How coronavirus could change business and society

April 07, 2020 08:47
The coronavirus crisis could prompt some industries to ask if they need so many employees in the office as they find ways to work from home and on-line. Photo: Reuters

Economists were shocked when US unemployment claims shot up from 281,000 to 3.28 million in just one week from March 14 to March 21. The cause was of course the COVID-19 virus. Specifically, the cause was precautions against the spread of the virus - measure like the temporary closure of businesses like restaurants.

Here in Hong Kong, the government was rolling out new measures to encourage social distancing as a second wave of the virus hit our city. Many gatherings of more than four people were forbidden. Restaurants, bars, cinemas, gyms and other facilities have had to restrict customer numbers of close temporarily. Meanwhile travel restrictions have caused the international tourism industry to almost come to a halt.

This has inevitably created controversy about the pros and cons of restricting businesses in ways that would damage revenues. Commerce and Economic Development Secretary Edward Yau Tang-wah admitted that there would be an economic cost – but pointed out that the cost of doing nothing to prevent the spread of a deadly disease could be far greater.

Some restaurants are pushing take-away business instead. Retailers and some brands are trying to promote sales on-line. But for a wide range of companies, business and revenues are simply plummeting. Cathay Pacific, for example, has cut its passenger capacity by 96%.

We can only guess what this is going to mean for 2020 as a whole. Financial Secretary Paul Chan has said that the impact on international supply chains and trade will probably mean that the global economy will shrink in the first half of the year.
For many households in Hong Kong, it seems very likely that there will be a noticeable cut in incomes at least for the first half of the year.

Is it worth it? In the US, some business figures and conservatives are openly doubting that the economic costs of fighting the pandemic are justified. Some have even claimed that it makes more sense to let some older people die rather than to cause major unemployment and cut families’ incomes. Their opponents, on the other hand, argue that you cannot put a dollar value on a life.

Actually, people working on statistics do try to put a value on life when trying to calculate the costs and benefits of environmental and health policies.

But I think most of us in Hong Kong – and many other places – do not see the question in purely financial or ideological terms. We will accept some economic hardship if it helps save lives. There is a purely practical angle: If we do not take precautions, we run a risk that the health care system and other services become so overloaded that ultimately society cannot function anyway.

But this means we have a major challenge ahead of us. As the Wall Street Journal put it: “The coronavirus has produced something new in economic history.” Never before have governments tried to put swaths of national economies in an induced coma, artificially maintain their vital organs, and awaken them gradually.”

The mainland’s experience gives us an idea of how difficult recovery will be. Small businesses and households have borrowed or drawn on savings to get by. Even if things return to normal, they will need to build up savings or pay off loans. That means consumption will be depressed for some time to come.

This is going to happen on a global scale. Demand is going to be depressed, and it could take the rest of the year – or longer, no-one knows – before manufacturing supply chains, travel and other activities start to recover.

The pandemic could have a major impact on the world in the longer term. For example, people will question the benefits of globalization.

But it may not be all bad. This crisis could promote positive changes in our working and leisure lives. Some industries may ask if they need so many employees in the office as they find ways to work from home and on-line. The trend of more online retailing will probably get a boost.

Societies may also ask more about their priorities. People are asking why the most essential workers who cannot stay at home and must risk infection – the health care staff, cleaners, food supply workers – are also the lowest-paid.

Last but not least, the international community must surely learn some serious lessons. Nations and leaders have to cooperate when humanity faces a global threat.

Maybe the world can be a better place at the end of this.

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Executive Council member and former legislator; Hong Kong delegate to the National People’s Congress