Ten ways corona virus has changed the world economy
Economic shocks like the coronavirus pandemic of 2020 come once every few generations, and they bring about permanent and far-reaching change. Here is an overview of some of the transformations.
Big government staged a comeback. Authorities had to track where people went and who they met and to pay their wages when employers couldn’t manage it. These interventions made world’s governments run budget deficits that add up to $11 trillion this year.
Even Easier Money
Central banks were plunged back into printing money. Interest rates hit record lows. History shows that pandemics depress interest rates for a long time. It found that a quarter century after the disease struck, rates were 1.5% points lower than they otherwise would have been.
Debts and Zombies
Governments offered credit as a lifeline and business grabbed it. One result was a surge in corporate debt levels. The Bank for International Settlements calculates that non-financial companies borrowed a net $3.36 trillion in the first half of 2020.
The World Bank warns that the pandemic is spawning a new generation of poverty and debt turmoil.
As economies locked down the upshot has been labelled a “K-shaped recovery.” The virus has widened income or wealth gaps across fault lines of class, race and gender.
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.
You’re on Mute
Work-from-home has mostly passed the technology test. 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 companies like videoconferencing platform.
Not Going Anywhere?
Global tourism fell 72% in the year through October. McKinsey reckons a quarter of business trips could disappear forever as meetings move online.
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 China.
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.