Skip to content


How will the pandemic downturn end …And what will the future look like?

AJP Taylor asked an interesting and counter intuitive question, How Do Wars End? Most historians focus on how they begin: with re-armament, broken treaties and aggressive expansion, but how do they end? That can be a more interesting question, examining the impact of national exhaustion, often unbearable loss and a reinvigorated appetite to build bridges across divides. And as President Macron reminded us when all this started, we’re at war with COVID19: so how will this war end? How will the social and economic turbulence caused by the pandemic finally come to an end, and what will the world look like when it does?

Well, given the scale of the economic shocks the virus is leaving in its wake, we certainly can’t expect all the building blocks of the existing economic order simply to fall neatly back into place; and nor should we, because there are serious lessons to be learned.

President Macron was right when he cautioned “Many certainties and convictions will be swept away. Many things that we thought were impossible are happening, so the day after we have won the battle against the virus won’t be a return to the day before: we will be stronger morally and we will draw new conclusions about the way ahead”. And that’s a view shared too by the Leader of the Social Democratic Party in Germany: Norbert Walter-Borjans has predicted a radically new kind of globalisation in the post COVID world, and even Henry Kissinger (a confirmed economic conservative if ever there was one) has advised leaders to prepare for a “new world order” when the virus is finally defeated. 

So what will this new world order look like? 

First, and most obviously, we will almost certainly see a redefinition of the role of the State in civil society, with fresh importance attached to social capital: a new emphasis on the role to be played by individuals, communities and business as part of a more energised and engaged national framework. Just look at the rapid (and wholly voluntary) enlistment of more than 750,000 would be participants in the UK Government’s Coronavirus Support Scheme, making the divisions caused by Brexit seem a million miles away and graphically confounding Steve Bannon’s prediction that the “administrative state” is dead. Who wants to be entirely reliant on Amazon and commercial suppliers for the supply of protective facemasks if anything even remotely like this happens again? The crisis has taught us we need the administrative state more than ever, and the State will have a new role.

Indeed, as a catalyst for economic survival that newly defined role is already apparent. Unprecedented sums have been committed across the globe through Central Bank and Government interventions: Donald Trump (hardly a fan of Keynesian economics) has approved a $2 Trillion Financial Stimulus Package, and in the United Kingdom the Conservative Government (with a decade long policy of financial austerity) nodded through a £342 Billion support measure. In the EU more than 540 Billion Euros have been allocated to meet the unforgiving challenge of the pandemic. That’s £2.5 Trillion in all, or £300 Billion more than the entire UK GDP in 2019. If Coronavirus support was an economy, those three interventions alone would make it the sixth biggest in the world.

Even though tighter monetary policies are likely to be reimposed after the virus is finally consigned to history, the capacity of this kind of state inspired intervention to end an economic downturn (no matter how severe) has been thoroughly tried and tested for at least the last 90 years. Lower interest rates also act as a further stimulus to recovery, and although typical central bank rates were hovering around 0.75% in March so they haven’t got that much further to fall, analysts predict that even a 0.25% reduction can increase GDP by as much as 1%.

So that’s the first thing we’re likely to see: stronger and more confident State oversight. If it was difficult to see that not happening in the aftermath of the global crash in 2008, it’s almost impossible now. Steve Bannon is unlikely to find himself on the right side of history…

Which brings us to the second key pointer: the pandemic has resulted in the role of Globalisation being scrutinised like never before. Joseph Stiglitz, Professor of Economics at Columbia University, has predicted a reduced role for global supply chains, pointing out (with obvious justification) the failings of dangerously localised and disparate facilities for production of medicines and clinical equipment. So for that and other reasons it seems likely our dependence on just in time supply chains will also diminish and give way in time to more regionally based production centres. Economies like India, which has already established an enviable reputation as an Asian distribution hub, are likely to benefit from the change…which neatly leads into the third key pointer.

Even before the pandemic emerged, we were seeing definitive signs of a progressive shift in economic power away from the West and towards Asian economies. The response to the crisis means we can now expect that trend to be speeded up.

Harvard International Relations Theorist, Stephen Walt, put it succinctly: “Coronavirus will accelerate the shift of power and influence to the East. South Korea and Singapore have shown the best responses, and China has managed well in the aftermath of its initial mistakes. In contrast, the response of Governments in Europe and the United States has been sceptical and likely to weaken the power of the western brand.” And for those thinking China, Singapore and South Korea have been successful only because of a lack of democratic traction, think again: Shivshankar Menon, Visiting Professor at India’s Ashoka University, points out that Authoritarians and populists alike are no better at handling the pandemic. Those countries that responded early and successfully, such as Korea and Taiwan, are democracies”.

But East or West, cooperation has never been more important than it is now: after an all too often stumbling and uncoordinated response in the West, countries across the globe have now been drawn to work together as they have rarely done before, whatever their political complexion might be.

And that alone should give us cause for hope: our global future might just be better, more collaborative and more cohesive than the past has ever been.

 Invest in Red Ribbon Asset Management 

RRAM logo-Sep-25-2021-01-47-12-00-PM-2

Nobody understands the fundamentals of the Indian economy better than Red Ribbon Asset Management, which has placed the subcontinent at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on unrivalled knowledge of local markets with an expert team of more than a hundred advisers working in India’s economic hotspots, the Red Ribbon Private Equity Fund offers unique opportunities to share in this potential.

Suchit Punnose

Suchit Punnose / About Author

Leave a Reply