Covid-19 Response
Covid-19 Response

New Normal, More of the Same?

The use of ‘unprecedented’ has been unprecedented in recent months, though there is an argument that those in charge should not be too surprised by the chaos that Covid-19 has caused. Just last September, a report compiled at the request of the UN by the Global Preparedness Monitoring Board (GPMB), co-chaired by former WHO director-general Gro Harlem Brundtland and head of the Red Cross, Elhadj As Sy, warned of the “very real threat” of an apocalyptic pandemic permeating the planet and claiming up to 80 million lives.


he paper also warned that such an outbreak would wipe out up to five percent from the global economy. At the time of writing, the UN estimates a 3.2 percent contraction in global economy for the year 2020, with a “modest” 3.4 percent growth the following year, “barely enough to make up for the lost output”. The report also laments national leaders only respond to health crises once fear and panic has already spread, with most countries failing to “devote the consistent energy and resources needed to keep outbreaks from escalating into disasters”.



Indeed, though New Zealand has been rightly lauded for its handling of the corona crisis so far, our response was at least partly steered by our lack of preparedness for it, leaving little option but to ‘go hard, and go early’. Last year, Aotearoa placed 30th out of the 60 high-income countries for pandemic preparedness in the Global Health Security Index, with the USA coming out on top—also proof, then, of the importance of capable leadership in times of such uncertainty. While the leader of the free world has rambled and tweeted about conspiracies and ‘Obamagate’ and injecting disinfectant to kill the coronavirus, in barely more than a couple of months, it has in turn killed more Americans than the Gulf War, the Iraq War and the wars in Afghanistan and Vietnam, combined. In a seemingly parallel universe, our prime minister calmly charmed us all into closing our doors for the greater good of the community, while further charming the world over some more. Forget the naysayers proclaiming we got lucky with our isolation and sparse population, of course those things helped, but every country with the courage to completely close its borders and shopping streets sooner has been more successful in suppressing this disease. Just compare Central and Eastern Europe’s caseloads with their far wealthier, supposedly more well-equipped Western neighbours.


“The government messaging really has been spot on,” says former chief economist for BNZ, now independent economist, Tony Alexander, “especially when compared with the US or the UK. The recession hasn’t come about because the virus has made us sick, but by sacrificing the economy for the lives of people and their long-term health. It’s a choice to be made and everywhere around the world seems to have just about judged to have make that choice. Just about.”

United Nations Covid-19 Response
United Nations Covid-19 Response



Going forward, Tony says its vital the government doesn’t play the role of Big Brother too much, rather remove barriers to enable private sectors to more easily invest and hire “when things settle down later this year, or early next”.


The (reassuring) implication being that he wholeheartedly expects some kind of return to some kind of normality.


“Recessions always end,” he adds. “Recovery will come along. We’re probably in the worst of it right now with a lot of people effectively already unemployed but temporarily still getting paid through the wage subsidy. I’ve been telling people not to panic. We’ve had recessions before and just because this is unique, it doesn’t mean that it’s the end of days.”


How do you even begin to go about forecasting in such times?


“With forecasting you must gain some sort of understanding, if not of what something is, then of what it isn’t. This is not a repeat of the global financial crisis because it is not banking crisis—the banking system around the world is actually in pretty good shape. And it’s not a Great Depression because that was caused by bad policies by governments at the time who were cutting back spending, cutting money supplies, and restricting world trade. It’s basically a temporary sacrificing of large parts of one’s economy and jobs. The evidence out of the 1918 Spanish Flu is that those countries—or individual states within the US—that acted early came out more strongly, economically, on the other side.”


Tony says restructuring across society is inevitable. Companies will cut back on CBD office space as they realise much work can be done through telecommuting; an increase in online shopping will impact high streets all over, but in smaller towns especially; and automation in factories will take an ever more predominant role. All trends, he adds, pertinently, that were accelerating anyway.


But tourism, most notably the international kind, is the obvious glitch.


“I hope that it never recovers to where it was before,” Tony says. “There were just too many people sloshing around the country. We’ll look back at that time and wonder what the hell were we thinking having people queuing to walk the Tongariro Crossing. The smart operators will have accepted already that this is never going back to the way it was.”


And he’s doubtful that even the trans-Tasman ‘travel bubble’ will recoup the loses.



Does it all spell the end of globalisation?


“Other than the tourism sector, I don’t think so,” he says. “When it comes to manufacturing, the sourcing of goods and inputs from the cheapest place, I really don’t think it threatens that.”


It’s human nature to over-extrapolate, to presume something radical will take the place of the norm—especially if that norm is perceived to be broken.


“We will adapt,” Tony goes on. “If you want to talk about the labour market, my image of high unemployment is dole queues of skilled tradesmen unable to find work. I have clearly defined jobs in mind, of people’s roles. But this generation of young people coming through know nothing other than change. They’ve known nothing than the expectation that they will have seven careers or whatever. They know about new technologies, they know how to experiment, they know who to create apps.”


Tony believes this generation of young unemployed people will be the most adaptable and flexible in history.


“They’ll have a go at something new,” he says. “And I get the impression that a lot of them are not in it for the money. The transition of those people will be the best that we have ever seen, I have a lot of faith in their ability. I have a lot of hope.”