The world economy has for many years now been a runaway train, driven by mass consumerism and massive globalisation with alternatives seemingly inconceivable. Now with Covid-19 raging around the globe and governments the world over introducing unprecedented measures to contain it, the global economy has stalled. Covid-19 has effectively applied a brake that has created an opportunity to press “Reset” on the past. The opportunity to imagine a new normal exists but what factors will shape it?
The problems surrounding PPE in the current crisis have exposed the failing of global supply chains. Many industries now are totally reliant on suppliers in China and this must surely be a business and to some extent a national security risk that needs to be addressed. Acceleration in the process of “on-shoring” must surely result especially as the reliance on cheap labour markets is reduced by automation.
It’s already obvious that “home offices” will be the new norm. Barclays has recently stated that its big offices “may be a thing of the past”. This is more an acceleration though, it was already happening to some extent, but for those that cannot work from home a more profound change is coming. Maintaining social distancing will almost certainly mean staggering the working day, something that will have major implications for society and on the use of transport.
All forms of travel have been reduced to a fraction of what they were, a reduction that may be permanent. International travel may continue to be limited by video conferencing, virus hangovers and financial constraints. Domestic travel may once again become more popular however, it will also be affected, not least because of staggered working but also as the government seeks a “massive expansion” in “active travel” such as cycling or walking.
A recent study showed CO2 levels reduced by 8% during the current global lockdown so is this now the time for governments to finally tackle climate change? Will global cooperation on the pandemic ensure that post virus recovery plans tackle climate change? Indeed the changes mentioned above will have a profound affected on emissions so there maybe no better time.
The pandemic has shown one thing, markets cannot handle a crisis on this scale; only governments can. With governments now paying the wages of private companies and providing huge bailouts the question is “what risk are investors actually taking?”. Traditionally, investor returns are driven by the risk involved and so delivering Shareholder Value has been paramount. But, if governments are now on the hook when things go wrong, how does that continue to be true.
Over 40 years successive governments have privatised critical infrastructure but the Covid-19 crisis has shown that can create national security issues. Witness that the railways have been temporarily nationalised to keep vital transport moving. Indeed some of these assets now have little value and so are easy for the government to acquire. There will likely then be an expansion of government as a result of the pandemic with more public control of everyday life.
Celebrity and Sport
Finally, will society continue to be obsessed with celebrity and sports or see personal relationships and community as much more important? There are signs that interaction with social media influencers has already taken a hit. As people unite against combating the virus we all have a new sense of what matters in our lives.
These are just some of the ways I see the world could be different after global pandemic. It is up to all of us to embrace this new world, to harness the opportunities it presents.