In a shocking development, German Chancellor Angela Merkel put herself in self-quarantine when she learned that her doctor tested positive for Covid-19. At least, she was doing this out of an abundance of caution, but other famous personalities, such as Sophie Grégoire Trudeau, the wife of Canada’s Prime Minister, and Senator Rand Paul of the US, have already tested positive and are in isolation.
Merkel, in a press conference attended by journalists scattered around to maintain the 6-feet distance rule, acknowledged how Covid-19 is changing the way we live.
“Today we see everywhere in Germany that our cities, our traffic, our economic and private life look completely different from only a week ago,” she said. “I know it means economic and human sacrifice when shops have to close when you can’t just mingle with other people, or what is even more painful, see grandparents, meet friends.”
She could well have been speaking for all of us. While our initial reaction to the way the world has reacted to Covid-19 is one of awe — after all, as free societies, how can we shut ourselves off from one another? — there is a slow realisation that some things will never be the same once the pandemic subsides, a cure is found, or a vaccine is available.
After the end of the Cold War, freedom spread around the globe as nations shed their tight control on populations in favour of free association. Magical inventions like long-range aircraft, financial institutions helping investors and entrepreneurs look for opportunities in the far corners of the world, and the internet brought all 7.7 billion people closer together. Suddenly, any point on Earth was only a day or so away.
Office space demand to plummet
For nearly three decades now, we’ve been spoilt. Economies of scale and massive productivity gains in every aspect of globalisation have made it easy for us to do what we wish. If we wanted to meet a friend or relative, even on a whim, we would make travel plans and go there. I remember that a round trip air ticket from the US to India in 1988 was about $850 when the exchange rate was $1 = ₹13. Even before Covid-19 hit, with the exchange rate at ₹1 = ₹72 , the air ticket priced in dollars was still the same, meaning that the cost of air travel in inflation-adjusted dollars has substantially decreased.
Business travel flourished when we gleefully accepted — partly for selfish reasons — that deals could only be won when we shook hands with customers over a lavish meal of food and wine. Shopping centres, malls, hotels, restaurants, and bars sprung up everywhere to cater to the millions of travellers. Forbes reported last year that the travel and tourism sector added $8.8 trillion to the world’s combined GDP (more than 10 per cent of the total) and supported 319 million jobs.
As Covid-19 strikes hard at the global hospitality industry, it’s also true that millions not working in this sector are able to work from home, survive and even be productive. Government officials, private-sector employees — really, anyone who spends most of their time sitting at a desk in front of a computer in the office — are realising that they can do nearly the same by sitting at a desk in front of a computer at their homes. With software from companies such as Google, Zoom, and Cisco, 500-person virtual town halls are only a click away — and meetings, like those that are held in scarce conference rooms, can be instantly set up. WhatsApp allows for video calls of up to four people and the offering is free. Chat windows, the ability to share screens, and collaborate using documents in the cloud are all features that can be set up even on the most common PCs and mobile phones. Home internet access is ubiquitous and largely affordable.
So, after the Covid-19 pandemic dies down, why should anyone go to the office? The traditionalists may defend the practice to return to old ways, but even if 20 per cent of the organisations worldwide elect to adopt telecommuting, that would be a huge change to the world as we know it.
For one thing, the demand for commercial office space will plummet. There won’t be as many cars on the road and public transportation commutes will be easier. A demand for fewer cars will create havoc in manufacturing, affecting the economies of China, the US, Germany, Japan, South Korea, and even India.
A new normal?
With fewer people travelling to work, busy restaurants in downtown locations will be forced to scale back. Most are facing imminent closure now, so many may never come back. With fewer people travelling on business — why travel for a few days to a faraway location when you could teleconference? — airlines will have to cut capacity. The big aircraft industry will suffer as fewer planes are made.
With everyone travelling less, there will be less demand for oil. Economies that depend primarily on selling oil — like the OPEC states and Russia — will be severely affected. It is estimated that Saudi Arabia needs oil to be at $90 a barrel for it to support its lavish welfare economy. The price of Brent Crude closed around $26 last week; forcing oil economies to dip into sovereign funds will cause fast depletion, leaving them poorer.
The world could well be looking at a big drop in global employment. Meanwhile, advances from automation, artificial intelligence, and robotics will likely continue at a breathtaking pace — placing strains on a smaller workforce. The winners could be the environment, because of a shrinking urban sprawl and lower traffic density, and old-school thinkers who have regretted rapid changes to the world during the last three decades.
Believers in the theory that Nature has a powerful way to auto-correct human excesses are asking: Was Covid-19 the vehicle that Nature deployed to do just this? We will know in a few years if the world returns to normalcy as we know it, or if we end up getting used to a brand new normal.