Mar­kets are mis­taken, the new nor­mal is here to stay

Kathimerini English - - Front Page -

Pan­demic re­sponse. The eco­nomic re­cov­ery will not be un­til 2024-25 at the ear­li­est, and big­ger gov­ern­ment is one of the long-term changes now un­der way.

We are in a cri­sis. No­body would deny that. At some point we will all face the re­al­ity that dis­rup­tion is with us for some time.

The largest so­cial dis­rup­tion in the US since the 1960s, sparked by the racially charged and tragic killing of Ge­orge Floyd. The worst eco­nomic down­turn since the Great De­pres­sion. The great­est pub­lic health threat since the Span­ish flu.

All con­nected, all am­pli­fy­ing each other. Yet we have re­opened, through pol­icy and protest alike.

And no mat­ter how un­com­fort­able it may make us, we must un­der­stand and chal­lenge this ‘‘new nor­mal’’ ac­cord­ingly.

Mar­kets, which we have come to view as all-en­com­pass­ing judges of risk and op­por­tu­nity, are read­ing this cri­sis wrong. Share­mar­ket op­ti­mism should be ig­nored. Its high-fly­ing mood is noth­ing more than a punt on the flow of free money.

First, the econ­omy. Just as they did af­ter the 2008 scare, con­sumers are load­ing up their sav­ings – so economies won’t likely get off their backs on con­sumer spend­ing.

We may well get a fairly brisk re­cov­ery in places where pub­lic fi­nance can be wheeled in freely and to ef­fect. In al­ready over­loaded debtor na­tions, that will only make mat­ters worse.

All up, I ex­pect a credit crash in the next eco­nomic wave.

The virus is still spread­ing and in some places it will run amok. Thank­fully that is not the case in Greece but as the bor­ders open to tourists the sit­u­a­tion will have to be mon­i­tored closely.

The ex­tent of that risk is so great that we re­ally can’t as­sume pre-Covid-19 mo­bil­ity be­fore we achieve near univer­sal im­mu­nity, pre­sum­ably from a vac­cine.

Given the time re­quired to con­firm the safety of a vac­cine and to then pro­duce it in vast quan­ti­ties, I think the ear­li­est we can ex­pect a low point or base in this cri­sis is 2023. The ear­li­est re­cov­ery would then be in 2024-25. Even this pic­ture re­lies on big ifs. Such as: if we get a true vac­cine, which it­self is no small chal­lenge, made tougher by Covid-19 mu­ta­tions that ef­fec­tively re­quire spe­cific vac­cines. Changes that have al­ready oc­curred in our lives are likely to be baked in.

Travel, for ex­am­ple, won’t go back to the way it was for a very long time. So tourism will be dif­fer­ent. Coun­tries like Greece, that rely on tourism, will have to adapt. Mass tourism will go away so the new model will need to be one of pri­or­i­tiz­ing qual­ity over quan­tity.

In fact, a whole range of hu­man, con­sumer and busi­ness be­hav­iors of a sus­tained kind are un­der way.

Covid-19 ac­cel­er­ated the dig­i­tal ef­fect, boost­ing the in­ter­ac­tions and com­merce of dig­i­tal means to lev­els a long way above the pre-pan­demic ex­pe­ri­ence.

Work has changed. In Greece and else­where pan­demic con­tain­ment mea­sures have fallen heav­ily on those who work in cus­tomer-ex­pe­ri­ence roles such as hos­pi­tal­ity, travel and tourism. These of­ten are also min­i­mum-wage jobs, their loss cre­at­ing pro­found ef­fects for peo­ple who have few op­tions.

This prob­lem ex­isted be­fore Covid-19, but now it is mas­sive and en­trenched, with lit­tle ev­i­dence of re­lief.

We sim­ply have to act to pro­tect peo­ple most af­fected by the pan­demic, not least be­cause other forces at work will heighten risks to their wel­fare. The United States and China were al­ready headed for col­li­sion, and Covid-19 has made mat­ters worse.

China wants global lead­er­ship, but not for a mu­tual ben­e­fit.

China wants a world on China’s terms, and that will force peo­ple to make choices. Com­pa­nies will have to de­cide whether they have two ways of op­er­at­ing, and max­i­mize ef­fort where it best suits them.

That is a sim­ple choice for US or Chi­nese com­pa­nies, but tough for coun­tries such as Aus­tralia and Canada and even tougher for coun­tries like Greece. Their choices will be made harder by the fact that the US is likely to fo­cus on its own in­ter­ests for at least a decade or two.

In the end, most West­ern-based com­pa­nies pre­fer the Amer­i­can way of do­ing things.

For the West, how­ever, I think cap­i­tal­ism and democ­racy are go­ing to have a sort of di­vorce af­ter what has been a very much mar­ket-de­fined mar­riage.

Gov­ern­ments are go­ing to have a big role. They must step in to deal with schisms and in­equal­ity that are a blight on so­ci­ety.

They must un­der­write strong, ac­ces­si­ble health and ed­u­ca­tion sys­tems. They must act to man­age out­comes for the wider com­mu­nity, to give cit­i­zens a fair share of what can be a highly pros­per­ous pe­riod.

A new in­no­va­tion agenda in coun­tries re­spond­ing to the Covid-19 im­pact will do bet­ter than we have done in cre­at­ing new work, valu­able work that en­gages tech­nol­ogy and skills in ways that are both sus­tain­able and re­ward­ing.

Per­son­ally, I have been en­cour­aged by the Covid-19 ex­pe­ri­ence in its stim­u­la­tion of com­mu­nity.

Peo­ple pro­tect­ing each other. Peo­ple act­ing for the com­mon good. Peo­ple tak­ing time to share and help at a ba­sic hu­man level.

We’ve learnt we can count on com­mu­nity. It’s a pow­er­ful idea.

Now we can act also on the other big is­sues. We can take care of the planet. And we can work on or­ga­niz­ing so­ci­ety for bal­ance and fair­ness and op­por­tu­nity.

Med­i­cal per­son­nel wait to ex­am­ine peo­ple for Covid-19 in Athens, yes­ter­day.

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