A colleague used to say economic forecasting was designed to make astrology look good — after all didn’t economists predict nine of the past five recessions? Wisecracks aside, predicting the future is fraught with difficulty.
Yet it doesn’t seem too much of a stretch to suggest that we are on the cusp of a global post-pandemic boom. All of the rich economies are expected to post growth rates in 2021 unseen in decades. The IMF is predicting global growth of 5.2% in 2021. This has not happened since the boom times after World War 2.
If history is a guide it will also be a period of creativity and innovation. The number of patents registered in the US in the 1920s grew from 57,347 in 1918 to 87,603 by 1928. This led to innovations such as radios, phonographs, vacuum cleaners, washing machines and refrigerators later that decade.
The patent for the first semiconductor transistor was filed in 1926. New types of companies emerged, such as McKinsey in 1926. New sectors emerged and old ones such as aviation, vehicles, entertainment, advertising and health got a boost. Telecoms and pharmaceuticals grew strongly in this decade.
Such has been the tempest since early 2020, few industries will escape being either reformed, restructured or removed. The pre-Covid economy is gone. The pandemic accelerated the pace of change and exposed big old-economy reliables such as hotels and airlines.
This is history repeating itself. In the Global Investment Returns Yearbook 2015 the authors analysed and compared the industrial composition of listed companies on American and British stock markets in 1900 and in 2015. Railroads were the dominating industry at the turn of the century with a massive 63% share of the US stock market. One hundred and fifteen years later, railways account for a 1% share of the US stock market. The resilient industries that thrived throughout this period are characterised by their ability to adapt and innovate. In 1900 the telegram was the main piece of telecommunications. Today it’s smartphones.
Looking at two separate years separated by 115 years will give no scientific conclusions. It is merely illustrative of how things change and how industries can experience periods of over- and undervaluation. So what is likely in the coming years?
If education, health and shopping can all move online then most things can. From virtual conferences to virtual tourism, this world will stay with us. So too banking. During the pandemic ATM usage (which was already falling) shrank further. The shift from cash to digital payments is accelerating.
There will probably be strong growth in personal services such as fitness and wellness. Sectors that emerge from the pandemic stronger will be strategically more important: health care, pharma & biotech, education and retail. Entertainment and the arts will grow. Real estate for remote workers. Tourism, too, probably with a focus on eco-tourism and bespoke offerings, which is good news for this country. Mining is already feeling the boom.
In terms of employment relationships it’s likely that non-standard forms of employment — part-time workers, gig workers and workers with multiple employers — will grow. These workers were badly exposed during the lockdowns, and I see an increased focus on how benefits systems can become more portable. For rich countries the fiscal stimulus packages they effected amounted to the largest-scale experiment in universal basic income (UBI) to date. On these pages I can count half a dozen articles about UBI since the start of the year. It is a growing conversation.
The pandemic showed that borders do actually matter. The post-pandemic economic system will be more resilient and probably more localised. Firms that are part of global supply chains have witnessed first-hand the risks inherent in their interdependencies and the large losses caused by disruption. Is it the end of globalisation? No, but do expect more mercantilist thinking.
There is risk too. A recent paper by the IMF showed that pandemics can expose existing social fault lines. The IMF study considered the effect of five pandemics, including Ebola, severe acute respiratory syndrome (SARS) and Zika, in 133 countries since 2001. It found that they led to a significant increase in social unrest, which peaked two years after the pandemic ended.
Omar Little, the Robin Hood figure from HBO’s The Wire said: “Money ain’t got no owners. Only spenders.”
We are about to find out on what.
• Rynhart is a specialist in employers’ activities with the International Labour Organisation, based in SA. He is author of ‘Colouring the Future: Why the UN Plan to End Poverty and Wars is Working’.
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