The world is facing the greatest economic crisis it has seen since the Second World War because of global lockdowns as governments seek to limit the dangers of coronavirus – but what sort of economy will we see as we emerge from the restrictions?
Some have looked at the impact of the last recession, sparked by the credit crunch in 2008, for some answers – but in truth the situation this time is very different and the impact is likely to last much longer and cause even more fundamental changes to society.
What is common between the two downturns is the impact of confidence among people generally – and while in the middle of a crisis it is very difficult to imagine how deep an impact that is likely to be, the suspicion is that this time it could take a very long time for confidence to return.
The basic cause of the crash in 2008 was banks around the world woke up to the fact that they had lent too much money to too many people, organisations, and even some governments who would be totally incapable of paying it back.
That forced them to beg governments for help – which they received because the alternative would have been to allow the collapse of the global banking system. However governments remained determined to get back as much of their money as possible so many countries (including the UK) had a policy of austerity to ensure this debt could be paid.
Those policies took years to come through and despite some major hiccups, the world economy was starting to look on track again during the second half of the last decade.
People were starting to regain confidence in the banks. Banks were starting to show confidence in their customers. The world economy was starting to look as if it was heading in the right direction.
The coronavirus crisis has changed all that.
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What we are currently living through is a deliberately-manufactured recession aimed at suppressing demand in a bid to keep us at home and prevent coronavirus spreading. Massive sections of the world economies have been closed down. Economic activity has (depending on who you believe) fallen by between 14% and 24% in a month. That is unprecedented.
Of course this level of suppression will not carry on indefinitely – but the very fact it has happened will have a huge impact on economies around the world. Even if it were totally lifted by the end of May it would mean 2020 would have suffered a massive recession.
When we do come out of lockdown confidence will again play a massive part and is likely to have a massive impact on the world we emerge into.
Some people will feel such relief at the end of restrictions that they will instantly look for the nearest pub, restaurant, concert venue or sports ground to get back to “normality.”
But for millions of people, unless they are totally convinced that a vaccine has been found that will give them 100% protection from the virus, getting back to “normal” simply won’t happen.
A season ticket holder at Portman Road told me: “I can’t see myself wanting to be in big crowds like that for the foreseeable future.”
All that means that some industries, particularly the leisure and tourist industry that this area relies so heavily on, could have a real challenge – but also a real opportunity.
People might not want to go to crowded pubs, to busy restaurants, and particularly to venues that attract huge numbers like theatres or cinemas. They could really struggle.
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However some sectors could benefit, especially those with space. Visits to the seaside or countryside could become more popular. Venues like National Trust estates, nature reserves like Minsmere, and even a day out at the beach (providing it isn’t too crowded) could be popular.
And even if restaurants do struggle to win back customers to their tables, could entertaining at home become more popular – in which case could delivery services continue to grow in popularity?
After the last recession we lost Woolworths, Zavvi and Littlewoods stores. BHS collapsed a few years later. But Amazon became a much larger retailer – while we also saw the rise of ASOS and Netflix.
This time Carluccios restaurants have gone into administration. Could more large restaurant and pub chains follow? But could Deliveroo and Just Eat become the new giants of the food industry?
And one glimmer of light for the tourist industry is that the coronavirus crisis could encourage more people to holiday in the UK without the need to fly on crowded aircraft.
But one thing that is certain is that when the world economy does emerge after the end of the crisis, we will all have to adjust to a new normality – nothing will be quite the same.
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