After Covid-19: What Next?
Recently, these last weeks, there has been little news but that which is Covid-19 related. We have watched the unfolding events with feelings of shock and fear, and then monotony and boredom, through to a new feeling now dawning – that is a head scratching wondering about what happens next.
The narrative so far has been one of public health. Things are starting to shift, however, as we know more about the virus and its effects. So our concerns are moving to economic matters. The pandemic has caused chaos to all aspects of society, and nowhere more so than in the economic sphere.
Therefore, the question coming to the fore now is what will the world look like once we come out of this. And the much-discussed question among economists: will we have a recession, a depression, or are we going to be able to pull off the biggest recovery ever known?
Most of us have seen the regular ups and downs of the markets over the last 20 years. Not least with the financial crisis and then global crash of 2008-09. We survived that. But everyone is agreed that that was a whole different challenge. This time around the risk posed is not just to one country’s economy but also to the whole of the developed world and, indeed, to our way of life.
For a start, this time the central banks have less scope to cut interest rates than they did ten years ago. And you can forget about fiscal stimulus while the whole economy across the Western World is in lock down. This aspect is what makes the Covid-19 risk to the economy unique: the extent to which it has hit both production and consumption.
When the lockdown is unlocked no one really knows how we shall be living, or how we are going to start working again.
Worryingly for businesses, consumers may well cling to habits acquired during the lockdown. The High Street, dying in the UK and elsewhere, may finally receive the Last Rites and be buried.
Not least because the ongoing reliance on global supply chains, which is all about saving money, looks like something unsustainable if not a national liability. Countries will start to examine who is producing its foodstuff and where from, and with a greater scrutiny than ever before.
There will be some winners as a result of this localism. For example, start investing in 3D printing as countries start to look to this to help reduce reliance on imports.
The way business and its customers sell and purchase has changed and may not go back to the way it was before Covid-19. So home delivery will be the “new normal.” It is time for businesses such as restaurants and greengrocers and many others to adapt or die.
There has been a lot of war imagery deployed by politicians in the UK and elsewhere. However, they may wish to look to the post-War world of the 1950s and 60s. It was then that countries such as Germany had to rebuild its economy. The Germany of 1945 was desolate compared to that of 1939. It was ground zero.
But we all know of the post-war economic “miracle” of Germany. What we think about less is how war had destroyed the relationship between politics and industry. A new “class” of entrepreneurs drove the innovation and subsequent recovery across Germany in the 1950s and 1960s. These entrepreneurs did not wait for the former structures to be put in place. Instead, they created new ones. You could say that that new group of entrepreneurs created the bedrock of Germany’s success for all the decades that followed until today.
This Covid-19 crisis is so big that only equally large thinking will counter it. This is an opportunity like never before for such new ways of thinking.
Paradoxically, the UK may be in the best position in Europe to capitalize on this by virtue of Brexit. The rest of the EU may be too concerned about keeping its existing structures than understanding that only new structures are going to work from now on.
What of the US? America may not come out of this crisis earlier than others, but it will likely come out stronger than most. And for the same reasons as the UK. The US is able to take and – if President Trump remains in the White House – will take radical and swift action to restart the economy and stimulate recovery. The EU is just not that sort of political and economic beast and may struggle to get up to speed with the new world.
The plague of Covid-19 forces us all to look at how we live both in a micro and at a macro level. Countries as well as individual citizens will have to rethink how they operate. We will only succeed in this rethink if we see the coming recovery – and that is exactly how we must see it —as an opportunity to work from this “year zero”, an end point of sorts, yes, but also a point of beginning too.
