The importance of preparing now, to get out of the economic crisis caused by the pandemic
The health crisis is placed as the first strategic action, the implementation of measures from governments, health systems and citizens to save lives. However, under this peak of the iceberg, we observe that the crisis will have very important short, medium and long-term effects and impacts on socio-economic development. Perhaps, therefore, it is necessary to consider the appropriate responses to the possible effects, considering the time horizon of each one of them.
Let’s begin by recognizing that the global crisis as a result of the rapid expansion of COVID-19 in most countries of the world, is not comparable to any economic-financial crisis before. In fact, there is a health and sanitary crisis happening at practically the same time, along with an unprecedented socio-economic crisis.
Academics and researchers propose two phases to conceptualize this crisis. The first is based on the fact that the parameters of the economy and society have changed and cannot be classified as normal, because a significant part of their activity is sleepy. We can define this phase as that of resistance to the pandemic. It is a critical phase in which reactive policies from governments try to minimize the consequences in the short term to survive the shock.
A strategic study from PWC about COVID-19 in China, after 55 days of confinement, highlighted that the sectors most affected were tourism, transport and leisure, and, by way of indicators, pointed out that hotel occupancy had fallen by 90% or passenger transport by 80%; commerce was another sector with a drop in retail sales of 30% while online sales grew by 3%.
Two other areas of activity affected are construction and industry/automotion with a decline in new residential construction of 23 %, a decrease in car sales of 66 % and a drop in industrial production of 16 %. This shows that this external factor, the COVID-19, is giving rise to strong economic impacts of supply and demand that feed back on each other and may even be greater if the financial system also ends up being infected.
Then, the second phase of reconstruction and renewal of the economy and society will begin. The key question is how can we prepare ourselves from today to face the renewed socio-economic crisis that the future will bring?
The challenges identified so far, such as demographics, the digital revolution and the climate emergency are closely related to the impacts of the COVID-19 and, consequently, to the medium and long term responses.
Europe, through the Green Pact, is committed to transforming the economy to achieve sustainable development and during this stop period, which we are experiencing intensely, there are certain processes that accelerate some solutions to achieve this objective. I am referring to the increase in productivity through the application of new forms of work, the reduction of emissions from teleworking or the introduction of more sustainable consumption patterns. Global value chains must be reinvented to define new balanced systems in the use of energy and raw materials. It should not be forgotten that deep changes are needed in the areas of education, health, food, communication and mobility.
The complexity of this evil moment presents public policy makers with the challenge of implementing them at the right time with intelligence and flexibility.
The impact, as we are seeing, is uneven by sector and company. For some it will be easier to return to normal activity while for others it will be more difficult and complicated.
The positive side is that there is already a lot of knowledge about how to do things differently. Business innovation centres, technology centres and clusters, such as MetaIndustry4, are spreading and promoting the incorporation of new technologies related to telework, virtual reality or robotic manufacturing, to which we will have to add tele-health and on-line education as new models and technologies that are being accelerated in this second phase of renewal.
Intermediate organisations, such as clusters or local development agencies, will have an even more key role to play in this new scenario by making greater connectivity between companies more dynamic in order to build new value chains and develop foresight and competitive intelligence between sectors and companies.
It is time for shared leadership, for collaborative processes between governments, universities, companies and socio-economic agents. Responses to the current and future socioeconomic crises must be generated from transformative dynamics that, in addition to addressing social challenges, generate new opportunities for the development of new businesses. Let’s be proactive and take the first step now.
President of MetaIndustry4 and Femetal