What are the Long-term Implications of the Pandemic?

I started using as a framework the excellent April 1 Globe & Mail article written by Kevin Lynch and Paul Deegan. Another thoughtful source was a piece also appearing in the Globe, dated April 6, written by David McKay, CEO of the Royal Bank of Canada. Other sources are not identified but they have been worked into the following:

A. Debt

• huge debt increases in both federal and provincial debt will result. Post WWII the large resulting debt was handled by significant growth in the economy, which may not happen post COVID
• central-bank balance sheets expansion: quantitative easing will incur a massive expansion
• future tax cuts and new government programs will be debt constrained
• private sector borrowing to preserve their operations will test bottom lines
• financial vulnerability of cities: some could crash under debt and reduced revenues
• financial vulnerability of universities/colleges; similar forces regarding debt and reduced revenue streams
• concern re “supply destruction not mere disruption”; we are entering a world in which “firms will …be valuing anti-fragility…and planning for catastrophe” (Mark Carney in the Economist)

B. Globalization

• global supply chains will be less centralized in hubs (such as China) and more distributed
• more built in redundancy; this redundancy and self-reliance will make Canada more expensive, as we don’t have a significant domestic market
• reduced free flow of goods/increased self-reliance: RBCs McKay wrote that the “global trade migration is not likely to go back to the old model”…and that “it does mean we need to think…about how to be more self-reliant in the areas that matter most to our competitiveness and prosperity”. “Our governments, leading enterprises and academic institutions need to determine how to best develop and protect more resilient Canadian supply chains” (as the next “normal” may not include the free flow of goods)
• more looking after individual country interests in global trade and investment; Canada is vulnerable as we are an exporting country
• mandated national critical medical supply capacity: governments will mandate supply capacity for things like medical devices, vaccines and technologies
• impact on travel enormous (both leisure, business and education related); see D

C. Health Care Systems

• a more integrated approach to health care will result (including: strong research to identify sources of an illness and develop responses; innovative firms developing solutions; hospital surge capacity)
• an upgraded role for public health care models; realization of the concept of social determinants of health (holistic approach) will gain further traction
• enhanced public health and epidemic modelling
• health care as a competitive advantage: resilient and efficient health-care systems will become part of the competitive advantage of nations
• mental health: the impact of the pandemic on those who have mental health problems will be significant presenting challenging care issues; the pandemic also has the consequence of creating/exacerbating conditions of anxiety, etc
• long term care residences crisis: current talk in Canada of bringing long term care residences under government control, even ownership
• reduced tolerance for/influence of the anti-vaxxers; the consequences of being a potential disease source will be unacceptable

D. Nature of Work, the Workplace, Education, Culture and Technology

• huge change in information technologies is occurring (remote working; virtual networking; office messaging sites; student learning; online purchasing). The world is learning that a laptop computer and video conferencing are effective.
• significant advantages of early technology competence: the country, the business, the individual that learns and adapts will be advantaged; Canada has to be an early mover
• the use of office space and remote capacity concepts will be challenged; there is a possibility that the increased home office trend (not everyone likes the office environment and not everyone will get “immunity certificates”) will be offset by an increased demand for more space driven by the need for increased personal work space
• move away from big downtown cores to suburbs likely (and even farther to the cottage or ? as geography doesn’t matter in a digital world): to avoid riskier commutes (where shopping on foot will also be possible); also reduces commute infrastructure, be it highways or public transportation
• ever-increasing online purchasing will challenge the bricks and mortar retail industry with many not surviving
• vulnerable retail food franchises: the pandemic will underscore the belief that there is an oversupply of retail food franchises, many on secondary sites that may now not be economic
• accelerated move to robotics will occur (benefits: increased productivity; reduced vulnerability to future pandemics; but also employment)
• support industry value: the value of those that assist our system functioning will increase (financially; respect), e.g delivery personnel, grocery store and pharmacy workers, medical system and long term care personnel, transit workers, police, firefighters, etc.
• worker and consumer skills need to be upgraded; requires education/training investment; all will need computer/internet and even typing skills
• drive for world class education investment: strong incentive for greater investment in making Canada’s education among world best
• increased online learning will impact teaching profession; further impact on/implications for concept of lifelong learning; the trend will likely include special teaching positions handling only online teaching
• technology implications: both in network capacity and security; move to invest in next generation infrastructure, e.g. satellite-driven rural broadband and smart cities
• health care technology implications, specifically AI, is being employed to trace the risk of infections and to improve diagnostic procedures; drone technology is being used in China to get medical supplies delivered where needed, virtually contactless; telehealth/telemedicine is being employed and will remain a mainstreamed option
• rich/poor fault lines: the virus has exposed a deep rich/poor density divide (the advantaged can do remote work, order in, etc.; others use transit, need to work, etc.)
• tests of faith emerge everywhere; perhaps the best outcome, as one minister put it, is “to be more loving, more compassionate…that we must learn to pull together”. Outlying positions may resolve themselves in a Darwinian fashion: in Pakistan as Ramadan approaches dozens of well-known clerics and leaders of religious parties have signed a letter demanding that the government exempt mosques from the shutdown during the holy month or “invite the anger of God and the faithful”

E. Geopolitics

• while Lynch and Deegan see a rise in nationalism and decline in multilateralism after observing that this pandemic has had relatively little international co-ordination, I think this will change
• increased international institutions/cooperation: initially, the turning inward for protection and advice will continue (particularly regarding medical supplies). But eventually the irony of it all will emerge: that viruses don’t care about geography or politics. The result could be an increase in the role our international institutions play, particularly the United Nations and the World Health Organization and, as well, general inter-country cooperation. Even in the U.S. a high percentage of people say international co-operation was very important when dealing with the problem (82% for Democrats; 77% for Republicans, in a recent Pew survey)
• that won’t obviate the inclination for individual countries to becoming more self sufficient

F. Environment

• accelerated awareness of interconnectedness of our earth systems
• climate change as a value: after the Covid crisis it’s reasonable to expect people to demand a new hierarchy of values; climate change will be a great test of this revised hierarchy
• increased trends to build economies on green vs old technologies/thinking
• short term pandemic impact: already significant changes taking place in pollution measures, e.g. air quality. Some carbon emission changes occuring, e.g. large drop in avgas for air travel and bunker C for cruise travel Q is whether some gains can be maintained
• potentially increased car (and gasoline) sales as people avoid riskier, confined public transportation; also lower gas prices and lower financing costs will reduce automobile travel costs
• autonomous cars/trucks: increased incentive to increase as they are Covid safer (plus environmentally beneficial)

G. Personal Behaviours, including Leisure, Sports and Travel

• greater consideration of personal values. e.g. family and friends are important and can be a salve (resulting in more regular – and visual – communication, e.g. the Zoom phenomenon); health quality (the virus affects those with other afflictions – comorbidity – more, so do something about them as well); possessions (do I need all this stuff?)
• change in leisure habits, e.g. increase in reading and hobbies; drinking (has increased – up 41% says one survey; consequences?); working out or just walking (my wife and I walk almost very day now – and are exploring different routes; we’re seeing others and likely this habit will be sustained by many)
• accelerated movement to cashless society; money/coins toxic; cheques will all but disappear; bank cards, e-transfers, smart-phone based systems, electronic fare cards will dominate
• reduced travel, especially international (risk/inconvenience, i.e. temperature checks may be likely; long lines; masks); all public transportation (ships, planes, trains, buses, subways are petri dishes for contagion even after a vaccine)
• cultural and sports sectors negative impact huge, particularly venue related; need for viewing/participation countered by social distancing necessity will reduce capacity/drive up costs/prune marginal operations
• increased use of shopping services such as Instacart, dark or ghost kitchens allowing anyone to start a company, virtual or not, will result in redesign of entire food sector
• personal investing challenges: betting against the commodity influenced Canadian dollar; stock selections (Amazon; Zoom?), alternative banks/other options in low interest environment
• real estate industry: talking to my son and his wife (who are at the leading edge of real estate world innovation) the industry was being transformed even before Covid; but the accelerated consequences will now include: anything that can be digitized will be; financial criteria displayed/met before process commences; accept no cheques; all electronic signatures; no driving to view properties; no open houses; first showing is now virtual; maximum of one visit and limited to clients only. Industry still a sellers market; little inventory exits
• purchasing insecurity: increased inclination to stock a few more essentials (the toilet paper phenomenon); attempt to predict vulnerable products, e.g. meat plant difficulties
• more caution in normal social behaviours, probably permanently (kissing, handshakes, hugging)
• reassessment of the culture of ageism in Western societies; human rights don’t have a “best-before-date”

H. Politics: Canada vs US

• attitudes to collective security: we will benefit from Canada’s greater commitment to collective security; we accept strong measures that don’t go down as well south of the border
• personal and economic freedom: regardless of opinions re Trump, it’s apparent that Americans place such a strong emphasis on personal and economic freedom that many of them may be willing to accept a large number of COVID-19 deaths, in exchange for being able to live their lives as they see fit
• political unity in Canada: our country is more than ever unified, a distinct contrast to the divisive situation south of the border where a lot of finger pointing has occurred. One trigger was Trump ordering 3M to stop shipping respirator masks to Canada.
• social cohesion will aid next phase: the pandemic will result in a difficult dynamic between “protect all” vs “economic resumption”; health vs income is now playing out politically with the results not yet clear; Canada has a high degree of social cohesion which will aid in effective solutions

I. Public Policy Implications

• next steps tricky (see H) after infection curve flattened; the blunt instrument of population-wide physical isolation was used but now the metrics on guiding us on reopening Canadian society will include a sustained reduction in cases, ample hospital capacity and increased testing and tracing capabilities. There are apps (through a joint Google/Apple project) that would enable contact tracing on most of the world’s mobile phones (with privacy and security controls)
• federally/provincial common purpose and caution: there seems a sense of common purpose, offering a high level sense of what lies ahead and to avoid breakdown of national consensus; there is also a lot of contact between provinces where the real actions will occur; probably the prairie and Atlantic provinces will commence a selected reopening; common view is that governments will need to err on cautious side, removing selected restrictions and measuring impact
• behavioural change: designers of public policy directives will need to understand the principles of behaviour change design to effectively craft their actions, e.g. citizens will need to feel like they matter and that if they make sacrifices, they will make a difference. As well, how can people be given room underneath the rules that need to be in place for the greater good
• questions re future government role: the pandemic will result in increased government involvement in a number of areas; will we end up with too much government? As Mark Carney says, “Will the state remain emeshed in commerce, and so restrain private dynamism?”