Pandexit

Eduardo del Buey
Foto: Ap
La Jornada Maya

Miércoles 6 de mayo, 2020

Many of us confined to our homes following health advisories are waxing nostalgic about life before COVID 19 and are longing for our isolation to end.

Once the virus spread plateaus, regions will likely re-open at different times. Until a vaccine is developed however, we will all have to learn to live with the risk of infection while we strive to get back to normal.

But, is “back to normal” realistic, or are we facing a “new normal” that will change our lives significantly?

This article looks at how “pandexit” – the eventual removal of restrictions on movement -- could result in a different future than the one might expect.

Necessity and technology have allowed public and private sector organizations and universities to accelerate the shift to working from home.

The general success of this sudden change has caused many of us to think about its ongoing impact.

Home offices, powered by cloud computing and virtual private network access to data, as well as videoconferencing, could change the landscape for commercial real estate, as organizations may require less office space. In addition, as people become more home based and linking through technology, airlines, hotels and restaurants could suffer from a decline in business travel, with a concomitant increase in unemployment in those sectors.

How about the psychological and sociological challenges?

These changes will have a major social impact as families learn to spend more time together, sharing the same space, and interacting with each other to a greater degree.

Many will undoubtedly feel new stresses.

People will have to forgo the “in person” exchanges with colleagues that enrich and add an intangible dimension their lives. Technology companies, especially those pioneering virtual reality, will be challenged to create similar environments.

There are however benefits to be had from new ways of doing things.

People working from home could save time and money by not having to commute for hours every day or having to dress up to go to the office.

All this could mean less travel, a lower carbon footprint, less fuel consumption, better access to education and more family time.

Students may well have access higher education, from a broader variety of sources, at far lower cost online than through traditional facilities. This could well result in a revamping of our education system as well as a way to reduce student debt loads – a major concern in many countries.

Moving from the individual to the political a major concern is the temptation to assess blame for the pandemic and for the trillions of dollars and tens of thousands of lives that it will have cost, once it subsides.

Some are already saying that China should be held to account for its role on suffocating knowledge about the pandemic for so many weeks and for arresting the doctors who first brought the pandemic to public attention.

While true, I would caution them to stop and think.

Was the shortfall in personal protective equipment (PPE) needed to combat the virus the result of our manufacturing dependence on China? We can see now that from the outset, China initially hid the impact of the virus and imported billions of pieces of medical equipment from abroad thereby weakening preparedness in many countries.

No doubt, this lack of transparency weakened preparedness in many countries, but one can also ask if there was also a lack of adequate planning for reserves of equipment despite warnings, from notables such as Bill Gates and President Obama, of the impending risk of a pandemic?

For the time being China remains the world’s manufacturing center. It could take some time to change this reality and this only if investors believe that local alternatives can be cost-efficient.

As Willy Shih of the Harvard Business School wrote recently about retaliating against China, “This isn’t just about medical supplies – it’s also about electronics, textiles, furniture, toys, and a lot more, adding up to a half a trillion dollars in imports (to the United States alone)”. He went on to conclude, “So I am from the school that talk is cheap. And if you want to go down that path (of retaliation against China), then you have to be prepared for the consequences”.

Indeed, China’s supply chains are so intricately woven into the global economy that retaliation could prove costly not only for China but also for consumers making the political cost worth calculating. In essence, this will require carefully thought out industrial development strategies and policies in most countries.

Global growth also requires access to China’s now developed consumer market and its capital reserves to help the recovery once the main ravages of COVID 19 pass.

Many posit that China is a major human rights violator and anti-democratic. However, if the European Union has been unable to sanction Hungary as Prime Minister Viktor Orban grabs absolute power, can a politically and economically debilitated West and an absent U.S. afford to attack China on its human rights record or for its initial behaviour with respect to the pandemic?
A question to be pondered carefully.

Another issue is how do we create and sustain the national and international governance institutions required to manage a world based on communications and technology.

Do we continue with governance structures and procedures that date back to the 17th century, or must our political leaders and academics create institutions of governance fit for purpose in this century?

Is the nation-state the right institution to manage the many challenges facing humanity that are global in nature?

The main challenge has always been that economic globalization has not resulted in complementary strong multilateral governance institutions. Consequently, we are now seeing the resurgence of protectionist nationalism and the further weakening of the United Nations and its specialized institutions. The Security Council remains gridlocked and serving little purpose in this pandemic and on many other issues, and there is little hope that it will become more effective anytime soon.

Governments that place priority national over global interests hamstring many of the specialized agencies. We have seen the accusations of a preponderance of Chinese influence in the World Health Organization (WHO). Dealing with the refugee issue has challenged the United Nations High Commission for Refugees (UNHCR) due to the nationalistic reactions of many governments. So, in a world of plenty, many are denied assistance due to political posturing.

In fact, refugees find themselves fleeing their homelands because cruel and corrupt leaders prefer absolute power to respecting life and freedom. Should they be condemned a second time because of international indifference?

Former Swedish Foreign Minister Carl Bildt has summed the current situation in a recent tweet noting that, “This is the first crisis of the post-American world. The UN Security Council is nowhere to be found, the G-20 is in the hands of the Crown Prince of Saudi Arabia and the White House has trumpeted America First and Everyone Alone for years. Only the virus is globalized”.

Institutions like the European Union (EU) have been exposed by their absence during this pandemic. The failure of EU states to come to the early rescue of Spain and Italy – the two hardest hit victims of the pandemic in Europe – underscores the weakness of the EU and, perhaps, justifies to some extent the views of BREXITEERS who consider it not fit for purpose.

It appears that the heir to this post-American world may well be China with its economic and infrastructural tentacles spreading around the globe through its Belt and Road initiative.

A tectonic global change is in the works. Are we ready for it?

COVID-19 offers both challenges and opportunities.

One opportunity is the rapid development of on-line medical assistance through telemedicine that allows patients to access doctors in an inexpensive and time saving manner. Some companies in Canada are providing this service to employees since it enhances productivity and reduces time wasted. Given the dearth of family physicians in many countries, this would enhance the quality of life for many who do not have access to proper medical assistance, either because of the cost or because of its unavailability in any given region.

A major challenge is in how we get people back to work.

Will we revert to a globalized economy that allows private sector giants like Amazon.com to make tens of billions of dollars per year without paying any taxes anywhere? Do we allow these global firms to destroy local economies and prevent small and medium enterprises from surviving and creating job opportunities for local economic growth?
Will we revert to a global economy that leaves the production of strategic products and materials in a few geographical locations, or will economic nationalism and necessity require a restructuring of the global economy so that production is spread out among many countries, satisfying the current growing nationalistic fervour of some governments?

As well, the current quarantine has created a major increase in online purchasing. These global web-based businesses are replacing local, tax paying and employing retailers that have had to close and threatening the long-term viability of local economies.

Can this trend be reversed when the “pandexit” occurs and local businesses try to regain market share and not only recover old jobs but also create new employment opportunities?

One excellent example of how business and governments can work together to give local businesses a fighting chance is the current initiative of the government of the province of Quebec (Canada) to create a “panier bleu” (blue basket). This is an online directory of Quebec retailers that can provide the same or similar products and services on-line that the global marketers provide but doing so by sourcing local and regional suppliers.

Can governments, academia, and the private sector work together to create the digital platforms and training courses to allow local businesses to become strong players in the digital economy? Can they train or retrain employees to function in the new economy?

If countries want to repatriate local manufacturing, the only cost-effective way will require the widespread use of artificial intelligence and robotics. This presents two major problems: robots don’t pay the income and other taxes paid by workers nor do they consume. In addition, while it may create some higher paying jobs, it will likely not restore all the manufacturing jobs. The train may have left the station.

Will the new economy have the resources to meet the challenges of rapidly accelerating change that technology is bringing to the economy, and avoid creating what historian Yuval Harari has labeled the “useless class”?

Currently, many governments are investing billions of dollars in providing a safety net for many during this pandemic.

But, how will they cope with the aftermath?

How will they choose strategic industries that require a local manufacturing base and support these while respecting free and fair trade agreements?
How will they facilitate the retraining the tens of thousands who lose their jobs to a massive restructuring of the economy?

How will they ensure that companies benefiting from bailouts don’t spend their windfall to repurchase shares and give senior executives huge bonuses as they did in aftermath of the financial crisis of 2008?

How can the money go into investing in people and processes that can guarantee fuller employment on the one hand, and more efficient business models on the other?

Can governments justify these expenses once the pandemic dies down and people begin to focus once again on private and public debt?

Should current transitory conditions become permanent, governments will have to find ways to incorporate the disenfranchised who cannot access modern technology because of income challenges, educational shortcomings, or, simply, their own subsistence earning lifestyle.

All of this could well result in a new normal – one that has as many challenges as it has opportunities.

Some will ask if governments and societies can afford to create a new economic model and re-train many of the currently disenfranchised to function in the post-pandemic economy.

I ask instead if governments can afford not to do so

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Edición: Ana Ordaz