The coronavirus (COVID-19) crisis has broken all the rules. What the world is facing is something economist David McWilliams likes to call a “pandession.”
What COVID-19 is causing is a combination of a pandemic and recession. It is a one-in-a-generation event with no economic blueprint for recovery, explains McWilliams, also an author, journalist, documentary-maker and adjunct professor of global economics at the Trinity School of Business in Dublin, Ireland.
“We are at this extraordinary, one-off moment where the global economy is now in a tailspin, and the timing of when we get out of that is not going to be dictated by anything you and I understand in economics,” he says.
Speaking at the Alltech ONE Virtual Experience, which was held May 18-22, McWilliams used history as a basis to offer insights on life after COVID-19.
Prepare for a Massive Shift in Thinking
In looking at major, world-changing events of the past, such as World War I and the fall of the Berlin Wall, McWilliams says crises change the cumulative mindset.
“You get these moments where what you think was absolutely kosher yesterday becomes ridiculous today,” he says. “What was radical before the crisis becomes mainstream. What was mainstream becomes redundant. There’s a massive shift in thinking.”
Consider how the central banks are trying to shift the U.S. economy out of fear, suggests McWilliams, who used to work for the central bank in Ireland.
“If you’d told me the Federal Reserve was going to buy government bonds directly, was then going to buy corporate bonds directly and then buy junk bonds and take those off the balance sheet of the banking system, and we’re going to give banks cash to lend out, I would have said, ‘That ain’t going to happen,’” he says. “But right now, we have a choice between abandoning our dogma and having a Great Depression. So, what do you do? You get rid of your dogma and fight your battle.”
The Global Supply Chain Will Transform
In taking the long view of global economics, McWilliams predicts a significant shift in thought processes and priorities.
“I think what's quite obvious for a global business is that the supply chain is going to change profoundly,” he says. “Price, which has been the dominant factor for many, many years in the supply chain, will probably be elbowed out by security. You revert back to who you know in times of crisis. You do business with people you know and people you like. This COVID crisis will re-energize the importance of relationships.”
This transformation should provide opportunities for small countries such as Ireland, Israel and Denmark, where the workforce is educated, the legal system is watertight and relationships are strong, McWilliams says.
“They could become important cogs in the global supply chain,” he says.
McWilliams also predicts more mergers and acquisitions in the future.
“These periods of economic contraction lead to consolidation, and the guy with the wallet wins,” he says. “In every industry, there’s a fire sale on assets.”
Necessity Breeds Invention
The upside of global crises is people become innovative and creative.
“These opportunities emerge in crises, and you just have to have the self-confidence and belief in yourself to keep plowing on,” McWilliams says. “All these crises lead to great renewal. And great renewal stems from people taking a risk because things have changed, and normality has changed.”
Remember, he says, the mother of all invention is necessity.
“There are many instances when you imagine humanity will go going into a tailspin,” he says. “But what humanity actually does is entrepreneurs, leaders and thinkers come through — and they change the world.”