How much will the Covid-19 crisis change us?

How different will the world be when the Covid-19 crisis is at an end?

Article updated: 26 March 2020 3:00am Author: Michael Baxter


In times like these it’s difficult to think beyond the next few weeks. I had a headache yesterday and at one point felt a little sick, “that’s it, I’ve got it,” I concluded. This morning I feel fine. My point, we all feel a little nervous. If we are not worrying about ourselves, we are worrying about our families. This crisis is awful and I'm not sure that has ever been a point in the entire history of this planet when such a high proportion of the human race felt simultaneously glum. Except the markets yesterday. They are still in denial. I heard yesterday that if we got invaded by aliens governments would respond by cutting interest rates. Things will get worse — we all know that. But eventually they will get better. Eventually they will return to normal. So let’s think about this, prepare and get ready to act.

I am dividing this article into two sections: reasons to be fearful and reasons to be hopeful. I’ll start with reasons to be fearful — apologies for writing downbeat words when we all feel glum, but let me assure you, this article will get more optimistic.

Reasons to be fearful

There are three reasons to be fearful. I list them in ascending level of fearfulness, although I am struggling to work out which is the most alarming of my second and third reason.

The economy

First of all, is the economy. Obviously it will tank this year — we will almost certainly see the biggest economic contraction in peace time ever recorded. (No one recorded the contraction that came with the Black Death, presumably that was a lot worse). But will this crisis leave an economic wound that will take a very long time to heal? Many think it will. The crisis will see businesses and individual incomes collapse. When the crisis is over, the economy will need re-building. But where will the money come from to re-build? The entire economy will have been in deep recession — any economic surplus required to support expansion will have turned into nothing. Government debt will be sky high and we will have to repay it. Taxes will therefore rise, global austerity will begin. Businesses will only recover slowly.


Secondly, is the backlash against globalisation and linked to that a growing sense of xenophobia and anti-Chinese sentiment. Studies make it clear, the more open the world, whether that is movement of goods, services, capital or people, the more wealth is created. In 1930, the US imposed the Smoot–Hawley Tariff, this imposed tariffs on 20,000 goods imported into the US. The act made the US economic depression worse, and may even contributed to global social discontent that sowed the seeds for the Second World War. Guys, we haven’t learned the lesson, I believe that the end result of a sharp reversal in globalisation will be global conflict.


Thirdly, Covid-19 is by no means the worse shock the world will face over the next decade or two. It may not even be the worse pandemic. For reasons probably related to population growth and climate change, Coronaviruses are on the rise. Covid-19 won’t be the last. A bigger threat relates to the overuse of antibiotics. The discovery of penicillin may have saved as many lives as were lost to Black Death (in-excess of 100 million). If we lose the war against superbugs then it will be awful. But there are worse dangers — climate change, dwindling fish stock, plastic pollution, and the erosion of the natural world. I think technology poses an even greater threat still, although it also creates equally significant opportunities. I have a book coming out soon about this: Living in the Age of the Jerk

Reasons to be hopeful

Keynesian stimulus

There is a view, held by economists of a more Keynesian leaning, that for it to be effective, a Keynesian stimulus must be enormous, but in peace time, a stimulus of sufficient scale would never get political support. The theory behind Keynesian economics is not intuitive — the idea that governments should spend when everyone else is tightening their belt doesn’t feel right. But there is a subtlety to the ideas of Keynes, the famous economist who died in 1946, that critics don’t get. Bear in mind, Keynes never suggested using government spending to even-out the economic cycle — that idea came after he died. Keynes advocated extreme stimulus in times of economic extremes — when planned savings greatly exceed investment. This happened in the 1930s (maybe 1920s in the UK), and it has been happening most of this century. There have only been two occasions when a proper Keynesian type stimulus (Keynesian in all but name) was applied — in the Napoleonic War and Second World War. On both occasions, UK government debt greatly exceeded 200 per cent of GDP. On both occasions, an extended period of what was at that time record economic growth followed. On both occasions the economic stimulus had followed industrial revolutions— first industrial revolution from around 1760 to 1820. Second from around 1867 to 1914. Right now we are seeing a Keynesian stimulus of the scale normally only seen in war time.

Money printing

People say government debt will be excessively high post Covid-19. But if a government can borrow in its own currency this may not matter. It depends on the circumstances. If an economy is operating at full capacity, like it was largely doing in the 1970s, Keynesian stimulus or money printing is inflationary. If a country tries to pay back debt in isolation, its currency often collapses (unless the country is the US, which is different.) But post Covid-19, there will be massive spare economic capacity. Government stimulus will be applied globally — currencies can’t all fall. Governments will either be able to borrow at near zero per cent, or print money. Providing they get the timing right, the risk of inflation will be minimal.

Fourth industrial revolution

I believe that we are failing to translate the economic benefits of the fourth industrial revolution into economic growth largely because companies are being too slow to adopt digital practices. Or, maybe, it is a tad too early in this revolution to get a real economic benefit. By 2022, we should be seeing an economic benefit from the fourth industrial revolution, but maybe a massive Keynesian stimulus is required to get it going — as happened with previous industrial revolutions.

Move to digital

We are seeing the rise of remote working. For many this will be a permanent change. The economic benefits of remote working will be considerable — less time spent commuting, or travelling between meetings or deliveries; less time spent in traffic jams or queuing at train stations; less time spent trying to work on a crowded train; less time in pointless meetings, or worrying about office politics. Augmented and virtual reality will simultaneously promote remote working and communication. In virtual reality, communication will occur avatar to avatar, perhaps creating the opportunity for anonymous flow of ideas, reducing the negative impact of prejudice.

The rise of remote working will make it easier to win the war against climate change, but at a lower economic cost.


Technology can answer the challenge posed by Coronaviruses and superbugs — by using AI, big data, advanced computer modelling (eventually using quantum computers, but not for a few years), nanotechnology, genome sequencing, DNA editing (CRISPR/ca9) and even meat substitutes such as plant alternatives or cultured meat to reduce farming of livestock, reducing overuse of antibiotics, freeing up land for tree planting and for the natural kingdom to flourish again. Technology can also be used to in the front line in the war against climate change. Just as technology poses threats it creates wonderful opportunity.

Technology can only achieve this if we let it. There is a need for global cooperation, open standards, and in some cases less patents, slowing up the flow of ideas. Globalisation leads to mass demand, this creates accelerated learning rates for technologies, increasing the speed with which they fall in cost and increase in sophistication. So a backlash against globalisation, rising xenophobia and anti-Chinese sentiment could destroy our best hope of coming out triumphant.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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