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.

Today, we are in the midst of a major crisis the likes of which the world has not seen for a very long time. Even the elites and scientists seem disoriented. Of course, this can be explained by the speed of the phenomenon and its very concrete consequences in terms of human lives. That being said, if we feel so helpless, it is above all because nature has just reminded us that it is the strongest. Our so-called economic and scientific power is incapable of resisting an entity of microscopic size. We also feel lost because this virus has just blatantly called into question our economic and social system based on the relocation of production, tight flows and the absence of stocks. "Just in time" is the very first victim of 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.

Above all, when the storm is over, it will be time to take stock. What was valid yesterday will no longer be valid tomorrow. First, China will have to justify the way it ignored the problem for more than a month, allowing the virus to take off. Then, its way of life will also be called into question by other countries, in particular the promiscuity with animals in the markets. But above all, developed countries will be forced to become much less dependent on Asian production capacity. Europe and the USA will have to relocate their industries or diversify their sources of supply in several other countries. The African continent could be one of the beneficiaries of this movement. In our latitudes too, the effect could be positive. Nevertheless, production costs are likely to take a turn for the worse, with a higher need for stocks and also higher wages. This, combined with rising government spending, risks relaunching 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.