Twin Crises to change the World

We live in extraordinary times.  Normal life is almost everywhere on hold, and even hitherto important issues such as Brexit or the Labour party leadership (finally concluded, in case anyone is still interested in party politics), or for other people, the fate of sports teams and championships, pale into insignificance.  Instead, all talk is of the two crises affecting the world – the health crisis, and the economic one.

Right at the moment everyone is concerned most of all with the immediate health crisis.  We face a disease we do not know how to prevent, have no cure for and cannot (it seems) control without the most extraordinary measures.  In the name of preserving lives, liberal democratic governments have imposed measures – social distancing, lockdowns, forced closure of businesses – the like of which have not been seen in our lifetime and perhaps not even in times of war.  And if anything, many people are demanding even more strict action.  Inevitably, the virus and the resulting lockdown dominate the news and family discussions. 

But this overlooks the fact that we have two crises not one.  And, unfortunately, the second crisis, the economic crisis, may if we are not careful end up more damaging, more long lasting and more difficult to recover from than the immediate health crisis.

This is not to belittle the health crisis or downplay the tragedy of many deaths.  But Covid-19 does not actually kill very many of the people who catch it, and even the higher estimates for total deaths are not that large compared to annual deaths from all causes, or even annual flu deaths.  In the Great Plague of 1665, about 1 in 30 people across England died (though it was more in London, then the only city in the kingdom of any real size), and in the Black Death of the late 1340s, the death toll was as many as 1 in 3 of England’s population.  We do not face that sort of catastrophe, or even we hope anything approaching it, sad though every death is.  The great majority of people will survive Covid-19.

But the second crisis, the economic one, is potentially rather different.  We are dismantling our economies in the most extreme way imaginable.  Strong countries may survive this for a few months, weaker ones in the third world (particularly badly hit because many of them rely so heavily on tourism) will quite possibly collapse.  Almost no country knows how to survive a year of lockdown.  And as well as the economic damage, which will affect everyone, crashing economies do also cost lives – lives lost because people cannot access (or in some countries afford) health services, lives lost to default and debt, lives lost to despair.  When countries’ GDPs shrink, so do their life expectancy rates.  We may yet end up with more deaths caused by the recession brought on to fight Covid-19 than from the disease itself.

And the economic crisis also leads to a potential third crisis, which is one of mental health.  Nobody knows what an extended period of social distancing will do for the fragile, the lonely and the already mentally ill.  In particular the effect weighs unusually heavily on our young people, who despite themselves being in general among the least susceptible to the virus, are paying some of the highest prices in the ensuing lockdown.  Some will feel they have nothing to study for, nothing to live for except debt and unemployment – those graduating from college this summer in particular will find that the job market is one of many that has almost ceased to function.

The problem for our political leaders is that the three crises are intertwined.  And the solution to the first – lockdown, self-isolation and social distancing – is creating the second and third.  At some point we will have to get the economy going again, we will have to release people from solitary confinement.  But when?  Do it too soon, and the virus will roar back; do it too late, and the economic and mental health damage may be beyond easy repair.

But to end this essay here would be too gloomy.  The world will survive the Corona Crisis, and will rebound in time from the Economic Crisis as well.  But to expect life to go back to how it was in 2019 would we think be wrong.  The twin crises will change society in many ways.  And three, above all, seem likely to stand out.

The first is the shape of the developed world economy.  Most western economies are moving rapidly towards a much larger role for the state:  we have more state support for the essential services, more support for the out of work, the gig economy, the homeless.  Many countries will have to either support or nationalise large parts of their economy – the UK has already extended state control to the railways, much of the private medical sector and the like.  We will see very much higher levels of state borrowing, and in time probably higher taxes.  Nor is this an ideological issue:  governments across the political spectrum are rushing to extend the state, and the many “temporary” measures being introduced may prove difficult to unwind.  

The second big change may be to the shape of international trade.  It is unlikely that we will return fully to the just-in-time global supply chain economy which characterised the last 10-20 years;  it was without doubt super-efficient in financial terms but at the cost of being worryingly lacking in resilience, worryingly reliant on countries allowing trade and travel across borders.  Europe in particular will need to review its long-distance supply chains and reliance on just-in-time deliveries from halfway across the globe – which European company will in future want to be totally reliant on a factory in Asia now?

And the third change may be to the shape of society.  Just as in the immediate aftermath of a war, there is a chance that in many western countries, there will be a greater sense of one nation, of social solidarity, of what David Cameron once called the Big Society.  This is a little ironic, because when Cameron claimed in 2010, as his government ushered in a period of austerity, that “We are all in this together”, it was simply not true – despite the claim, the rich were clearly not sharing the pain, and this explains a lot of the angst, anger at the elite and rise of populism since then.  But in this fight we are, very literally, “all in this together”.  The rich are locked down like the rest of us, they need the health service to survive and cope just as much as the rest of us.

Not all the current waves of support that so many countries have seen for their health workers will survive the return of more normal times, heartfelt and genuine though they are right now, but it is unlikely that they will all evaporate, all be forgotten.  And this might be the lasting result of the crisis, a slightly gentler society, less fixated on financial progress and more willing to recognise other ways to measure whether life is worth living, life is getting better.

The twin crises – health and economic – will pass, and after the storm, the sun will shine again.  But it may shine on a rather different world.