The New Abnormal: The World After COVID-19
The pandemic has made further disruptive shocks — both positive and negative — more likely over the decade ahead.
Six months into the 2020s and the conventional wisdom is that we have already experienced the decade’s defining disruption. But what if the COVID-19 pandemic is just the first in a series of disruptions that will shape the decade — for better and worse?
Late last year, Volans began working with the World Business Council for Sustainable Development (WBCSD) to analyse macrotrends and disruptions set to shape the 2020s. As part of this, we identified ten potential “wild card” disruptions, which, if they came to pass, would have a major impact on the decade ahead. A global pandemic was on the list — and we are all now experiencing just how disruptive one of those can be.
So high-impact disruptions happen. But — more than this — in an interconnected world, one disruption can trigger others. Think of it as a kind of domino effect. Many of the other “wild cards” on our original list of ten now look much more likely to materialise in the near future than they did just a few months ago.
Let’s look at a few examples:
- A financial crisis: COVID-19 has triggered the severest economic contraction in decades, but, so far, governments’ efforts to put their economies on life support have staved off a full-blown financial meltdown. Stock markets plummeted early in 2020, but have since bounced back. There’s a good chance that a crash has simply been delayed rather than averted though. Last October, the IMF warned that an economic slowdown half as severe as the 2007–8 global financial crisis could result in $19 trillion of corporate debt (nearly 40% of total corporate debt in major economies) being owed by firms that cannot cover their interest expenses with their earnings. That would be worrying enough if the COVID-19 crash were only half as severe as the global financial crisis. The financial markets’ day of reckoning is probably still to come.
- A tipping point for the energy transition: Carbon Tracker now reckons that fossil fuel demand peaked in 2019 — for good. BP’s CEO thinks that might be right — and in June the company effectively wrote off $17 billion worth of stranded assets, as it lowered its long-term forecast for global oil prices. Shell, meanwhile, has been forced to cut its dividend for the first time since the Second World War. All of this suggests that a tipping point is nigh — both for the energy industry and for financial markets. Investors have been gradually waking up to climate risk, but as the scale and imminence of the disruption to the fossil fuel economy becomes clearer, financial flows — and asset valuations — are likely to shift quite suddenly, triggering what some have dubbed a climate “Minsky Moment”.
- An “Economic Singularity”: fears about an impending era of mass unemployment have been around for a while. Now they seem to be coming true as a result of the pandemic. Unemployment has already spiked around the globe and there are likely to be more job losses to come. And the jobs destroyed by COVID-19 will not all be replaced by new ones any time soon — not least because the pandemic is also accelerating the shift towards greater automation in some parts of the economy.
- Popular revolts leading to regime change: COVID-19 clearly did not cause the outpouring of anger and despair in the wake of George Floyd’s death, but it contributed to a context in which both violent and non-violent protest first spread rapidly, and then continued for a prolonged period — in America, and around the world. It remains to be seen what long-term change will flow from this, but it’s certainly plausible that it could trigger both a change of personnel in the White House and a dismantling of at least some of the structures that embed racism in many societies. Meanwhile, from Russia to Brazil, the list of governments whose grip on power looks shakier as a result of incompetence (or worse) in the face of the pandemic is long.
- A Global Green (New) Deal: COVID-19 may have temporarily delayed global climate talks that were due to be held this November, but, in the longer term, it may have increased the likelihood of a breakthrough in global climate policy action. The pandemic has profoundly shifted assumptions about the role of governments. It has weakened the fossil fuel industry’s political clout. And it has created a need for major public investment to stimulate economic recovery. With consumer demand likely to be suppressed for years, the challenge of decarbonising whole economies could be the source of demand needed to kickstart recovery and create good jobs. From the EU’s Green Deal to South Korea’s announcement of a net zero target, there are signs that several major economies will embrace the opportunity to build back greener. And if the US electorate decides to dump Trump in November, then the diplomatic calculus for global climate action changes dramatically.
- A “Techlash”: in the short term, Big Tech is among the big beneficiaries of lockdowns. The FAANGs and their Chinese counterparts will almost certainly emerge from the current crisis even more dominant. Their products and services are well-suited to a moment in which the whole world is forced to interact digitally. They have the cash reserves to weather the storm. And they will use these to invest through the downturn, buying up would-be competitors. Taking a 10-year view, however, this may come back to bite the tech giants. Antitrust enforcement was a hot topic in the US and EU pre-COVID-19. It could come back even stronger once the dust settles. As for the gig economy, COVID-19 has exposed just how problematic it is for vast swathes of the workforce to have no job security and no access to sick pay. Citizens and governments may be less willing to put up with the Uberisation of the economy post-pandemic.
So we’re in for a decade of disruptions, but it isn’t necessarily all bad news. We can choose to hope in vain for a return to stability, or we can embrace the opportunities presented by an era of instability to drive transformative innovation across the public and private sectors. Now is the time for bold thinking and action that builds resilience and contributes to economic, social and environmental regeneration.
To find out how Volans can help your organisation prepare for the decade ahead, visit our website or get in touch.
For more on how we expect COVID-19 to shape the 2020s, see The consequences of COVID-19 for the decade ahead, a briefing developed by Volans in partnership with the World Business Council for Sustainable Development (WBCSD).
