COVID -19 : Lauchpad for Economy 4.0
COVID-19 is once in a century kind of event. There were
plagues in the past, which used to make the world, standstill for 5-10 years
but they were not recorded or discussed at such great length, perhaps due to
lack of communication channels. No one knows the accurate answers on future of
such pandemics, but this note aspires to make a brief attempt to analyze the
projections on the future scenarios.
How long will this
take?
There are many theories going on how long will this take for
things to settle down. China published the Genome in beginning of January 2020.
Scientists have replicated the synthetic RNA and trying to develop the vaccines
or antidotes. But it seems that there are very less chances of getting anything
developed, approved, mass - produced and then distributed in less than 18-24
months. Adding to this is the lack of complete understanding about the 2 most
prevalent strains. As of now, they just know that the L Strain (which is close
to 70% of the total infections) is more dangerous than the S strain.
There may be more than 2 strains but what if those (other
than L and S) are more dangerous mutations?
Too fast vaccine approvals or a quick fix can botch up the
things. It may have dangerous implications and such vaccines may lead to some
super virus.
Wait for Herd Immunity – UK postulated this but even they
backed out as by the time 60% gets infected, we may have perhaps 10% deaths.
So, the consensus, as of now (early March 2020) seems to be
that Vaccine (with reasonable accuracy and effectiveness) will be with the
commoners (elite may have hands on it earlier), at the best, around mid 2021.
However, some molecules may come in between for better treatment or delaying
the impact on lungs.
Oh! China won and
South Korea, Taiwan, Russia and Singapore are doing well, so can we!
There are different governance structures around the world
with different level of discipline and religious interferences in governance.
The underlying fundamental principle of democracy provides the sense of freedom
among its citizens, which they have enjoyed with nil (called reasonable)
restrictions. Also, some countries like Iran have governance structure with
strong religious tinge (which provides the validity to the ruling class). All
these factors play out and make it complex and close to impossible to replicate
Chinese success.
Human beings should actually be very thankful that this
started in China and China already set up templates of lockdown and severe
actions, which enabled most of the liberal and diverse societies outside China
to reasonably accept the hardships.
So, some countries (one with democratic setups) may take
way-way-way longer to come at the stage, where Chinese is right now.
What will be shape
of the recovery Curve?
Markets work on investor psychologies, so it is futile to
touch market recovery shape. However, there are 3 scenarios, which are
currently being discussed among experts with respect to the economy
1.
Optimistic - U Shape
2.
Pessimistic – L Shaped
3.
Ultra-Optimistics - V Shaped
Assuming there will be a point of inflection, all these are
plausible options. Though Causation cannot be derived from Correlation, still
it seems the correlation of virus spread v/s temperature is strong enough. As
of now, it seems the virus has not spread across countries in the tropics. Countries
such as India, Bangladesh, Indonesia and Nigeria etc have huge population and
minimal cases as of early march. Due to uncertainties over the factors
responsible for spread, the assumption of a single point of inflection seems to
be wrong. Instead the recovery may be in waves as under
1.
It may subside in summer; there may be a trough
around June-July 2020. Complacency from euphoria of winning over COVID may set
in around May 2020 (want avoid discussing stock markets, but it seems they
might surge from May to July)
2.
If vaccine or some molecule does not come by
October 2020 (mostly like scenario), then there might be another peak around December
2020 – February 2021 (once the winter sets in northern hemisphere).
3.
Seasonal (Weather) Waves of high amplitude,
across multiple seasons, degenerating and culminating with herd immunity, if
vaccine is delayed
4.
Waves may be different across geographies and
across different demographics in same hemisphere. Within same hemispheres,
countries like India, Nigeria, Indonesia may face the real test in December
2020
Though there are more questions than answers over shapes of
these waves, the recovery may not have any uniform global defined path.
What will be the
new economy look like post COVID-19 or say 2023?
100,000 years ago, group of monkeys descended from trees in
Africa and they learnt new ways of fighting out the dangers on ground. These
monkeys were, are and will be the most dominant and intelligent species. These
monkeys kept on finding new ways of leveraging resources, other than their own
limbs or tails, as was the case with lions or elephants, as under
Phase 1 – They leveraged stones and sticks and warded off
their threats
Phase 2 – They leveraged other animals (cows and horses) to
power their basic machines
Phase 3 – They leveraged coal (and solar recently) to
increase powers of their advanced machines
Phase 4 – They may leverage advanced machines to produce
more intelligence (AI)
Phase 4 produced something, which makes these monkeys more
redundant in their own pursuit of complex and intelligent systems. Post AI, the
redundancy of human beings have increased and COVID-19 is going to provide the impetus
for this shift as under
1.
Knowledge Worker
a.
WFH (Work from home) may become the norm in 2
years as companies will try to reduce costs during recession, which seems to be
certain as of early march
b.
In their pursuit, to derive value from WFH,
companies will learn to automate more work
c.
To automate more work, new forms of AI may come
up in future
d.
Transmission and application of Knowledge and
skills, which need physical meetings or interactions, will be substituted with
more complex AI. For Example – Complex IT skills of 2020 may become “Routine
job of 2023” and may no longer need physical presence of skilled human being.
e.
Some New jobs will definitely be created in next
level of complexity of the knowledge economy, but they may be lesser than the
jobs, which ceased to exist
2.
Physical Worker
a.
Due to extended period of social isolation, it
will become imperative to replace almost all the physical work by machines
b.
Some jobs will totally disappear due to social
isolation. Many people knew what does a lift operator or phone operator means in
2005 and many of us know what a translator or receptionist or waiter in
restaurant means 2020. But many of these jobs may not be traceable in 2023.
3.
Privacy and Social Aspects of Economy amid
Government Control
Success of China in managing crisis and quickly revitalizing the economy
has provided background for greater support for government interventions and
strict control in economy as a whole.
a.
To control COVID-19, there will be increased
scrutiny of data related to an individual (such as travel data, health etc)
b.
If this COVID-19 dust takes longer to settle,
then citizen privacy may become a watered down term, even in very liberal
countries.
c.
Liberal Societies has social pressure groups and
their pressure tactics, which sometimes succeed in cases such forcing a pharma
companies or cosmetics company to change their course of action. Due to
prolonged period of social isolation and increase in powers of governing
structures, the powers of citizens to express opinion of society may reduce.
d.
Globalization and Urbanization may subside for
some time
e.
Call it bad or good; governments will be
tempting to exercise greater control in some sectors such as healthcare,
tourism, retail etc. Some countries may even nationalize some proportion of
private hospitals or pharma companies (hope that happens in India)
If it takes longer than 18 months, then perhaps “Machines
will take over”. The redundancy of human beings in the economy may increase
drastically and irreversibly. There may be some short term pain with long term
gain for human civilization as under
1.
There may be sudden decrease in pollution and
carbon footprints, which will increase quality of life of human beings
2.
Human Beings will get more free to do more
creative and research work rather than routine work
3.
Political boundaries of work will reduce a lot
and hence pace of outsourcing of work to countries like India will increase
(side comment on market - Body shopping of IT manpower will reduce
simultaneously so it will have negative impact also)
4.
To prevent any social unrest from short term
pain and with increase confidence in underlying data related to citizens,
schemes like Universal Income may evolve in many countries.
