The long-term effects of the coronavirus
The global spread of the coronavirus COVID-19 is the ultimate news story. On the one hand, new statistics are announced on an hourly basis. On the other, the idea of a mysterious new disease spreading from country to country plays on humanity’s deepest fears. Given both the physical and psychological impacts of this novel coronavirus, it is time to examine its potential long-term effects on a global scale.
One potential effect may be to alter global trends in the way in which almost everything we use is produced. The supply chains for innumerable products have become increasingly global and interconnected. China accounts for approximately 27% of the world’s manufacturing output. Together with South Korea, the two countries account for over 30% of global manufacturing.
The Chinese city of Shenzhen – one of the first cities to which the virus spread from Wuhan – manufactures, according to some estimates, 90% of the world’s electronics. China is one of the world’s major producers of raw materials for the pharmaceutical industry as well.
There have been close to 80,000 reported cases of coronavirus in China, with over 2,700 deaths. While some reports indicate that the spread of the virus in China has slowed, it is still too early to tell if this trend will hold. If COVID19, or panic over COVID-19 in Asia continues to spread, this will have far-reaching consequences for the global supply chain.
Already today there is a counter-trend to the globalization of supply chains. The fourth industrial revolution, which includes the growth of autonomous smart factories, together with rising wages in China, and international trade wars, is decreasing the gap in production costs between China and the West.
According to the Boston Consulting Group, in 2016, “overall productivity-adjusted manufacturing costs in China came within a few percentage points of parity with the southern US.” As a result, “a number of manufacturers began re-shoring the production of goods sold in North America back to the US to cut logistics costs and be closer to customers and core R&D operations.”
Indeed, at the February 25 Israel Industry 4.0 conference in Tel Aviv, a senior executive from a major German multinational noted that one of the benefits of the Industry 4.0 revolution (and of his company’s partnership with an Israeli start-up) was that it allowed the company to lower costs and keep manufacturing jobs in Germany.
The psychological and practical impact of the disruption in supply chains due to COVID-19 may accelerate the reversal of the grand trend of supply chain globalization. This would have a major impact on the future of the global economy.
Another long-term effect of the current coronavirus epidemic is its impact on the future of megacities.
AS THE world’s population continues to both grow exponentially and urbanize, the number of megacities – those with over 10 million people (more than the entire
State of Israel) – will continue to increase. According to the UN, there will be 43 such cities by 2030.
While much of the focus in the international discourse over the future of such cities has focused on issues like smart transportation, sustainability and food security, public health will be a major issue as well. If a new disease like COVID-19 were to take root in such a city, it could potentially spread to hundreds of thousands of people within a short time.
Surprisingly, there appears to be a lack of innovative start-up activity in the field of public health in future cities. COVID-19 should spur aspiring entrepreneurs to fill this gap.
In the era of globalization, international conferences and trade shows have become part and parcel of doing business. On February 26, the Health Ministry issued a far-reaching warning urging Israelis to avoid such international conferences both at home and abroad.
If COVID-19 continues to spread around the world over the coming months (rather than petering out with warmer weather), we may well see a move toward virtual business conferences. In terms of conveying information, there is no need to physically attend a conference venue. The advantage of being present at a conference, of course, is the networking and mingling. While not yet widespread, it is likely that virtual reality could soon allow people to “network” at a conference while sitting at home in their pajamas. (The “attendees” would still miss out on the mini-sandwiches, but the swag could be home-delivered by Amazon.)
On a grand scale, the coronavirus, by discouraging travel and potentially reversing trends in supply chain globalization, is driving people apart. In another sense, it is bringing people together.
Coronaviruses do not discriminate based on nationality or religion. They touch on our most basic human condition and human fears. Understanding the disease, slowing its spread and developing a vaccination, will require intense international cooperation. If Israeli technology were to play some role in providing a cure to COVID19
or a solution to its spread, it is hard to imagine even the most fanatical regimes and BDS (boycott, divestment and sanctions) activists rejecting its use. (A lady at the Innovation 4.0 conference told me that her Israeli start-up had already developed a way of detecting COVID-19 through the sense of smell. I can only hope that’s true.)
One of the dangers of COVID-19 is that it will increase suspicion or racism against those who appear to hail from areas where the virus is most prevalent (particularly Asia.) Instead, it should trigger an empathetic human response to those suffering. Additionally, the threat of a mysterious respiratory disease spreading around the world should put the day-to-day partisan political debates in perspective. There are some things that are bigger than any one politician, party or country.
Whatever our differences, viruses like COVID-19 know no borders. We are all in this fight together.
The writer is a strategy and communications consultant, and a Fellow at the Kohelet Policy Forum. Follow him @fredman_a.