COVID-19 freeze will change things
April 15, 2020
Some day soon, we hope, we’ll wake up to learn that the COVID-19 viruses have gone to that place in the cosmos where the nanometer-size undead go when they can’t cause diseases any more.
“Ah-h,” we’ll say as we stretch and yawn, “back to normal.”
“Normal? Not quite,” economists and other business forecasters are scoffing.
We’ll recover, all right, they say, but it won’t be the same.
“The coronavirus is not only a health crisis of immense proportions,” according to McKinsey economists Kevin Sneader and Shubham Singhal, “it’s also an imminent restructuring of the global economic order.”
Things changed permanently after the 2008 crash, other economists said, and the COVID-19 freeze will also result in permanent change.
Changes, the economists say, are likely to include “permanent effects on consumer sentiment and spending,” continued caution about visiting crowded dining and entertainment venues, some rethinking of meetings and on-site work as businesses continue to encourage self-quarantining, and either less or more use of global supply chains.
Economists seem to differ about how the COVID-19 crisis will affect the way businesses procure the goods they need as they try to avoid future disruptions due to the next worldwide emergency.
Some say businesses will try to stabilize supply chains by using more domestic providers, while others say that actually widening an international supply base will better ensure a steady flow.
Robert Azevêdo, director general of the World Trade Organization, writing in The Guardian newspaper, warns against reducing global trade.
“Responding to this crisis by turning further inwards would add self-inflicted economic shocks to those we are currently enduring,” he wrote. “While some favored industries might benefit from heavy-handed attempts to create wholly national supply chains, many more would lose, and so would consumers already hit by the recession.”
Gary Shilling, writing for Bloomberg, however, sees a continuation of “the drift from free foreign trade and globalization toward protectionism that started when China entered the World Trade Organization in 2001.”
He shares Azevedo’s thinking, however, on why isolationism is not advisable.
Al Levenson, a University of Southern California economist, said another trend to watch for is more government regulation designed to help workers in the “gig economy,” independent contractors like Uber and Lyft drivers who don’t routinely receive healthcare and other benefits. The gig economy has been hard hit by COVID-19.
For example, Levenson said, a recent California law requires many gig workers to be treated as employers, entitled to some benefits
Shilling said the stock market is only likely to return to 70 to 80 percent of its peak value before the coronavirus crisis.
Three Harvard economists, however, say that because the coronavirus crisis is unique, forecasts about its outcome are likely to be unreliable. Unknowns include a lack of understanding about how the virus works, unknown rates of infection, uncertain policy-making and the ways in which businesses and households react.
The British Broadcasting Service, however, says the U.S. is one of the leading nations in resilience to COVID-19’s negative effects. The U.S. was quick to pass stimulus measures, and social distancing seems to be working in the U.S., according to the BBC, and workforce policies are more flexible than in much of the world, all of which increase U.S. ability to bounce back.
Steve Hansen writes for Clovis Media Inc. Contact him at: