What a world, or what world…?

There is much debate, not surprisingly, about the ways and extent to which the current pandemic will change people’s behaviour and assumptions. The phrase “the New Normal” is much used, which we find interesting, as one could argue that the world has never been “normal”, because it is ever-changing through processes of what one might term natural, economic and political selection. Normal for whom exactly?

Be that as it may, clearly there will be changes- some of which are already evident, and some of which are still speculation.

For example, the Chinese Communist Party (CCP) in its guise as the government of the PRC has clearly used the “opportunity” of a distracted world, and in particular the internal contradictions of its only serious rival, the US, to increase its control over Hong Kong, pretend that its actions in its “Far West” are to reduce the risk of terrorism, test Indian military and political resolve, and enhance its surveillance and coercive capabilities both internally and externally. That is quite evident. Actions speak. And so, far, there have been few material consequences for PRC.

Elsewhere, new approaches to managing and deploying labour are being widely tested (of necessity), but their final configuration or scope remains unclear, as the true balance of advantage versus the “old ways” is as yet unclear.

The balance of power in the financial markets has clearly shifted. No longer do “bond-market vigilantes” over-awe any but the feeblest central bank; while there is more capital available to be deployed than most investors know what to do with, and savings rates have spiked, at least temporarily. The important question, to which the answer will only be obvious ex post facto, is whether that capital will be invested productively, or wastefully. When major central banks are “hoovering up” their own governments’ bonds (or the Eurozone’s in the case of the ECB) and depressing yields, being able to analyze and price risk adjusted returns will be a distinct competitive advantage, because there really is little, if any, “easy money” to be made.

What is also evident is that politicians are extremely poor allocators of capital. Think of how many trillions of dollars, or the equivalent have been “thrown” at economies almost indiscriminately (and sometimes corruptly given the largesse available), when, reportedly, only tens of billions have been applied to research on vaccines. There is a clear absence of a coordinated Manhattan Project” for vaccine development, no matter what all the rhetoric would have one believe. Of course, the current disorganized “competition” may quickly result in a safe, effective and rapidly deployable vaccine. Let us hope that the capitalist approach to health policy works in this case, while recognizing that the “obvious” approach is often known only with the benefit of hindsight.

As we stated above, “normal” is the wrong term to use for any historical period. The arc of recorded history shows that becoming complacent, or assuming that certain things simply will not happen (even though they clearly can) is an approach which leads to dislocation, and often disaster. Crises occur regularly. They just come in different forms.

Much of the population of the world has been (and in many cases still is) the subject of an economic and social experiment of epic proportions through enforced “lockdowns” of different degrees of severity. That may be feasible once (the shock of the new), but it is highly unlikely that, in the absence of authoritarian repression, the experiment can be conducted at scale repeatedly. Even dictatorships end, because they require the acquiescence of the governed or repressed. At some point, that no longer works.

All this may seem a little abstract, but consider what the world has become and how it may have to adapt in the absence of an effective vaccine.

At Awbury, we work on the assumption that one always has to adjust one’s mental and analytical models in the face of new information. The current situation is simply another example, albeit one with potentially broader implications.

The Awbury Team

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