Looking back to look forward: What does the next normal look like?

Gary Rynhart, Specialist, Employers’ Activities, DWT/CO-Pretoria

Crises, such as that caused by COVID-19, bring change. What can previous crises tell us about how those changes are likely to manifest themselves?

In the last 100 years there have been seven crises that have had a truly global impact. Two global wars (1914-18 & 1939-1945); two global health pandemics, the Spanish Flu (1918) and HIV/AIDS (1980s onwards); one major political crisis (1989 – the end of the cold war); and two financial crises (1929 and 2008).

All these crises emerged in unique circumstances, with multiple causes. Yet we can draw some tentative conclusions that are relevant to our situation today.

First – hardly a news flash – is that health crises lead to innovation in health care. Penicillin was discovered in 1926 in a decade that was marked by medical advances. The groundwork for the modern pharmaceutical industry was laid in this decade. The focus on hygiene led to the emergence of new companies, like Unilever and Procter&Gamble.

In general, innovation follows health, political and (especially) military crises. The periods after both world wars were filled with innovations based on wartime technology. However, innovation does stall after an economic crisis. If we take patents in the US as a proxy, we can trace significant slowdowns after the 1929 and 2008 crisis. And, these two financial crises were also followed by periods of political disruption, the 1930s especially, which saw violent nationalism leading to global war.

Social progress usually follows a crisis. Any crisis. The 1920s and ’30s saw vast amounts of international labour law created (28 ILO Conventions adopted in the 1920s and 39 in the 1930s). Women’s voting rights increased post World War I. The UN system and the Declaration of Human Rights emerged after World War II. HIV/AIDS forced conversations about sexuality, and many believe it laid the groundwork for the marriage equality that followed in the 2000s.

So, based on the experience of previous crises, what can we expect for the 2020s?

Birzeit Pharmaceutical Company © World Bank

Let us start with the obvious; because of the nature of this crisis, we can probably expect innovation in the pharmaceutical and health sectors.

More broadly, economies will change. New sectors and companies emerge or expand and older ones will go under. In the 1920s, aviation took off and management consultancy emerged as a mainstream business (McKinsey was formed in 1926); in the 1930s it was health and the modern pharmaceutical sector; modern tourism in the 1950s (Best Western Hotels was founded in 1946 and Holiday Inn followed in 1952).

At the time of the 2008 global financial crisis, the top five companies were Exxon, General Electric, Microsoft, AT&T and P&G. Only two of them are in the top 10 today. The five largest companies today are Apple, Google, FB, Microsoft and Amazon.

What else? People like to let their hair down after a crisis. Jazz and rock and roll emerged after the world wars. New art movements emerged (Bauhaus and Art Deco) in the 1920s. So, expect bursts of creativity to flow into expanded arts and entertainment sectors.

The global disruption to supply chains caused by the pandemic seems likely to encourage firms to limit their risk exposure. This will probably result in much more use of automation and artificial intelligence, not least because these technologies can make it easier to produce goods closer to the buyers that want them. This has major implications for employment.

We have also seen that major policy decisions have been made quickly and have been successful.

Take for example working from home (WFH). Without the daily commute it is not hard to see both productivity and financial benefits. Expect a reduced need for big, expensive, downtown offices. It may not be the end of the office, but it is the end of the old way of viewing the office.

© Thomas Hawk

This has wider implications. If white collar workers (perhaps up to half of them) do not need to sit in the office every day then they do not need to live in expensive cities. So while cities may not totally empty of prime office real estate, they will need less of it. That opens the way for cities to reimagine their business model. They could become creative centres, living spaces and entertainment hubs.

But, one thing that makes great cities great might be missing. Migrants.

COVID-19 brought almost all migration to a halt. Some political leaders will see current migration restrictions as an opportunity to reinforce broader, longer-term agendas, riding a public mood that was already going in that direction. This could mean cities may lose this key, yet often underappreciated, ingredient that makes them great.

A crisis and the reaction to it are times of great ideas – political, economic, social, and scientific. Some of these led to innovations that made life better for millions of people, others to conflict and war.

Whatever we can expect in the coming decade, we can with certainty expect one thing. Change.

By Gary Rynhart, Specialist, Employers’ Activities, DWT/CO-Pretoria

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