by futurist Richard Worzel, C.F.A.
“What’s often missing from [the story of the 1347 European pandemic] is the wider context and the lasting impact of the Black Death. This is a story not only of unfathomable tragedy, but also of transformation and rebirth. The plague, in combination with a host of other related and overlapping crises, delivered a death blow to Medieval Europe, ushering in a new age — the Renaissance and the rise of so-called agrarian capitalism — and ultimately setting the stage for the Industrial Revolution and the modern world.”[1]
– “The Black Death led to the demise of feudalism. Could this pandemic have a similar effect?” – Ann McBride, Salon website, 26 April 2020
This Crisis Will Transform Society, We Just Don’t Know How
The economy and our society are like a car that was traveling at high speed, then hit a brick wall. There is massive damage, lots of injuries, and there is no way we’re going to get the car back up to speed anytime soon.
This means, as described in an earlier blog, there are going to be lots of personal and business bankruptcies, and people are just going to be, and feel, poorer. That means they’ll buy less, go out less, go to fewer movies, donate less to charities, travel less, and so on. That, in turn, is going to severely hobble the economic recovery, even after people can safely gather in crowds again.
As a result, people will try to recover financially before they do any heavy-duty consuming. This means saving money rather than spending it, probably saving much more than they did before in order to have a safety buffer, in case something like this happens again. It means making due with existing clothes, cars, and furniture rather than getting new ones. It means having your hair cut less often. It means not taking the expensive vacation, or wintering in Florida or Arizona (especially as medical insurance won’t cover pandemics).
So, for a while, governments are going to continue to be the biggest consumers, pushing purchasing power into the marketplace to try to kick-start the economy. And that means the battle to influence government policy is going to be ferocious.
I doubt if anyone can possibly see all the ramifications of this, but here are some of the battles that seem likely to me.
Reset or Reboot?
The overall description of what’s going to happen, post-virus, is whether society, voters, and governments opt to reset, that is, try to return the world to the way it was before the virus hit, or reboot, change the way that society works to improve on the way society, and government policies, work.
And that really boils down to: Who decides what would be an “improvement”.
Those who held the most power, and the most wealth, before the virus hit will be pushing hard, mostly in the shadows and behind the scenes, to reset the world to the way it was, with them on top.
On the other hand, a huge number of people (voters) will demand that the rules change because the way things were did not work the way they should have.
So, all of the issues we are likely to see will boil down to a struggle between the powerful few, and the less-powerful many. And who wins will boil down to: Who can be most persistent?
The rich and powerful can hire people to do the work they need to convince policymakers to reset the system, and those people, largely lobbyists and professional opinion-makers, will work diligently and tirelessly, as they are paid by the hour.
The less powerful would typically lose this kind of battle because they have other things that demand their attention, like making a living, or raising their kids, or meeting their mortgage or rent payments. But this time may be different.
It may be different because many of the less-powerful will have lost people they loved, often because they are at the bottom of society, often because the health care they felt they should have was denied them, often because the promises politicians made were hollow. So they will be both angry, and motivated. And that will probably create a massive political wave that might wash the professional lobbyists and opinion-makers away, at least for a time.
We won’t know who will ultimately win for years, and we may not be able to clearly discern the results until we can look back decades from now.
But the battle will be full-throated, and bloody. Let’s look at some of the likely battlefields ahead.
Green Energy vs Fossil Fuels
This battle was simmering well before the events of 2019-20, but the combination of the falling demand due to the pandemic, and the collapse of the oil markets has been a catastrophe for all fossil fuel producers.
As a result, such companies, especially the big oil companies, are going to clamor for government bailouts and subsidies, plus the removal of carbon taxes or the equivalent, plus waivers of liability for pollution or clean-ups. The fossil fuel companies are going to push hard to reset the clock to the 1990s or even earlier, in order to “protect the industry.” And much, if not most, of their activity will take place behind the scenes, through intense lobbying of legislators with promises of political and financial support, and threats of job losses.
Meanwhile, advocates for the reduction and elimination of fossil fuels will seize on this post-pandemic period as a perfect time to wean the economy from fossil fuels entirely. They will not only oppose any bailouts or subsidies for these companies, but they will advocate for the removal of the current, massive subsidies for fossil fuels, and the subsidy and policy encouragement of renewable and low-carbon energy sources. Their activities will be public, noisy, and will start by pointing out the large popular support for green energy sources, and end by pointing out that renewable energy is now largely cheaper than fossil fuels. Moreover, they will point out, there are more jobs now tied to renewable energy than to fossil fuels, even in traditional fossil fuel locales like West Virginia, Texas, or Alberta.
This is going to be a massive power struggle, and one that will not be settled early – or quietly – because there is so much money and power involved.
Globalization vs Domestic Suppliers
The global supply chain broke down in many places during the pandemic. This was most noticeable in health care supplies, especially the Personal Protective Equipment (PPE) that health care workers have to have to stay safe while they treat people who are ill with the covid-19 virus.
This has led many, or even most, countries to start musing that they must have a domestic industry for certain things in order to safe-guard their populations. The problem is that no one can agree what certain things need to be produced domestically.
This will feed into the protectionist struggle that has gone on for decades, with unions and (mostly) left-wing politicians arguing that globalization is a bad thing because it harms local industry, and throws many workers out of work as industries decamp for cheaper labor forces elsewhere.
More recently, some right-wing politicians have joined the chorus arguing against people who support globalization (or, as they call their opponents, “globalists”) in order to justify the racist and nativist policies of excluding people who are different from them. This has led, for instance, the previously free-trading Republican Party of the U.S. to argue against their own traditional policies in order to try to throttle immigration, especially immigration of people from brown or dark-skinned countries.
As it happens, from an economic standpoint, both groups are overlooking important aspects of the argument.
Globalization increases economic efficiency, reduces costs, and, on average, increases standards of living for the large majority of people by making things cheaper. An unavoidable side-effect of this is the leveling of wages world-wide – and that creates winners and losers, with the losers being developed world workers who are thrown out of work in favor of cheaper workers elsewhere.
I suspect that this battle, between the remaining free traders, and those who want to haul some or all industries back home (all over the world), will shift in favor of protectionism and domestic industries, at least for a time. And that means that goods are going to become more expensive, which means that standards of living will go down, compounding the feelings of relative poverty – and hence, resentment – that people feel. And this will probably happen pretty much everywhere.
Globalization will be in retreat for a time, which will create new winners and losers. The winners will be those who get paid more to do jobs that had been performed more cheaply elsewhere. The losers will be the large majority of people who have to pay more in prices and taxes to subsidize nativist (“America first!”) or domestic-made policies.
Universal Health Care vs “We’re Out of Money!”
This applies mostly (but not entirely) to the U.S.
People, especially young or healthy people, are now realizing that good health is not guaranteed, and hence their health care needs to be. This has been a long-running and epic struggle in America, which is the only developed country, and one of the few countries of any kind, that does not have government-sponsored, universal health care.
This issue will take on new significance, especially for people who were not able to afford the Covid-19 virus test, treatment, or saw family members die through inadequate care.
Those who oppose universal health care are going to have a massively difficult task trying to convince voters that (a) they don’t really need health insurance, and (b) America can’t afford it. I would guess that if the Republican party, which has almost made opposition to health care their battle standard, try to run against universal health care in November, it will come close to destroying them politically.
Meanwhile, other countries that have universal health care, such as Canada, have had the holes in their coverage highlighted. Voters are going to want them fixed, and pronto.
As to whether governments, in America and elsewhere, can afford it, see the next battle ground.
Big Government vs No Government
In my previous blog, I opened with a quote attributed to Ronald Reagan: “Government isn’t the solution to your problems. Government is the problem.”
That meme has been crushed by this crisis, and any politician who tries to preach austerity is going to be jeered off the political spectrum.
“How come,” people will ask, “we could spend hundreds of billions or trillions to save the rear ends of corporations and their CEOs, but now you’re saying we can’t afford decent health care for my mother?”
There’s no politically reasonable answer to that question, and many others like it, including money for homelessness, universal basic income, election security, education, the penal system, and much else besides.
And yet, despite this, the current massive wave of spending has to be temporary. It cannot be permanent because even governments, even the mighty U.S. government, does not have unlimited money. But finding a politically acceptable way to turn off the taps is going to be difficult, if not outright suicidal, at least in the short run.
This will initially play to the strengths of left-wing parties. In the long run, much will depend on the subsequent strength of the economy, and the willingness of taxpayers to fund programs as to what stays and what gets cut back. But it’s going to be a profligate time. And, again, in the short run, that may be a good thing because the economy will need governments to kick-start activity.
Front-Line vs Back-of-the-Bus
Whose work is more important: someone who stocks shelves at the supermarket, or a hedge-fund manager? A practical nurse in a nursing home or the CEO of a publicly-listed company? A bus driver or highly-paid tort litigator?
It is not going to sit well with people who have been risking their lives and been called “heroes”, to later be told that they’re not worth $15/hour, that they don’t deserve benefits, that they can be replaced by the next body that walks in the door and therefore should shut up and doing what they’re told. And why are former front-line workers paying higher percentage of their total income in taxes than corporate CEOs?
And that is going to fuel further activism around the question of: Who’s really important to our economy? This simmering anger is going to be a potent political force for some time to come.
–––––
There will be other battles, including many I haven’t mentioned or thought of, but I think I’ve made my point: the world has changed and the world we emerge into, once the “All Clear” has been sounded, will be vastly different from the way it used to be.
And the critical question will be: Are we going to reset or reboot?
Some of the Other Questions We Will Have to Face
What happens when most charities go bankrupt?
What happens when most day-care operators go bankrupt?
What happens when more than half of the restaurants you used to go to are gone?
What happens when the only stores left in your town are the big chains, and even many of those have gone?
What happens when nobody wants to get on a plane to visit grandma or go on vacation?
What happens to the finances of Florida & Arizona when a big percentage of snowbirds don’t show up next year?
What happens when people stop thinking about what they need to do to stay safe, and start wondering who to blame for what happened?
What happens to doctors and dentists whose practices suffered enormous losses because people didn’t come to their offices during the pandemic?
What happens when conservatives want to spend money and pass legislation to help big companies and big donors regain their former positions and wealth, while liberals want to spend money and pass legislation to help people get better health care, and better wages?
What happens in nursing homes, meat-packing plants, and prisons?
What happens when governments say they can’t afford something that involves hundreds of millions or billions of dollars, and critics point out that they’ve been throwing hundreds of billions and trillions around?
What happens to cities, states, and provinces that have had to shell out money they didn’t have to help keep their citizens alive, and now have to slash services to compensate?
What happens when nurses, doctors, orderlies, and cleaners stop being hailed as public heroes, and go back to being taken for granted in a massive, badly managed system that’s clogged with red tape and dominated by vested interests that don’t put the public interest first? Will they be OK with that?
What happens when foreign students won’t come to America for grad school, and grad school enrollments drop by half as a result?
What happens when the populations of poor countries are decimated, and their governments are destroyed by the pandemic, and many of them become failed states like Somalia or Sudan, and breeding grounds for disease and political instability?
What happens when almost everyone is poorer, often dramatically poorer, than they were before the virus hit?
And, perhaps the most important question: What will we choose to do about these things?
Copyright, IF Research, May 2020
Blogs in this Series:
Part 1: What Are Stocks Worth?
Part 2: What Will Happen to Businesses?
Part 3: Bankruptcies, Panics, and Opportunities
Part 4: ’Til Debt Do Us Part; What Will Happen to Governments?
Part 5: Reset or Reboot? The Virus & Society
[1] https://www.salon.com/2020/04/26/the-black-death-led-to-the-demise-of-feudalism-could-this-pandemic-have-a-similar-effect/
