Middle Class Musing
We cannot understate the economic fallout of the COVID-19 crisis, but its moment in time will eventually pass. Take comfort that life will not return to normal. The following looks at this from a “middle class” situation, and leaves out of account those many issues of new immigrants, foreign students, and those who are on the margins of society.
In 2008, two big pillars kept global capitalism alive for the time being: the US (The Federal Reserve, the US Central Bank), and China. But the US is not in a position to prop up other countries and this virus has significantly damaged China’s capacity to manufacture for global markets.
We are embarking on changes in the way we will live, permanently.
There is no consensus about the future. But that doesn’t mean we have no responsibility to anticipate it. Regardless of the merits of any prediction, those who contemplate change will be better at shaping it, adapting to it, or thriving in it. Yogi Berra said, “If you don’t know where you are going, you might wind up someplace else.”
The predictions below consider education, the workplace, retail, government control, and globalization. The recurring theme is this: Everything digital leads to a concentration of wealth and opportunity to the few.
– Students will consume more education online.
During social distancing measures, universities and schools have adopted wholesale online teaching. Some of them even seemed to jump at the opportunity, closing classrooms prior to government mandates and moving entirely to online teaching. Online classes are not new, but they may become the primary method of education, or at least significantly augment traditional classroom teaching.
– More students will have access.
Students, less privileged and living in remote areas, will have greater access to education. For private schools and universities, this is a new revenue opportunity. There is no limit to class size. However, public schools will likely lag behind unless given appropriate budgets.
– Leading institutions will have greater global reach.
The implication for education as an industry is that online education will concentrate in leading universities. When Ivy League schools and other leading institutions seek the top 5%, they are no longer limited to the size of their campus. Digitally, they can reach the top 5% in every country. A university’s social policy and doctrines can now reach more minds too. The best teachers will become gurus. Popular teachers will be the new reality celebrities.
Jobs & Workplace
– Job loss will be followed by more meaningful jobs.
Factory closures, unemployment, and a reduction in discretionary spending suffer the slings and arrows of economic cycles. Things get better, then worse, then better. When consumer demand returns, many of the same job positions will not be refilled. Automation, robotics and artificial intelligence are happening in parallel. The good news is that the advent of online education will make re-training accessible, and in many cases, people will be positioned for more meaningful tasks.
– Work and lifestyle blend.
The workplace will change permanently in two ways; both are an acceleration of what was already underway. First, more employees will work remotely from home (or elsewhere), spending less time in the office. Everyone will enjoy freedom from the commute and schedule personal time with greater flexibility. Second, more meetings will be virtual. Productivity, whether it will go up or down, depends on the individual. Robust communication technology is required.
– Big companies will fare better than small companies.
Big companies can decentralize and adopt ‘work from home’ programs. SMEs, ‘mom & pop’ operations and blue collar jobs are mostly site-specific. Work from home for the latter group is not an option. Bigger companies usually are more diverse, more assets, more cash reserves to survive and have better qualifications for loans. SMEs will not have the cash reserves to weather the storm beyond a few months. As well, government assistance tends to be focused on the larger employers, always.
– Fall of the city and the rise of the suburb.
Large cities are under threat. People will come to value the idea of personal outdoors space more. As people work more remotely and conduct virtual meetings, companies will shrink their central office in large cities. They will migrate to decentralized satellite offices or work pods, or nothing. The suburbs will see a resurgence of low population density office parks, entertainment venues, eateries and public services.
– Death of the physical storefront and expansion of e-commerce.
Companies like Amazon are the big winners. During the crisis they are increasing the number of first-time adopters. There is a logic to Amazon offering free children’s e-books and audio books during the crisis. These new digital consumers will get used to shopping online.
– Big box stores will prevail.
Big box stores like Walmart are an exception to digital retail because they offer a range of basic goods at competitive prices.
– Services will not recover in the short term, but new digital services will arise.
As the economy recovers, there will be pent up demand for some physical products. But losses suffered by service providers will never recover lost revenue. People will not go and get four haircuts if they’ve missed several months of grooming, nor will travelers double up on missed vacations. However, new service companies will arise. Where there is destruction, there is rebirth.
– Government surveillance will be ubiquitous.
Sensors will track our movements and our health. Algorithms will predict our movements. The technology is available and affordable. We see governments conducting surveillance activities already. Initial application is justified under the pretense of a public emergency. China is the easy go-to example. The Chinese government tracked the movement of COVID-19 patients with smart phones, mobile apps and CCTV cameras.
– Biometric surveillance will be the second wave of surveillance.
The use of surveillance technology is not new and, in this case we hope, for benevolent purpose. The concern is that initial uses tend to broaden into widespread applications. Concerns of privacy rights arise. Ideological debates will unfold, and laws will be applied to fortify government resolve. Orwellian debates of how the data is used, stored and accessed will linger and then be reinvigorated when surveillance goes under the skin.
– We are not all equal.
Globalization has asymmetrical consequences. Europe sneezes and Kenya gets the economic virus. Growing flowers for export is a huge industry in Kenya. Suddenly, markets around the world are shut down. No sales to Europe. An entire industry is shut down. Yet, Kenya has nary a case of COVID 19. In contrast, when Africa was being ravaged by AIDS, people in Europe did not suffer any economic consequences.
Science fiction writer William Gibson famously said, “The future is already here. It’s just not evenly distributed yet.” All these changes toward digitization were underway, but the future has arrived quicker than expected. Education was moving online. Employees were working remotely. Retail was moving to digital platforms. This is our collective awakening: To reinvent ourselves for a sustainable digital economy. All digital leads to a concentration of the few. Where there is crisis, there is opportunity. But not for everyone.