How the world has changed
Take the world of work. Everyone lucky enough still to be working will have noticed how meetings have all become virtual on either Microsoft Teams or Zoom. But they still happen, and in many cases, they work just as well. The fact that you can’t see who is actually listening to you as you speak (if video is turned off) is compensated for by the great saving in time and costs, with nobody having to travel across cities/countries and stay overnight. Meetings are all starting and ending on time. Most companies have now asked a large majority of their employees to work from home and continue to do so even with lockdown relaxing further to level 3.
As a recent edition of the Economist puts it, “as well as highlighting how bloated some travel budgets are, virus contingency plans may reveal how inefficiently office space is used”. The magazine states that big companies in the United States and United Kingdom pay on average $5 000 (R88 037) per employee in annual rental costs. In addition, just 40% to 50% of desks are actually used during working hours. It concludes that if managers find that productivity doesn’t dip from staff self-isolating at home, the case for teleworking “may look irresistible”.
What will happen to supply chains? The Economist notes that in the 1970s, Toyota pioneered lean manufacturing and just-in-time delivery of components, which made production much more efficient, but more vulnerable to disruption. These days, most companies stockpile fewer and fewer necessary materials. The average firm in the S&P 500 carries only 66 days of inventory, with a company like Apple having just nine days.
With COVID-19 affecting all firms’ potential and actual subcontractors simultaneously, it’s clear that in future, it will be necessary for companies to carry bigger inventories, but more importantly, to keep suppliers much closer to home.
In addition, with everyone suddenly now realising that China manufactures a large percentage of the world’s antibiotics and medical equipment, expect this also to change as countries attempt to become less reliant on China.
Will the US still be the supreme world power? In a recent article in Business Day, Gideon Rachman points out that most would agree that the US economic, political, and social systems are under severe strain, and – love him or hate him – it can’t be denied that President Donald Trump hasn’t displayed the leadership qualities needed for a crisis of this magnitude. But, does it mean that the US is in terminal decline?
“While US military dominance is increasingly contested, the dollar’s global role as a safe haven and the leading currency for trade is unchallenged,” Rachman says. “This translates into huge political power. No other country has a currency that commands the same respect.”
But he points out that the US’s huge $2 trillion stimulus package has led to a surge in the US national debt and a corresponding risk that the US currency will eventually lose the world’s confidence. The continued pre-eminence of the US and the dollar will be the key geopolitical issue to watch out for. The US has been counted out many times in the past. Expect them to reinvent themselves and eventually to carry on growing after the crisis subsides.
Though the EU has survived numerous crises, this one could be the most serious yet. A core principle of the EU is the free movement of goods and people, but countries were quick to close their borders when the crisis broke out.
Though this is understandable, it will be much harder to justify the fact that France and Germany refused to assist Italy with face masks during the peak of its crisis. Germany, in fact, explicitly banned their export, while France requisitioned its stock.
Citizens increasingly will ask what use the EU is when at a time of national emergency, each country reverted selfishly to protecting its own and did little to help its neighbours. One has to wonder how long Italy will remain in the EU, and whether the EU will survive in its current form.
What will happen in Iran? There is little argument that the Iranian leadership has botched its handling of the epidemic, and even though the official figures are widely disbelieved, they are, in themselves, brutal enough (about 7 500 deaths).
What is also interesting is how the country’s leaders have been affected. The Economist notes that two vice-presidents, some ministers, and 24 members of parliament have contracted the virus. The government has made numerous errors. These include taking too long to stop flights from China, allowing an election to take place on 21 February when the virus was already known to be spreading, and being accused by the US government of misusing vital medical supplies. Adding this to the previous disaster of mistakenly shooting down a passenger plane with 176 people onboard in January, one has to wonder how much more the Iranian people will take.
Before the virus, Iran’s economy was already isolated thanks to US sanctions. Now, it’s even more cut off. Its main trading partners, including Iraq, are restricting the passage of people and goods. Religious, medical, and leisure tourism, worth almost $12 billion last year, has dried up. With the oil price collapsing, market watchers expect another run on the Rial, and the Economist quotes experts who think the economy could shrink by 25% to 30% as a result of the virus. This will, no doubt, be a testing time for the leadership.
Whatever happens in Iran, expect other governments in the Middle East to come under increasing pressure after the crisis ends either for the way they mishandled the response, or from a desperate people who will be demanding a more equitable share of the vast oil revenues most of these states possess. Expect much instability. This won’t be restricted to the Middle East.
Finally, no one can possibly predict with any certainty how the world will change, but change it certainly will. The last great upheaval occurred around World War II, which brought about huge and unimaginable change. Expect nothing less this time around.
- Harry Joffe is a tax and trust attorney.