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COVID-19 will lead to a structural reorganization of the global economy, The Logic’s subscribers say.
Over 70 per cent of subscribers who responded to our March survey agreed with the statement. Of those, 51 per cent somewhat agreed and 20 per cent strongly agreed. The survey was conducted between March 13 and 16.
“Returning to business as usual will not be possible,” one subscriber wrote.
Concern about the economic impact of COVID-19 has spread as quickly as the outbreak itself. Markets hit record lows last week, when the Toronto Stock Exchange’s S&P/TSX Composite Index saw its worst day since 1940 and Wall Street sank into bear territory. The turmoil continued Monday, as circuit breakers halted trading at New York and Toronto stock exchanges for the third time in a week. According to some economists and analysts, a global recession is here.
The Logic’s subscribers were emailed a private link to an online survey on Friday, March 13, and the survey closed Monday, March 16. Respondents’ identities were kept anonymous and duplicates were removed as needed. Subscribers were asked whether they agreed or disagreed with the statement, “COVID-19 will lead to a prolonged, structural reorganization of the global economy.” Their choices were: strongly disagree, somewhat disagree, neither disagree nor agree, somewhat agree, strongly agree. Secondly, they were asked, “Is your company making or anticipating structural changes related to COVID-19?” They were given the choices: yes, no, I don’t know. Finally, they were asked, “Should the federal government introduce a broad stimulus package or exercise fiscal restraint?” with the options: stimulus, restraint, I don’t know.
“Global disruption in demand [and supply chains] will have [a] long term impact on how we conduct business in the future, post COVID-19,” one subscriber wrote.
Some subscribers expect to see a “sustained” or “significant” recession.
Many of the changes subscribers predicted are reactive, such as a realignment of economic systems to be “more robust against future similar events,” as one subscriber put it, and paying increased attention to risk assessment and disaster-recovery planning, as another said. One subscriber suggested the crisis may cause companies to explore different delivery models and reckon with “what constitutes essential services.”
Other changes are better understood as consequences of a prolonged period of economic disruption. Several respondents suggested that changes to global supply chains will be long term; others wrote that re-shoring or deglobalization could be accelerated.
Some subscribers reflected on the long-term effect the virus could have on certain sectors.
“I am interested to see whether this perfect storm (COVID-19, low oil prices, airlines going bust) will compel a realization re: the need to radically transform our global economy around a low-carbon/carbon-neutral future,” one wrote.
Another predicted that COVID-19 will impact the health-care debate in the U.S., which could have market implications.
Several subscribers pointed to permanent changes at the corporate organizational level, including a shift toward remote work, a reevaluation of business travel and more conservative spending. Consumer patterns could also be altered long-term amid widespread event cancellations, restaurant closures and orders to stay home.
“Cultural changes will have a more lasting and subtle effect on the economy,” one respondent wrote.
Not all subscribers were convinced that the economic effect of COVID-19 will be prolonged—20 per cent disagreed with the premise. “The changes will be as long as the viral shutdown/disruptions. Any permanent changes will be small,” one wrote.
While several subscribers indicated it’s too early to say how the crisis will affect the economy, one provided a timeline, predicting that economic reorganization will ensue if the virus continues to spread for longer than the next three months.
The Logic also asked subscribers whether their companies are making—or anticipating making—structural changes related to COVID-19. Sixty-eight per cent of subscribers confirmed their companies were making changes; 18 per cent said they were not; and 14 per cent did not know.
Many subscribers mentioned shifts to remote work, or digital classes. One subscriber’s company had shifted from a “fairly firm” no-work-from-home policy to more than 80 per cent of their workplace working remotely in the span of two weeks. “In other news, I need some sleep,” they added.
One subscriber said that the crisis prompted their organization to upgrade its technology systems to allow for more secure remote access, including introducing additional VPN options.
A small number of subscribers mentioned possible layoffs and expenditure cuts.
Several subscribers detailed how the crisis is affecting their particular industries. One who identified themselves as an emergency room physician in Alberta said that hospital privileges are being granted across zones so that staff can work at different sites if coverage is needed. Another said they work in the travel industry, and will need to factor in “up to an [80 per cent] slowdown.”
A subscriber who works for a public technology company that “enables the world to work together virtually” wrote that their firm is limiting spending and offering for free services that allow employees to work from home. “We are fortunate in that we are working in the land of technology,” they wrote.
Several said their organizations are introducing new offerings or adjusting their business models to meet new opportunities.
Finally, The Logic asked whether the government should introduce a broad stimulus or exercise fiscal restraint in hopes of lessening the fallout.
Governments have revealed various stimulus efforts in recent weeks. The U.S. Federal Reserve and the Bank of Canada have both slashed their interest rates twice, and Finance Minister Bill Morneau committed $10 billion to Canada’s coronavirus response for small business last week after Prime Minister Justin Trudeau announced a $1-billion plan. Still, executives at Scotiabank and BMO have both asked the government to go further in delivering assistance.
The bulk of subscribers—76 per cent—were in favour of a stimulus. Fourteen per cent favoured restraint, and 10 per cent said they did not know.
“We need to spend now to keep companies and individuals afloat,” one subscriber wrote. “When your house [is] on fire, you don’t ask who is paying for the fire hose.”
Some respondents who supported stimulus expressed a level of urgency in their comments. One wrote that assistance is “desperately required,” and another called it the “only tool left!”
Many detailed the kind of stimulus package they wanted to see. There was substantial desire among respondents to see direct support to individuals and businesses affected by the crisis, rather than to the financial sector as a whole. “The economy will eventually recover, but many small [businesses] and individuals who live [paycheque to paycheque] will struggle,” one wrote.
“The stimulus needs to reach individual Canadians and small businesses,” wrote another, who said that as a consultant and gig worker, their own income will be uncertain for months.
Some were skeptical about the value of a “broad” stimulus package. Instead, they suggested tailoring stimulus packages to assist groups at elevated risk, including Indigenous groups, precariously employed workers and part-time workers.
Morneau is expected to announce additional stimulus this week.