There will be a before and after Covid-19

Sorry to bore you with yet another article about the Coronavirus. It's all we hear about these days and it tires me out at least as much as it does you. However, the purpose of this article is not to count the number of cases, deaths or to fuel the ambient psychosis even more, but rather to try to imagine what the possible long-term consequences are from an economic and social point of view.

Paradigm shifts in the world very often occur during major crises. This was the case on September 11, 2001, which triggered a long war of civilizations, or following the fall of the Berlin Wall, which opened the door to the all-powerful capitalism, with its good and bad sides. Smoother changes also exist, but they have more difficulty in establishing themselves. They need one or more major external events to make them emerge. For example, environmental movements have benefited from a succession of disasters such as Chernobyl, Fukushima and global warming.

Aujourd'hui, nous sommes en plein milieu d'une crise d'envergure comme le monde n'en a plus connu depuis très longtemps. Même les élites et les scientifiques semblent déboussolés. Bien sûr, cela peut s'expliquer par la rapidité du phénomène et ses conséquences très concrètes en matière de vies humaines. Ceci étant dit, si nous avons l'impression d'être tant démunis, c'est avant-tout parce que la nature vient de nous rappeler qu'elle est la plus forte. Notre soit disant puissance économique et scientifique est incapable de résister à une entité de taille microscopique. Nous nous sentons également perdus parce que ce virus vient de mettre de façon flagrante en cause notre système économique et social basé sur la délocalisation de la production, les flux tendus et l'absence de stocks. Le "Just in time" est la toute première victime du Covid.

Tomorrow, when the dead have been buried and the rest of the patients treated, the economy will be drained. Governments will have increased their deficits, unemployment will have risen again and massive investments will certainly be needed from the States to restart the whole machine. The central banks have in fact already exhausted all their cartridges since the last financial crisis.

Surtout, lorsque la tempête sera derrière, ce sera l'heure des comptes. Ce qui était valable hier, ne le sera plus demain. La Chine d'abord devra se justifier de la façon dont elle a passé le problème sous silence durant plus d'un mois, permettant au virus de prendre son envol. Ensuite, son mode de vie sera aussi remis en cause par les autres pays, en particulier la promiscuité avec des animaux dans les marchés. Mais surtout, les pays développés seront contraints de devenir nettement moins dépendants de la capacité de production asiatique. L'Europe et les USA devront relocaliser leurs industries ou alors diversifier leurs sources d'approvisionnement dans plusieurs autres pays. Le continent Africain pourrait être un des bénéficiaires de ce mouvement. Sous nos latitudes aussi l'effet pourrait être positif. Néanmoins, les coûts de production risquent bien de prendre la tangente, avec un besoin en stocks plus élevé et des salaires également plus hauts. Ceci, associé aux dépenses gouvernementales en hausse, risque de relancer l'inflation.

While developed countries and Africa can benefit, China, on the contrary, risks being the big loser in this crisis. Its communist system is held together by its production apparatus. This is already in decline and will probably have a lot of trouble restarting in the long term, when companies have implemented their new supply strategies.

On our side, things will also change. We will certainly return to a little more normality, with a more local focus, whether for consuming or producing. The virus may also, by force of circumstances, "rejuvenate" our societies somewhat, because of the deaths of a certain age but also perhaps by a baby boom that we see quite often in this kind of situation. The problems of yesterday, such as the aging of the population and social security deficits, will then perhaps give way to rising production costs, rising prices and higher interest rates. In short, old "problems" that reappear, which is not necessarily a bad thing.


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4 thoughts on “Il y aura un avant et un après Covid-19”

  1. Philip of Habsburg

    Our patience will pay off! Looking forward to the bargains 🙂
    Today the stock markets are collapsing. In 1 month, do you think it will be worse?

    Otherwise, changing the way our economic world works a little will do us the greatest good. Nature will always be the big winner!

    1. It is impossible to say how long this will last. Covid was the trigger, now oil is getting involved and soon we will see falling profits, perhaps recession and unemployment. So it can last. In this kind of situation it is better to enter the market a little too late than too early.
      Let's also not forget that if prices are going through the roof it's because they were very high...

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