THE SHAPE OF THINGS TO COME

Martin Mockler of Evans Mockler, Accountants, Auditors, Business and Tax Advisors

The words unprecedented and unparalleled have appeared in media commentary on a regular basis since our world was first locked down in March, with plenty of justification for these descriptions. For the vast majority of people living on the planet, our assumptions of what normal life looks like have been turned upside down.

Of course we had all learned about the great pandemics and plagues of centuries past including the Spanish and Asian Flus of the 20th Century. However for most of us, the social restrictions that have recently been imposed together with the economic devastation that has occurred, have been truly shocking.

“May you live in interesting times” is a saying similar to the coronavirus in so far as it apparently originated in China. There is no doubt that 2020 is at the very least interesting, albeit in a tragic way for hundreds of thousands, if not millions of people. In fact the Chinese expression is a curse as it is used ironically – uninteresting times are those of peace and tranquillity whereas interesting times are usually those of trouble and conflict.

In addition to the human tragedy, much has also been written about how business leaders steer their way out of the suspension and resume economic activity. A lot of commentators have focused on the shape of graphs of forecast gross domestic product (GDP) for various countries when projecting the economic recovery. Much has been written about either the V, U or L shape of these forecasts assuming various scenarios and timeframes for the return to our previous normal. The optimists are squarely in the V shape camp, whereas the pessimists are convinced that we are facing an L shape recession and that we will experience a new normal with lower levels of trade.

It is often said that if you place 10 economists in a room they will emerge with 11 opinions and indeed predicting the next couple of years is going to be more of an art than a science. Other than the Great Depression, we don’t have a comparative economic event, particularly when we look at US unemployment numbers which are heading towards an additional 45 million Americans out of work since the pandemic enforced lockdown.

Personally, I think that the shape of the world recovery will be a combination of the U and L shapes and much like the shape of the Nike ‘swoosh’ logo. We have all felt a sense of our own mortality during the past few months and there is no doubt that people have been scared and will also be somewhat scarred. It is inevitable that for a while our spending patterns will reduce and we will save more. Although this is a sensible approach for us as individuals, it will have a negative impact on the broader economy; particularly in the US where 65% of GDP is related to consumer spending being the ultimate consumer society.

However in the medium term we have a very strong and unbroken track record of recovering from whatever is thrown at us. These historic obstacles range from the Black Death in the 14th Century to the Great Depression and both World Wars in the 20th Century. Although world population growth presents a long term threat to the environment, it also presents an opportunity for sustained increases in economic development. There are just under 8 billion people inhabiting this world which reflects a staggering increase during the 1800s and 1900s. In fact it took 200,000 years for the population of the world to reach 1 billion, yet it only took 200 years to jump by a further 7 billion to the current 8 billion today.

The undoubted takeaway from our history of natural, man-made and financial disasters is that human endeavour, resilience and adaptability will overcome whatever we have to deal with. Although a coronavirus vaccine will almost certainly not be available until 2021 at the earliest, this would still mean that an inoculation against Covid-19 would be delivered in record time. This forecast timeframe for an available vaccine further reflects the dramatic advances in biomedical science in the past couple of decades. There is a developing convergence of medicine and computing which is creating deep pools of knowledge – a large element of this new scientific field emerged from the final mapping of the genome on 14 April 2003.

These advances will undoubtedly continue. The only certainty is that the future is uncertain. However we can also be absolutely sure that hope springs eternal and as a species we will overcome all of the obstacles that will appear in our path.