World economists are watching with great scrutiny what is happening with the Chinese economic recovery in the aftermath of their own experience with this virus. What they are seeing is a lingering effect of economic uncertainty that has surprised Chinese officials and sunk the country in to a recession that resembles the devastating one back in the 1970s. The number of cases they experienced were less than America and it impacted a much lower percentage of their population yet the V-Shaped economic rebound that their economists predicted is not happening. In essential ways their economic prospects as a world manufacturing center and new economy leader should have made them more resilient than the United States. We should be paying close attention.
The optimism that life will return to normal if and when a vaccine is found for Covid-19 could benefit from a reality check. Our individual lives will be impacted as dramatically as anything we have experienced as a county and much of it will be permanent. As consumers we have made a transition to utilizing online purchasing as our primary mode for acquisition of basic goods for example. This was inevitable, yet it was hastened along by circumstance. Telemedicine has also been expedited as has telecommuting. The economic impact of this will be significant I predict because whole industries who relied on foot traffic and a physical presence as their primary business model will become increasingly extinct. As will the commercial real estate market that housed them and the displaced workforce that once filled office buildings. Banks are going to be deluged with bankruptcies and will be forced to restrict lending.
Business will do whatever it must to survive in the aftermath of this event, just as it did following the 2008 economic crash when companies adjusted their model to employ more people in part time positions with lower pay and fewer benefits. The 3% unemployment figure that Trump liked to brag about was made up of a workforce that was underemployed and underpaid. Wage growth has been negligible the past three decades and that is not likely to change. The only thing that has kept our economy going really has been low interest rates and when that situation changes due to inflation, consumers will find it more difficult to buy cars and homes and available income will be allocated toward basic essentials. Health insurance could be relegated to a luxury expense. College loans and possibly a university education itself will need to be reevaluated as a priority if it’s goal is to better prepare for employment. The economic divide will continue to widen and what we once understood as the middle class, identified primarily by home ownership, will be replaced by a renter class. These are just some of the more obvious changes we will have to adjust to. It makes sense that there will be social and economic impact no one could have anticipated. We may replace old institutions with new ones eventually, but what happens until those kick in? Empires have fallen with less of a push before, are we to be one of those? The Renaissance happened after the plague, will we also see surges in innovation?
I write this not to be negative, yet this is a time at least think about what our economic life will look like when this illness is contained. I am an entrepreneur and we are among the most optimistic people you will find, yet my life experience and background in business tell me this is going to be far more pervasive than Americans are prepared for. It’s not premature to start prepping ourselves for a stark new reality. I don’t see much opportunity for preemptive measures that can be taken either by individuals or our government to circumvent these changes, at least at this moment.
How we adjust and turn this around is not something I am willing to conjecture on at this time. We will be in uncharted territory when we get on the other side of this.