Hold tight, it’s going to be a bumpy ride
As the Economist writes, at the end of this pandemic, people will generally be poorer, angry at the hardship they have gone through, and many of them will also have been sick. That will make for a very discontented population, and will create toxic politics.
In such conditions, people do things and support ideologies they wouldn’t normally. A simple look back to the 1930s bears this out in the fascist parties in Europe, who in the roaring 20s were generally seen as a joke, but suddenly came to power all over when the Great Depression hit. (Apart from Mussolini, who came to power much earlier, in the 1920s, but that was also due to general dissatisfaction.)
Things are already tense in the world with “strongmen” in power in countries like Turkey, Russia, and Brazil. Expect politics to become more angry and unstable as we come out of this pandemic. While hopefully, we won’t see any fascist parties coming to power, traditionally mainstream parties will move further to the extremes, and extremist parties/protest movements will become more powerful.
Governments all over the world have run up huge deficits with stimulus packages and assistance to the vast legions of unemployed. They are going to have to increase taxes to pay off this debt. In 1946, after World War II, the top marginal tax rate in the United Kingdom was 86%!
Expect marginal tax rates to increase, but more importantly, the discussion about wealth taxes to start up again. Although wealth taxes in countries that have tried them have raised only small amounts of tax, and are complex and difficult to administer, they have political benefits in that they are seen to make the rich pay their share of any reconstruction.
Lockdowns have brought fascinating environmental changes. Nature has come alive again. We have seen jellyfish swimming in the canals of Venice, deer walking the streets of Eilat. But most importantly, a huge decrease in pollution and carbon emissions. The air in the major cities has become cleaner, and rivers less polluted. Will people not want this to continue after we revert to some form of normality?
Already there are strong movements in London, Paris, and other European cities to keep many more streets closed to cars, and to increase biking tracks and trails in city centres. Alternative and renewable energy is being pushed all over, and this might well be its time, with advances now making renewable energy cheaper in many cases than fossil fuels.
As the Economist of 23 May states, the demand for renewables demand jumped 1.5% in the first quarter, even as demand for all other forms of energy sank. The magazine also stated that renewables are expected to surpass coal’s share of power generation in the United States for the first time this year.
With electric cars starting to take off, is this the start of the great movement to clean energy? At the very least, expect this movement to become much more mainstream and gather much more support among ordinary people. This has already become evident at various company annual general meetings in the past few months, where environmental groups have become much more aggressive in demanding compliance with environmental regulations by boards and directors.
Although the pandemic will eventually fade, it has brought to the fore the importance of healthcare and workers’ rights. Expect a major movement all over the world to improve access to quality healthcare, and improve working conditions. This will undoubtedly become a major trend, and one of the themes of the 2020s.
Every time the world undergoes a major crisis or historic inflection point, like World War II for example, although the crisis itself is difficult and painful, the period after that is almost always positive. Again referring to World War II, the post-war period from 1950 onwards ushered in a time of great and positive technological, social, and political changes. Technological growth and innovation increased rapidly. Many new countries became independent. This was a period of rapid economic growth all over the world, with many more people gaining access to education, and growth in social and political rights.
So, the period after the pandemic will very likely be one of great technological advancement and positive growth for the world as a whole, but expect a bumpy ride along the way!
- Harry Joffe is a Johannesburg tax and trust attorney.