Coronavirus likely to be driver of economic change
15 May 2020: virtually no business has been left untouched by coronavirus but according to Professor Trevor Williams, historical context gives us cause for economic optimism and a chance to create a new future.
The Justinian plagues of the 6th Century - which wiped out half of the then-known world’s population - together with the Black Death 800 years later and the 1918 influenza pandemic, have much in common beyond their collective morbidity.
For they were key drivers of societal and economic change that transformed communities across the world, largely for the better, and today’s COVID-19 pandemic may also be about to have a similar impact.
That’s the message from Professor Trevor Williams, a former chief economist at Lloyds Bank and rotating chairman of the Institute of Economic Affairs Shadow Monetary Policy Committee (SMPC), in a webinar he gave to ICAEW members on the post-COVID-19 economic outlook for the UK.
The visiting professor at the University of Derby argues that such destructive forces led to great social and positive change, having brought down empires and freed people from serfdom with transformative 30-50% economic uplifts.
Williams argues that the 1918 pandemic and end of the First World War created the conditions that led to the formation of the Labour Party and the ending of deference.
The end of World War II, itself partly a result of the forces unleashed and unaddressed from 1918, says Williams, led to the birth of a number of truly global institutions such as the North Atlantic Treaty Organisation (NATO) and the World Trade Organisation (WTO). Closer to home in the UK, those same forces helped create the National Health Service (NHS), free education and nationalisation.
The current coronavirus crisis is “another once-in-a-100-year event, but this time a pandemic”, says Williams.
Perspective is key
Despite the gloominess of the current economic scenario, perspective is key, stresses Williams.
“We are able to ride this out if we do the right things, and at the moment we are doing the right things,” said Williams.
He commented that the government was playing its part in making sure that there is a social net to catch those that are most impacted by this” and such a course of action would ensure that the “current market-led system that we have survives”, which is imperative as” it is the best way of increasing wealth, prosperity, living standards and freedom around the world”.
The webinar, hosted by Ian Wright, former Labour MP for Hartlepool and ICAEW director for Business and Industrial Strategy, explores key historical events and hard economic data and looks ahead to what may lie ahead for business and societies in the UK and the wider world.
Williams analysed whether the world will repeat the “economic nationalism” of 1918 and the “misguided economic policies” of the 1920s and how “the winners” of this pandemic and its aftermath “will compensate the losers”.
He highlighted how pandemics have a tendency to further expose the fractures and splits that exist in societies, with the US health system a case in point, especially now that the USA is now the “current epicentre of the crisis in terms of deaths”.
However, he was quick to point out that at the moment there are still more COVID-19-related deaths in London than Lagos, and with no vaccine available and the real possibility that there may never be one, it is a virus that “we will have to live with”.
QE and ultra-low interest rates had kept volatility in financial markets artificially low, said Williams, while policymakers need to be “extremely careful” about how they manage the easing of the economy out of current restrictions as a second and third wave could lead to “further lockdowns” and “greater economic harm “.
Williams stressed the importance of the WHO advice to track, trace and isolate anyone showing symptoms as a key weapon in the fight to arrest the spread of COVID-19.
The OBR, BoE and “most private sector forecasts” agree that while the economic downturn will take a hit to GDP of some 30-40% there will be a definite bounce back in Q3 and Q4 of 2020 as lockdown measures are eased.
Change brings with it many opportunities to take a different tack, to innovate and fix broken elements of society, argues Williams, and the chance to create a new future alive with “vigour” and “optimism”.
You can view the webinar and its subsequent Q&A here.