Buckle up, the ‘new normal’ is going to be a bumpy ride
One of the consequences of the coronavirus pandemic has been a serious of previously unthinkable political and economic outcomes. Even a few weeks ago, few would have predicted the scale of change, from massive state intervention in many economies to the fact that at one point more than half the world’s population was in some form of lockdown.
The number of events without precedent grows by the day. One of Donald Trump’s economic advisers, Kevin Hassett, predicted last week that the US would suffer easily its worst economic contraction since the Great Depression, a fall of more than 30 percent on the annualised rate. Add to this the already massive spike in US jobless figures, with about 30 million people filing for unemployment in the last six weeks alone; exceeding the 22 million jobs added since November 2009, when employment began to recover from the nadir of the 2008 financial crisis.
The growing list of “unthinkables” shows how ill prepared the world was for the pandemic, and gaps in our knowledge of the coronavirus are still being exposed. For instance, there has been growing optimism this month that the health emergency has passed its peak in China and much of Europe. However, countries that appeared to have the pandemic under control, such as Singapore and South Korea, have had to re-tighten borders and impose stricter containment measures amid growing concern about new infections imported from elsewhere.
This has led to speculation that rather than one big lockdown in each country, on which rests the theory that countries will rapidly bounce back, there may need to be a number of semi-continuous restrictions. This issue was highlighted powerfully last week by Robert Redfield, director of the US Centers for Disease Control, who warned that a coronavirus wave this winter could coincide with the normal influenza season, which could be even more difficult to deal with.
The growing list of “unthinkables” shows how ill prepared the world was for the pandemic, and gaps in our knowledge of the coronavirus are still being exposed.
Many stock markets are significantly higher than last month’s lows, so it remains possible that the rapid bounceback theory turns out to be true. However, several virus-related beliefs have been smashed before; at one point it was widely thought that the virus could be contained in China.
As is often the case, the business world has an acronym for all this: VUCA, or “volatility, uncertainty, complexity and ambiguity,” a phrase that dates from the 1980s and was much used in military training for the end of the Cold War. In our “new normal,” leaders from governments to multinational companies are seeking to better prepare, build resilience and unlock prosperity with strategic planning and forecasts. What is already clear from such exercises is that many organizations need better future proofing, given the potential for transformation in areas from employment to post-pandemic transport, and the future belongs to those that can turn crisis into opportunity.
An example is the question of whether the fracturing of global supply chains means now is the time to rethink them. A further reversal of economic globalization is already forecast, with a significant rise in local production, as politicians such Donald Trump are also encouraging.
Another striking element of the current crisis is the strong corporate responsibility response in many countries. Many companies have repurposed their production processes to produce personal protective equipment, and ventilators too. This may leave a powerful legacy, and it already appears that an increasing number of organizations are thinking longer term to try to bring wider stakeholder benefits, beyond strict or sole focus on shareholder returns, to embed themselves more into society. Perhaps the key idea behind this concept, which was a central theme at the World Economic Forum in Davos in January, is that corporate competitiveness and the health of society at large are mutually dependent and reinforcing.
Capitalizing on the connections between societal and economic progress, and tackling the grand challenges facing the globe, can drive a new wave of post-pandemic growth. For example, one of the few positive by-products of the pandemic lockdowns has been lower global carbon dioxide emissions, mitigating the effects of climate change. When the global economy picks up again, there is likely to be increased focus on organizational sustainability, with “net zero” even higher on the agenda of many environmental campaigners.
This is a new landscape of significant change that will only intensify the VUCA world. In the new normal that is emerging, organizations will increasingly need to build resilience and future proof themselves from the wild unpredictability on the horizon.
- Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics