Coronavirus set to scar world economy for decades amid an uneven, unequal recovery, observers say

‘All told, the decline in gross domestic product last year was the biggest since the Great Depression. The International Labour Organization estimates it cost the equivalent of 255 million people full-time jobs. Researchers at the Pew Research Centre reckon the global middle class shrank for the first time since the 1990s.

‘The costs will fall unevenly. A scorecard of 31 metrics across 162 nations devised by Oxford Economics Ltd. highlighted the Philippines, Peru, Colombia and Spain as the economies most vulnerable to long-term scarring. Australia, Japan, Norway, Germany and Switzerland were seen as best placed.’

Read here (South China Morning Post, Apr 18, 2021)

The billionaires who profited from the pandemic should help pay for our recovery

‘The collective wealth gain of roughly a trillion dollars that the billionaires have enjoyed is more “than it would cost to send a stimulus check of $3,000 to every one of the roughly 330 million people in America,” the report states. “A family of four would receive over $12,000.” The report points out that a trillion dollars is also “double the two-year estimated budget gap of all state and local governments”—the deficit facing states that will certainly prompt them to make more cuts in public jobs and services if it isn’t addressed. The authors of the report don’t argue that taxing the recent gains of the mega-rich would cover the entire fiscal cost of the pandemic. They stress, instead, the undoubted fact that, at the very apex of U.S. society, there is now a staggering—and historic—amount of wealth that could be taxed.’

Read here (The New Yorker, Dec 10, 2020)

Capitalism after the pandemic: Getting the recovery right

‘Governments also need to consider how to use the returns on their investments to promote a more equitable distribution of income. This is not about socialism; it is about understanding the source of capitalistic profits. The current crisis has led to renewed discussions about a universal basic income, whereby all citizens receive an equal regular payment from the government, regardless of whether they work. The idea behind this policy is a good one, but the narrative would be problematic. Since a universal basic income is seen as a handout, it perpetuates the false notion that the private sector is the sole creator, not a co-creator, of wealth in the economy and that the public sector is merely a toll collector, siphoning off profits and distributing them as charity.

‘A better alternative is a citizen’s dividend. Under this policy, the government takes a percentage of the wealth created with government investments, puts that money in a fund, and then shares the proceeds with the people. The idea is to directly reward citizens with a share of the wealth they have created...

‘A citizen’s dividend allows the proceeds of co-created wealth to be shared with the larger community—whether that wealth comes from natural resources that are part of the common good or from a process, such as public investments in medicines or digital technologies, that has involved a collective effort. Such a policy should not serve as a substitute for getting the tax system to work right. Nor should the state use the lack of such funds as an excuse to not finance key public goods. But a public fund can change the narrative by explicitly recognizing the public contribution to wealth creation—key in the political power play between forces.’

Read here (Foreign Affairs, Oct 2, 2020) 

Lancet COVID-19 Commission Statement on the occasion of the 75th session of the UN General Assembly

Executive summary: ‘The Lancet COVID-19 Commission was launched on July 9, 2020, to assist governments, civil society, and UN institutions in responding effectively to the COVID-19 pandemic. The Commission aims to offer practical solutions to the four main global challenges posed by the pandemic: suppressing the pandemic by means of pharmaceutical and non-pharmaceutical interventions; overcoming humanitarian emergencies, including poverty, hunger, and mental distress, caused by the pandemic; restructuring public and private finances in the wake of the pandemic; and rebuilding the world economy in an inclusive, resilient, and sustainable way that is aligned with the Sustainable Development Goals (SDGs) and the Paris Climate Agreement. Many creative solutions are already being implemented, and a key aim of the Commission is to accelerate their adoption worldwide.’

Download full statement here (Sept 14, 2020)

Working life has entered a new era: Farewell BC (before coronavirus). Welcome AD (after domestication)

‘Without the Monday-to-Friday commute, the weekend seems a more nebulous concept, as does the 9-to-5 working day. In future employees may work and take breaks when they please, with the company video call the only fixture. The downside, however, is that the rhythm of life has been disrupted and new routines are needed: as Madness, a British pop group, sang about school in “Baggy Trousers”, people are reduced to “trying different ways to make a difference to the days”.’

Read here (The Economist, May 30, 2020)

We need a Covid-19 law right now

‘When I am asked what businesses need from a legal perspective in this Covid crisis, I come up with a critical minimum list of three, for our local small and medium enterprises (SMEs). First, breathing space to earn income and turn around a cash flow deficit to meet debts. This translates into: (a) freezing of demands for payment, and (b) freezing of legal actions... Second, protection from eviction from business premises, and repossession of machinery, equipment and assets that are essential to generating revenue, for a similar period of time. This is fundamental to SMEs’ ability to carry on business as a going concern... The third measure required is then, assistance with the restructuring of debts.’

Read here (FocusMalaysia, May 9, 2020)

Patterns of pain: What Covid-19 can teach us about how to be human

‘Our institutions will need to be rebuilt with transparency, with heart and by learning from the people who have been staffing them, not just the managers and owners. Doctors, nurses, carers and delivery people have things to say about how their institutions could be better run. The body politic and the politics of the bodies that make up our world must be reconfigured, and we need to start thinking about that now.

‘I conclude with Freud: “The aim of psychoanalysis is to turn hysteria into ordinary human unhappiness.” That is an accomplishment for an individual and for a society. We cannot escape unhappiness. It is constitutive of being human, just as are creativity, courage, ambition, attachment and love. Let’s embrace the complexity of what it means to be human in this time of sorrow as we think and feel our way to come out of this, wiser, humbler and more connected.’

Read here (The Guardian, May 7, 2020)

McKinsey & Co: The phase of Return is in sight. But rapid Return comes with higher risk, and a new reality

Pages 29 to 55 of this 63-page McKinsey & Co report start with the following introduction:

• Weeks of shelter-in-place provisions globally have caused a deep economic challenge, straining governments’ ability to save lives while safeguarding livelihoods
• Governments are now considering options and timing for a gradual re-opening, with the US being the most recent announcement.
• Many of these re-openings are occurring in very different environments. Some geographies are considering opening after they have plateaued, while others are seeking to return after additional verifications are complete (e.g., hospital capacity, testing capacity, other)
• These variations are driving concerns within businesses around risks associated with a return-to-work, and whether these risks can be adequately managed
• Additionally, COVID-19 has changed many realities for businesses. Remote first may be a goal achievable in months, consumers have structurally adopted digital channels, and the prospect of the largest economic recession since the second World War could quickly challenge the business

The section goes on to discuss ‘Return planning’ which is relevant to all Malaysians as we enter the phase of conditional MCO.

Download the report here (McKinsey & Co, April 24, 2020)

Could it be time to swop fast car for slower, sturdier one?

Danny Quah, dean, and Li Ka Shing Professor in Economics, Lee Kuan Yew School of Public Policy, addresses the questions: How should the world change post Covid-19? Will we all just go back to business as usual? What lessons do we need to learn from this pandemic?

Upclose and personal: “Post-Covid-19, the new focus will concentrate more sharply on individual well-being and individual responsibility. Old political dogmas about individual rights and state surveillance and control need to be recalibrated. In a world of spillovers, individual rights are immediately social ones too. Covid-19 has shown how our economic world is rife with externalities, where we ourselves rise by lifting others around us."

Two paradigms: The overall tradeoff involves two paradigms of development. Comparing a highly souped-up car with a slower sturdier one, he concluded: “The critical trade-off is between driving an economic system to maximal efficiency and building in redundancies and resilience through spare back-up capacity. Government intervention is needed to repair the problems created by externalities in health systems.”

Read here (Straits Times, April 23, 2020)

Ray Dalio discusses depression economics and what to expect

Ray Dalio, "Global Macro Investor", philanthropist and founder of the world's largest hedge fund, understands deeply the inner workings of the world economy. In this 52-minute interview with Corey Hajim and Chris Anderson of TED, he mentions the following:

1. The world is going through a massive stress test, akin to the 1930s, when there would be widespread economic collapse, money printing and subsequent restructuring. Wealth will be redistributed but the levers of power will decide how it would be (within nations and internationally). This will cause a lot of friction, even wars.
2. Even today, there is demonisation of "others" even if they are being helpful. For example, while China is helping many countries, anyone holding such views can be ostracised in the US.
3. It is an opportunity to reform capitalism to create more equal opportunities, greater harmony, more innovation and more productivity via universal education.
4. Companies that win will be those that provide basic needs and those that are adaptive and creative. Algorithmic thinking, especially in investment, will give way to more human interventions and creative input.
5. For the individual investor, he calls for humility and diversification, and not to try to time the market. Cash, he stresses, is not good investment.

View here (TED, April 9, 2020)

“If you insist on every single contractual right... that will suck the life out of the economy”

Singapore passed a new bill that gives temporary relief to businesses and individuals if they are unable to fulfill their contractual obligations due to the coronavirus outbreak such as paying rent. “If you insist on your minutest every single contractual right at this point, that will suck the life out of the economy. You have got to protect everyone,” Singapore’s minister for home affairs, K Shanmugam said.

Read here (CNBC, April 8, 2020)

Towards a market structure that serves the greater good

‘This crisis lays bare the myth of the invincibility of the market. Market has broken down in a big way and the state is asked to step in to solve this crisis – from bail out of companies, to paying wages of workers, to cutting interest rates, soft and loans to small business guaranteed by the state etc.

‘Markets will continue to exist and play a part in the economy. But it must be subordinated to society, to be regulated by the state to serve a greater good. For market to function well as a public good, it must not only be free but also fair. Both attributes are equally important, like the two wings of birds. The new economy must prioritise people’s as well as nature’s wellbeing over profit making for a few.’

Read here (IPS News, April 6, 2020)