Economic Fallout of Coronavirus
By Faraz Khan
Islamabad, Pakistan
Amid the din of commentary and analysis over the past two months, one statement that gives us pause, is a comment attributed to the CEO of Uni Lever Group, Alan Jope: “We are adapting to new demand patterns and are preparing for lasting changes in consumer behavior, in each country, as we move out of the crisis and into recovery.”
Consumer behavior has changed for a generation. When the global economy will open fully is at this point an academic question; it really doesn’t matter whether it happens in three months or six. The reality is however that the nature of our global economy has changed inexorably.
Starting from the early 1990’s, the push for globalization championed during the Clinton years has hit a brick wall due to the combination of US trade wars and Covid-19. Exactly what impact the trade wars have had on global commerce is a different debate for a different platform. Be that as it may, Covid-19 has reversed almost three decades of international integration, cross-border cultural exchanges and free movement of peoples. The most visible example of this can be seen on the European continent, where once the European Union was a single cohesive supranational body, it is now a hodgepodge of small nation states carefully guarding their borders. A similar breakdown of cooperation may also be seen in and amongst Latin American countries in the near term.
But it’s not all doom and gloom. The emergence of hard borders could prove to be a boon for indigenous manufacturing. Where once heavy industry and blue-collar jobs moved from the West to select countries in Asia, there will inevitably be a reversal of this phenomenon. There was a widespread jolt in the United States when it first became public knowledge that much of the personal protective equipment in that country was in fact being manufactured in China. That is to say, American lives and the American healthcare system have been dependent on what the Trump administration has defined as a clear threat: China.
Importantly, after emerging from the trauma of Covid-19, consumers the world over may well be inhibited in their spending. Where once upwardly mobile aspirational young people would have saved for the latest, most expensive smart phone, they can now be expected to save hard-earned salaries for any eventuality. This will undoubtedly impact the revenue of large multinationals who thrive on consumer spending. However, it will also result in increased savings (at the individual and the collective level). Yes, we are not going to see unrestrained spending and this may not be exciting in the short run, but more responsible financial behavior is surely an advantage on balance.
Quite apart from spending behavior, it is now clear that we will have to fundamentally reimagine how we live, how we work, and how we socialize. The near universal usage of videoconferencing applications is not likely to die down once Covid-19 has been contained. Corporations, big and small, will realize that they stand to save vast sums of money by having employees work from home. Furthermore, this will make for happier employees – who for once will not have to keep chasing work-life balance. The very definition of recreation will also, I suspect, change in the days ahead. Gathering in highly dense locations like malls, cinemas or stadiums may well be a thing of the past. This will negatively impact the revenue streams of established businesses, and will open up opportunities for other more innovative avenues of entertainment.
It’s important to acknowledge that, in the larger scheme of things, Covid-19 may not be uniquely destructive. The human species have weathered other equally deadly diseases. And yet, it is also worth noting that how the global community as a whole responded to this challenge is unlike anything seen before.
Regardless of who we are or where we may be, we have felt the terror that spread through Wuhan, made its way to Italy and ravaged London on the way to New York. We have prayed for all those who have been struck down, we have celebrated all those who have survived and we salute every front-line worker who is currently serving humanity.
Post-Covid-19, the world is likely to be a different place. In many ways, it won’t be as it was before but maybe, just maybe, because of the common experience of confronting a common threat, it could become a better place to live.
