As the Covid-19 pandemic continues to overwhelm health systems and economies across the world, four aspects of what lies ahead are becoming clear.
First, with a vaccine 12-18 months away, the speed at which scientists develop an effective therapeutic drug and antibody tests will carry economic consequences easily measured in the trillions of dollars over the next year. We are thus once again in a situation in which never was “so much owed by so many to so few” — but this time we are reliant not on fighter pilots during the Battle of Britain but instead on a small band of medical researchers.
With a therapeutic drug that makes it possible for more people to easily weather and survive Covid-19, those who have not yet had the disease could feel more comfortable returning to work in the office, shopping at stores, and engaging in other in-person commerce. And with an effective antibody blood test, we would know who already has had the disease and is presumably immune to a recurrence. Both these innovations are likely to be available well before a vaccine is. Without them, we will need to cycle through intermittent rounds of broad social distancing measures to limit mortality — with ongoing economic damage. With them, much more targeted measures are possible. (The worst idea is to end the social distance prematurely, before people are confident that they can safely interact with others because we have effective therapies and tests.)
The biopharma research teams working on these innovations understand that their success would save lives. They should know it would also mitigate further massive economic damage. The good news is that the research community is operating with a remarkable degree of cooperation, and this could very well hasten innovation.
Second, as the first rounds of government stimulus inevitably generate backlash, the politics of future stimulus become more challenging. Governments across the world have stepped up, as they should, by spending generously to blunt the economic pain from the disease and the measures taken to limit its spread. So far, and unlike in the 2008-2009 financial crisis, these programs have generated little controversy. But we should expect that to change as the programs get up and running and as the economic suffering that the programs are meant to mitigate spreads.
As the money starts to flow, some of it will inevitably go to fraudulent recipients, and some will also inevitably go to people who spark popular backlash by deciding it’s a good idea to post a social media photo from a yacht, private plane or mansion. At the same time, we are almost certainly going to need additional rounds of stimulus. Enacting the next round will be much harder than the first was, but will nonetheless be crucial to avoiding ongoing economic harm (especially by including additional assistance for state governments in the U.S.).
Third, we may face new supply shocks because we are asking many workers who don’t normally think of themselves as emergency response types to play an essential role in keeping food, medical supplies and other necessities flowing throughout the economy. Workers at grocery stores, delivery services and related businesses are not used to viewing themselves as a nurse or firefighter or police officer, because their roles typically do not involve an elevated personal health risk. Yet in every crisis, the definition of core infrastructure differs — and given the nature of social distancing, we are particularly dependent on this set of workers during this crisis. So far, so good — but we need to pay close attention to these key supply lines.
Finally, and even beyond an expanded role for government that will persist, the crisis is affecting the global economic structure in ways that will last, because the longer the pandemic persists, the more entrenched our new habits will become. For more than a decade, the world was supposedly flat — as information flowed and supply chains stretched across the globe — but our most important human interactions still happened in person. Everything from crucial business meetings to medical care to college courses were predominantly face-to-face. Telemedicine had limited pickup, as did distance learning. As we now learn to conduct more activities through video conferencing, the effects are likely to persist.
At the same time, the pandemic has reinforced the importance of physical access to key sources of goods production. As we emerge from the coronavirus crisis, we are therefore likely to see a strange juxtaposition: More activity will become virtual and therefore global, but at the same time more of the production of physical goods will become national. The result will be more “winner take all” markets in the virtual world but fewer in the physical world.
Most of these developments already seem almost inevitable, even if the details of exactly how they will play out remain unclear. As we make our way out of this crisis, after the numbers of coronavirus infections and deaths go down and stay down, our post-pandemic future will come more fully into focus. In the meantime, our economies are counting on the scientific community to come through.
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