Greek Business File, April-May 2020, No 125

By Nick Papandreou


Some lessons from the crisis

There is much talk, and rightfully so, about a change in the way our global system will work once we get past the pandemic – however long that will take. First priority, of course, is for lives to be saved and for both a vaccine as well as a cure to be developed. Perhaps what is even harder is to know what the appropriate policy measures are to ensure that the economic system does not just collapse.

How the whole story will play out is hard to predict. In an article for Stat, epidemiologist John Ioannides of Stanford points out that actual death rates are probably not as high as 1%. If this is the case, the global panic is unwarranted, and the quarantine is doing greater damage than good. On the other hand, if the pandemic spreads rapidly and massively, even a small rate of 1% when applied to millions of people is an enormously large number to contend with. At the time of writing, there has not been enough testing of the population at large to make safe guesses. But for better or for worse, most governments are operating on the worst-case scenario.

As for the survival of the existing economic system, it is not clear as yet whether the massive government interventions to spend and support the system will be enough to keep the machine going. There is no overall agreed upon approach, and no global authority to ensure a consistent and meaningful policy. Instead, each government is operating according to its own policy priorities, internal politics and financial constraints.

A good example of smart policy is that of Denmark’s. With unanimous parliamentary and trade union concurrence, the Danish government decided to deploy funds to the extent of 13% of its GDP in order to prop up demand and protect its citizens from the effects of the sudden downturn. One interesting measure they have already adopted is that any company that feels the need to dismiss workers to survive the crisis will be asked not to dismiss the workers. Instead, the government will pay approximately 2/3 of the employee’s salary, up to about 3,800 euros per month while they stay at home. The thinking is that once the economy picks up again, these idle but not dismissed employees can come back instantly and smooth the transition back to “normality.” These employees are thus kept on the payroll without burdening the firms.

It is impossible to imagine we will ever return to how the economy was before the pandemic. It may turn out that certain consumer habits may change forever. People will most likely travel less, regardless of their financial ability to do so. Cruise ships and tourism in general may suffer a permanent fall in demand.

During this period of confinement which we are all obliged to undergo, it seems we have already discovered that many of our past habits are unnecessary while others seem much more important. For example, clearly most people are right now less engaged in purchasing consumer goods like an extra pair of shoes or yet another pair of jeans – where would you go to wear them after all? And is it really necessary? In general, the excessive consumerism of Western society may finally have met its match. We are all much more concerned about our jobs and everybody’s well-being.

Once we come out of however long we are kept in isolation, we might think twice about the need for the newest smartphone or a new car.  On the other hand, eating more healthily and doing exercise – two habits that preserve our health and reduce our chances of serious complications should we contract the virus, may become part of our new way of life. I expect we will discover that the new workplace will allow for many more employees to work at home. Politics and decision making will most likely adopt more forms of technology. Municipalities are already using teleconferencing to vote on passage of decisions. Perhaps parliaments will go that way too. This will also require greater interaction with citizens through live electronic forums to discuss issues with their candidates. We will see improved technologies for e-voting, even for national elections. I can see a rush to build 5G technologies globally to account for the new work and political habits that will emerge post-corona. E-democracy (see Estonia) will be reinforced and people will be able to vote on their mobiles and interact with their candidates electronically. And clearly certain civil rights will be swept aside in order to use mobiles to track the movement and contact of individuals in order to follow the social interactions of infected people.

Finally, this crisis shows perhaps how mistaken a direction we have taken in our rush for economic development. A recent article in Science points out that this virus and many others to come are the result of the way we live close to animals – as we continuously encroach on the last virgin-nature territories. These animals (bats in this case) are full of viruses that humans have not yet grown immune to. Industrialization has brought many goods for us, but the unchecked rates of growth clearly have their downsides. Finally, it should come as no surprise that global pollution rates are falling even after a month of growth slowdowns. Fish are apparently appearing in waters they previously avoided. In the new world just around the corner, we will have learned a lot about the way we live, and one hopes we will discover greater consensus on how best to work towards a healthy sustainable planet.