What is the long-term systemic impact of Covid-19?

Countries around the world are struggling to cope with the fall out of the Covid-19 pandemic.

While most are making valiant efforts, the pandemic is a test of the quality of the legacy of historical investments and building up of public health infrastructure as well as the level of trust between populations and their governments as well as public administrations.

There is only so much that can be done in haste in place of what should have been done at leisure over decades.

In the flurry of news, it is easy to reach information saturation and overlook the long-term systemic impacts of Covid-19. Nevertheless, it is vital to longer term strategic considerations that we consider how the world is being changed by Covid-19.

First, after the global financial crisis over a decade ago dealt a serious blow to the credibility of the West, Covid-19 could crush any lingering prestige and reputation it still has.

That may be a bold statement but events will bear it out. Going forward, emergent economies will look East for examples of economic, social and political approaches that have been “tested” by the harshest of conditions.

The long-lived lustre from the Enlightenment, Industrial Revolution and victory in World War II and the Cold War will soon fade into oblivion. Thus Covid-19 will be a historical “hinge” in global psychology and perceptions.

Second, the absence of global leadership and the breakdown in coordination between the First World economies means that the post-World War II international frameworks such as the United Nations, the World Bank and the International Monetary Fund will lose legitimacy.

There will be stronger calls for greater legitimacy in these frameworks through a restructuring of the voting power and reconsideration of veto authority. This will take time to play out but momentum will build. 

The United States, with its egregious failure to take effective action domestically to prepare and its utter lack of interest in the welfare of allies and enemies alike, has abdicated its claim to global leadership.

Going forward it will find its voice increasingly diminished even as it continues to build up militarily as a self-comfort in its power and influence.

Third, the lesson will be learnt that it is not size but quality of governance that makes the difference in managing large scale crises.

China, Hong Kong, Taiwan, South Korea and Singapore will be held up as positive examples in contrast to Italy specifically and Western Europe more broadly, with the possible exception of Germany.

This means that populations will want to see governments that can deliver and above all be competent. This may turn the tide against populism which has been building up into a tidal wave in Western democracies. 

The abject performance of US President Donald Trump and British Prime Minister Boris Johnson may finally persuade their electorates to pay attention to leadership quality rather than personality attractiveness. 

Good governance is not entertainment. Under crisis, it is a matter of life or death.

Fourth, the days of long economic expansion are over. The momentum which commenced in 1991, interrupted in 2007-2009, is coming to a screeching halt.

While there may well be pent up demand in the immediate recovery from Covid-19, it will take a long time to repair and reconstitute supply chains and to rebuild small and medium enterprise ecosystems which will be devastated by the economic impact of Covid-19 containment policies.

This will have political and social impacts. A generation of young people poised to enter the workforce will face blighted futures.

However, it is useful to remember the late Austrian political economist Joseph Schumpeter’s concept of “creative destruction” — where the demise of some companies in a competitive process frees up talent and capital to fuel new champions. 

A crisis like Covid-19 therefore also presents opportunities for new ventures and ideas. But these will take time to make themselves known and their countervailing effects felt.

Fifth, the first of two “winners” from Covid-19 is technology. Technology is what is enabling communication, containment and sustainment of communities under lock down. Technology is also what is ensuring that economies do not perform even worse.

Companies are working around limitations and finding solutions through digital means. The upshot is that long after Covid-19 is over, companies and staff may continue to maintain these innovative new channels of work, communication and coordination. 

So established organisational models and processes are undergoing fundamental and perhaps permanent shifts.

Sixth, the second “winner” is science. Science is what is being deployed to fight Covid-19. The importance of scientific education and protection of primacy of facts over convenient fictions is an important and welcome side impact of Covid-19.

Societies should take this opportunity to allocate scarce monies to rehabilitate their education systems to ensure that they can produce the next generation of scientists, healthcare professionals and technologists.

Covid-19 is a warning of a future fraught with bio health challenges as the effectiveness of antibiotics continues to degrade.

These six systemic impacts will be uneven across countries and regions and will take time to reveal themselves clearly. And how governments and populations choose to react to them will also be determinative.

Some will embrace the challenge while others retreat further into nostalgia and comedy politics because it helps them avoid hard choices. 

Each of us has a voice, either through the power of social media, through the vote or through personal action to help make the right decisions for yourself, your family, your community and your country.

It is time to step up and be counted. 

ABOUT THE AUTHOR:

Devadas Krishnadas is chief executive of Future-Moves Group, an international strategic consultancy and executive education provider based in Singapore.