There will be no 'back to normal'

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There will be no 'back to normal'

The pandemic will change the world permanently and profoundly. Even if countries can control the spread of COVID-19 in the coming months, there will be vast political, economic, social, technological, legal and environmental consequences which will last many decades.

In this article, we summarise and synthesise various - often opposing - views about how the world might change. Clearly, these are speculative; no-one knows what the future will look like. But we do know that crises invariably prompt deep and unexpected shifts, so that those anticipating a return to pre-pandemic normality may be shocked to find that many of the previous systems, structures, norms and jobs have disappeared and will not return.

For this reason, adaptation and innovation are more important than ever. Tempting though it is for organisations to ‘batten down the hatches’, in anticipation of resuming business as normal in a few months, many will emerge to find that their market has evaporated, their partners or supply chains have shifted, and that their stakeholders have radically different priorities. At Nesta, we're using this analysis as a basis to explore the role of innovation in possible future scenarios in the aftermath of COVID-19. We hope it also helps others to facilitate important discussions within their organisations as we all look to adjust to the new world that emerges.

Update July 2020

It has been great to see so much readership and engagement with this blog! Whilst many of our forecasts have proved correct, in the three months since the original post, we have learned more about the pandemic and its impact, and so provide short updates within each section. Since we are unfortunately still at the early stages of the global pandemic, we may provide further updates in due course. We’re also interested in exploring how these factors interact and feed into different scenarios – such as these created by Leah Zaidi – and may publish some of our own in due course.

Political

The ‘Overton Window’ has dramatically expanded. The pandemic could harm the structures of liberal democracy. Nationalism is likely to increase whilst globalisation retreats. At the same time, the crisis highlights the need for international collaboration, and might bring countries together in the fight against the virus. As the coronavirus exposes society’s fragility, and the interdependence of globalised industries, it might fundamentally change our worldviews. The power of the State, and public perceptions of its role, will shift dramatically.

  • The “Overton window” - the range of politically acceptable policies - has become more like an “Overton Greenhouse” where the previously unimaginable is now possible. Political and ideological principles are suddenly more flexible.
  • This radical rethinking will spill-over into all areas of politics. The pandemic and recession may be "the sort of world-making event that allows for new economic and intellectual beginnings."
  • We are seeing a major shift in the power of the state, including nationalisation of key industries, and acceptance of state intervention in all areas of life. More authoritarian governments may be reluctant to relinquish emergency powers.
  • The pandemic and recession will be portrayed by some as a crisis of capitalism; legitimate or not, the exposure of society’s fragility will lead to greater demands for, and experiments with, wider social safety nets such as UBI.
  • We may see a huge global power shift, depending on whether the backlash over censorship and lack of transparency is China’s ‘Chernobyl Moment’, or whether its subsequent handling of the crisis enables the Communist Party to consolidate power and potentially seize the role of ‘global safe haven’ from the US.
  • Expansion of nationalism and retreat of globalisation: how countries which closed their borders early fare in the long run will have significant political consequences for attitudes towards globalism, borders and immigration.
  • International bodies: despite the above, global pandemics need global responses and international collaboration. However, it may prompt questions about the fitness of the WHO and broader United Nations, especially given that the pandemic is not a black swan event, but was predicted by many.
  • Internal social, economic and political turbulence will cause many countries to focus their attention inwards; distracted political structures and economic chaos will create unpredictable interactions with other global issues like refugee flows or conflict hot spots, and our ability to co-ordinate a response to these.
  • Within the European Union, inefficiency of the policies implemented by different EU member states highlights why a Europe-wide public health authority may now be a priority. But it has also strained Eurozone debt, intra-EU relationships, and tested free-movement and Schengen arrangements, prompting questions of whether the EU is a ‘fair-weather club’. The UK government may have to ask for a Brexit extension.
  • Within the UK, differences in outcomes between the home nations may boost calls for independence, especially if the UK government is seen to favour England; alternatively, poorer outcomes may boost calls for revoking devolved power.
  • International differences in outcomes may reinforce - or shake - public faith in experts and the role of science in policymaking. If it highlights the limitations of science in dealing with uncertainty and moral dilemmas, this may provoke a shift to more democratic and participatory engagement with scientific methods and insights (e.g. the ’Post-Normal’ model).
  • New modes of collaboration between the public and private sectors will emerge for future surge capacity - e.g. hotels designed, and part-funded, to act as hospital overspill.

Update July 2020

  • Internationally, it now seems clear that the US has fared worse than China, and that, rather than being weakened, the Chinese government has taken advantage of distracted states to consolidate power; together, this may make the ‘Thucydides Trap’ – the conflict between a rising power and the ruling one – more likely.
  • Domestically, the crisis has highlighted some of the inconsistencies with devolved powers, which may lead to renewed calls for an English government.

Economic

The recession prompted by the pandemic will very likely be much worse than the financial crisis, but it will not be a ‘normal’ recession. Many countries are entering recession in the worst possible shape, with traditional levers already exhausted. Mass unemployment is possible. Fiscal and monetary policy solutions previously considered radical enter the mainstream political and public discussion. Firms that survive will change their focus and business practices, including major supply chain reorganisation, and a shift from streamlined efficiency towards resilience.

  • The recession will likely be much worse than the financial crisis - perhaps “the mother of all financial crises”. Major increases in bankruptcy, unemployment, underemployment and working poverty. (IMF, McKinsey, ILO, Gourinchas)
  • This recession will not be a ‘normal recession’: rather than clearing out less productive firms, this one will see the death of many good firms due to artificial/governmental constraints - so needs a different response.
  • At the same time, many countries are entering recession in the worst possible shape, with high national debt and low interest rates (even negative interest rates), depriving them of core levers needed to stimulate the economy.
  • Nevertheless, States have promised to “do whatever it takes”, meaning new approaches and tools are being considered, which may include Universal Basic Income or a universal income floor, and a wave of nationalisations.
  • The economic impact will clearly affect some sectors (e.g. hospitality, tourism) more than others (e.g. logistics, farming, healthcare), but may be difficult to predict. We will see greater emphasis and state support for key national industries (possible permanent move towards the ‘Chinese model’ of free market for some sectors, but state support for others?)
  • The crisis may exacerbate income inequality, since higher-income workers are, on average, more able to work remotely.
  • Places with less diverse economies (especially if reliant upon hospitality or tourism) will fare worse.
  • Possibly millions of people may suffer permanent health issues (e.g. lung scarring), causing further economic impact.
  • Government economic priorities and language will likely to shift away from productivity towards employment and ensuring a basic safety net for all.
  • The failure of indebted corporates and banks may mean reinvigorated moves to transparent digital currencies or tokens.
  • Rebounding will require new ways of getting new firms (and social enterprises or philanthropic ventures) off the ground quickly - e.g. ways for companies to raise money quickly with less red-tape than issuing securities; more crowdfunding (perhaps more international than we’ve seen to date); a possible new wave of initial coin offerings.
  • Rapid - and possibly permanent - reconfiguration of supply chains is underway, both internationally and nationally, as well as rapid pivoting of business models (e.g. food wholesalers moving from restaurant supply to home delivery).
  • This also means that many jobs that disappear during the pandemic will not return.
  • We will see moves away from ‘just-in-time’ manufacturing, and major shifts towards practices which reinforce resilience (e.g. stockpiles, redundant capacity, duplicated systems) at the expense of efficiency.
  • There will also be an accelerated trend towards re-shoring, as the recession reveals obscured supply chains and international dependencies (as well as hidden debt).
  • We anticipate lasting interest in remote working models (which may lead to a further fall in commercial rent).
  • There may be possible acceleration of labour-replacing automation by firms, especially if the cost of borrowing decreases and the minimum wage increases

Update July 2020

  • Consensus about the economic outlook is tending toward the worse end of earlier predictions; together with uncertainty and behavioural change this may lead to a ‘90% economy’.
  • Whilst worries that enormous government stimulus could stoke inflation seem unfounded for the moment, spiralling public debt is already leading to calls to reform state pensions and other public expenditure.

Sociocultural

The crisis will prompt a reappraisal of what we - individually and collectively - value most, inevitably leading to significant social change. Quarantine will have a detrimental effect on the mental health of the population. Negative effects of the economic crisis will be concentrated among those most at risk and with lower resources. Tension may increase between social demographics which weather the crisis differently. However, the crisis may also bring a new wave of communal support, social enterprises, localism and solidarity.

  • The crisis may prompt a reappraisal of what society cares about most, with short-term attention focusing on the bottom of Maslow’s ‘hierarchy of needs’. (This may have the effect of, for example, boosting relative status of health workers and farmers, and diminishing ‘luxury’ industries, including leisure, gaming, arts - although history suggests that this will be short-lived, and the luxury status of some goods and services may ultimately be reinforced.)
  • Extended quarantine will have a detrimental effect on the mental health of the population; this may create both positive reactions (e.g. closer family connections, stronger friendships) and negative (strained relationships, domestic abuse); novel solutions to combating mental illness, boredom and social isolation will emerge.
  • Community cohesion may increase as, faced with a ‘common enemy’ scenario, people begin to look past their differences, and establish community groups to support each other.
  • However, some of this will come at the expense of established charities, which are expected to lose at least £4bn of missed donations over the coming 12 weeks.
  • Moreover, in the aftermath, tension may increase between social demographics which weathered the crisis differently.
  • One dimension of tension may be generational: the disease disproportionately affects the old, and the recession will create a huge inter-general wealth shift as property prices fall (hence older investors lose; younger buyers gain). However, younger generations will bear much of the cost of the crisis in future years.
  • Another dimension is gender: the pandemic appears to kill men at twice the rate as women, and will further skew the gender balance of the aged population, which need to be supported by the remainder. However, women make up the majority of NHS workers, may be over-represented in the sectors most heavily affected by recession and are likely to bear the brunt of the increased child care responsibilities during the lockdown. On the other hand, a permanent increase in flexible work and telecommuting may be beneficial for the gender earnings gap in the future.
  • There is likely also to be a significant impact on the most vulnerable (e.g. those in precarious employment, homeless and prison populations, etc.). This, in turn, could trigger social unrest or broader social collapse as “those who are left hopeless, jobless, and without assets could easily turn against those who are better off.”
  • Long-term interest in home-schooling and alternative schooling methods (e.g. AI remote teaching, virtual classroom environments) may persist. However, this may increase educational inequality, as some students may not receive adequate home-schooling or may fall out of the education system altogether.
  • The normalisation of remote working might also slow the trend of people moving from countryside to cities, whilst prompting more interest in distributed organisations, and depressing commercial property rents.
  • The role of the media and of censorship will come under scrutiny: Chinese censorship was instrumental in allowing the initial spread, and there will be debate as to whether censorship of social media and mainstream media struck the right balance of preventing panic vs encouraging complacency.

Update July 2020

  • As we discussed in this interview with Sir Michael Marmot, it is clear that lower socio-economic classes are more likely to die from COVID-19, just as they are for many other diseases. It has also become apparent that COVID-19 has disproportionately affected minority ethnic groups. Together with reignited support for the Black Lives Matter movement sparked by the death of George Floyd, this could bring a wave of greater focus and support for these groups, and/or greater social tension.
  • Given that many COVID-19 deaths have occurred in care homes, we may also expect a review of care standards and training for care workers, as well as greater regulation.
  • Guidance for, and adoption of, edtech tools has proven very patchy; this may widen the attainment gap and lead to changes in teacher training, as well as driving a more holistic and consistent approach to edtech.
  • As the connection between COVID-19 and other diseases becomes apparent, Government is renewing efforts to tackle obesity; this may lead to the state taking a more muscular role in public health and individual choice even beyond COVID-19.

Technological

Technological solutions may help combat the epidemic, cope with the quarantine, and ease its economic consequences. The crisis will lead to innovations, including permanent changes in our use of digital solutions and models of distributed governance. However, the epidemic could mark the defining moment for surveillance, censorship and personal data. The relative success (or otherwise) of a ‘science-led’ approach in the UK may further reinforce (or undermine) public faith in science and expert opinion.

  • The crisis is accelerating major changes in how we live online, many of which will be permanent - e.g. some firms which can function effectively with a remote workforce will close offices to save costs, whilst many commuters will be reluctant to resume that lifestyle.
  • It will also spur greater digital government, online delivery of public services, electronic voting, telemedicine, and mass online learning.
  • Regulatory barriers to online tools and many novel technologies will fall (see Legal section).
  • However, cyber-crime will increase, especially as immature technologies are being rushed into service.
  • Virtual reality tools will flourish, both for entertainment and business (e.g. VR tours of properties for home-buyers)
  • The crisis is stimulating a vast global effort in collective intelligence and collaborative open science, which will persist.
  • There will also be an increased interest not only in collaboration-over-distance, but in fully decentralised organisations, and the governance structures and decentralised technologies which enable these.
  • Interest in systems for digital trust, such as online identity verification, will increase, as may digital currencies.
  • The trend towards online shopping has hugely accelerated and is unlikely to revert; this will further impact high streets (with possible exception of local grocery shopping, where there is renewed interest in local, non-supermarket options).
  • Food security concerns will prompt increased interest in AgTech, potentially including home hydroponics.
  • More people will voluntarily surrender personal data (such as medical and genomic data, contact data, location data, etc.) to help the common good.
  • Surveillance technologies, such as Taiwan’s electronic fence, China’s use of drones and mobile phone positioning, and facial recognition, have increased dramatically as societies make trade-offs between liberty and security; this may mark a watershed moment for state surveillance.
  • However, there will be major questions about the role of state censorship in allowing the initial spread of the disease, and whether censorship by social media firms contributed to public complacency outside China. This is likely to create a surge of censorship-resistant technologies.
  • The crisis will test the application of artificial intelligence in various areas. AI is already reinventing the way that we invent, and may play an important role in drug discovery, as well as medical diagnosis.
  • We are also seeing an increase in ‘frugal innovation’ and creative improvisation, as with personal protective equipment.

Update July 2020

Legal

Many regulations are being temporarily suspended; not all of these will return, as more attention is paid to whether lighter-touch regulation is needed to stimulate economic growth. The ‘precautionary principle’ may give way to the ‘innovation principle’. Legal systems will likely be clogged-up for some time with contractual disputes and arguments over ‘force majeure’. Local authorities and individual officials may be given greater delegated powers; at the same time, there may be reduced scope for appeal to higher authorities.

  • Civil rights and property rights are being suspended as governments declare states of emergency; some fear that these rights may never be restored, leading to a permanent erosion of civil liberties.
  • Across all sectors, many regulations are being temporarily suspended (e.g. from vehicle MOTs, to company reporting, to home abortion). Not all of such regulations will return, as questions are asked about whether the regulation was needed in the first place, and whether longer-term relaxation will help economic growth.
  • Relatedly, we may see regulators abandon the ‘precautionary principle’ - which emphasizes caution and avoidance of potential harm - in favour of the ‘innovation principle’, which preferences innovation as a driver of economic growth. (This may apply particularly to organisations such as Public Health Enlgand and the US FDA, which are seen by some as having obstructed private firms from developing novel coronavirus tests).
  • Delegated powers will increase (e.g. council planning committees replaced by individual planning inspectors) as governments at all levels battle overwhelming workloads. We may also expect more limited appeals processes. This may give rise to greater occasions for bribery and corruption.
  • Uneven enforcement, heavy-handed legal sanctions or officiousness by police and authorities may lead to decreased trust and confidence of the public, and diminished notion of ‘policing by consent’.
  • Criminal justice systems are trying to reduce the rate of imprisonment, and even releasing inmates early; whilst some fear that this may lead to higher levels of crime, it may also lead to a reappraisal of the use of imprisonment - especially if there are more useful social functions which could be addressed by community sentences.
  • Many firms are citing ‘force majeure’ or ‘Acts of God’ as a legal defence for failing to honour contractual obligations; such terms - which may not have received much legal scrutiny at the time that contracts were signed - will become the basis for ongoing legal arguments which last for many years. Claims relating to insurance and employment law are likely to be particularly numerous.
  • Legal disputes will have related economic consequences: e.g. delayed projects and missed milestones may automatically trigger credit reassessment or default processes, which may in turn lead to the cancellation of projects.
  • Temporary open access of research journals has helped researchers; calls to maintain open access will get louder.
  • The patent system may come under increased scrutiny, as China attempts to patent treatments, and IP rights are blamed for hindering the availability of key medical equipment such as ventilators.
  • Concerns about legal liability for the safety of customers may mean certain activities (e.g. mass sports events) do not resume in their previous forms once social distancing has been relaxed.

Update July 2020

  • The increased backlog of court cases is creating pressure for legal innovations, and may necessitate virtual juries.
  • HR advisors and employment law specialists are likely to be in high demand as the relationship between employers and employees becomes strained, and remote working reveals new challenges.

Environmental

The crisis shows that co-ordinated global action is possible in a genuine emergency, and may prompt a re-evaluation of lifestyles. Global greenhouse gas emissions have plummeted due to the reduction in economic activity. Food security will be a concern for many countries, and questions will be asked about the culture of eating exotic mammals. However, if the economic crisis is prolonged and oil prices remain low, investments in clean energy will be slow to return, and the urgency of climate change may take second place to more immediate concerns about food and the economy.

  • The crisis has created a dramatic short-term reduction in air pollution and greenhouse gases, as travel and industry have dropped precipitously.
  • However, the longer-term outlook is grim: evidence from previous economic downturns suggests that any environmental benefit is limited, and as the recession hits, investment in clean energy will likely fall (especially if the oil price remains near historic lows).
  • Similarly, public spending is likely to be focused on short-term priorities, meaning reduced subsidies for renewables and a reluctance to support measures which might hamper economic growth.
  • Nevertheless, the crisis shows what is possible when there is concerted global action around a true emergency - and may build public and political support for more aggressive state intervention to combat climate change.
  • Additionally, the demographics of the pandemic and the climate crisis are quite different: whereas action against climate change finds more support among the young, the virus predominantly threatens the elderly; this may potentially galvanise inter-generational support for collective action on some issues - especially as people realise that many of the root causes of climate change also increase the risk of future pandemics.
  • The crisis also presents us with an opportunity to re-evaluate our lives and working practices; some changes - such as remote working - will persist and be net positive for the environment.
  • Although investment in electric vehicles has fallen, if air pollution is shown to be a contributory factor in coronavirus deaths (currently unclear but postulated), this may lead to renewed efforts to remove polluting vehicles and other sources of air pollution.
  • UK food security is threatened by supply chain disruption; this is exacerbated by the worst locust plague in Africa/Asia for decades, and a wet UK winter which has delayed crop planting. In the short-term this may lead to price-rises, which will particularly impact poorer families and vulnerable individuals; in the longer-term this may lead to a change in national strategy, with greater focus on UK farming and self-sufficiency.
  • Longer-term, we may rethink global agricultural practices, as we re-evaluate the risks posed by zoonotic diseases and the link with intensive animal rearing.
  • Restrictions on the trade of exotic animals will increase, possibly also with greater protections for wildlife. (Epidemiologists were warning for decades that "the presence of a large reservoir of SARS-CoV-like viruses in horseshoe bats, together with the culture of eating exotic mammals in southern China, is a time bomb".)

Update July 2020

Author

Christopher Haley

Christopher Haley

Christopher Haley

Head of New Technology & Startup Research

Chris leads Nesta's research interests into how startups and new technologies can drive economic growth, and what this means for businesses, intermediaries and for the government.

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Jack Orlik

Jack Orlik

Jack Orlik

Programme Manager, Open Jobs

Jack is the Programme Manager for Open Jobs.

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Eszter Czibor

Eszter Czibor

Eszter Czibor

Principal Researcher, Innovation Growth Lab

Eszter is Principal Researcher for the Innovation Growth Lab in Nesta’s Research, Analysis and Policy unit.

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Hugo Cuello

Hugo Cuello

Hugo Cuello

Researcher, Innovation Growth Lab

Hugo is a Researcher for the Innovation Growth Lab (IGL), based in Nesta’s Research, Analysis and Policy team.

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Teo Firpo

Teo Firpo

Teo Firpo

Senior Researcher, Innovation Growth Lab

Teo is a Senior Researcher for the Innovation Growth Lab in Nesta’s Research, Analysis and Policy unit.

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Marieke Goettsch

Marieke Goettsch

Marieke Goettsch

Senior Policy Manager, Innovation Growth Lab

Marieke is a Senior Policy Manager for the Innovation Growth Lab in Nesta's Research, Analysis and Policy unit.

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Lou-Davina Stouffs

Lou-Davina Stouffs

Lou-Davina Stouffs

Research and Programme Manager, Innovation Growth Lab

Lou-Davina is Research and Programme Manager for the Innovation Growth Lab (IGL) in Nesta's Research, Analysis and Policy unit.

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Laurie Smith

Laurie Smith

Laurie Smith

Principal Researcher, Explorations

Laurie undertakes experimental work in new fields at Nesta and leads for the organisation on futures methods.

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