COVID-19 - Long term impacts
In this article, we will dive into the current state of the coronavirus pandemic and its potential long-term impacts.
At war with a virus
Angel investor and entrepreneur, Balaji S. Srinivasan, put the coronavirus situation into perspective when he tweeted: “We are now truly in World War V, the war against the virus. The virus needs no budget, runs 24/7, is fully decentralized, infinite morale. We can’t win this with bombs, printing money, sarcastic articles. Only with science and technology.”
He has a point. The novel coronavirus is a global threat that requires cooperation and collaboration between all countries to ensure that the pandemic does not bring the world to a halt.
Today, schools are closed in Italy until mid-March, there are travel restrictions into Israel for citizens of affected countries, airlines are canceling hundreds of flights, and public events across the globe including SXSW are being postponed or canceled.
Unfortunately, that is only the tip of the iceberg as (most) governments are scrambling to prevent an exacerbation of the outbreak while businesses are preparing for an almost certain slowdown in the economy.
If the COVID-19 pandemic is not under control in the coming months, people’s behaviors will change, and the global economy will continue to suffer.
Corona-fueled Xenophobia
The anti-Chinese sentiment, which has been on the rise in recent years as China’s economic and military power is being felt more and more across the globe, has been exasperated by the COVID-19 outbreak. Because the virus originated in the People’s Republic, mainland Chinese have become an unwelcome sight for bigoted, uninformed people (and media outlets) across the globe.
Worryingly, racist attacks against Chinese and people of East Asian descent are on the rise in the US and UK.
Impacts of COVID-19
An increase in xenophobia against citizens from heavily affected regions will not remain the only impact of COVID-19.
First and foremost, we can expect to see a boom in remote working, and remote software applications such as Zoom and Slack.
Freelancing - which is often done remotely - is already an increasing trend as people have become disillusioned with the corporate culture of yesteryear that still exists at some large companies.
Some corporations have started to offer staff work-from-home options to compete with remotely driven startups. This trend is poised to accelerate in the coming months as companies will ask more and more (if not all) employees to work from home.
Additionally, we can expect more digital, open-source collaboration to combat the virus.
For example, a group of archivists set up an open-access directory of 5000+ scientific studies about coronavirus that is accessible online for free despite the potential legal implications of their actions.
Moreover, Chinese researchers who sequenced the coronavirus following its outbreak made the initial genome data available online for the whole world to study it.
We can also expect a move towards more self-sufficiency.
The world’s reliance on China as “the factory of the world” is starting to be felt as the global supply chain is slowing down and anyone who is conducting business with the People’s Republic is feeling the pinch. As a result, a trend that will most likely follow the coronavirus outbreak will be a move towards more self-sufficiency both on a personal and an industry level.
Industries that have been relying heavily on China, such as manufacturing, will likely reconsider their business ties and move (at least) a part of their operation elsewhere to diversify risk.
Individuals, many of which have been panic buying in the last two weeks, have woken up to the realization of just how unprepared most of us are in the event of a crisis. As a result, many are rethinking their spending habits and what necessities they should have at home at all times.
Finally, we can expect more controls, surveillance, and privacy infringements.
To contain the outbreak, authorities are tracking the infected, putting people into quarantine, and are controlling closely who is crossing their borders. It would, therefore, not be surprising to see an increase in privacy-reducing tracking and surveillance measuring of citizens under the disguise of combating the viral pandemic.
In addition, populist politics may also benefit from the panic caused by the coronavirus outbreak and the current trend in right-wing populist politics may continue as xenophobia and border controls will become hot topics again.
How have the markets responded?
Global markets are usually the first to react to a crisis. When it became clear that the coronavirus is not going to go away anytime soon, stock markets across the globe took a hit.
The S&P 500 Index had its worst week since the 2008 Global Financial Crisis after the CDC issued a public warning about the coronavirus when it dropped by over 11 percent in the last week of February.
Conversely, the yield of the benchmark 10-Year US Treasury hit an all-time low as investors moved out of risky assets and into safe-haven assets. Gold also experienced a spike, to add to its strong rally since the start of the year.
The price of oil tanked by over 18 percent since the start of the outbreak. If industry (and the global supply chain) are expecting a slowdown, oil is usually the first to drop in value as its demand goes down.
A wave of coronavirus interest rate cuts by central banks in Australia, Canada, and the US, has helped to bolster troubled markets, which resulted in a stabilization of the equity markets. The aggressive rate, however, cuts feel more like panic moves than well-thought-out monetary policy actions.
Finally, bitcoin (BTC) has moved largely in line with the stock market and retraced back below the $10,000 mark as coronavirus fear hit global markets. Overall, bitcoin market sentiment remains positive though, in light of the upcoming halving and the expected rally that has historically always followed block reward halvings.
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Alex Lielacher, Khareem Sudlow