THE NEW WEALTH: SPACE, SAFETY, SECURITY.

With its profound health and economic effects this pandemic will transform society in ways we do not yet fully understand. History teaches that major events result in major shifts in new consumer and voting patterns, some of which were not foreseen at the time they happened. Let me try anyway.

I think of my own parents, who lived through the Great Depression and two world wars. Those events affected their habits for the rest of their lives. They became cautious with their finances, avoiding risks that might entail a loss of their retirement savings or home. They preferred investments in bonds rather than equity. With war rationing, they learned that we could do without many things even if we would prefer to have them. At the same time, they were optimistic about the future once life became more settled. After all, what could be worse than two major wars and an economic depression in barely three decades?

The Pew Research Center reports on polls taken after 1933 on political attitudes in United States. Depression-era Americans felt insecure economically and more supportive of institutions and government spending. Americans supported Franklin D. Roosevelt’s New Deal, social security, and regulations to prevent misleading advertising and prohibit child labour. They also favoured nationalizing electric power and the munitions industry but were tough on crime because of rising theft during the Depression. On social policy they had mixed views, accepting that wages were too low and profits too high but generally opposing strikes or increasing farm and wage benefits. Support for government spending eventually weakened, however, as public debt mounted to 40 per cent of GDP in 1937 (we should be so lucky!).

As we come out of this deep recession in 2020, I expect people will become more cautious and feel less secure. They

expectations seem to be (that) governments have

unlimited resources.

will be worried about their health and hygiene. After losing jobs and in some cases, homes or businesses, they will want to make sure they have sufficient resources to meet future contingencies. While governments have poured money into the economy to offset the effects of the lockdown, it will soon become apparent, maybe even before fall, that they don’t actually have $2.2 trillion a year in their pockets to replace the economy’s annual output of goods and services on a continuing basis.

After their experience with social distancing, people will want more space. They will also want more safety and security.

Many businesses will have to rethink operations that until this March crowded people into airplanes, restaurants and bars, and offices. Trying to boost density has been the goal of much recent urban policy. Not any more! Rather than take public transit, many people will prefer driving alone to work. Living in an unattached single home will trump a densely crowded condo development. Travel for domestic vacations may feel safer than travel to a far away destination. People likely will be willing to pay a premium for space if it means more health protection at gyms, grocery stores and entertainment facilities.

The consumer shift to safety and security will also have broad implications. After the financial crisis of 2008 and the pandemic of 2020, people will want to ensure they have sufficient resources for future contingencies. They will be less willing to take risk, which will affect their choice of occupations, their finances and what they consume. They will prefer employers in sectors less subject to booms and busts, who could also provide more secure pension arrangements. They will want to make sure they have good health care and longterm care for their retirement.

People will also look to governments to provide security. Financial security is best met by job creation and better incomes, which will make economic growth government’s number 1 priority. People will want to be sure governments can handle future emergencies, including by stockpiling medical equipment or supporting domestic supply. They will want an effective and innovative health system to deal with diseases — even if they have to pay for it. Safety will be important whether at home, in the workplace or in public spaces.

Right now, public expectations seem to be based on the idea that governments have unlimited resources to support the economy. They don’t. You often hear that governments, unlike people, can rollover debt forever. But that’s true only if private lenders are willing to buy public bonds. And that depends on governments’ fiscal sustainability. If the market is worried a government might eventually renege on its debt rather than impose the higher taxes needed to pay it, credit spreads will widen, making the debt burden even less manageable. That’s what happened to Greece and Italy after the past financial crisis. In the end, Germany had to bail them out. But we don’t have a Germany to bail us out.

These are just some of the changes that may occur as space, safety and security preoccupy the broad public. But we should not jump to the conclusion that only government can provide these things. Governments should instead make sure their policies help, not hurt, economic recovery. There is hope at the end of all this if we manage risks well.