Economic shocks like the coronavirus pandemic of 2020 only arrive once every few generations, and they bring about permanent and far-reaching change(AP)
Economic shocks like the coronavirus pandemic of 2020 only arrive once every few generations, and they bring about permanent and far-reaching change(AP)

10 ways Covid-19 has changed the world economy forever

The takeover of factory and service jobs by robots will advance, while white-collar workers get to stay home more. There’ll be more inequality between and within countries. Governments will play a larger role in the lives of citizens, spending, and owing, more money.
By Bloomberg | Posted by Ayshee Bhaduri
UPDATED ON DEC 30, 2020 10:10 AM IST

Economic shocks like the coronavirus pandemic of 2020 only arrive once every few generations, and they bring about permanent and far-reaching change.

Measured by output, the world economy is well on the way to recovery from a slump the likes of which barely any of its 7.7 billion people have seen in their lifetimes. Vaccines should accelerate the rebound in 2021. But other legacies of Covid-19 will shape global growth for years to come.

Some are already discernible. The takeover of factory and service jobs by robots will advance, while white-collar workers get to stay home more. There’ll be more inequality between and within countries. Governments will play a larger role in the lives of citizens, spending—and owing—more money. What follows is an overview of some of the transformations under way.

Leviathan

Big government staged a comeback as the social contract between society and the state got rewritten on the fly. It became commonplace for authorities to track where people went and who they met—and to pay their wages when employers couldn’t manage it. In countries where free-market ideas had reigned for decades, safety nets had to be patched up.

To pay for these interventions, the world’s governments ran budget deficits that add up to $11 trillion this year, according to McKinsey & Co. There’s already a debate about how long such spending can continue, and when taxpayers will have to start footing the bill. At least in developed economies, ultra low interest rates and unfazed financial markets don’t point to a near-term crisis.

In the longer run, a big rethink in economics is changing minds about public debt. The new consensus says governments have more room to spend in a low-inflation world, and should use fiscal policy more proactively to drive their economies. Advocates of Modern Monetary Theory say they pioneered those arguments and the mainstream is only now catching up.

Even Easier Money

Central banks were plunged back into printing money. Interest rates hit new record lows. Central bankers stepped up their quantitative easing, widening it to buy corporate as well as government debt.

All these monetary interventions have created some of the easiest financial conditions in history—and unleashed a frenzy of speculative investment, which has left plenty of analysts worried about moral hazards ahead. But the central-bank policies will be hard to reverse, especially if labour markets remain fractured and companies continue their recent run-up in saving.

And history shows that pandemics depress interest rates for a long time, according to a paper published this year. It found that a quarter-century after the disease struck, rates were typically some 1.5 percentage points lower than they otherwise would have been.

Debts and Zombies

Governments offered credit as a lifeline during the pandemic—and business grabbed it. One result was a surge in corporate debt levels across the developed world. The Bank for International Settlements calculates that nonfinancial companies borrowed a net $3.36 trillion in the first half of 2020.

With revenues plunging in many industries because of lockdowns or consumer caution, and losses eating into business balance sheets, the conditions are in place for a “major corporate solvency crisis,” according to one new report.

Some also see danger in offering too much support for companies, with too little discrimination over who gets it. They say that’s a recipe for creating “zombie firms” that can’t survive in a free market and are only kept alive by state aid—making the whole economy less productive.

Great Divides

The stimulus debate can feel like a first-world luxury. Poor countries lack the resources to protect jobs and businesses—or invest in vaccines—the way wealthier peers have done, and they’ll need to tighten belts sooner or risk currency crises and capital flight.

The World Bank warns that the pandemic is spawning a new generation of poverty and debt turmoil, and the IMF says developing nations risk getting set back by a decade.

Creditor governments in the G-20 have taken some steps to ease the plight of the poorest borrowers, but they’ve been slammed by aid groups for offering only limited debt relief and failing to rope private investors into the plan.

K-Shaped

Low-paying work in services, where there’s more face-to-face contact with customers, tended to disappear first as economies locked down. And financial markets, where assets are mostly owned by the rich, came roaring back much faster than job markets.

The upshot has been labeled a “K-shaped recovery.” The virus has widened income or wealth gaps across faultlines of class, race and gender.

Women have been hit disproportionately hard—partly because they’re more likely to work in the industries that struggled, but also because they had to shoulder much of the extra childcare burden as schools closed. In Canada, women’s participation in the labor force fell to the lowest since the mid-1980s.

Rise of the Robots

Covid-19 triggered new concerns about physical contact in industries where social distancing is tough—like retail, hospitality or warehousing. One fix is to replace the humans with robots.

Research suggests that automation often gains ground during a recession. In the pandemic, companies accelerated work on machines that can check guests into hotels, cut salads at restaurants, or collect fees at toll booths. And shopping moved further online.

These innovations will make economies more productive. But they also mean that when it’s safe to go back to work, some jobs just won’t be there. And the longer people stay unemployed, the more their skills can atrophy—something economists call “hysteresis.”

You’re on Mute

Higher up the income ladder, remote offices suddenly became the norm. One study found that two-thirds of US GDP in May was generated by people working at home. Many companies told employees to stay away from the office well into 2021, and some signalled they’ll make flexible work permanent.

Work-from-home has mostly passed the technology test, giving employers and staff new options. That’s a worry for businesses catering to the old infrastructure of office life, from commercial real estate to food and transportation. It’s a boon for those building a new one: shares in videoconferencing platform Zoom jumped more than six-fold this year.

The option of remote work, along with fear of the virus, also triggered a stampede of urbanites toward the suburbs or countryside—and in some countries, a surge in rural property prices.

Not Going Anywhere?

Some kinds of travel came to a near halt. Global tourism fell 72% in the year through October, according to the United Nations. McKinsey reckons a quarter of business trips could disappear forever as meetings move online.

With vacations upended and mass events like festivals and concerts called off, the trend among consumers to favour “experiences” over goods has been disrupted. And when activities do resume, they may not be the same. “We still don’t know how concerts are going to be, really,” says Rami Haykal, co-owner of the Elsewhere venue in Brooklyn. “People will be more mindful, I think, of personal space, and avoiding places that are overly packed.”

Travellers may have to carry mandatory health certificates and pass through new kinds of security. Hong Kong based China Tech Global has developed a mobile disinfection booth that it’s trying to sell to airports. Chief Executive Sammy Tsui says it can clear pathogens from the body and clothes in 40 seconds or less. “You feel some cool air on your body, and some mist,” he says. “But you don’t feel wet.”

A Different Globalization

When Chinese factories shut down early in the pandemic, it sent shock waves through supply chains everywhere—and made businesses and governments reconsider their reliance on the world’s manufacturing powerhouse.

Sweden’s NA-KD.com, for example, is part of a flourishing “fast fashion” retail industry that moves with social media trends rather than the traditional seasons. After deliveries got jammed this year, the company shifted some production from China to Turkey, says Julia Assarsson, head of inbound and customs.

That’s an example of globalization adjusting without retreating. In other areas, the pandemic may encourage politicians who argue that it’s risky to rely on imports of goods vital to national security—as ventilators and masks turned out to be this year.

Going Green

Before the pandemic, it was mainly environmentalists musing over theories of peak oil—the idea that the rise of electric vehicles could permanently dent the world’s demand for one of the most polluting fossil fuels.

But when 2020 saw planes grounded and people staying home, even oil majors like BP felt a real threat from the world getting serious about climate.

Governments from California to the UK announced plans to ban the sale of new gasoline and diesel cars by 2035. And Joe Biden was elected with a promise the US will rejoin the Paris Agreement.

SHARE THIS ARTICLE ON
Close
Representational image. (ANI)
Representational image. (ANI)

Govt tweaks public procurement policy to save pandemic-hit MSMEs

By Rajeev Jayaswal
UPDATED ON FEB 25, 2021 09:42 AM IST
Now, the eligibility of a firm will be judged on the basis of its net worth only. Earlier, fulfilling both criteria was necessary to become an eligible bidder for government contracts
Close
Geely and Volvo will move their powertrain activities into a separate company, which will enhance focus on development of electric vehicles.(REUTERS)
Geely and Volvo will move their powertrain activities into a separate company, which will enhance focus on development of electric vehicles.(REUTERS)

Volvo and Geely drop merger, betting they’ll be faster apart

Bloomberg
PUBLISHED ON FEB 25, 2021 08:26 AM IST
The manufacturers will preserve their separate corporate structures while cooperating more closely on electrification, software and autonomous-driving technology, according to a joint statement.
Close
FILE - In this Aug. 13, 2018, file photo a house is pictured for sale in Christchurch, New Zealand. New Zealand's government on Thursday, Feb. 25, 2021 made the first of several promised moves to rein in skyrocketing house prices by ordering the nation's Reserve Bank to consider the impact on housing when making decisions. (AP Photo/Mark Baker, File)(AP)
FILE - In this Aug. 13, 2018, file photo a house is pictured for sale in Christchurch, New Zealand. New Zealand's government on Thursday, Feb. 25, 2021 made the first of several promised moves to rein in skyrocketing house prices by ordering the nation's Reserve Bank to consider the impact on housing when making decisions. (AP Photo/Mark Baker, File)(AP)

Real estate in New Zealand feels Covid heat as housing prices skyrocket

PTI, Wellington
PUBLISHED ON FEB 25, 2021 07:57 AM IST
Opposing the expectations, prices have risen by more than 19% over the past year, putting them out of reach for many people wanting to buy their first home.
Close
“The PIPE and SPAC (special purpose acquisition company) investors will hold 20% and 10%, respectively in the combined entity,” Sumant Sinha, ReNew Power chairman and managing director told Mint.
“The PIPE and SPAC (special purpose acquisition company) investors will hold 20% and 10%, respectively in the combined entity,” Sumant Sinha, ReNew Power chairman and managing director told Mint.

ReNew Power to merge with RMG for US listing

By Utpal Bhaskar, Livemint, New Delhi
PUBLISHED ON FEB 25, 2021 07:29 AM IST
The transaction puts an enterprise value of around $8 billion on ReNew Power, and is expected to close in the second quarter of this year, the two companies said in a joint statement.
Close
Flipkart plans to have charging infrastructure at nearly 1,400 supply chain centres.(REUTERS)
Flipkart plans to have charging infrastructure at nearly 1,400 supply chain centres.(REUTERS)

Flipkart looks to deploy 25,000 Electric Vehicles by 2030

By Madhurima Nandy, Livemint, Bengaluru
PUBLISHED ON FEB 25, 2021 07:26 AM IST
The online retailer owned by Walmart Inc. will also create charging infrastructure at its delivery hubs and offices, a senior company executive said, adding that the company has started deploying 450 EVs, both two and three-wheelers, in several cities.
Close
The decision, announced by finance minister Nirmala Sitharaman, is expected to improve efficiency and competition while helping smaller banks earn revenue.(PTI Photo)
The decision, announced by finance minister Nirmala Sitharaman, is expected to improve efficiency and competition while helping smaller banks earn revenue.(PTI Photo)

Private banks can vie for government business

By Gopika Gopakumar, Livemint, Mumbai
PUBLISHED ON FEB 25, 2021 07:23 AM IST
At present, only state-owned banks and large private banks are eligible to undertake government business, including collecting revenues and disbursing payments under various schemes.
Close
Das also said the RBI is “very much in the game” and is getting ready to launch its own digital currency.(ANI file photo)
Das also said the RBI is “very much in the game” and is getting ready to launch its own digital currency.(ANI file photo)

RBI has concerns about cryptocurrencies: Governor Shaktikanta Das

By Gopika Gopakumar, Livemint, Mumbai
PUBLISHED ON FEB 25, 2021 07:20 AM IST
In 2018, the Reserve Bank of India (RBI) had banned banks and other regulated entities from supporting crypto transactions after it found digital currencies were used to commit fraud after demonetization. Last year, the Supreme Court struck down the curbs after cryptocurrency exchan-ges challenged the move.
Close
Covid-19: Australia's Qantas delays expected restart of international travel
Covid-19: Australia's Qantas delays expected restart of international travel

Covid-19: Australia's Qantas delays expected restart of international travel

Bloomberg
PUBLISHED ON FEB 25, 2021 07:18 AM IST
Qantas now aims to start overseas flights to most destinations from late October 2021, four months later than planned, the airline said in a statement Thursday.
Close
Sebi may launch an in-depth investigation and initiate adjudication proceedings against NSE if any fault is found at the exchange level, the person sa(PTI File Photo)
Sebi may launch an in-depth investigation and initiate adjudication proceedings against NSE if any fault is found at the exchange level, the person sa(PTI File Photo)

Sebi seeks explanation from NSE over Wednesday's trading halt

By Anirudh Laskar, Livemint, Mumbai
UPDATED ON FEB 25, 2021 07:17 AM IST
Sebi said it has advised NSE to conduct a detailed root-cause analysis of the “trading halt” and also explain the reasons for trading not migrating to the disaster recovery site, the people said on condition of anonymity.
Close
As trading resumed at 3.45pm, in a special session, stocks surged, confounding investors with the sheer velocity of the rally.(AP)
As trading resumed at 3.45pm, in a special session, stocks surged, confounding investors with the sheer velocity of the rally.(AP)

Bug disrupts NSE trading for 4 hours in longest such outage

By Nasrin Sultana, Livemint, Mumbai
PUBLISHED ON FEB 25, 2021 07:09 AM IST
The outage prompted the National Stock Exchange (NSE) and its main rival BSE to extend trading hours until 5pm on Wednesday to allow investors to close their positions ahead of Thursday’s expiry of monthly derivatives contracts
Close
Centre estimates the scheme will help the pharma sector clock incremental sales of <span class='webrupee'>₹</span>2.94 lakh crore and incremental exports worth <span class='webrupee'>₹</span>1.96 lakh crore during the six years. (File Photo. Representative image)
Centre estimates the scheme will help the pharma sector clock incremental sales of 2.94 lakh crore and incremental exports worth 1.96 lakh crore during the six years. (File Photo. Representative image)

Centre okays PLI plan for pharma, IT equipment

By Neetu Chandra Sharma, Livemint, New Delhi
UPDATED ON FEB 25, 2021 07:08 AM IST
The cabinet, chaired by Prime Minister Narendra Modi, said the PLI scheme for pharma will be effective over FY21-FY29, while incentives for manufacturers of laptops, tablets, all-in-one personal computers and servers, will enjoy the benefits for a four-year period.
Close
GST authorities are using data analytics and AI to track tax evaders, the first official said.
GST authorities are using data analytics and AI to track tax evaders, the first official said.

GST collection in February expected to top 1 lakh crore

By Rajeev Jayaswal, New Delhi
UPDATED ON FEB 25, 2021 09:18 AM IST
Early indicators such as number of e-way bills generated in the first three weeks of February suggest that GST collections in February will be in excess of 1 lakh crore and mark an increase from the year-ago month
Close
Modi said the FY22 budget has put forward a clear roadmap to put the economy on a high-growth trajectory and the PSE policy announced in the Budget aims at right utilization of public money.(PTI Photo)
Modi said the FY22 budget has put forward a clear roadmap to put the economy on a high-growth trajectory and the PSE policy announced in the Budget aims at right utilization of public money.(PTI Photo)

Govt has no business to be in business: PM Modi

By Asit Ranjan Mishra, Livemint, New Delhi
PUBLISHED ON FEB 25, 2021 06:07 AM IST
Modi said it is not necessary or possible for the government to remain the owner of so many central public sector enterprises (CPSEs) and the government should rather focus on public welfare and development. “That’s why I say government has no business to remain in business,” he added.
Close
A surge in household savings under lockdown has fueled speculation of a rapid increase in consumer demand as the government starts to unwind virus restrictions next month.(AFP Photo)
A surge in household savings under lockdown has fueled speculation of a rapid increase in consumer demand as the government starts to unwind virus restrictions next month.(AFP Photo)

Bank of England dismisses talk of inflation threat during post-Covid rebound

Bloomberg
PUBLISHED ON FEB 24, 2021 11:45 PM IST
Answering questions from lawmakers on Wednesday, policy makers said data monitored by the central bank don’t show evidence of inflation overshooting its 2% target.
Close
Customers are being given discounts and cashback offers on several product categories such as TVs, laptops, mobile phones, air conditioners and refrigerators.(Mohd Zakir/HT File Photo)
Customers are being given discounts and cashback offers on several product categories such as TVs, laptops, mobile phones, air conditioners and refrigerators.(Mohd Zakir/HT File Photo)

Govt clears 7,350-cr PLI booster for production of laptops, tablets, PCs

PTI
PUBLISHED ON FEB 24, 2021 08:25 PM IST
The PLI push is expected to bolster electronics ecosystem in India, at a time when globally manufacturing is undergoing a shift and companies across the world are looking to diversify their manufacturing base, to mitigate the risk involved in depending on a single location.
Close
SHARE
Story Saved
OPEN APP