Much of the media is like a mother hen. It only focuses on the here and now. But as an employment specialist and resume writer, I look in to the near future and examine a range of factors – and it’s not good.
The policy response to the Covid-19 crisis entails a massive increase in fiscal deficits, at a time when public debt levels in many countries are already high, if not unsustainable. Worse, the loss of income for many households and firms means that private-sector debt levels will become unsustainable, leading to mass defaults and bankruptcies.
The Covid-19 crisis shows that much more public spending must be allocated to health systems, and that universal healthcare and other relevant public goods are necessities, not luxuries. Yet, because most developed countries have ageing societies, funding such outlays in the future will make the implicit debts from today’s unfunded healthcare and social security systems even larger.
The crisis is also creating a massive slack in goods (unused machines and capacity) and labour markets (mass unemployment), as well as driving a price collapse in commodities such as oil and industrial metals. That makes debt deflation likely, increasing the risk of insolvency.
With millions of people losing their jobs or working and earning less, the income and wealth gaps of the 21st-century economy will widen further. Companies will re-shore production from low-cost regions to higher-cost domestic markets. But rather than helping workers at home, this trend will accelerate the pace of automation, putting downward pressure on wages and further fanning the flames of populism, nationalism, and xenophobia.
The pandemic is accelerating trends toward balkanisation and fragmentation. The US and China will decouple faster, and most countries will respond by adopting still more protectionist policies to shield domestic firms and workers from global disruptions. The post-pandemic world will be marked by tighter restrictions on the movement of goods, services, capital, labour, technology, data, and information.
Populist leaders often benefit from economic weakness, mass unemployment, and rising inequality. There will be a strong impulse to scapegoat foreigners for the crisis. Blue-collar workers and broad cohorts of the middle class will become more susceptible to populist rhetoric, particularly proposals to restrict migration and trade.
Recurring epidemics are, like climate change, essentially manmade disasters, born of poor health and sanitary standards, the abuse of natural systems, and the growing interconnectivity of a globalised world. Pandemics will become more frequent, severe, and costly in the years ahead.