The Covid-19 pandemic leaves us wrestling with a callous calculus: a crude and capricious trade-off between the tragic and huge loss of life and the many more livelihoods that will be lost.
We are nowhere near knowing how bad it will get, or when it will end. Varying behavioural and policy responses, and pervasive misinformation, are making matters worse. What is worrying is that the epidemiologists are warning that the disease could return later in the year, or even become endemic like colds and flu. But even if we hope that it will be over in a few months, and a vaccine is fast-tracked, the world will never be the same again.
The pandemic is set to shake up not just healthcare, but politics and business, the economy and financial markets, culture and society, lifestyles, the use of technology, well-being and the environment.
While the world will undoubtedly breathe a collective sigh of relief when the pandemic ends, it is likely to be left profoundly changed by the experience. Actions taken in the heat of the crisis will have lasting effects on attitudes, relationships and behaviours.
So how might the new world look? In a report for ING’s New Horizons Hub, I make a start on ‘pandenomics’, combining several disciplines to identify 15 shifts that may confront us over the coming years.
15 ways that Covid-19 could change the world
- Big government is back – Covid-19 has forced governments to intervene in the economy and daily life in a way unprecedented in peacetime. More changes will come after emergency lockdowns and support has ended.
- Peak populism – populist politicians will push their nationalist agendas, pointing to the dangers of unbridled openness, but some countries may embrace a more focused internationalism to tackle global problems.
- Competence matters – governments and companies that fail to show competence and compassion amid lost lives and livelihoods will rapidly lose trust and support. The recriminations may fuel ongoing conflict.
- From monetary to fiscal – a further radical transformation of macro policy will cast a long shadow. With fiscal rules cast aside, dealing with a massive build-up of debt will be an enormous challenge.
- Inequality matters – it’s not just a matter of fairness, it’s a matter of social stability and public health security. Society’s dependence on often low-paid and vulnerable people providing vital services is now in the spotlight.
- ‘Too many to fail’ – pandemic lockdowns will lead to a shake-up in the service sector, especially in high social contact areas such as leisure, which are dominated by small businesses, the low-paid and self-employed.
- Collateral damage – government intervention in the financial system will continue. Beyond a rethink of how to keep financial markets functioning in future crises, a surge in insolvencies will leave a painful legacy.
- Rethinking efficiency – the pandemic exposed the dangers of over-optimising processes, which leave little slack to deal with sudden setbacks. Instead of ‘just in time’, the ethos will shift to bigger ‘just in case’ inventories.
- Rethink risk management – businesses will shift from linear thinking based on quantifiable risks based on past precedent to a new focus on mastering uncertainty with resilience and agility.
- Rethinking supply chains – the fact that the pandemic emanated from China, the modern day ‘workshop of the world’, exposed the vulnerability of global supply chains.
- Expertise matters, and it needs to be diverse – on top of epidemiology, investments in science, both physical and social, will be needed to help inform difficult political, ethical and economic choices on future challenges.
- War on disease – the huge human and economic toll of pandemics will push investments in health research and systems to the top of the agenda and add to the urgency of addressing other global threats to sustainability.
- From physical to digital – sustained curbs on travel and enforced working from home during the pandemic will lead to a step increase in people interacting digitally, radically shaking up the structure of the economy.
- Lasting shifts in consumer behaviour and social norms – the mortal threat posed by social interactions has shifted our thinking about how we relate to our households, families, neighbours and communities.
- More benign surveillance of individual health and social interactions – the benefits of tracking of personal health and our interaction with others may be reconciled with privacy and security by decentralised technology.
The report highlights that talk of a V-shaped recovery following the Covid-19 pandemic is misplaced. Mass unemployment and bankruptcies will cast a long shadow, necessitating sustained state intervention. Nationalist responses will sustain protectionism and tension, delaying necessary international co-operation. The need to build resilience into production processes will carry a heavy cost, and the pandemic’s scars will lead to lingering risk aversion and caution. These factors will weigh on long term economic growth.
However, the challenges of the pandemic aftermath also present enormous opportunities to put the global economy on a more sustainable path. While creating resilience for households and businesses will be costly, the long run benefits of avoiding or mitigating catastrophes will be huge. The recognition of the downsides of hyper-connectivity will lead to smarter use of digital technology, and the societal pressure for greener and more social approaches will present opportunities for smarter, more far-sighted governments and institutions. Grasping these opportunities will not be easy and may take many years, but the mobilisation around them may help us get through the pandemic.