The Covid pandemic represents the most important public-health challenge that our world has faced. This book discusses ways to address this, so as to hopefully be able to alleviate some of its impacts going forward. The authors are Dr. Klaus Schwab, Founder and Executive Chairman of the World Economic Forum (WEF), and Dr. Thierry Malleret, economist and Founder of the Global Risk Network at the WEF and the co-founder of the Monthly Barometer.
That the present pandemic has put our world in a serious crisis is beyond doubt. Many changes may have to come about. The authors make the strong point that we should take advantage of this. But it is indeed hard to come up with a clear set of actions, since the present pandemic-induced crisis seems to be different than any other crisis. Thus, history may not be able to provide us with relevant guidance. The authors have however nevertheless been able to come up with a comprehensive analysis of what the world may be facing, given this pandemic, organized along five key macro-categories, as well as micro-terms for industries and firms, and finally key effects on us cum individuals.
As a condition for the macro-discussion the authors state that three “pillars” should be adhered to in the conceptual scheme they are developing, namely wide-spread interdependence, high velocity (speed) as well as large complexity. Based on this the authors suggest five different “resets”:
Economic reset. They make the vital observation that to do what it takes to contain the virus also is the key to economic recovery. Public confidence gets a boost, and spending increases. But the inevitable economic reset is likely to entail a labor market crisis, in that people shall be replaced by robots and “smart” automation. Perhaps we shall see a relative shift from focus on growth in economies’ gross national products (GNP), swinging towards relatively more focus on the “care economy” (health, welfare, education, …). The power of massive fiscal stimulation “packages” to keep economies going is discussed. And the authors do not see an apparent danger of increased inflation coming from this. A stable US dollar is seen as a precondition for gaining successful economic reset.
Societal reset. Societies that seem to be more effective in handling this pandemic crisis tend to be characterized as 1) being well prepared, 2) being able to make fast, decisive decisions, 3) have well developed health-care systems, 4) enjoy good leadership with high emphasis on widespread trust and societal acceptance, and 5) with solidarity being a common societal denominator. The crisis such as the present pandemic tends to lead to a relative increase in governments’ powers, manifested largely through increased funding to the public sector. This makes it even more paramount that the governmental sector is competently run. In line with this shift the so-called social contract within many societies will emphasize more social assistance and more protection of those most vulnerable in society.
Geographical reset. The authors discuss the geopolitical “trilemma” of only two of the following three critical success factors being mutually attainable: economic globalization (such as free trade and non-protectionism); political democracy (i.e., in contrast to dictatorial regimes); nation state (nationalistic policies). Two important trends now seem to be inversing – global supply chains seem to be “shortened”, with relatively more regionalization instead, and more nationalistic policies seem to be on the rise, such as imposing restrictions on foreign owners buying into what a nation might consider to be strategic companies for them and/or to prevent foreign takeovers. A lack of strong instructions for global leadership seems to be a factor contributing to these types of changes. Even though the World Health Organization (WHO) might be saddled with much inefficiency, this institution nevertheless represents a potentially positive force for combatting Covid-19. Direct as well as secondary effects from the pandemic might lead to national instability, not only the burden of handling the significant increased costs, coupled with a lower taxable income, but also due to significantly less income from tourism, due to travel restrictions. Lower prices on fossil fuels can also hurt many countries’ economies.
Environmental reset. Diseases that spread from animals to humans are on the rise. Growing urban sprawl and significant deforestation are contributing to animals and humans now being more closely packed together. More effective environmental policies seem to be called for, calling for strong leadership, more awareness of key risks, a change in the behavior of all of us (seriously increasing our prioritization of better environments), and due to the advent of vocal activist groups.
Technological reset. The pandemic seems to have induced an accelerating trend regarding technological progress and digital transformation. Three major stakeholder groups are searching for new technologies to cope with the pandemic: the customers (online shopping and home delivery), the regulators (more liberal payment approaches, …), and the firms (automization, …). There could be a dilemma here, namely, how to protect personal freedom while also stimulating technological advances, this analogous to protecting public health benefits while not infringing on personal freedom. The recent controversy over so-called Covid-passes illustrates that this dilemma can be real!
The second part of the book discusses what might be seen as resets at the micro level of business firms as well as for various industries. Let us first review how firms might cope when it comes to this. Four factors seem to be particularly critical. First, to take advantage of acceleration of digitalization, such as by implementing O2O (online to office). Secondly, by shortening and simplifying supply chain. Third, by implementing increases in salary expenses, above all by paying for minimum wage levels. And, finally, by implementing a broadened stakeholder focus, such as so-called ESG (environment, social, governance).
Resets with various industries seem to be driven by three major factors:
The extent to which social interaction might change (such as in much of the entertainment industry i.e., theatres, cinemas, concerts; sports – empty stadiums; …)
Are key behavioral factors changing? We see this, for instance, when it comes to shopping (online shopping), vacationing (in one’s own country, rather than going abroad), ….
Resilience: Are industries able to thrive in different circumstances?
The third part of the book deals with resets for us as individuals. What are typical effects from self-isolation and/or disarrays of personal and professional plans, for instance? The authors discuss four areas where the pandemic might be likely to impact individuals:
Creativity
Time
Consumption
Mental health and well-being: back to nature.
In the concluding section the authors repeat what now might be quite obvious to most readers, namely that the crisis stemming from the pandemic might lead to significant resets, at the macro-, micro- and individual level. The impressive discussion of all of this, in essence focusing on how complex crises might be coped with, might indeed lead to insights potentially supporting how mankind might deal with other critical global challenges, such as nuclear threats, the climate shifts, the incontrollable extraction of natural resources (mining, forestry, fishing, …), and how to cope with widening income differences.
I would recommend this book. It is indeed as relevant today and it was when it was written, more than a year ago.
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