The world after the Great Lockdown

Although there seems to be no widely settled upon name for this particular crisis, the International Monetary Fund’s labelling of it as ‘the Great Lockdown’ is a term that appropriately captures the mode of existence for most advanced economies, and many emerging markets.

Given that very human tendency towards chunking or categorizing things to make them easier to understand, the cleavage of the world into pre and post-Covid will likely lead to a number of erroneous conclusions about geopolitical events that are not in reality a result of the pandemic.

What is true is the shock will shift forward the timelines for a number of trends that were already at play.

In effect, we are finally seeing the end of World War II. 75 years after the end of fighting, the post-conflict consensus that was built and structured around key international institutions (particularly the United Nations, World Bank, IMF, World Trade Organisation, and World Health Organisation) is coming apart as these bodies have ossified, becoming slow-moving, bureaucratic, and prone to capture by special interests. While there may be a burst of reform around global health information sharing and governance, this institutional decay is likely to continue.

A significant driving force behind this is the United States’ withdrawal from its role at the centre of the global rules-based order. As it pursues an ‘America First’ approach (which contrary to media attitudes began prior to the Trump Presidency), it leaves a vacuum in coordinating global activity that China has ambitions to fill but is not yet at the stage of full expression.

This reorienting of the global order will proceed with even greater pace. Nations and non-state actors that had been attempting to avoid taking a side between the two superpowers will be forced into more and more of these decisions. There will be no shortage of stratagem around this, as states or businesses attempt to force confrontations to damage competitors.

The wave of nationalism that had already been sweeping across the globe will pick up pace in the short to medium term, as nations focus on domestic economic recovery and fears linger about the biological risk from the free movement of people and non-essential products. The open market globalisation that has been a predominant feature of the last 30 years and which was already waning in popularity will more quickly become closed off as economies swiftly swing back towards having greater state intervention and control.

Whether what happens next is a true retrenchment of globalisation and free trade, or a new hybrid form of statist internationalism, remains to be seen. Either outcome will have a profound effect on the built and natural environment.

At a more domestic level, the trend towards urbanisation will continue, as will the deep resentment and divide between urban and regional citizens. Despite the current communitarianism that is in vogue as people band together (while apart!) and abide by social distancing to reduce the pressure on health care services and protect the most vulnerable, the growing inequality between the biggest centres and smaller cities or towns will only get worse as the benefits of innovation continue to be most readily accessible to those at the top and in cities.

Government finances, already stretched thin prior to the crisis but now facing challenges not seen since the Great Depression, will have to make hard choices about where to invest and what existing commitments will now no longer be affordable. The resentment particularly regional areas will accordingly feel as they see another wave of broken promises, and cities continuing to go forward, will further the divide between urban and rural.

The long and the short of this is we will have a smaller, lower growth economy for the next 18 months at least. Predicting when and exactly how things will unfold is largely a futile or dishonest exercise. Planning for potential outcomes as the world adapts to a new normal will see new winners and losers in all sectors. As always, the best way to operate in a fluid environment is to remain open minded, constantly test assumptions, and the see the trend and not the moment.