The physical world has reasserted itself. With the advent of the coronavirus many of the central assumptions underpinning modern civilisation are being questioned. There are those — not least the President of the United States — who believe that society will rapidly return to it status quo ante, and those who believe the world is forever changed. There are those that see Covid-19 as the final confirmation of all their prior beliefs — “Coronavirus proves that Capitalism/Liberalism/[insert whatever -ism] is dead” — and there are those who, quarantined at home, are increasingly questioning their own unfulfilling jobs (that they may no longer have), boring lives and general reason for being.
We are in the realm of Knightian uncertainty now. Many different paths can be imagined. All predictions must be taken with a big grain of salt. Even the “nowcasts” are missing the mark completely: ever week hundreds of financial analysts (who could have been more productively employed elsewhere) engage in the useless task of guessing the number of initial jobless claims that have been filed in the United States over the preceding week. 99 percent of the time the number fluctuate very little from one week to the next — and the analyst estimates flock closely together. But when an extreme event strikes and precise expert estimates actually would have been useful, the analysts are hitting orders of magnitude out of bounds. In the weeks ending on March 21st and March 28th the numbers came in at 6.648.000 and 3.341.000, in the first case more than double and in the second case almost double the number of the consensus estimate. (Update: another 6,6 million jobless claims filed in the week ending April 4th).
If economists cannot even nowcast the next week, they have no hope of accurately forecasting the next year. Still, economists are now downgrading their estimates for this year’s economic growth on an almost daily basis as the crisis unfolds. It may be slight consolation, but the economics establishment can at least take solace that the medical establishment are doing little better with their widely varying forecasts for how the Covid-19 infection and death curves will develop.
One thing that is certain however, is that Covid-19 has revealed the underlying fragility of modern civilisation. Both governments and businesses have been found woefully unprepared for the pandemic. In the name of Business School (or BS) “efficiency” society has been over-optimised to the degree that there is no redundancy in the system. The supply of welfare services — be it the number of ventilators, intensive care beds or the capacity to process unemployment benefits applications — has only been calibrated to meet “normal” demand. Many companies have similarly been operating with the bare minimum of working capital required in a “normal” scenario, and do not even have liquidity buffers to withstand suspension of operations for 2–3 weeks. This crisis will probably boost sales for Nassim Taleb’s Antifragile, but alas both the public and private sectors have failed to heed the book’s message about building things that gain from disorder — or at least institutions that do not collapse under distress.
Taleb was also one of the few who warned against the risks posed by the coronavirus back in January, in a note published with Joe Norman and Yaneer Bar-Yam. Most governments eventually followed the advice of instituting social distancing policies of varying severity, although the argument stand the damage could have been limited if the politicians had been quicker to act.
In Spain, one of the worst affected countries and where I currently am, the government has extended the society-wide lockdown for a further two weeks until April 26th. The curve for deaths from Covid-19 has fallen from a peak of 950 registered deaths on April 2nd to a daily rate of 6–800 in recent days. With the entire population in lockdown it is so quiet here that you here little else than birdsong. And the degree of compliance with the social restrictions has been notable. But the risk is obviously that the rates of infections and deaths will bounce right up again once the lockdown is lifted.
I cannot claim to have any answers, and neither do I offer any bold or confident predictions. I have only written down some of the questions I find relevant to ask in these times and some of my thoughts around them, on a range of topics in pretty much random order.
Will societies re-open?
This week both the Danish and Norwegian governments have announced plans for a gradual re-opening of society toward the end of this month. (The coronavirus’s epicentre Wuhan, China, has also started a very limited re-opening after 76 days). But if that playbook is anything to go by (for the bigger European countries and the US), it does not look very appealing. There will not be a definite endpoint to the coronavirus crisis. Any restart will be partial, incremental and tentative. To make a permanent escape from social distancing policies by the end of 2020 looks unlikely. A scenario where societies will remain in limbo, with the lockdown becoming a frequent feature of life, looks more likely — and in a way a more demoralising prospect.
How will people deal with extended periods of lockdown?
There are limits for how long people will accept being locked up in their own apartments — especially in city apartments without a garden or even a balcony. In Spain and Italy — both countries in total lockdown — there are signs that people’s patience with the restrictions is getting stretched to its limit. If this state of a affairs continues on and off throughout the year, will people hit the wall? Or, at some point, turn out in the streets?
Is this a turning point in history?
While keeping in mind A.J.P Taylor’s dictum that there were many turning points in history that failed to turn (the 1848 revolutions being the original reference point), John Gray, the British philosopher, in one of the better pieces written on the consequences of the Corona crisis so far, argues convincingly that this is an actual turning point marking the end of the era of Peak Globalisation. That there will be a backlash against over-extended supply chains and the over-reliance on China that has become a central feature of liberal capitalism seems inevitable, the only question is how big the shift will be. That will be both a political and corporate issue. In the business world more critical questions will be asked of MBA types who want to outsource critical functions to China and other low-cost hubs. In politics the growth potential for nationalist economic policies is even bigger now than it was before the emergence of Covid-19.
Of the EU Gray says:
“If the EU survives, it may be as something like the Holy Roman empire in its later years, a phantom that lingers on for generations while power is exercised elsewhere. Vitally necessary decisions are already being taken by nation states. Since the political centre is no longer a leading force and with much of the left wedded to the failed European project, many governments will be dominated by the far right.”
He is right. For all practical purposes the EU is dead. The coronavirus response has made it very clear that the decisive political unit in a time of crisis is the national not the multinational/globalist. The only relevant body of the EU is now the ECB, the central bank which will continue, on an even larger scale, with its money printing schemes that have been going on since the last crisis in the futile hope of breathing fresh life into the European economy. A deep economic depression will in all likelihood not make Italians and Spaniards more happy campers than they already are in a monetary union tied to the same exchange rate as Germany — especially when the Northern Europeans are not even willing to issue common Coronabonds.
The EU’s science chief Mauro Ferrari accurately summed up the state of the union in his resignation statement on Wednesday: “I have been extremely disappointed by the European response to Covid-19. I arrived at the ERC [the European Research Council] a fervent supporter of the EU but the Covid-19 crisis completely changed my views.”
Which companies will die, and which will prosper?
The Corona crisis is a litmus test for businesses; separating the real from the fake and the phony. One thing that has struck me is that the Corona crisis seems to have an outsize negative impact on BS industries. Ponzi startups like WeWork are collapsing. Obviously, many good businesses are being hit too, such as restaurants and hairdressers who normally provide a value but who are being forced to shut down. But they will open again. I am not so sure the same can be said for that strange phenomenon of Late Capitalism, the conference circuit. The conference circus has been one of few really fast-growing industries in recent decades, thanks to the bizarre willingness of public and private organisations alike to spend vast sums on sending huge numbers of people around the world to sit passively and listen in overcrowded auditoria to TED speakers, “inspirational” snake-oil salesmen and other mindful yogis — perhaps followed by a brain-dead brainstorming session — with little value-added to show for the money spent and air-miles flown. Now this whole ecosystem has collapsed instantly. Will it rise again? Perhaps. But certainly, a $500 per attendee conference on the “Future of Work” will not be top of anyone’s list of priorities in a world of 1930s’ levels of unemployment.
As a consequence of the coronavirus many people have less money to spend, but on the other hand they have more time to spend. Naturally this bodes well for all non-sport online entertainment. Even digital newspaper subscriptions appear to be rising, although the rise is being offset by falling advertising income. iGaming, with the obvious exception of sports-betting, stands to profit from the crisis. Players are migrating from sports-betting to online casino. The absence of physical sports may also accelerate the growth of Esports.
In general, it appears that Covid-19 is serving as a catalyst for the transition from analog to digital in a number of industries. Customers who had not yet been pulled in by the allure of online offerings are now being pushed online by Covid-19. While some may return to the physical world after the Pandemic, many late adopters will probably prefer to remain in cyberspace — finding it more convenient than they had expected to order groceries and meals or do shopping online rather than going out. This is probably pushing the online market share of the economy as a whole permanently higher than it would otherwise have been in a world without Covid-19. The resilience of Amazon’s share price through the crisis is an indication of this phenomenon. This will likely have long-term repercussions for the world of retail and for cityscapes in general — will they become permanently (half)-deserted?
The rise of social media has fuelled spending on “experiences” that can be shared virtually. The main beneficiary of this trend has been the travel industry. Now, if people cannot share Instagram stories from airplanes en route to exotic avocado islands, what are they going to do with their lives? The fact that travel opportunities in all likelihood will remain restricted at least to the end of the year, will have a huge impact on social behaviour. Exactly how is harder to foresee.
I expect that there will be, to some degree, a shift from spending on “experience” to spending on “stuff” and “skill”. After all, quarantine, home office or unemployment is a perfect opportunity to learn new skills. Or to just binge watch Netflix series. Being confined at home many will probably upgrade their television sets and sound systems. I would also guess that sales of pianos and other musical instruments.
Is the travel industry facing a temporary or permanent hit?
People’s desire to travel will never disappear. But even if most of the travel restrictions related to the coronavirus should be lifted relatively soon, it will take a long time for the travel industry to recover. In some countries — notably Sweden — airline traffic was already falling mildly before coronavirus, driven by Thunbergian prophecies of impending climatic doom and “flight shame”.
Summer 2020 is already officially cancelled. Even if things should normalize, people who book their summer holidays in advance will not be going on their annual sun-bathing skin cancer fest to the Mediterranean. Perhaps it will not be that much missed. Many will instead have more time to spend on more meaningful pursuits, such as gardening, ornithology or Olympic weightlifting, and will probably come to the conclusion that spending two days in a Ryanair nightmare for lying 12 days on an overcrowded beach surrounded by obese Brits, Scandis and Germans, is further from the idea of paradise than the tour operators present it as.
Will we go back to the office?
One of the businesses I am involved in has just spent a lot of money on new offices — which we cannot use due to the Corona crisis. As Simon Kuper comments in the FT even the British government is now holding Cabinet meetings on Zoom. This unplanned shift from physical to virtual workspaces is far from seamless. But after one month of adaption and adjustments it so far seems to be working much better than feared. Though the question remains if organisations would be able to maintain cohesiveness over time if they ditched the office permanently and worked only remotely? It is after all in the office the esprit de corps is built, and that is harder to do on Skype. So, at least speaking for myself, we will be going back to the office when it will become possible to do so.
Does the crisis mark the return to Tradition?
I may be prejudiced but I believe the coronavirus crisis will reverse the feminization of society associated with Late Capitalism to some extent. Based on my (admittedly very anecdotal) evidence it seems that biological traditional gender patterns are reasserting themselves in this time of real crisis. The Feminists now have the chance of a lifetime to hammer the final nail in the coffin of the oppressive Patriarchy, that they have complained so loudly about and are purportedly so prepared to overthrow. But, interestingly, they don’t seem too keen on actually grabbing the chance to seize power over the commanding heights of the economy for themselves, and have instead gone surprisingly quiet. While (some) men are now outwardly exploring new opportunities and assuming risk in an upended world, most women (and indeed the majority of men too) are seeking the security and comfort offered by the welfare state and/or domestic life.
Many men and women alike will be having second thoughts about modern city lives these days. In a lockdown who will fare the best: a family living in a substantial house with a garden in the countryside or a suburban area? Or a single person or family living in small, overpriced apartments in a metropolis? The answer is quite obvious. I was myself in London until mid-March, when the city was starting to feel like a ghost town. Then the Spanish countryside, even in a state of total lockdown, is way more pleasant.
This crisis is a severe indictment of modern society. In a time like this press conference assurances ring rather hollow from elected leaders trying to evade responsibility for a crisis they were woefully unprepared for and reacted slowly too. Only the words of a true Monarch carry any weight in circumstances like these. The Corona crisis has shown the significance of having a Head of state elevated above the drama and frivolity of day-to-day politics and the arriviste Macrons of the world — executing the dignified part of the Constitution as Bagehot would have it. Queen Elizabeth’s special address to the nation achieved this in a way no speech from a regular Head of government or elected President could — which is precisely why the Queen’s address made the French boil over with Regis envy.
Will the Academy survive?
Peter Thiel has drawn an interesting analogy between the Catholic Church of the early 16th century and universities of today. In the place of exorbitantly priced indulgence letters that will pay off in afterlife we have got exorbitantly priced academic diplomas that will supposedly pay off in this life. This system is obviously a scam. The only surprising thing is how long the illusion has been maintained, even if almost everybody, or at least a whole lot of people, know that the Emperor has no clothes. But now, as for virtual working and online shopping, the coronavirus might be a catalyst for change. Most students are already aware that they can learn more from watching YouTube videos for free than from listening to third-rate lecturers live. But few have been willing to break with orthodoxy. Now that campuses in many countries are closed and education programs are effectively little more than dressed-up webinars, it will become increasingly evident how little educational value students get for their tuition bucks. This may be a Luther moment — but do expect a protracted counter-revolution from the orthodox academic establishment.
Will the social distancing policies unleash a creative explosion?
Studies allegedly indicate that boredom can be a catalyst for creativity. With millions now unemployed, furloughed, quarantined or pretending to continue to work from home we can only hope so. The long-awaited innovation explosion — that the techno-optimists for so long have said is right around the corner — propel us out of our decades-long secular stagnation.
Will wannabe dictators seize the moment?
Why not? Has there ever been a more opportune moment for would-be dictators to have a shot at achieving absolute powers. Governments from Russia to Norway have already used the Corona crisis as a pretext for seeking emergency powers. With the American presidential election coming up in November it would be naïve to expect that President Trump will not try to exploit this extraordinary situation. “Sovereign is he who decides on the exception”, as the controversial German jurist Carl Schmitt said.
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