Throughout the world, people are struggling to assess the consequences of the Covid-19 pandemic. From an economic perspective, most experts agree the crisis will have lasting negative effects. At the same time, the crisis has triggered some good news and a much-needed wake-up call as well.
Let’s take a look.
A simple GDP calculation tells us that if we return to normal now, it will take us at least 3 years to go back to the pre-Covid-19 economic levels. The real question is when can we go back to normal and realistic estimates of normalization vary from early to late 2021.
With this in mind, we all need to replace our current fixation with daily Covid-19 statistics with a focus on preparing for the good, the bad and ugly.
It is undeniably clear this virus is about to trigger an economic depression that in many aspects is more severe than any crisis in modern human history.
While national GDP’s continue to shrink, the virus is wiping out the value of publicly traded companies throughout the world. While there is some talk of creative destruction, reality is that flagship institutions are being destroyed and nothing is being created in their place.
Similarly, commodity prices are facing historical drops catapulting global energy markets into chaos. And with storage facilities almost reaching capacity, oil producing countries continue to generate more supply that will not be matched with new demand.
Countries are already facing massive unemployment. More unemployed people, besides economic hardship, will also lead to an increase in crime and other societal problems associated with large-scale unemployment.
The worst consequence of this invisible menace is of course the thousands -potentially millions- of lives that it will claim before it disappears.
Learning the hard way
On the other hand, Covid-19 has generated some good as well. The appetite for financing civil war has plummeted together with the profits of fossil fuel exporters like Saudi Arabia, Russia and Iran causing less bombs to fall on innocent civilians in Yemen, Libya and Syria.
While discussions about environmentally friendly production methods have gained prominence, realization kicked in that we cannot continue polluting the earth without accountability.
White collar workers in big cities spend an average of 1.5 hours a day to commute to work. In a country like Turkey with 8 million white collar workers, this means 10 million extra working hours and less pollution. With policy-makers and employers realizing people can actually work from their own homes, plans to build more roads and office buildings have been cancelled and we are finally discussing how to stimulate less travel instead of facilitating it.
The importance of international cooperation has been acknowledged; even by traditional antagonists. Both voters and politicians finally aligned on the value of universal healthcare while the service of healthcare professionals is now globally recognized.
Having witnessed that investing in oil is riskier than previously assumed, investors have taken a renewed interest in clean energy companies which seem better suited to weather the crisis.
The inability to import everything we need has caused a new appreciation of local agricultural production while the need to stop (mistr)eating animals is now painfully clear.
A US-China Cold War at the gates?
Faced with a necessity to stay at home due to the Covid-19 measures, book sales went up and people are reading again. They are also learning to differentiate between what they “need” and what they used to think they “needed”.
E-commerce is finally receiving the appreciation it deserves while a new focus on efficiency and digitalization in traditional industries like banking and finance has become inevitable.
While the necessity to stay at home has increased domestic violence throughout the world, a positive externality of that same necessity has brought many families closer together while societal appreciation of the local community is finally more felt.
And last but not least, with economic activity coming to a halt, for the first time in decades, our planet has been allowed to breathe. Even in large cities wildlife has celebrated this rare occasion causing birds to sing and dolphins to dance.
Besides the good and the bad, perhaps the ugliest but likely consequence of this Covid-19 crisis will be a new Cold War; this time between the United States and China. It was already in the making but it now seems inevitable and will carry substantial repercussions for every citizen on this planet.
Finally, perhaps most worrisome of all, is the fact that no real contingency planning exists for a crisis of this magnitude that could help us leverage the good, mitigate the bad, and prepare for the ugly.