Economists predicted that the world was going to plunge into catastrophic decline. Yet, this did not happen. The Black Death medieval plagues in Europe were followed by the Renaissance. Similarly, the Spanish Flu led to the decade of the Roaring Twenties, the 1920s. Global GDP growth accelerated; and economic progress was particularly strong in the US with its GDP growing by over 40% during the decade.
The Roaring Twenties were powered by three major forces. First, consumers were ready to celebrate their deliverance from disease and suffering. Entertainment, art, and music flourished. In fact, the Roaring Twenties era is also known as the Jazz Age with cabaret, jazz, and band music becoming enormously popular. Women got to vote and began to participate more fully in political and social life. Vast parties were thrown and it was time to dress up and be seen. Art Deco was at its peak, and the decorative arts explored entirely new designs and forms. Frumpy Edwardian style was junked for avant garde dress and manners. The recent movie, The Great Gatsby, captures the spirit of the Jazz Age well.
Second, the adoption of new life-altering technologies accelerated. Electricity entered most homes and led to modern lighting and cooling. Automobile usage exploded and millions of cars were soon driving along on newly constructed roads. Telephones came into use and it became possible to reach people conveniently. Modern appliances such as refrigerators and ranges began to be used. Aviation developed rapidly and intercontinental travel within days became possible.
The third major growth driver was construction spending to rebuild the cities, roads, and bridges devastated by World War I. With consumption exploding and new technologies becoming available, a major building boom began. Most of the world’s major cities – such as London, Paris, New York, Shanghai, and Mumbai – took shape during this time. Skyscrapers were developed, boulevards of stylish apartment buildings sprang up, and splendid new hotels were built. The first airports and many grand railway stations were commissioned during the Roaring Twenties.
A century later, once the Covid-19 pandemic begins to fade away, we are likely to see another such decade: the Roaring Twenties of the 21st century. The global economy will likely boom, and India will see many years of strong growth and rising prosperity. Amid today’s dour mood, this is certainly a contrarian perspective. However, as in the Roaring Twenties of the 20th century, this decade too is being powered by some irresistible forces.
Cooped-up consumers are ready to spend. We can already see that in several major industries. Car, motorcycle, and appliance sales are already above last year’s levels. Real estate prices in tier 2 and 3 cities are going up. Entertainment spending at home is surging as evidenced by the rapid growth in various media streaming services. Even luxury goods companies are seeing higher sales. These trends will only be amplified once people can once again live and spend freely. Consumption of all types will then soar as pent-up demand and desire to live life to the fullest is unleashed.
A second force that is propelling growth is the range of new technologies that are taking off. Electric mobility is growing rapidly, which will bring electric motorcycles, cars, and buses into mainstream usage. Artificial intelligence and machine learning (AI/ML) coupled with 5G networks will make augmented and virtual reality commonplace. Cloud computing will result in a range of digital services being available anywhere, anytime for everyone. Work behaviours and learning experiences will be transformed with AI/ML tools enabling access to the best productivity tools. The Internet of Things will similarly transform manufacturing and agriculture.
These new technologies require entirely new infrastructure such as advanced 5G networks, charging stations, intelligent highways, grid-connected battery storage, and massive cloud computing centres. In addition, climate change pressures will force major changes to our residential, commercial, and industrial buildings. Our energy networks will have to be transitioned to green technologies to reduce carbon emissions. Similarly, public health gaps cruelly exposed during the pandemic will necessitate a massive build-up of hospitals, clinics, and ancillary medical facilities.
The world is prepared to finance the Roaring Twenties. Central banks have unleashed a tidal wave of liquidity and reduced borrowing rates to zero. Financing is available to fund a green economy and to boost consumer spending. Every country is looking to find ways to keep their workforces employed, particularly on efforts that allow us to “build back better”.
India is seizing this extraordinary set of opportunities to drive robust growth. PM Modi’s government has implemented dramatic structural reforms in labour, agriculture, mining, strategic disinvestment, education, defence production, social security, and there is more to come. With the pandemic coming under control, the next few years promise to be India’s Roaring Twenties.
(The writer is Lok Sabha MP from Hazaribagh and Chairman of the Standing Committee on Finance.)