Notwithstanding what a bad year 2020 was, when people said they “couldn’t wait for 2021,” I was skeptical. Why did they think that circumstances would change on December 31, 2020, an arbitrary point in time? In fact, many of the debilitating factors in 2020—a raging pandemic, collapsing global economy—looked likely to get worse in 2021.

On reflection, however, I am optimistic about 2021, because of what we are learning. Here are three lessons.

  1. COVID-19-RELATED PUBLIC SPENDING HAS A BETTER CHANCE OF REACHING THE POOR. Many COVID-19 programs are doing at least one of two things that have been shown to make public spending more effective. One is to engage communities and civil society in the management of public expenditures. The second is to provide information, alongside money and other resources, to poor people to influence behavior.
  2. PEOPLE ARE NOT SWEATING THE BIG STUFF. In many countries, there are one or two giant distortions that impede growth and poverty reduction. However, the private sector seems to find ways of getting around these distortions, especially when they are egregious. When a distortion gets extremely big, people find ways of working around it.
  3. BREAKING UP IS HARDER THAN GETTING TOGETHER. Last year saw Britain’s exit from the European Union and the signing of the African Continental Free Trade Agreement (AfCFTA). The contrast between these two processes was stark. When countries come together to form a partnership, there is the initial agreement on paper, and an implicit commitment to cooperate towards deeper integration. By contrast, when a country leaves a union, there are no rules governing post-breakup activities and, by definition, the cooperative spirit has diminished. In short, the fact that Africa is coming together in 2021 makes me optimistic about the continent.

Read the full article about reasons for optimism in 2021 by Shanta Devarajan at Brookings.