The epidemic and its consequences are acquiring day after day all the characteristics of an epochal turning point. In the early months of the coronavirus crisis, there was still hope for a relatively rapid recovery after the drastic collapse that was becoming increasingly evident. But without a definitive solution, the coronavirus will continue to be a drag on economies for a long time: many companies will close their doors, many workers will lose their jobs, and banks will face increasing levels of non-performing loans.
Most experts expect global production to return to pre-crisis levels no earlier than the end of 2021 or later. But the consequences of this phase could last for years. The Great Depression was triggered by the crash of the stock market in October 1929 but the economy did not hit bottom until March 1933. While we now live in different times, and we are much more prepared to react, but the crisis cannot be expected to end with the discovery of a vaccine.
In their latest September outlook, Fitch Ratings predicts that world GDP will decline by 4.4% in 2020. A global decline of this magnitude has nothing to do with the crises we have experienced in the recent past. It is very unlikely that the world will return to what it was before the pandemic because we are not facing a normal recession. What we have in front of us is instead a real process of transformation on a global level.
The pandemic has forced all of us in a few months to a deep reflection and to rethink the way we live, work, and interact with each other. Many dynamics and trends that were already underway were accelerated by the encounter between the pandemic and a globalized world that was increasingly showing all its contradictions.
The parallel is often made with the terrible plague that hit Europe in the mid-fourteenth century which, with the violence of a storm, swept everything away. The entire social system collapsed leaving deep marks in the way of living and thinking. All points of reference that were until then looked upon with absolute certainty suddenly disappeared. This process remodeled the feudal society, cultural values also changed completely, there were extraordinary innovations which later brought about the Renaissance. With the necessary differences taken into account, starting with the incomparable costs in human lives, we can assess that such profound crises always correspond to phases of great and significant changes.
Even today we begin to perceive that values based on wealth, efficiency, and economic power are much more fragile than we thought. Perhaps never before has a threat to public health changed the habits and lifestyles of all the peoples of the planet so deeply and for so long. A rupture has been foreshadowed for quite a while now, and covid-19 has only accentuated all the criticalities and vulnerabilities of the system.
The effects of the current pandemic will not end with the restoration of production levels or GDP but they will have effects for years to come. It is up to us to make it an opportunity for renewal. It will depend a lot on the actions we take now. There must be a paradigm shift in the values and priorities that have guided us so far. It is neither possible nor farsighted to try to return to the situation before the epidemic. Instead, it is now necessary to aim to strengthen the mechanisms of resilience and socio-economic sustainability by shifting the focus on human beings, and modifying some of the values so far considered absolute which have proved to be profoundly wrong and inadequate.
Augusto Cocchioni
October 2020
