Covid hit the fast-forward button on emerging trends

If you had told me a year ago that office workers would be mostly working from home, I would have forecast disaster. Thank goodness no one gave me the tip-off.

This has always been a strange time of year, stranded between the recent Christmas festivities and the coming celebration of the new year. But this year it feels even more peculiar, with not much festivity to recover from and perhaps not much celebration to look forward to.

In a normal year, I use this time to look back on the past 12 months, commenting on what happened and on how well my forecasts performed. This year, however, that seems otiose.

We all know the big event of the year. As for assessing my forecasts, suffice it to say that I began my final article of last year with: “What a rum year 2019 has been.” Oh dear. Over the past several months we would all surely have readily settled for another rum year like 2019.

But rather than rehearse recent events or engage in self-flagellation, I am going to draw out some of the main things that we have learned.

The first concerns the power of what Donald Rumsfeld once called “unknown unknowns”. The coronavirus crisis is the second mega shock to have apparently come out of the blue in little more than a decade. We know very little about the future – except that something big will come along to surprise us.

We also learned that in the right circumstances there is virtually no limit to the feasible size of the government budget deficit of a country that issues its own money.

The old rules about balancing the budget and keeping the debt ratio down have seemingly been turned upside down.

The trouble, however, is that the new wisdom only applies when normal economic life has been suspended. Surely these conditions will not last and accordingly it is important not to be seduced into believing that the “magic money tree” is the tree of eternal life. At some point, it will wither and die. We have also learned a lot about technological progress. The effectiveness of communications technology has been a revelation. If you had told me a year ago that office workers would be mostly working from home, I would have forecast disaster. Thank goodness no one gave me the tip-off.

But we have also learned about some of the limits. In the first lockdown, there was an initial outbreak of euphoria about home working. Many people spoke of “the death of the office”. But as the year wore on, it became clear that the missing human factor was critical.

We often want and sometimes even need to work in physical proximity to one another.

So, although the old nine-to-six, five days a week office model is dead, most office workers will still need to access some central location at least some of the time. This experience has also taught us about what economists call the co-ordination problem.

There has been a lag between the effectiveness of communications technology and its widespread takeup. For years, individual businesses and employees could have switched away from the traditional office model. But they didn’t.

If one individual set out to work mainly from home, they risked being seen as uncommitted and also isolating themselves from other employees, and the associated social and professional interaction. Similarly, while other businesses were still following the traditional office model, it was difficult for one business to break out and take a radically different route alone.

So the coronavirus crisis provided a nudge to a development that should have happened anyway.

Something similar applies to the growth of online shopping and the decline of cash payments. These trends were already under way but Covid gave them a major push.

These lessons about technological improvement have clear connections with the use of robots and AI. Over the past year, many businesses have embraced greater use of them and it has become clear how much more they have to offer. But there are limits.

I argued in my book TheAI Economy that there is one thing that robots and AI will never be better at than human beings – being human.

In certain activities, we will always want and need to interact with other human beings – as the experience with working from home has underlined.

On the international front, perhaps the most powerful lesson of the year has concerned globalisation. It has long been believed that globalisation is a completely new phenomenon that once begun, cannot be reversed, and that it is wholly beneficial.

Yet there have been waves of globalisation before that have come to an end. And although it brings some benefits, globalisation also brings some major downsides.

As it happens, even before this year began, it looked as though globalisation was approaching its limits. Now, it seems that the clash between China and America is stopping it in its tracks.

At bottom, this is about fundamentally different visions of how the economic and political system should be run. It is going to be difficult to ignore this clash, and countries like the UK will have to choose to align themselves with either China or the US.

In 1992, the distinguished scholar Francis Fukuyama published a book entitled The EndofHistory, trumpeting the global triumph of Western democratic capitalism.

Many of us have written things that subsequently proved to be illjudged. But, in my view, great book though this is, for getting things wrong Fukuyama takes the biscuit.

As this awful year has made clear, we are nowhere near the universal acceptance of shared values about how society should be run.