The COVID-19 crisis has created “a sharper and more synchronized” downturn than the Great Depression, but it will most likely not last nearly as long thanks to better policy responses, said a report on the long-term implications of the coronavirus pandemic by Credit Suisse, a multinational financial services firm.
The December 2020 report called “What will last? The long-term implications of COVID-19” finds that “rather than radically changing the world as we know it,” the virus has “accelerated existing trends.”
These include the digitization of everyday life, the trend toward more flexible work arrangements, the deceleration of globalization, and an increased vulnerability of cities — all of which existed before the pandemic struck, the report said.
Globalization will slow further post-COVID, the report said, and a trend toward keeping production close to home will open up opportunities for lower-cost production countries that are close to the main consumer centers, the US, Europe, China and Japan.
The work from home trend is decentralizing economic activity in developed countries, and the option of employing workers in rural areas and small cities is becoming more attractive.
Despite a potential deceleration in the speed of urbanization, as large, densely populated cities were the worst hit by the pandemic, “it is premature to declare the end of big cities,” the report said. “As history shows, cities can recover after a crisis, but this requires adjustments to make them more resilient.”
The impact of the virus has also deepened inequalities in society, hitting the poorer and less advantaged populations hardest both on the health and economic front.
“Socially disadvantaged population groups are more likely to suffer job losses and lower income,” the report said. “While wealth has remained steady thanks to decisive fiscal and monetary action, the pandemic has set disadvantaged population groups apart through inequality of opportunities in education, health, access to jobs as well as higher infection risks due to working and living conditions. As a result, COVID-19 will likely see policymakers focus on corrective measures.”
There is no evidence that authoritarian regimes have been more successful than democratic countries in fighting pandemics, the report said, noting, “Both can fail or thrive in a pandemic.” Success or failure in the battle depends on a variety of factors, including experience in past health crises, speed of action, the ability to take effective policy actions, people’s trust in the government and cooperation within and among countries.
The pandemic may trigger nations to set up more and improved social security nets, the authors of the report said. But too much state intervention may “hamper economic activity and undermine individual responsibility.”
“In the past, conflicts, diseases, economic downturns and mass unemployment often led to an expansion of the state. If history is any guide, the extension of state powers during the COVID-19 pandemic may well outlast the crisis.”
Because “remote work is here to stay,” demand for office space and business travel will likely decrease. Remote learning will also continue, especially to keep working people updated with skills. But schools and educational institutions “will not disappear” because of the critical role they have in promoting integration and teaching students social skills and societal norms.
“Throughout history, health crises have helped to drive scientific and social innovation, shaping the paths of future economic development,” said Sara Carnazzi Weber, head of Policy & Thematic Economics at Credit Suisse, in a statement. “The current crisis will be no exception, but rather than radically changing the world as we know it, COVID-19 has mainly accelerated existing trends, triggering structural change in fast motion in many sectors.”