Economists, investors, and CEOs on how the coronavirus has forever changed the world
14 May, 2020, 12:40 am
Last modified: 18 May, 2020, 07:24 pm
Disclaimer: This article first appeared on Bloomberg.com, and is published by special syndication arrangement.
The coronavirus pandemic has forced economists, financiers, executives, and policymakers to jettison or dramatically revise their forecasts for 2020. But what will the future look like on the other side of the crisis? We asked a variety of leaders from around the world for their best guess on how our lives will be fundamentally changed.
The "Great Lockdown" has likely tipped the world into its deepest economic contraction since the Great Depression. Some forecasters say a bottom is near, but few expect the economy to snap back to the way it was before the pandemic. Get ready for massive debt relief, more government intervention, heightened China-US tensions, and—on the bright side—more women in the workforce.
After the pandemic stabilizes, the New Cold War will be more visible between China and the US-led West. The blame game has already started. But it will get worse once the economic hardship from the pandemic materializes in the coming months or years, to decouple China further from the developed West. As a result of the crisis, China will shift further back to its Communist roots and the Maoist era in terms of worldview and policy mindset.
There will be a vast tangle of unpaid debts that cannot be cleared, and—what is different from 2008 and 2009—the model of foreclosures, evictions, and repossessions to deal with them is going to be absolutely unacceptable. People sheltering at home without income are in no way responsible for their circumstances and will refuse to accept the terms of those contracts. So the contracts will have to be suspended, and the debts cleared away, or there will be a confrontation on a vast scale. This is similar to the farm foreclosure confrontations of the 1890s and 1930s in this country, but on a much larger scale, and in many cases urban and suburban. The right model is that of the treatment of inter-allied war debts after World War II: They were canceled, because dealing with the common enemy was a common effort. So the whole financial system will have to be reset. This is not an ideological point but a practical necessity for reestablishing a functioning economic system.
Essentially the coronavirus will make the world look more like China, in terms of the state's involvement in private-sector activities. It is the US converging to China, not the other way around.
The pandemic has proved the extent to which we can still be effective and create value away from our office desks. For a country like Japan, where there is still a tendency to measure performance by hours spent at the office, I believe there could be important implications for gender diversity in the workplace. If Japan embraces greater flexibility in working styles, and if the unprecedented amount of time some Japanese men are currently spending at home encourages them to take on a greater share of housework, then I hope we will see more women being liberated to pursue full-time careers. These are big "ifs." But the economic boost could be substantial; at Goldman Sachs we estimate that closing the gender employment gap could lift Japan's GDP by 10%, and in a "blue-sky scenario" where the ratio of female vs. male working hours rises to the OECD average, the GDP boost could expand further to 15%.
Ray Dalio says money managers should get used to near-zero interest rates. They should also stop hoping for a V-shaped recovery, argues real estate billionaire Sam Zell. Banking titans James Gorman and Mike Corbat see more and more of the financial industry going digital. One upshot: Firms like Morgan Stanley and Citigroup may not need all that office space.
Travelers wearing protective masks and raincoats at the Hankou railway station in Wuhan on April 8 as China lifted restrictions after an 11-week shutdown. Photo: Bloomberg
The second-order consequences of the coronavirus will be big. The large monetizations of debt and the pushing of bond yields to around 0% (while necessary) will reduce the appeal of holding dollar- and other reserve-currency-denominated debt. The wealth and political gaps and the conflicts from them will influence the distribution of wealth and power. The differences in how the United States and China handle this crisis will influence changes in the world order.
We're all learning about each other as family groups. The family meal is a tradition that maybe will be restored again. There may be a kinder, better world—and I don't mean to be too schmaltzy—but I think that's a very probable outcome. Another thing which is probably not as good—we're going to become more and more nationalistic. We're becoming more isolated and less globalist. It comes at a time when we need cooperation for the climate. There will be less importing, more of a trend to manufacture at home and not depend on other people, whether it's oil or electronic components.
In our industry, financial activities viewed as inviolably "high client touch" are moving online by necessity. From putting letters of credit on blockchains, digitally onboarding clients, and conducting virtual roadshows for IPOs, bankers are ripping up some of the last paper trails we have left. Consumers who might have not done a lot digitally until now are engaging remotely. Many of those core activities will never go analog again. All that puts even more responsibility on financial institutions to help close the digital divide, for people, communities, and clients in the public and private sectors. We'll need to do more to bring more people into the formal economy, because increasing free and low-cost access to digital services is going to be key to the coming recovery.
I can't imagine companies are going to go back to spending as much on business travel. Everyone has been forced to figure out how to do business across country using Zoom or whatever video products. And there's a ton you can get done, there's no question, and it can be very intimate, in fact. I hope it's going to have a lasting impact on things like co-parenting. That would be a beautiful thing. There's a lot of men out there who are realizing there's great pleasure in doing a lot more with their families than maybe they were able to do when they were working 16 hours a day. There's a lot of jobs that can be done remotely.
Does this change how we hire around the world? Unfortunately it probably pushes outsourcing a lot more for certain types of jobs in the US, because you can hire someone just as well who doesn't have to necessarily live in your town. So in some ways it's positive for the world, creating a more dynamic economy. In other ways it could be another pressure on the middle class, which I'm a little bit worried about.
There are so many unintended consequences that we don't understand yet. The markets will continue to be very volatile, because with this degree of unprecedented uncertainty, analysts and others can't really create the dimensionality around which you can create models for valuation purposes. There are just too many variables and interacting differently. They defy being modeled.
The impacts will be societal, economic, political, and personal, from smaller things such as being more mindful of personal hygiene and closer scrutiny of cultural norms like handshakes, to larger things such as the way elections and mass gatherings like sports events may be held and attended. We have already seen some changes that appear to have real potential to be long-lasting, including the accelerated use of technology to facilitate remote work and distance learning, and a greater reliance on experts in all walks of life for facts, insight, and guidance.
Clearly we've figured out how to operate with much less real estate. Do I think everyone is going to be working from home? No. The mentoring, the connection, the team bonding, the brainstorming, the creativity that comes from being in groups of individuals, like-minded and not like-minded, that's how great organizations thrive. But can I see a future where part of every week, certainly part of every month, a lot of our employees will be at home? Absolutely. People have been functioning extremely well. We will have less footprint.
The biggest change will be how businesses look at the supply-chain issue. That's the 1,000-pound gorilla. Will companies that are dependent upon China for essential parts for their businesses move production out of China or at least second-source out of China? That's going to come back to the fore as businesses and people in the financial markets try to figure out, "OK, how much exposure should I have to the Chinese economy?"
Too many people are anticipating a kind of V-like recovery. We're all going to be permanently scarred by having lived through this pandemic. How soon will anybody get on an airplane? How soon will anybody stay in a hotel? How soon will anybody go to a mall? The fact that these places may be open doesn't necessarily mean that they'll be doing business.
The travel industry won't disappear, but it may look a lot different. Ditto for fashion, shopping malls, sports, and digital payments, to name just a few.
A thermal camera at a supermarket in Georgia registers the temperature of customers entering on March 26. Photo: Elijah Nouvelage/Bloomberg
People will go out less, be at or near their homes, and spend more time with their families. We will think about our clothes in this way, so that people feel less stress. When the world changes, clothing will change accordingly.
The new global consciousness about the migration of germs—not just within a household, but within a community, state, country, and across the world will continue to impact the way societies at large go about their daily lives. We now understand how the actions of a single person can impact literally thousands of others globally. The underappreciated role of hand-washing and being careful about what your hands touch—especially outside your home—is and will continue to be top of mind. We are rethinking how to push an elevator button, open a door, or greet a friend. And adjusting the way we shop, too—how we inspect produce, where we place our phone, how close we stand to one another on line, and even how we pay.
You're going to see fever checks in all airports. They're going to try to catch anyone who's coming through who may be infected. Certain jurisdictions are going to ask you to download an app to track where you are. Because they want to know—if you've come from another country—and you turn sick, they're going to want to know who you've been close to. People may have to give up some of their privacy if they want to go to certain countries that are going to be more hesitant about letting people in.
Don't you wonder whether work from home has changed forever? I think it may have. We've all learned how to do this. I've been going into an office for 40 years, and all the sudden I've had to figure this out. Which, you know, it's been pretty easy. I happen to be a tech exec, but still. It's pretty efficient. I wonder if this will change how families communicate. Every weekend now we're on with both my husband's family and my family for an hour and a half, doing a Zoom call. We never did that before!
People will interact in a different way, and products and services will move. For example, we have a lot of malls where people visit. I'm sure that the whole e-commerce side of the business is going to grow and become the new normal after Covid-19.
Usually in times of crisis, sports bring us together. Whether it's 9/11 or Katrina or a war, sports have this unifying quality. In this case, I can't think of anything worse than sports. You've got this communicable infectious disease, you've got this terrible virus. What could be worse than putting 60,000 people in one place and telling them to all stand in tight quarters? It's really problematic. The big question is how creative are sports willing to get?
Sports have really been moving toward the viewer at home, the viewer on their phone and away from the arena. Media rights matter more than ever. Maybe this will accelerate. But even if there are no fans in the stands, you've got players, officials, someone's got to operate the camera, someone's got to be in the broadcast truck. Even without selling a single ticket, you're still talking about hundreds and hundreds of people on the ground. The threshold for when is it healthy enough, and when are we economically desperate enough, is going to be really interesting to monitor.
After this crisis, the way we work will be very, very different. To work from home might become very common. Now is like a stress test to see if working from home works or not. I think it does to some extent. Also for Zoom, the boundary between the consumer use case and business use case is not very clear anymore. We need to rethink how on the one hand, we keep serving our big business customers and—given there are so many consumer use cases—make sure we balance that and really focus on privacy and really focus on security.
We have to reinvigorate the mental health conversation around the world as we look to manage the long-term implications of loss, loneliness, and financial strain. It will take time, but we will come through this stronger together.
While the virus has emboldened nationalist politicians, it's also sparking hope among some policy wonks that global leaders will be reminded how important it is to work together. More collaboration would be good news for some of the world's most daunting challenges, everything from fighting climate change to strengthening supply chains.
The pandemic stresses us. It reminds us that we are connected. It reminds us that global supply chains, personal relationships, everything is connected. We don't win alone. We don't even win as small groups or nations. We win more broadly than that. We start to think a little more broadly about problems like global warming, like income inequality, and other things that dog society.
Our way of working is going to be different. It was sort of a shock to a lot of organizations and people to have to work from home. But a lot of people are finding that they can stay connected. Businesses are going to migrate to a new normal that's sort of a hybrid from what we used to be. We won't do away with offices entirely, but we're going to do a lot more connected. It's going to widen our reach. The most aggressively networked organizations, whether military or businesses or governments, are going to come out really well.
I hope I'm not looking at it through rose-colored glasses, but it's possible we may understand that at least with regard to minimum safety nets, and minimum health care, we need to do much more for our country and each other than we are doing now. We can't ever afford to find ourselves so unprepared and lacking in the basics. The richest country in the world can't even make sure all its people are safe. That makes no sense. Americans as a whole are gaining a deeper appreciation of how important government is. When government does not really function as it should, most of the time for most of us it's just an irritation. Now it's a matter of life and death. That changes the calculation. It changes the stakes. Americans emerging from this may say to themselves: We really do have to have a government that works well. And we've got to have a public-health system that is the best in the world. Why not?
A lesson of the crisis would be to increase resilience of all economies and entities, public and private, and prepare for what we're seeing now—namely, a sudden stop of part of both production and demand in many economies of the world. We shouldn't be depending on only one source for any particular service or manufactured good just because it keeps down costs. The idea of risk management and risk diversification at the level of the planet will be a key part of the concept of sustainable globalization.
There is a compelling case for international cooperation and coordination in addressing the crisis and keeping its devastation to a minimum. If that coordination takes place and is successful, it could provide the basis for the next stage of international cooperation, integration, and economic growth. If, however, many countries choose to insulate themselves from the rest of the world and fail to act with others, the crisis will last longer and the chances for increased nationalism and diminished integration will greatly increase to the detriment of the entire world.
All these trends that we thought would play out over 10-20 years are happening now because we're in this crisis. We're going to have to shift to where the first point of care is going to have to be artificial intelligence. If you have a symptom, you go online to an AI program. Everybody will have a home kit of a thermometer and a scale and a blood-pressure cuff and a few other simple things. You'll put in your symptoms and your readings from home. And you'll get a differential diagnosis. If you just have to stay home and have chicken soup and liquids and rest, the AI will tell you that. If you need to be escalated, the AI will refer you to a telemedicine general consult, and then perhaps to a specialist telemedicine consult, and only then to a human.
The fact that we were able to pull off within two weeks, almost across the entire nation, finding an alternative way to deliver on the goals that students finish their courses and graduate, if they're eligible for graduation, is astonishing.
If we're smart, we will have learned so much about how to be better in the work that we do and better in our relationships with people. We'll use all these technologies we have to their best advantage, rather than sometimes to the lowest-common-denominator worst advantage. I also think that people will have such a greater appreciation for in-the-moment relationships that they'll never take them for granted again.
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