We are staring down four crises globally: health, economy, climate, and human capital. And as governments and the central banks of the world are pumping trillions of dollars into their countries, questions arise: is this going to trigger a 1970s-like level of inflation, as money comes in, but no products and services come out while the world stands still? Or, is this the tipping point, where the entire relationship between global, public, and private resources is redefined?
The world economy is not expected to recover this year. Next year, the overall growth rate is forecasted to be at 5.4%, i.e. higher than the anemic levels we have seen before the pandemic hit, but far from enough to compensate for this year’s losses. This, fundamentally, is why the risk of inflation is seen by economists as much lower than the risk of deflation. Demand has dropped off the cliff for entire industries and sectors globally.
Emergency assistance is providing just enough funds to cover the bare necessities at the bottom of Maslow’s pyramid and is limited in its duration. As it runs out, which will happen most likely sooner than the virus problem is solved, demand growth for products and services will have little to go on. And, at some point, it may become a self-fulfilling prophecy, where the longer the downturn lasts, the more damage is done, and the further it continues going. As restrictions are lifted, some people will be able to go to work, while many others will lose their incomes permanently.
Unemployment numbers are nothing short of stunning in this country and elsewhere. The unique nature of this pandemic is that it is truly global, is not economic in its origin, and strikes at the heart of what it takes to be a human at work and play.
The Service Sector that employs 71% of workers in the US has taken on the brunt of the crisis, with severe consequences for some of the most vulnerable segments of human capital – women, minorities, fresh graduates, and older workers. It is them that government assistance has benefited the most, and the fact that many of them have been temporarily lifted out of extreme poverty by these measures while they don’t produce value at work is often confused with inflation risk.
It is the most vulnerable, again, who predominantly suffer from the effects of climate change around the world, exacerbated by Covid-19. Before we started celebrating the healthcare heroes who bring people back from the deadly clench of the virus, we applauded firefighters and flood emergency workers, saving lives from natural disasters on every continent – every year, several times a year. Having spent close to nine years in crisis management, I have witnessed this first hand, and struggle to believe that the damage to the public and private sector worsening every year is simply a coincidence. The global pandemic in this context is unique only in that it is indeed global, and no one country or region is safe.
The “first wave” of Covid-19 hasn’t evaporated in the summer heat, as many had hoped. Just in the US, there have been over 100 thousand new cases in just two weeks in July, bringing the total to over 3 million, even before the toll of the July 4th holiday gatherings was fully accounted for in the numbers. Mortality curve has flattened, as the initial trouble with personal protection equipment, logistics, and numerous other unknowns have started to be addressed, and a couple of new and old drugs began chipping away at the early and late stages’ damages of the disease.
We have ways to go before it’s all under control, the so-called herd immunity is months if not years away, and experts are talking 2021, if not 2022. This will take an unprecedented amount of resources, and no company or country can possibly handle this task alone. Globalization at its best can, should, and would be leveraged here. It will be fascinating to see what unfolds, as forces both low and high in their motifs are extremely powerful and playing dangerously close to the edge.
The world’s health, the global economy, the planet’s climate, the workforce reskilling revolution that was due and is now overdue, are all problems that can’t be solved by even the most brilliant and willing minds without a major shift towards the innovation-led inclusive growth and globalized collaboration. This right now may be the only inflection point we get in our lifetimes to take that turn.