, and also to maintain the EU’s legitimacy and credibility – the lack of which could lead to a dangerous increase in EU scepticism and populism.

There is a need to speed up the review process of the EU fiscal rules to guide national and EU level political discussion, and to inform the intentions in a transparent manner. I suggest the following reforms for more efficient and suitable future of EU fiscal policy, which are widely supported both by the academia and European Fiscal Board (EFB):

  1. Country specific medium term debt level or no rule
  2. Net primary expense growth rate 
  3. Current account ratio
  4. General escape clause 
  5. Possible central fiscal capacity (CFC)

The current debt level of 60 per cent is arbitrary in terms of academic or any technical analysis. The debt rule was already difficult to follow before Covid-19 and will be even more so after. And it is hard to find any economic reasoning for this specific level. The debt rule, should the framework allow flexible expenditure and public investment, while maintaining a medium to long-term balance in net primary expenditure, will be unnecessary. Public sector should have the opportunity to revitalise and sustain investments even in recessions. This follows the so-called golden rule that investments should be financed with debt and current expenditure with income over cyclical fluctuations. 

The 3 per cent deficit rule is as arbitrary as the debt rule and acts as a barrier for public investment, reforms and any expansionary fiscal policy. The EFB has suggested an operational target for net primary expenditure for medium term which would not hinder public investment. Any investment on climate change could be counted out from the operational rule. The structural deficit rule allows de facto but not de jure country-based differentiated speeds for expenditure. In addition, the process of analysis is unclear which further decreases trust and transparency. 

Current accounts are a major indicator of fiscal capacity in the member states and should be considered as a fiscal rule. Current account imbalances were one of the main causes of the Eurozone crisis. Rules based on current account management should therefore be significantly strengthened. Current account deficits and surpluses should be treated symmetrically, for example by requiring the 3 per cent deviation from balance to be invested in the European Investment Fund.

The current crisis underlines once more the need for further deepening the Economic and Monetary Union. One crucial element would be a permanent and genuine central fiscal capacity. This central fiscal capacity should ideally take the form of a larger EU budget, financed by own resources, and with the capacity to borrow in the event of large shocks. Its size should be profound, and the spending should focus support on EU investment priorities.

These suggestions to reform the EU fiscal rules were both economically and politically necessary already before Covid-19 crisis. But it was difficult to find a political consensus on them, which has led to a pause in the revision process. Now, with the globally higher debt levels, it is not only necessary but crucial to continue the process. The EU fiscal rules are important to EU’s future credibility and political stability. It is time to get back to work.

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European fiscal rules: reform urgently needed, by Philipp Heimbergen

Changing the debt rule would miss the point, by David Rinaldi

Changing the debt rule would miss the point Thu, 06 May 2021 11:28:08 +0000 Changing the debt rule would miss the point Read More »

Already before the pandemic, it was clear that the economic governance framework of the European Union was unfit to drive long-term prosperity and that it was particularly ill-equipped to sustain the economy in times of recession. The point however is that moving towards a better post-pandemic economic framework is not only a matter of fixing some rules. It is a matter of changing the premises that have led to those rules.

The EU’s Stability and Growth Path (SGP), and even more the Fiscal Compact included in the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG), are based on the economic conviction that the main role of EU governments is to keep their public finances in order. If they do so, the market, duly reassured by macroeconomic stability, would channel the necessary investment, allocate resources efficiently and growth is restored. Unfortunately, however, that did not happen.

Actually, the market is not so stupid, nor that predictable. For instance, we have seen that it values political stability to a great extent: at times, even when governments’ macro-financial indicators on debt and deficit stand at ‘risky’, they can still have easy access to finance. Also, the market understands the nature of deficit and does not look at its amount solely: if the financed measures are economically sound, the spending is not seen as a burden, but it is valued for its growth potential. Personally, I have never been a great fan of ‘the market’, but one thing is sure: it is smarter than the current EU fiscal rules.

After the global financial crisis, our European policy response was to subject the public sector to market discipline, so that the financial markets – that created the problem in the first place – could lift us out of the recession by reigniting investment. No wonder that it failed.

Now, the debate on the new fiscal rules has often resulted in an attempt to make more space for investment within the context of the current framework. But the context has changed. We are confronted with the aftermath of a massive global health crisis, unprecedented shocks to employment and production, a climate emergency to address, and the urgent need to speed up the development of our digital infrastructure. We are facing a soaring demand for public intervention to fix, redress and re-organise many aspects of the society that neither the market, nor the public sector have solved before. Citizens clearly expect the European and national public sectors to actively steer socio-economic development. What Europe needs is not a bit more room for public investment, but a complete new economic model, a new Economic Governance that sets goals for the economy, rather than valuing it for its own purpose. The time is ripe to reset the objectives of the EU’s economic integration and coordination. Expanding from macroeconomic stability to political and social stability would be a first step. In addition, the internal annual reflection of the EU on its economic goals has already identified sustainability and fairness as strategic transversal objectives.

Figure – The emergence of a “new paradigm” already before the pandemic

Source: European Commission, Annual Sustainable Growth Strategy 2020, COM(2019)650 final.

Already before the pandemic,in Rewriting the Rules of the European Economy, Joseph E. Stiglitz and FEPS called for the transformation of the Stability and Growth Pact into a Stability, Growth and Employment Pact. Including employment as a key objective of European integration could certainly be a great move, not only to bring Europe closer to the interests of its people, but to make our Union economically stronger with tools that respond to employment shocks and a better management of the aggregate demand, sustaining internal demand and European production.

What we should focus on now, is a new Pact for Stability, Sustainability and Development, something that revises the foundations of economic policy in Europe and repurposes the whole notion of development, in line with the European model described in the Lisbon Agenda and the Europe 2020 Strategy. The questions that need to be answered are: why are we uniting our economies? And what kind of society do we want in ten, twenty and thirty years? Renewing the vision on our European Union is the point. New rules would then follow as a consequence.

To conclude, an invitation to the progressives that might read this article. The question whether to change the debt and deficit rule is a relevant one and has only one possible response: ‘yes, we should’. Often, however, there is fear that even raising this question would expose to not being taken seriously. It is often stressed that Treaty changes are currently unthinkable and that, at best, we can hope for a few refinements of the current fiscal rules. My suggestion then is to turn the tables and to push our approach to the re-design of the E(M)U economic governance, as well as to the debate on the Future of Europe, towards higher and more fundamental grounds.

We want fiscal rules to be applied more flexibly? Sure. But that would miss the point. We want a new debt to GDP rule set at 90 per cent? Sure. But that would only partly solve the problem. What we want is to give to Europe and its member states the possibility to steer economic development and lead in the ecological and digital transition, to provide high-end public goods and high levels of wellbeing. That cannot happen if the goal that we set for Europe remains that of macroeconomic stability alone.

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European fiscal rules: reform urgently needed, by Philipp Heimbergen

Speeding up the reform of EU fiscal rules – back to work, by Anni Marttinen

A vision for our European future Tue, 04 May 2021 14:28:17 +0000 A vision for our European future Read More »

We are entering a new phase of the European project. The central equation of this new phase can be presented in the following terms: if we want to renew the European economic and social model to address the ongoing ecological and digital transformations, and if we want to improve global governance to address the current global challenges, we must ask how our economic and financial instruments should be developed and how can we deepen European democracy in such a way as to be able to take the necessary far-reaching decisions. The European Union must assert itself as a full-fledged political entity with economic, social, cultural dimensions and take internal and external actions that are decided democratically by its own citizens. That is why a ‘Conference on the Future of Europe’ is so necessary at this particular historical juncture.

Our vision of how to live on this planet will doubtlessly be deeply transformed by our current collective experience of the Covid-19 pandemic and the looming climate disaster. Now is therefore the time to develop a common vision together.

The first step in this process is to change the relationship between humankind and nature. We are part of nature, and we therefore need to respect it by looking after its resources and biodiversity. This new aspiration comes at a time of technological developments that will enable a new way of producing, consuming, moving around and living. Now is the time to create and disseminate a new generation of products and services that are not only low carbon and zero waste, but also smarter because they are built on artificial intelligence. Our houses, schools, shops, hospitals, meeting places, cities and way of life can all be completely transformed.

New economic activities and jobs will emerge while others will decline. An immense transformation of the employment structure is already underway, and it has been accelerated by the Covid-related lockdowns. Although there are jobs where the main tasks can be replaced by automation and artificial intelligence, there are also new jobs dealing with climate action, environmental repair, human relationships and creativity of all sorts – these roles can be multiplied. We need to support this transformation with massive lifelong learning programmes, as well as by using social protection to mitigate the various social risks.

All this requires us to build a welfare system that is fit for the twenty-first century, based on the assumption that we will all end up combining a range of different activities – paid work, family care, community service, education and personal creativity – throughout our lifetimes. And, of course, we also need to find new ways of financing this welfare system, by tapping into new sources of added value and by updating our tax structures.

These new aspirations will be claimed by many citizens, from all generations and all countries, and this will create a push for deep policy shifts.

At the same time, the current gap between global challenges and global governance has become more and more evident and requires an ambitious renewal of the current multilateral system.

Initially, this renewal is needed to cope with the current Covid-19 pandemic and the resulting social and economic crises that are unfolding. Indeed, we need to have large-scale vaccination ensuring universal access and more powerful financial tools to counter the recession and to turn the stimulus package into a large transformation of our economies, in line with the green and digital transitions that are underway and with the need to tackle increasing social inequalities. 

Our response to the Covid-19 crisis should not delay the urgent action on climate change, otherwise the damage caused to the environment will become largely irreversible with implications across the board.

Additionally, the digital transition is in a critical phase, where the diffusion of artificial intelligence to all sectors risks being controlled by a small set of big digital platforms. But there is an alternative: we can agree on a common set of global rules to ensure that we have different choices, and to ensure that we improve fundamental standards regarding the respect of privacy, decent labour conditions, and access to public services. These global rules would also ensure new tax resources to finance public goods. 

It is crucial that we have a strong multilateral framework to underpin the green and digital transitions, so that we can better implement the sustainable development goals and reduce social inequalities within and between countries. Nevertheless, we need to identify with which actors the multilateral system can be renewed, and how we can therefore improve global governance. The way the global multipolar order is currently evolving means there is a real danger of fragmentation between different areas of influence and there is the additional problem of increasing strategic competition between the United States and China. The recent election of Joe Biden in the United States is very good news, and it creates a fresh basis to relaunch the transatlantic alliance. But the world has changed. There are other influential players now, so we need to build a larger coalition of actors – governments, parliamentarians, civil society organisations, and citizens themselves – to push for these objectives using a model of variable geometry.

The EU should take an active and leading role in building this coalition of forces necessary to renew the multilateral system. At the same time, it should develop its bilateral relations with countries and regional organisations so that we can cooperate and move in the same direction. The EU’s ‘external action’ must cover other relevant dimensions: from defence and cybersecurity to energy, science and technology, education, culture, and human rights. Promoting the sustainable development goals in all the EU’s relationships should also be a priority.

Alongside this, the EU needs to build on the recent historical leap forward that it made when it finally agreed on the launch of a common budget financed by the joint issuance of bonds to drive a post-Covid recovery, linked to a deep green and digital transformation. This is a unique opportunity that we cannot afford to miss. It requires all member states to implement national recovery plans to transform energy and transport infrastructures and to promote clusters of low-carbon and smart activities while creating new jobs. This needs to be combined with the development of new public services and new social funding for health, education, and care. These things should be at the centre of a new concept of prosperity that is driven by well-being. A welfare system for the twenty-first century should support all these transitions to new jobs, new skills, and new social needs, and it should be based on an advanced concept of European citizenship that includes not only economic and political rights, but also social, digital, and environmental rights.

This advanced concept of European citizenship, as proclaimed by the European Social Pillar, also needs to be underpinned by a stronger European budget, joint debt issuance, tax convergence and European taxation. This will be at the core of stronger European sovereignty – which is needed to cope with the current challenges we face – while strengthening internal regional and social cohesion. 

Stronger European sovereignty must in turn be grounded on strengthened democracy at local, national, and European levels, and it should better combine representative and participatory mechanisms. The current Europe-wide situation caused by the Covid-19 crisis opens new avenues of hybrid democratic activity which offer interesting potential for exploration.

The Conference on the Future of Europe, which will be launched on 9 May, is a first step on the long road to make our vision for our European future a reality. Let us all embark on this journey, bringing our progressive ideas, our creativity, our ambition and most importantly, our spirit of solidarity. 

This text is inspired by the introduction of the upcoming collective book Our European Future where 36 renowned European authors make their inspirational statements, to be launched on 27 May during the FEPS flagship event “Call to Europe”. 

Artificial Intelligence and social rights: a first assessment Wed, 28 Apr 2021 13:05:40 +0000 Artificial Intelligence and social rights: a first assessment Read More »

The EC’s recent proposal for AI regulation is the first of its kind in the world. It is an excellent base to shape a domain that opens enormous opportunities. But the door for abuses and wide interpretation by some member states, as well as by illiberal regimes worldwide, is not entirely closed yet. And against the backdrop of a technology that can be highly invasive to workers’ rights, better protection is still necessary.

On Wednesday 21 April, the Commission unveiled the long-awaited proposal to regulate AI. It can be considered the first endeavour of this kind across the world, which is why expectations were very high, in Europe, as well as abroad. Regulating the use of fast-evolving technologies with such broad implications on all sectors of our economies and societies is undoubtedly no easy task. A task that required years of work, study, consultations with a wide range of stakeholders.

The European Parliament actively contributed to this effort from the beginning, calling on the Commission to establish a legislative framework on AI as early as 2017, with its latest Resolutions on AI from last October as well as with the ongoing work of the Special Committee on Artificial Intelligence. From a first glance at the proposal, we can notice a range of undoubtedly positive elements, while some challenges remain.

First of all, despite having announced for months that the focus would only be on high-risk applications, the draft proposal introduces four categories of applications, with a different degree of obligations. From the low-risk ones, like the management of a high volumes of non-personal data, to the ones requiring transparency, such as chatbots, going to the high-risk ones, like robotic surgical devices and predictive tools for granting and revoking social benefits, for making decisions on termination of employment contracts, and, finally, to the prohibited applications. This is undoubtedly a response to the concerns that many in the Parliament, but also civil society organisations, have been voicing over the last months, demanding a more nuanced approach rather than a mere binary one.

In particular, in March we sent a letter to President von der Leyen and the involved Commissioners, co-signed by 116 MEPs from across the political spectrum, to demand putting fundamental rights first when regulating AI. In her reply, von der Leyen shared our concerns, and confirmed the need to “go further” than strict obligations, in case of applications that would be clearly incompatible with fundamental rights. The explicitly prohibited uses listed in article 5 of the draft Regulation – subliminal manipulation, exploitation of vulnerable groups for harmful purposes, social scoring, mass surveillance for example – confirm this commitment. The accent on immaterial damage to persons and society is also to be appreciated, as well as the strict requirements on high-quality datasets, robust cybersecurity, and human oversight for high-risk applications. However, several aspects remain to be clarified.

The issue that has attracted the most attention by commentators and on which Commissioners Margarethe Vestager and Thierry Breton spent most of their presentation on 21 April is the one on real-time remote biometric identification systems in public spaces for law enforcement purposes. Compared to the leaked text which was circulated a week prior to the presentation of the proposal, and which generated a lot of discussions and concerns, the draft article 5, point d) and subsequent paragraphs provide for a more detailed and limited framework for the implementation of such practice, restricting the cases in which it can be used (now limited to cases such as child abduction, imminent terrorist threats and the localisation of suspects of crimes punishable with over three years of detention) and making it subject to judicial authorisation and activation by national law. If this constitutes a substantial improvement compared to the leak, concerns persist as to remaining possible abuses and wide interpretation by some member states. 

Another area to flag up is the one on labour rights: Annex III lists high-risk applications, including those that monitor and evaluate workers’ behaviour and performance, those that control the time a worker spends in front of the computer when teleworking, or even assess their mood by detecting emotions when making calls. According to article 43, detailing the conformity assessment procedures to follow, this and other sensitive applications can undergo an internal conformity assessment (or self-assessment) instead of a third-party one. Regulating so loosely a practice so invasive for workers’ rights can be very dangerous, even more so as we consider these rules will apply to all AI developers targeting the EU market, including non-EU entities, that might not necessarily share our values. 

Affixing the CE mark autonomously would entail that potential violations would only be discovered at a later stage by overburdened market surveillance authorities, when damages have already occurred. If we consider that allocation of social benefits, illegal migration, or crime prevention are also on the same list, we can see the risk of undermining constitutional concepts such as the presumption of innocence or non-discrimination.

We cannot afford to make mistakes, in an era where authoritarian regimes are setting their own, illiberal standards. On the contrary, similarly to the case of GDPR, we have the unique opportunity to set a world standard for a human-centric, trustworthy AI, to allow our citizens and businesses to make the most of such a promising technology, whose benefits we already experience in a wide variety of sectors. The European Parliament stands therefore positive and ready to improve the text, to ensure appropriate safeguards are in place for high-risk applications, to stimulate good innovation and the creation of a true Internal Market for AI that serves humanity, and not only the interests of the few. 

The question that haunts President Joe Biden: can the US deliver on climate? Mon, 19 Apr 2021 09:30:59 +0000 The question that haunts President Joe Biden: can the US deliver on climate? Read More »

President Biden has placed climate change at the centre of US domestic and foreign policy. Yet the wide partisan divide on the issue in the United States threatens to hinder the efforts of his administration to increase global climate ambitions. The Earth Day Summit will provide an important opportunity for the United States to demonstrate that it can deliver on its promises.

No one watching President Joseph Biden can miss the signals. Since the very first day he assumed the US presidency, he has put climate change front and centre, making a slew of announcements to put the federal government back on track. To do so, President Biden had to execute an immediate U-turn from the direction set by President Trump, including seeking re-entry into the historic Paris Agreement. In a complete reversal, President Biden has appointed a historic number of experts with the word “climate” in their titles, including, most visibly, former Secretary of State John Kerry as his Special Presidential Envoy for Climate. Kerry even has a seat at the table on the National Security Council, the group responsible for assisting the president in formulating foreign and national security policy. Biden has ordered the creation of task forces and working groups designed to gin up action on climate change and rescued Obama-era policies that President Trump had tossed into the rubbish bin. On the 51st anniversary of Earth Day, 22 April, Biden will host a summit with forty world leaders designed to generate even more ambition globally.

All of this is good news for global efforts to limit planetary warming to 1.5 degrees Celsius to avoid the very worst impacts of climate change in accordance with the Paris Agreement. But lurking in the background is whether President Biden can overcome the partisan split that stymies climate action in the United States. In other words, will US climate action prove lasting in line with all the signals sent by the Biden team?

The American people are dramatically split on the issue of climate change. An April 2021 Gallup poll confirmed a strong partisan divide on even the acknowledgment of the role human activities play in climate change. While 88 percent of Democrats believe that human activities have primarily caused the increases in the planet’s temperature, just 32 per cent of Republicans believe so. And, sadly, the gap has widened between the parties in recent years. In 2003, 52 per cent of Republicans and 68 per cent of Democrats believed in human-caused climate change. The split continues regarding whether global warming should be a priority for Congress and the president. According to a 2020 Yale Program on Climate Change Communication poll, the vast majority of liberal Democrats (86 per cent) and moderate/conservative Democrats (72 per cent) think global warming should be a top priority. Conversely, only around a third of liberal/moderate Republicans (38 per cent) and just over one in ten conservative Republicans (12 per cent) agree.

But it is not just a divided electorate that President Biden faces, he also faces a divided Congress. Currently, the 100 member US Senate is evenly split between Republicans and Democrats. In addition to navigating that schism, President Biden faces challenges from his left-leaning flank who criticise former Obama-era climate measures, many of them crafted by political appointees to the Biden administration, that failed to sufficiently address environmental justice issues or the need for greater climate ambition regarding natural gas production and fracking. After President Biden proposed a $ 2.25 trillion jobs and infrastructure package, Greenpeace USA released a statement saying that, “the president’s ambition in this moment does not meet the scale of the interlocking crises facing our country. It is not enough to go back to normal.”

Internationally, the scepticism is palpable. After all, the United States has emitted more greenhouse gas than any other country in history, and is currently the second-largest emitter after China. As Saleemul Huq, a long-time climate advocate in Bangladesh, wrote after Special Envoy Kerry’s stopover in Dhaka, if President Biden wants to lead on climate, he “will need to earn that position of leadership. This means that his actions will speak louder than his words.”

A lot rides on the Earth Day summit. To restore US stature, President Biden will need to demonstrate that the United States can deliver dramatic greenhouse gas emissions reductions rapidly, and that it will make good on the 2015 promise by developed countries to mobilise $ 100 billion per year by 2020 for developing countries for climate action. Just since 2015, the world has experienced ever-greater impacts from climate change, including invasions of voracious locusts in Africa and Asia, the highest wind land speeds recorded from a cyclone, and thirty named storms in the Atlantic basin – so many that meteorologists had to turn to the Greek alphabet to name them – including two back-to-back Category four hurricanes striking Central America. Many of these impacts fall on countries, including small island developing states, who have had the least to do with creating the climate crisis, but that are most in need of assistance to prepare mitigation. They will want to know the US plan to address the inequities. 

Given these dynamics, it is not surprising that Special Envoy Kerry is engaged in shuttle diplomacy, visiting Bangladesh, China, India, South Korea, and the United Arab Emirates in advance of the summit to quell doubts about the ability of the United States to honour its commitments and spark greater ambition. After four years of backsliding, withdrawal, and outright denial of climate change during the Trump administration, confidence in the United States is weaker and scepticism is higher. With another presidential election less than four years away, can President Biden shake the country’s reputation for being fickle?
As this question about the United States’ ability to deliver shadows the summit, it is important to remember that President Biden devised this test for himself. He chose the day and the purpose of this meeting. He set the agenda. So as all eyes are on the Earth Day Summit, the world should expect that he and his team can deliver. Given the partisan divide, such action is a gamble to be sure, but since this is the only planet humans have, what is the alternative?

Turning the clock forward Thu, 15 Apr 2021 10:43:35 +0000 Turning the clock forward Read More »

The Covid pandemic has drawn new attention to the key importance of personal services for household survival, ranging from food delivery to care services. But all too often such services are provided by precarious workers, often employed via online platforms.

Platform work is widespread across Europe and growing rapidly, research funded by the European Foundation for Progressive Studies (FEPS) and UNI-Europa reveals. Surveys in 13 European countries, carried out by the University of Hertfordshire with Ipsos MORI, found that the proportion of the workforce finding work via platforms such as Upwork, Uber, Deliveroo or Myhammer ranged from around one worker in 20 (in Sweden and the Netherlands in 2016) to over a quarter in Czechia in 2019. In the UK, platform work doubled between 2016 and 2019. Since the Covid-19 outbreak, there has been further growth, especially in delivery services.

Platform work is at its highest where earnings are lowest. In more than nine out of ten cases, those doing platform work are using it to top up income from other sources. Being a platform worker is not their primary identity and some feel that it is stigmatising even to admit to doing it. Nevertheless, their willingness to undertake this kind of precarious work lowers the bar for others. The demand for platform services is especially strong among full-time workers, including many in low-income households. On average nine out of ten of those who work via platforms providing taxi and delivery and 84 per cent of those who provide platform-based household services are also customers for these services. It seems that many of the millions of Europeans who use platform services are buying ready-cooked meals, cleaning or care services in the market because they simply do not have the time to do this work themselves. Platforms form part of a vicious cycle whereby the need for extra income leads to working longer hours which leaves less time available for housework, leading to greater use of platforms which, in turn, increases precarious work still further. The challenge for Social Democrats is how to break this cycle.

Current platform labour practices undoubtedly represent part of a general degradation of work: another threat to the decent employment standards painstakingly put in place across Europe in half a century of social dialogue. A knee-jerk reaction is to try to put back the ingredients of this standard employment model – job security, clear occupational identities, a standard working week, and full social protection – and to bring the platforms under the scope of tax and regulatory regimes. But such demands position Social Democrats as people who want to turn the clock back: old-fashioned politicians on the side of rigidity and bureaucracy who are trying to hold back unstoppable forces and do not want to encourage innovation or progress.

Meanwhile, the employment model is not the only feature of the mid-20th century welfare state that is at risk. European governments are facing multiple challenges including an ageing population (leading to increased demand for care and other household services), growth in two-earner households (with less time available for household work), and a reduction in the supply of public services because of cost constraints and, in some countries, austerity policies.

Could it be that instead of seeing digital platform technologies as a threat to the old welfare state model we might instead treat them as building blocks for a new kind of welfare state, fit for the 21st century, that addresses some of these challenges?

It is true that as presently constituted, online platforms are often run by global corporations that put nothing back into the communities in which they operate, but extract a large rent from each transaction. All they contribute is poor working conditions, income insecurity, and forms of digital surveillance and control that threaten individual liberty. But what if they could be developed under different forms of control, in ways that are democratically accountable, and under conditions that guarantee decent working conditions and job security? 

The ability to match supply and demand for services in real-time that platforms enable could provide a key to making our public services more efficient and sensitive to user demands. Using modern technologies to deliver services in new ways might change their form but could, perhaps, bring them more closely into alignment with the fundamental aims of welfare states: to provide the wherewithal to ensure that all citizens obtain the basic services that enable them to live dignified, safe, and healthy lives and bring up their children free from the blight of poverty.

Public platforms could be integrated with existing public services to make them more efficient and responsive to citizens’ needs – for example for transport to medical appointments, meals on wheels for the housebound, emergency childcare services, or care for people with unpredictable medical needs. Savings could be achieved by delivering services only when they are actually needed on a just-in-time rather than a just-in-case basis. Devices such as voucher schemes could make it possible to integrate services provided free or at a discount on the basis of social need with commercial services. New forms of public-private partnerships and social enterprises could link local firms with service delivery agencies, boosting local economies. Involving public sector trade unions in the development of these services would ensure that the rights and work standards of the traditional workforce are not undermined and put in place appropriate forms of training, professional development, and management of the new workforce.

Could using platform technologies to build a digital welfare state offer a way to turn the clock forward, rather than back?

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“Like a boss” – management by algorithm is taking over at the workplace, by Valerio de Stefano and Antonio Aloisi

‘Old’ rules and protections for the ‘new’ world of work, by Sacha Garben

‘Old’ rules and protections for the ‘new’ world of work Thu, 15 Apr 2021 10:53:55 +0000 ‘Old’ rules and protections for the ‘new’ world of work Read More »

The labour status of people working in the online platform economy is key to their socio-economic protection. But it has proven a difficult issue for courts and regulators. The EU is considering introducing a ‘rebuttable presumption of employment’ to help address this problem. What could this entail exactly? 

For some time now, one of the hottest topics in the ‘world of work’ has been that of online platform work. Online platform jobs can present opportunities, in terms of lowering barriers to labour market integration and moving activities out of the shadow economy. But there are also clear challenges. Most importantly, this type of work often entails a high degree of precariousness. 

In recognition of this, the European Commission is planning to take action to ensure dignified working conditions and adequate social protection in platform work. In its first stage consultation of social partners, the Commission has identified a number of areas in which improvements may be needed, including (i) employment status; (ii) working conditions, including health and safety; (iii) access to adequate social protection; (iv) access to collective representation and bargaining, and (v) algorithmic management. 

The most crucial element is undoubtedly the first: the question whether the people working via online platforms are to be regarded as ‘workers/employed’ with the attendant rights under EU and national law, or instead as ‘independent contractors/self-employed’, as most other issues are directly dependent on that question of labour status. As they are often formally contracted by the platforms as independents and have working arrangements that do not always correspond clearly to a traditional employment relationship, online platform workers have been difficult to classify in many jurisdictions. While national courts seem increasingly confident to (re-)qualify online platform workers from self-employed to employed, they may feel that under the current legal framework(s) they have to fit a square peg into either a round or a triangle-shaped hole. 

As a possible way forward, the Commission suggests introducing a rebuttable presumption of employment. This could provide an elegant solution, that would significantly shift but not totally tilt the legal balance in favour of the increased socio-economic protection of online platform workers. It would mean that the majority of online platform workers would receive the protection that workers/employed receive under EU and national law, filtering out the false self-employed, while leaving scope for the possibility of genuinely self-employed working via platforms without imposing worker status or treatment on them. What could that look like, concretely? Here are some tangible suggestions for the key provisions of a possible Directive on the labour status of online platform workers.

Article 1: Application of EU law to online platform workers

Online platform workers are entitled to all the rights and protections applicable to workers under EU law, unless their relationship to the platform clearly does not feature the essential characteristics of an employment relationship and they are to be regarded as self-employed in light of, in particular, their full autonomy in terms of the pricing, organisation and execution of the work in question. 

Article 2: Application of national labour protections to online platform workers

  1. Member States shall ensure online platform workers all the rights and protections under the relevant national law applicable to persons with an employment contract.
  2. By way of derogation to paragraph 1, Member States may decide to disapply the relevant provisions of national law to those online platform workers whose relationship to the platform clearly does not feature the essential characteristics of a work relationship and who are to be regarded as self-employed in light of, in particular, their full autonomy in terms of the pricing, organisation and execution of the work in question.

Article 153(b) of the Treaty on the Functioning of the European Union (TFEU) would be the most likely legal basis for a measure containing the above provisions. While the issue of labour status is sensitive with the Member States, the obligation to apply national labour laws and protections to certain groups of atypical workers (by requiring equal treatment in relation to working conditions) is a central one in various already existing EU directives, such as on Fixed-Term, Part-Time and Temporary Agency Work.

In addition to a rebuttable presumption of employment, the EU measure could provide specific protection for all online platform workers –including those that are genuinely self-employed. It is not impossible to argue that Article 153 TFEU could be used to improve the working conditions of the self-employed. This is, however, not entirely certain, as it could also be said that for such additional protection concerning the self-employed, Article 53 TFEU applies, or that Article 352 TFEU would have to be added. The question of legal basis would be for another piece to explore in more detail, but if it were decided to provide additional protection for all online platform workers, it could look like the following provision:

Article 3: Specific protections for online platform workers

Member States shall ensure that the functioning of online platforms complies with the rights and principles contained in the EU Charter of Fundamental Rights. In particular, the activities of online platforms must fully respect the fundamental principles and rights to fair and just working conditions, non-discrimination, transparency, data protection and consumer protection. This includes the design, operation and application of algorithms, for which the online platform is fully responsible.
The merit of this approach lies not just in its capacity to efficiently tackle the issue of precariousness in the online platform economy. It lies in its acknowledgement that to protect workers in what is often called the ‘new’ world of work, the ‘old’ rules and existing protections are usually the best tools.They may need some updating and tweaking for best results, but most importantly, it needs to be made clear that they, quite simply, apply. This no-nonsense approach rejects the omnipresent but shallow narratives of technological exceptionalism that trade on the idea that the ‘digital revolution’ has made labour codes, and other important norms, redundant. To the contrary, it has underlined their primordeal importance.

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Turning the clock forward, by Ursula Huws

“Like a boss” – management by algorithm is taking over at the workplace, by Valerio de Stefano and Antonio Aloisi

“Like a boss” – management by algorithm is taking over at the workplace Thu, 15 Apr 2021 11:06:24 +0000 “Like a boss” – management by algorithm is taking over at the workplace Read More »

All managerial functions are now entrusted to algorithm-powered tools, raising large expectations and new risks. This trend is not confined to platform work. No economic sector is immune to the adoption of such systems. The EU institutions are engaged in a promising process that may lead to new regulatory solutions, but social dialogue and collective bargaining will remain essential.

Facial recognition and shift scheduling, smart badges and QR codes, GPS tracking and wristbands, job applicants’ assessment, and health self-reporting have ballooned in the last year. The labour market is experiencing a bewildering dystopia, and to a certain extent, we are docilely enjoying it.

A long-lasting process of datafication of working relationships, combined with ubiquitous tracking devices, the dizzying blurring between professional and private lives, and enhanced reliance on digital devices, results in an enticing opportunity to redesign power dynamics at the workplace, thus aggravating existing information asymmetries. AI-driven and more mundane software are now widely used to complement the role of managers and supervisors in all their tasks, from onboarding to promoting, from monitoring to firing. Often marketed as unbiased, fraud-less, and objective, algorithms fuelling these practices are in fact abstract, formalised instructions to conduct a computational procedure aimed at achieving a result, by increasing efficiency and enhancing performance. Game-changing technologies reflect business needs and specific preferences and, on many occasions, have proved to be far from perfect as they replicate and reinforce human stereotypes or measure pointless parameters. What is worse, given their obscure nature, these models end up limiting the understanding of employers’ strategies, jeopardising contestation. This also leads to an aggravation of societal inequalities.

In the past, forms of all-encompassing surveillance were used to make classifications and get a sense of workflow bottlenecks or deviant conducts (the use of data was eminently descriptive). Nowadays, a deeper dependence on inferential analytics, favoured by machine learning, helps managers to detect patterns and generate predictions about team dynamics, future behaviours, career prospects. At the same time, the overwhelming system of tacit penalty and reward is also expected to force compliance, thus reconfiguring interactions and nullifying autonomy. Therefore, workers’ choice is severely constrained. Katherine C. Kellogg and her co-authors argue that new models of algorithmic management are more “comprehensive, instantaneous, iterative and opaque” than before. From a labour law perspective, this allows employers a much more fine-grained, intrusive and adaptive form of control, which is not matched by increased powers of contestation for workers. Addressing this widespread augmentation in contractually unbalanced situations is vital for two main reasons. First, to escape a process of commodification of working relationships and dilution of corporate obligations. Second, to avoid that workers associate technology only with increased control and exploitation. Such a loss of trust could result in active resistance to new technology, and hence foreclose positive uses that increase competitiveness and workers’ well-being.

Platform work was only the appetiser. Algorithmic HR management is the icing on the cake

Besides permeating all aspects of our societies, technology is significantly rewiring workplaces and reshaping labour processes. The Covid-19 crisis has further accelerated a trend towards the digital transformation of managerial functions. Homeworking arrangements ramped up to limit infection risk, scattered teams resorted to collaborative platforms for project administration, interviews for new hires migrated online due to travel restrictions, academic centres began panic buying supervising software. In the last decade, platform workers have witnessed large-scale experimentation of such practices as rating, task allocation, incentivisation, customer reviews, gamification, which have now spiralled beyond the growing boundaries of this sector. Courts, inspectorates, and legislatures are effectively closing loopholes in enforcement, after years of perilous propaganda and uncertain litigation. The drawn-out fight on the appropriate legal classification of riders and couriers will probably end soon. The wildest inventions tested in this arena are instead here to stay.

Advanced technologies are not making humans redundant, they are making workers obedient and managers superfluous. There is an urgent problem to tackle. The existing limits to the expansion of managerial powers have been conceived when the potential of new techniques was admittedly unthinkable, at a time when supervision was exercised by humans in a direct, physical fashion. We are now witnessing an attempt to track sentiments and predict mood changes. This profound sophistication should encourage us to rediscover the prominent principles on which labour regulation is premised: human dignity at work, above all. And this should prompt an open discussion on the social convenience of algorithms at work. On closer inspection, perpetuating the techno-determinist narrative risks downplaying the much-needed collective scrutiny and bottom-up dialogue on ground-breaking innovation. As claimed by the OECD, “collective bargaining, when it is based on mutual trust between social partners, can provide a means to reach balanced and tailored solutions […] to emerging issues, and complement public policies in skills needs anticipation or support to displaced workers” in a flexible and pragmatic manner. 

Data protection laws risk being a blunt weapon

Excitement, as well as anxiety around the patchy adoption of management by algorithms, are gaining momentum, and institutions seem aware of the ramifications of the expansion of managerial functions in warehouses, offices and apartments. Not only has the European Commission’s consultation on the legislative initiative on platform work tackled this issue, but also the Action Plan on the EU Pillar of Social Rights – a flagship political initiative – is tasked with untangling digitised management in order to reap their benefits while addressing its harmful consequences (the proposed aims is to “improve trust in AI-powered systems, promote their uptake and protect fundamental rights”).

However, current privacy standards may fall short of providing meaningful protection, if narrowly interpreted and applied. Since AI and algorithms are substituting for bosses in a variety of function, we need to deploy a wide-ranging set of initiatives to regulate, if not ban, automated decision-making.

While creating a strongly consistent framework, the General Data Protection Regulation has a limited scope and it has been designed to encourage data flow. Its key mandatory requirement in workplace relationship is to implement the least right-intrusive option available. Moreover, Article 8 of the Council of Europe’s Modernised Convention 108 can offer a more human rights-based shield against pervasive control.To ensure the quality of decision-making and improve working conditions, policymakers and social partners must revive the importance of anti-discrimination and occupational safety and health instruments. Notably, there is an urgency to challenge domination at work. Regrettably, the ample set of principles informing data collection may be powerless in the face of the repurposing of information for less benign ends, or in cases when vendors’ pre-built or bespoke digital systems are rented from third parties. The introduction of modern technology assuming executive powers ought to be collectively regulated. Solutions must be systemic, and encompassing complementary tools based on the final use of algorithms. If they are meant to streamline workloads or reconfigure duties, occupational safety and health regulation comes into play to address physical and psychological risks. When choices are made about the competitive attribution of entitlements such as promotions, for instance through profiling, a modern understanding of antidiscrimination provisions is essential to avert prejudiced outcomes for women, younger and less-educated workers, minorities and vulnerable groups. This will lead to a renewed interested in these often-neglected instruments, which contain great potential in the new world of work.

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Can you hear me now? Mon, 12 Apr 2021 13:35:11 +0000 Can you hear me now? Read More »

Resentment and realisation can take many forms. Have the different generations learnt anything from the pandemic? Will we change the way we look at life and our relationships after Covid-19?

It is the first year of university for my nineteen-year-old son. No face-to-face tuition, freshers’ week, parties, or club meetings. Hard to meet new people – his first time away from his home. Yes, it has been tough not getting the typical student experience that is part of the ‘hard sell’ of going to university in the UK where tuition fees alone are around £10,000. But being a so-called ‘first world problem’ (he went to a good school and got his A-levels [state examinations] we have the money to send him to university, he’s able to travel home, etc.), he can survive it. If only that were the whole story.

Realisation and resentment can take many forms. I think, for the younger generations, realisation has led to the awakening of how unfair these times are on them: they are the first generations since World War II not to have the expectation of a better standard of living than the generation before. That bites hard. The pursuit of ever greater profits and shiny new things has cost the planet and our societies dear. Greed is not good. And the younger generation is beginning to realise what the cost has been and continues to be. Climate change is just one example. They are angry. When I speak to younger people, whether it is at university or to my son’s friends, they understand a lot about politics; they are engaged.

This generation does not get its news on the old mainstream TV stations. It is YouTube, Instagram alongside other social media platforms which provide a wide variety of in-depth information. These platforms provide the space for a great deal of content which outlines in a much more digestible style how the older generation has let companies such as Facebook, Nestle, Coca-Cola, Walmart, Volkswagen get away with a lot of destructive behaviour, how the older generation has ruined the planet. Whether it is not paying any or much tax, low wages or falsifying emissions, or using up fossil fuels whilst polluting the entire eco-system. The information is making them angry and asking questions to the older generation.

When I talk to Millennials, they face other issues, but just as significant. The world is very different to that in which their parents started their adulthood. There are no jobs for life any longer. Buying a house or flat is becoming more challenging. The consequences of the financial crises have left many struggling economically. Numerous younger people have had to move back in with their parents. Good pensions are practically non-existent. Without the support of parents and grandparents, this generation would be even worse off. 

Then Covid-19 hit the planet like a meteorite. With the epicentre in China, spreading out across the world, country by country, locking down, locking people in, wherever they were.

The reality of Covid is even harder than anything previously mentioned. The cumulative effect on all generations is already being felt. The younger generation, who, according to the information as it became available, have not been hit the hardest by Covid-19, have yet had to remain locked down – for the sake of an older generation that is suffering terribly. 

Resentment has built up during this time: locked in with parents, maybe violent partners, children – 24/7; students, like my son, bubbled in Covid-groups in their student accommodation with strangers in new cities they had never visited before. No support groups around them. The many families who have been locked into small, cramped apartments. Curfews. A litany of really, really challenging circumstances.

The younger generation may (justifiably) be angry and resentful at an older generation for the lock-in they have had to suffer for an entire year and more because older people are more susceptible to Covid-19. Not fair. But anger can also lead to a renewed sense of realisation. Grandparents and parents they have lost to the pandemic. Grief that there are no visits, no last words, no hugs, and no funerals. All so vitally important for closure. Realisation that what we did not value has become invaluable during the pandemic: the frontline workers, the hospital staff, volunteers, and others who have kept societies ticking over. Realisation that we must do things differently and that maybe, just maybe, the older generation has some wisdom and knowledge of how to live a life not as a consumer, but as a member of a community where everyone is co-dependent. Maybe, just maybe, that the younger generation has the keys to keeping our planet alive. If we listened to each other and if we heard each other. But we must be open to challenge and change.

Maybe that is one of the lessons of this pandemic: slow down, listen and re-learn the lessons of living on this planet together. There is always a choice to be made. We, as a collective, can choose a better way when we come out of the pandemic. Let us hope we choose that path – across generations. And maybe, just maybe, it is the planet that is asking us: now that I have your attention, can you hear me?