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Covid-19 pandemicThe future is not what it wasWhat are the temporary and permanent outcomes from the Covid-19 pandemic?As yet we don’t know, but it is certain that many areas of life will change forever.By James WallaceNations around the world continueto make gradual steps towardsreopening economies and societies.Governments, industries and householdsare learning to balance public health andwellbeing on the one hand, and economicactivity and freedom of movement, onthe other. Temporarily, a state of tensionbetween these mutually reinforcing societalgoals has emerged. We are learning waysto balance both in harmony. People arehighly adaptive by nature and will – throughcooperation and innovation – make thisnext normal work for as long as is required.And we may well develop some lastingbehaviour changes along the way.One of the enduring lessons from thisshared global experience is to remind ushow mutually dependent we all are for ourshared prosperity and existence. Somebelieve it provides the impetus for a kinderform of capitalism and a realignment ofsocial values in which businesses, firstand foremost, exist for the wider good ofsociety. These goals need to be alignedwith shareholder and investor value.ONE EYE ON THE CRISES TO COMEAs we recover from this pandemic, we mustremain vigilant about the consequences ofsocial inequality left in its wake. We mustalso ensure we learn all we can to preparefor future crises, from future pandemics,to tackling global wealth inequality andclimate change. Whether Covid-19 can beused to advance the agenda of greaterglobal pandemic preparedness, wealthredistribution or environmentalresponsibility remains to be seen.Climate change will be a defining globalemergency for the coming decades. Thepandemic has reminded us that climaterisk is not some theoretical event whichmight happen to future generations. As weare experiencing, once-in-a-century crisesdo happen. The reality of climate risk isalready evident to us, from extreme weatherevents such as Australia’s deadly bush firesin January to seasonal flooding in ruralEngland and Wales.By comparison, while climate change is acrisis of accumulation, Covid-19 is a crisis ofcontagion. The latter is rapid and propelledby a vastly interconnected planet throughglobal supply chains and mass internationaltravel, the former invites complacencydue to its slow-moving insurgency, butthe impacts will be felt in global economicactivity, health and mortality, ecosystemsand biodiversity, water purity, famine,population displacement and migration,political stress, conflict, and speciessurvival. Climate risks will affect everyone inthe end, unlike Covid-19.The challenge is how to incentivise theemployment of capital for environmentallybeneficial uses. Covid-19, in many ways,is a dress rehearsal for more gravechallenges to come. The moresocial lessons we learn fromthis crisis, the better wewill fare in those ahead.The world economywill look quitedifferent in theyears ahead. Globalsupply chains willdiversify, deriskingfrom a concentrateddependence on China,and become more local.The impact on trade willbe significant, which will provideopportunities for nations and economies toreinvent themselves. Global supply chainreorganisation is partly a response to thepandemic, partly a response to the broaderchallenge of automation and partly astrategic goal to build in resilience from thethe possibility of future trade wars.Southern European nations, which havebeen among the worst hit by Covid-19, may‘As nationsemerge fromlockdown, investorswill try to determinehow much demandloss is temporaryversus permanent.’consider further investment into logistics,automated manufacturing, warehousingand robotics, to meet European demandfor more regional and local supply chainalternatives.As we become less global, we will alsobecome more digital, further acceleratingdeglobalisation and digitalisation – a pairingthat many had assumed would havepropelled economies and societiesin the same direction. While digitaladoption will increase, it will do sounequally. For example, clothes stores,bank branches, business and highereducation institutes are likely to embracee-commerce, fintech, video conferencingand e-learning more, while the sharingeconomy may retrench.VACCINES IN SIGHT?Dr Anthony Fauci, the US infectiousdiseasesexpert, told a Senate hearingthat there are at least eight candidatevaccines in development, withsafety and efficacy resultstrickling in from lateautumn, early winter.Ultimately, the degreeto which economiesremain in hibernation,or semi-hibernation,which also relies onthe confidence ofpopulations to return towork safely, will dictateso much ofthe trajectory ahead. Forasset prices, including realestate, the recovery will correlatewith the macro economy.As nations and economies emerge fromlockdown in the coming weeks, investorswill try to determine how much demandloss is temporary versus permanent – theanswers will undoubtedly vary widely bysector. This crisis will have an end andeconomies can and do come back. But thefuture is not what it used to be. lIssue 2 July 2020 | Real Asset Insight 11