OPINION
IS THERE LIFE AFTER DEATH? The tens of thousands of views that “The countdown has started!” post has received are for me the measure of impatience and hope with which the public waits for even a partial return to an economically active life, aware that the current situation can only be temporary. It can only be a short-term solution that, the longer it lasts, the higher the risk of deep and harmful effects on the economy, similar to an economic ‘death’.
http://www.business-arena.ro
BY RADU CRACIUN
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This is why I think it is worth taking a closer look at how the return to work and social life is set to happen. The answer lies in the very reason of us having to stay home. We are basically dealing with two as yet unresolved issues: the ability to detect and isolate the sick and the under capacity of hospitals to treat all those in need of medical assistance. Hence the three critically important conditions that the European Commission identified that would allow Member States to lift containment measures and resume economic activity: a) reduction in the spread of the virus, b) large-scale testing and higher monitoring capacity and c) setting up a significant reserve of medical capacity. So, for the economy to stand any chance of a safe restart, we have a maximum of two months to meet the three conditions. To be honest, though, the three criteria will not guarantee a return to pre-containment normalcy. Fears will continue to haunt both employers and employees. The spell that we are going through will have businesses realize that people are in fact the weak link in the production chain. The famous adage “people are our most valuable asset” could for some take the meaning of “people are our main vulnerability”. At the end of the day, it is not the human viruses that attack machinery and robots (a different kind of bug is at play there...). This is why, before any fundamental changes to current economic models occur, the pandemic will act as an accelerant of some trends that pre-existed the crisis. That is clearly the case of digitization and robotization. Companies are
therefore, expected to allocate in the near term vast amounts of money to tech upgrades that would reduce their reliance on human resources, in particular on those who need to leave home to get to the production site. That would mean that only a portion of those left unemployed will find work, with the rest at risk of social and economic marginalization. These changes would probably speed up the introduction by some countries of a universal basic income, meant to provide a standard of living on the verge of decency to those left out by the new economic makeover. Businesses will also realize the following fact: supply chains will have to become more flexible, and bear the incurred cost. The justin-time delivery model may lose its attractiveness, as it becomes a significant weakness during times of crisis similar to the one we are experiencing. The poor management of a pandemic by a state that is the lynchpin in the production chain may bring whole industries to their knees in other countries, irrespective of their preparedness to respond. In these circumstances, I expect to see a rethink of the cost-flexibility balance where an increase in costs to achieve more flexibility might be considered acceptable. The lowest price will no longer be the priority, but whatever is more predictable, easier to control and even geographically closer. We are already seeing plans to relocate from China to other areas and European companies may be tempted to bring their offices back to Europe. Globalization may be replaced, at least in part, by regionalization. Such a trend may be boosted by lower reliance on human resources and therefore, lower human resource costs in
