Ten Ways Coronavirus Crisis Will Shape World in Long Term - Financial Times

11/14/2020 Ten ways coronavirus crisis will shape world in long term | Financial Times
Special Report World Economy
Opinion Coronavirus pandemic

Ten ways coronavirus crisis will shape world in long term
Much remains uncertain for business, the economy, domestic politics and international relations
MARTIN WOLF
Shoppers in Manila maintain social distance while queuing © AFP via Getty Images
Martin Wolf NOVEMBER 3 2020
https://www.ft.com/content/9b0318d3-8e5b-4293-ad50-c5250e894b07?sharetype=blocked&fbclid=IwAR2UKHeJxdTkUAwCZljX1kuBETcF4naVvPnz91naNswjppmW3LjU8la6J24 1/10
Covid-19 has had an immediate and massive impact. But how will it affect the longer term? That is
far harder to tell.
What do we already know, after 10 months of Covid-19? We know that the world was ill-equipped
to cope with a pandemic. It has caused about 1.1m deaths worldwide, mostly among the elderly.
Moreover, some countries have suppressed the disease far more successfully than others.
We know that Covid-19 has inflicted a huge global recession, but one that has been far from equal
across countries. This has inflicted particularly serious economic damage on the young, the
relatively unskilled, working mothers and vulnerable minorities.
We know that “social distancing”, partly spontaneous and partly enforced, has damaged all
activities dependent on human proximity, while benefiting ones that help people stay home. This
has slashed travel. We know that vast numbers of businesses will emerge heavily burdened by debt
and many will fail to emerge at all. Intervention by the fiscal and monetary authorities has been
unprecedented in peacetime, especially in countries with internationally accepted currencies.
Commuting may not go back to the pre-Covid status quo © Valery Hache/AFP via Getty Images
We know, not least, that the “blame-game” over the pandemic has destabilised relations between
the US and China. Moreover, the pandemic has already called globalisation, especially of supply
chains, into question.
What are the longer-term possibilities? Here are 10 aspects.
First, future of the pandemic. It is possible that a vaccine will be available quite soon and that it
will be made available across the globe not much later. But this combination seems unlikely. If so,
the disease will remain a threat for a long time.
Second, permanence of economic losses. These depend partly on how soon the disease is brought
under control, but also on how deep the scars will be, particularly, the impact of unemployment,
bad debt, increased poverty, disrupted education, and so forth. The world economy and most
individual economies will probably be permanently smaller and their peoples also poorer than they
would have otherwise been.
Third, structure of economies. Will these go back to the way they were before Covid-19 or will we
stop travelling and commuting to offices for good? The likelihood is that it will be both. Travel will
resume. So, too, will commuting. But they may not go all the way back to the pre-Covid status quo.
We have leapt into a new world of virtual engagement we will not leave. This will change some
patterns of living and working for good.
Fourth, enhanced role of technology. This is not going to reverse. At the same time, the centrality
of the tech giants has increased the focus upon their enormous influence. Pressure to regulate
monopolies and increase competition, especially in the tech sector, is likely to increase.
Fifth, the expanded role of government. Big crises tend to cause a step change in the role of
government. Particularly significant is pressure to “build back better”. So governments are likely to
be permanently more interventionist than before the pandemic?
Sixth, unwinding of interventions. Central banks are committed to “low for long”, in interest rates.
Provided real and nominal interest rates do remain low, governments will be able to manage their
own debts and help manage the restructuring of the debts owed by others. At some point, fiscal
deficits will have to be reduced. Given the pressures for spending, that is likely to mean higher
taxes, especially on the wealthy “winners”.
Seventh, effect on domestic politics. Some countries have shown effective responses to the crisis,
while others have not. Whether a country is democratic or not has not determined this difference.
Part of what does is whether the government cares about its effectiveness. Populist demagogues,
such as Jair Bolsonaro, Boris Johnson and Donald Trump have performed poorly. This may force a
shift against their performance politics.
Eighth, impact on international relations. This is a truly global crisis and one that can be effectively
managed only with global co-operation. Yet trends in the direction of unilateralism and
international conflict have been reinforced by the pandemic. The chances are good that this will get
worse now, especially between the US and China.
Ninth, future of globalisation. The globalisation of goods had already slowed after the 2008
financial crisis. It is likely to slow further post-Covid-19. The multilateral system is likely to be
further eroded, especially the World Trade Organization and the trade disputes between the west
and China will not be resolved. At the same time, virtual globalisation is likely to accelerate.
Finally, management of the global commons. On this, Covid-19 is a double-edged sword. One side
is the increased desire to do things better, not just domestically, but also globally, notably over
climate. The other is the reduced legitimacy of international agreements, especially in the US,
which has withdrawn from the Paris climate accord and the World Health Organisation.
Covid-19 is a profound shock. It follows the huge disruption of the global financial crisis just 12
years ago. It is sure to have large long-term consequences for business, the economy, domestic
politics and international relations. Much will change. We can guess some of it. Much remains
uncertain.
Copyright The Financial Times Limited 2020.

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11/14/2020 Ten ways coronavirus crisis will shape world in long term | Financial Times

Special Report World Economy

Opinion Coronavirus pandemic

Martin Wolf NOVEMBER 3 2020

What are the longer-term possibilities? Here are 10 aspects.

Copyright The Financial Times Limited 2020.

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