We face unprecedented times with the focus of the entire world on beating the Covid19 pandemic and probably never in world history has mankind faced one common enemy of such magnitude — there are usually sides.
This crisis has a number of interesting implications including that it could be a unifying experience for the many factions fighting in the world. If your enemy’s enemy is your bitter enemy too there is a logic that your enemy could be your friend. This could paradoxically lead to the world becoming a better place.
However, the immediate priority is fighting the scourge and the Western world is at a critical phase as it locks down to control the infection rate. China appears to have managed the threat with some other countries making progress, and the present action plus the enormous worldwide effort that is being put into finding a vaccine will lead to an eventual resolution.
But ‘when’ is the question. In the meantime, the world is suffering hugely, both sociologically and financially, and there is a strong argument that life as we knew it just a few weeks ago will never be the same again. Possible changes are conjecture but it is interesting to consider the implications and how our lives will be affected.
Firstly it is important to consider how the world was racing exponentially to oblivion. Climate change is driven by man’s profligacy and with the ever expanding population it is simply not possible for everyone to enjoy a Western world lifestyle, which is the ambition. Modern hedonism is quite unsustainable with people jumping on aeroplanes for a weekend on the other side of the world, excessive, conspicuous and often pointless consumption, ever increasing investment in pursuit of continuous economic growth and everything always bigger and better which in aggregate are using the world’s resources at an unsustainable rate.
Never in the world history has there been such growth. In the extraordinary period of the 75 or so years since the end of WW2 real world GDP has grown over 20 times to approx $80 trn (it was just over $1trn in 1900) and population has risen three times, so GDP per capita has grown seven times. This in three generations!
Nothing can go on forever and there are many examples of this excessive consumption of world resources leading to various social, financial and ecological problems, and arguably the world has reached its sustainable capacity. This is not a new concept and various voices are communicating these concerns, but no one in power is listening due to the immediate economic and often political implications, and also mans’ deep confidence in himself brought about by a long period of extraordinary success.
In these circumstances only a radical shock will bring change, and perhaps the coronavirus is prescient as when it is over man’s supreme confidence that technology can resolve everything will be shaken. There is also the theocratic belief of many that this pestilence is a warning to man as has occurred on occasions in Biblical times. Maybe this is the time that the world reboots!
So what are some possible consequences of this tsunami that has hit the world, and what will be the residual damage once the waters subside? The first probability is a massive recession as many industries are wiped out. Tourism, aviation, hospitality, some manufacturing and retail will all take massive hits, and for many businesses it is likely that they will not be in a position to recover — such will be the economic damage, especially for highly leveraged companies.
What are the prospects for banks, as a large proportion of their loan portfolios becomes non-performing? The key issue is how long it takes for some form of normality to resume, though predictions are changing from weeks to months and even years.
Some governments can support their citizens, as the UK has pledged, but where will the funds come from? Also what about the poor countries who will be unable to provide much support? Taxes will be reduced and loans will be difficult to raise, as the world is at present overborrowed to the tune of three times world GDP so the only option is to print money. W
World net worth will dive with depreciating equities and unredeemable bonds, and it will become a much poorer place. Everyone will be hit and though only conjecture living standards must fall, possibly by 10-15percent.
The question is will this be a bad thing? Certainly people will suffer, but it is probable that life will change forever and a new dynamic will evolve. Maybe life will go back years with people travelling less, consuming less and living more simply. The only concern is that many jobs will go, and large employing industries like mining, steel making and heavy manufacturers may no longer exist.
How populations will remain economically active is the challenge in our digital world, this probably being a force against globalisation, and it is likely to lead to protectionism and increased local production. It will also lead to most people questioning their lifestyles and material ambitions, and though a simpler life with reduced consumption may be forced on them the virus experience will make it easier to accept.
Though the prospects considered are very concerning there is no doubt that when this pandemic is resolved, and it certainly will be, the world will be a transformed place. The extraordinary experience of having assumed freedoms withdrawn and a period of incarceration imposed will change people’s priorities and perceptions of life and probably make the difficult political decisions that need to be taken more acceptable.
Political dogma will certainly change, as will many leaders who will be empowered to introduce the radical changes necessary to address the world’s real problems of climate change, population and resource conservation.
The writer is chairman, Davis & Shirtliff