A business leader’s daily task is looking ahead and making sense of what is coming that could affect customers or clients, organizations and our people. This ability to discern and anticipate allows leaders to change course and maintain momentum. Before the outbreak and spread of the new coronavirus, it was disruptive technologies, global competition and instant 24/7 connectivity that made forecasting difficult. Today, the sheer magnitude and instability triggered by COVID-19 has made the road ahead far less clear. Or has it?
One thing we know about this pandemic and all the other economic shocks over the past 100 years is that they expose design flaws in our big systems — health care, supply chains, worker protections and digital infrastructure. While these weaknesses have been felt for a long time, it is not until the whole system is put under massive stress and millions of people experience the problem firsthand that support is offered to solve it. These shocks expose underlying weaknesses but also act as powerful accelerants, fueling actions aimed at fixing underlying problems.
To look forward, Winston Churchill urged us to look backward first, to history. And history tells us that every economic shock carries a lasting imprint. The Great Depression that lasted from 1929 to 1939 was the longest, deepest and worst economic downturn of the 20th century. One in four people were out of work. Worldwide gross domestic product fell by 15 percent. An entire generation grew up with the motto “waste not, want not.”
In the 1970s, we faced stagflation — a combination of high unemployment and a productivity slowdown, combined with an oil embargo. The budding environmental movement was given life by this shock, as legions of consumer converts sought smaller, gas-efficient cars and renewable energy sources to avoid repeating the past.
The Great Recession that began in late 2007 crushed the real estate and stock markets, destroying $18.9 trillion of household wealth. Eight-million jobs were lost. Twelve years of prior economic gains were erased in 17 months. In response, new banking and financial safeguards were erected.
But the coronavirus shocked everyone. The spread has been exponential. In March, the U.S. stock market flipped from bull to bear market in fewer than 12 days. The federal government will likely spend more than $1 trillion in financial aid to support families and businesses facing job losses in the millions. Yet, amid all the devastation and pain we are experiencing, there are also signals that point to the lasting imprint that this pandemic may have on all of us well into the future.
Hardest hit of all are blue-collar and gig-economy workers who lack key worker protections to weather shocks like this one. Financial stimulus may stem the tide, but the cause for greater worker protections and rapid retraining will soar to the top of agendas for government and business.
On the demand side, we are seeing a break on consumer spending, a retreat to essential goods and services, and an increase in personal savings. Mothers and fathers, children and extended family members are reconnecting for support, safety and education. Online shopping, home and curbside delivery services are growing. Community cohesion and mobilization are rising around issues that matter most to people in crisis: food, shelter and health care.
On the supply side, manufacturers are rethinking where they buy and produce their goods. International trade, border control and U.S.-China policy are being rethought, if not by government, certainly by business. In the white-collar world, working from home and telecommuting may see a sustained jump when broadband access and company policies catch up, driven by avoided costs and time savings to families, not to mention immense environmental benefits from not commuting every day.
But what makes this economic shock from the coronavirus so different from other megacalamities is that service businesses and their employees are hurt disproportionately by global health crises. Hotels, airlines, restaurants, bars, casinos and their suppliers face massive disruption with no clients to serve. Small businesses, generally thin on working capital and cash reserves, are in a similar situation. Hardest hit are blue-collar and gig-economy workers who lack key worker protections to weather shocks like this one. Financial stimulus may stem the tide, but the cause for greater worker protections and rapid retraining will soar to the top of agendas for government and business.
At the institutional scale, the coronavirus outbreak has exposed big fissures within education, health care and larger corporations. Each of these sectors will be under tremendous pressure to modernize with the times. Distance learning, telemedicine and business resiliency practices all have taken on new importance.
The cracks in our coronavirus defense system are most pronounced in our digital infrastructure, never built to withstand the stress and scale of the work and life changes wrought by the pandemic. Never before have we fully understood just how critical this technology is to our personal well-being — enabling our health, education, work, public safety — and creating opportunity. Digital infrastructure deserves our attention and more investment.
Our first priority in such times is always caring for others: empathizing with those who have lost jobs, a place to live and even the lives of those closest to them. But tomorrow, we must rebuild. The coronavirus is challenging every leader in every sector of the world. It is exposing the faults in our systems, and, as history teaches, it will accelerate actions to overcome them. The road ahead is clearer than we think. Let us rebuild well.
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