We have all been shocked and saddened at the loss of life caused by the COVID-19 pandemic.
As Ray Dalio of Bridgewater Investments argues, another threat of the pandemic may be how it exposes the existing frailties in global markets.
The economic measures announced by the Treasury and Bank of England this week weren’t perfect but combining monetary and fiscal measures is what Dalio rightly calls for. If, as they are showing signs of doing, the markets seize up again, but this time with no global political will to unseize them, we will enter very dark and unchartered territory.
But assuming civilisation survives…Here are six things of variable magnitude that an extended period of Coronavirus might lead to or make possible:
A huge reduction in overseas business travel
Often big shifts happen when many factors combine. Long distance business travel was already challenged by high costs, the desire of organisations to show action on climate emissions and the steadily improving quality of video conferencing.
Psychologists tell us it takes just over eight weeks for habit to form. Add all this together, and an extended virus delay period could lead to long term decline in business travel, something which will have big implications for what will be left of the aviation industry.
Aligning non-standard workers with the rest
As RSA colleagues and others have pointed out, the virus is exposing the precarious position of many of the one in five of the workforce who are either self-employed or casual workers. The Government has made some response to this in the form of easier and faster entitlement to sickness benefits.
The virus may add to the case for getting rid of the ‘limb b worker’ category so that all workers get full employment rights. The broader issue for the self-employed is that their labour is undertaxed. Which is why organisations are tempted to misclassify workers as self-employed and why Government is tightening up the rules through IR35.
The braver and better solution involves taxing all labour at the same rate (which would be much simpler and hugely reduce non-compliance and the costs of enforcement) while using the revenue raised to extend sickness cover to the self-employed and to incentivise them to save for their retirement.
Universal Basic Income (UBI)
I’m not expecting the Government to announce a UBI. They couldn’t afford it and it would be a bad idea to do anything so bold and far-reaching without deep public engagement.
However, it is worth noticing that the DWP has been quietly dialling down the benefit conditionality regime, partly because the focus now is as much on labour market progression as participation, and also because the regime was not only unpopular and expensive but also ineffective.
This shift combined with a deeper awareness of economic insecurity caused by the pandemic fallout, might lead the Government to start at least talking about UBI, or perhaps the less radical-sounding but essentially similar idea of a ‘negative income tax’ (note that historically these ideas have had supporters on the right as well as the left).
Accelerating the energy shift
The economics of energy are very complex and falling energy prices are bad for renewables as well as fossil fuels.
Nevertheless, rising public concern about climate change, the falling costs of renewables, the contribution that the oil-price war is making to the economic crisis, and the decline in the size and voice of the fossil fuel sector after the shake-out may all combine further to accelerate the shift to more sustainable energy systems.
Strengthening the case for a strong state
As the Conservatives become enthusiasts for extra spending and quietly drop their commitment to shrinking either the debt or the public sector, and as Americans are given a rude awakening to the consequences for everyone of threadbare pubic provision and the wider dismantling of state capacity (something Michael Lewis warned of presciently a couple of years ago), the ideological champions of low-tax, small state policies may decide now is the time for an elegant retreat.
New ways of thinking about policy and change
I have written and spoken a lot over the years about the limitations of traditional policy making. The pandemic is forcing responsible Governments to work in ways that are both coordinated and agile; what we at the RSA call ‘thinking like a system and acting like an entrepreneur’.
When citizens see what Government can do when it has a mind to and the way dynamic interactions between policy, incentives and social norms can lead to major and rapid shifts, perhaps - if and when things return to some kind of normality - we will demand more effective and ambitious forms of Government action.
'Never let a crisis go to waste'
All in all, there are reasons to recall Rahm Emanuel’s famous dictum that we should never let a serious crisis go to waste. But first we need global leadership, and we need it now, or this already deep crisis will turn into a much, much greater catastrophe.