The View from the Economist: Planning for the 90 Percent Economy
Speaking remotely from London during a session at the ULI Virtual Fall Meeting, Zanny Minton Beddoes, editor in chief of the Economist, outlined several trends that the global COVID-19 pandemic has accelerated. Her prediction is that many of these trends will not be reversed, such as an increase in remote work, as her team recently completed the 31st weekly edition of the nearly two-century-old publication from her home.
Minton Beddoes, who also worked as an economist at the International Monetary Fund, began by saying she sees two time frames for consideration: the near term of the next year or two, because much of the world will still be in recovery from what she called an “induced coma” economically, and four to five years from now when the world will be in the “new normal.”
What will be the short and long-term #geopolitical and #economic consequences of the global #pandemic? @zannymb examines the scale of the damage and the impact on government finances, trade and #globalization, and the role of the state: https://t.co/k78wNijMaq#ULIFall pic.twitter.com/79CZ77oCax
— Urban Land Institute (@UrbanLandInst) October 14, 2020
“Even before COVID-19 struck, [the world was] in the middle of some tectonic shifts,” Minton Beddoes said. “COVID-19 has accelerated what was going to happen in a few years and accelerated it into a matter of months.”
The first shift she outlined was the technology shock that began during the 1980s with personal computing and that has continued to grow with technologies like artificial intelligence and the fifth-generation mobile technology standard being commercialized in the near term.
The downside to that technological shift, she said, is a lot of concentration in various industries ranging from airlines to banks. While some companies such as Zoom have seen their fortunes improve dramatically, she said, “Pretty much every week, a brick-and-mortar retailer is filing for bankruptcy.” Minton Beddoes compared it to the Industrial Revolution in terms of impact, creating great wealth but also increasing equality.
The technological shift also empowers remote work. “At one point, two-thirds of America’s GDP was being produced by people who work from home,” Minton Beddoes said. While she is optimistic about new jobs being created to replace those that are being lost, she said it will take time and investment to retrain low-skilled workers.
She also noted that even if the amount of remote work rises from 5 percent to 20 percent, that is still a huge shift. “We’re not going back to five days a week in the office,” said Minton Beddoes. “All the CEOs that I talk to are saying, we’ll be going back to more of a hybrid model.”
“We now have people in their 60s merrily doing their shopping for groceries online,” she said. Beddoes said that though the median age of the fatalities in the United Kingdom from COVID-19 is 82, she also worries about the impact on the younger population in terms of missed opportunities at a crucial development stage of completing an education or finding a first job.
Another ongoing shift Minton Beddoes highlighted is climate change, whether it is exemplified by the ice caps melting or wildfires. “Even with the international economy grinding to a halt, we’ve barely seen any decrease in carbon emissions,” she said.
The silver lining of the pandemic is that there is more awareness than ever of the seriousness of the climate change discussion because the pandemic has increased the focus on the natural disasters as they have been occurring, she said. The response that the world has seen in a race to create a vaccine for COVID-19 is one aspect of the pandemic that gives her hope about climate change, she said.
In April, the Economist had a cover story titled “The 90 Percent Economy,” Minton Beddoes noted. In her view, businesses need to plan for that 10 percent or more not coming back for some time.
While stock markets around the world have been performing well, quite a bit of stimulus has been propping up the global economy. “It’s still a very different world, and that makes it hard to see a V-shaped recovery,” Minton Beddoes said.
She said the role of national governments is likely to grow out of the crisis, and the debt that governments are taking on likely means higher taxes at some point, whether it be a carbon tax, a value-added tax, or an income or wealth tax.