Initial thoughts on the current Global Shock

Thinking about the challenges of the current global shock and looking at the 1918 Spanish Flu economic impacts for any clues is a necessity for me to give good advice on what I think may emerge in the coming years.

It is interesting to look at the Spanish Flue because the end of WWI came at the same time as the Flu Pandemic, where large scale de-mobilisation and economic degradation due to war, can potentially be similar in effect to global travel and the shock of the current warmongering of Russia which caused the collapse of the Oil price.

The Spanish flu lasted 2 years and affected 500 million of a global population of 1.9 Billion. If this infection rate is matched with our current population of 7.8 Billion, then it would affect around 2 Billion.

It should be noted here that not only will this mean that the death rate caused by this virus will be high, death by diseases arising from lowered immunity will also rise. Mental issues caused by stress due to unemployment, business failure and bankruptcy will also rise, along with social unrest and civil disturbance.

So, whatever happens, it will be prolonged trouble causing long term change.

This said, there is, by no means, a direct correlation between 1918 and now. People today are living in higher densities, travel much more freely and interact more than 1918.

On the other hand, medical resources and sharing is much more than before. Thankfully, the Chinese are leading the way and helping other nations, something that wasn't the case in the past, not that they are responsible or culpable, they aren't, they were the front line and have lessons to share.

So, a few thoughts:

Social distancing and self isolation will impact mental and physical health, social outlook and behaviours. Be in no doubt, we will have years to acclimatise to how we live our lives going forward, people will want to make things different, the question is what do we think may happen.

In Agriculture and food production, the 2020 growing season will have its challenges but the harvesting season, where migratory labour has traditionally been used will be badly affected. This means that robotics and mechanical harvesting will need to be prioritised and funding provided for this, otherwise the risk of food shortages becomes a concern. The next 6 months should see an increase in manufacturing in this area. 2021 will similarly impacted with emergent anti migrant policies in the UK, EU and the US consolidating this change.

Equally, logistics and manual handling will be affected because of unavailability of labour and technology here will have to be increased. Skill shortages are going to increase, but employment mobility will decline.

Short term changes to food supply chains tend to last longer than predicted, but, as always, it is customer behaviour that will most likely drive the future. It is likely that short term sentiment will turn against large gatherings and high volume physical space, whether that's for shopping, leisure or tourism.

Physical retail is going to be further pushed by eCommerce, because of the benefits provided during social isolation. This will inevitably narrow product mix and make online shopping increasingly dominant, resulting in retailers with large physical asset portfolio's having issues, as will the offerings that typically group around a shopping complex.

Energy production is going to be substantially upended, with the cost and demand for fuel likely to be further depressed by falling demand. This means that non-fossil fuel as well as fossil fuel based business models will have to change radically, asset and capital expenditure will be reduced and operations at the edge of economic sustainability will cease.

Utilities will also face challenges, with large end users like physical retailers, hotels, restaurants etc changing demand profiles. Remote working is a very different energy profile to a business premises, but like the retail fuel industry (automotive and travel) the changes are likely to be temporary, if very painful.

Travel and Hospitality face at least 2 years of struggle, with destinational resorts, large complexes and hotels being sidelined in favour of airbnb accommodation, rural destinations and places where smaller attendances are common. Outside attractions where social distancing can be practiced will be more popular than big events and attractions such as Disney.

Where destinations are in infection hotspots, they are likely to be devastated for some time.

Clearly, the models of healthcare are going to be substantially changed. Low income populations in countries with high cost health models (like the US) will be unduly impacted but as a communicable disease, wealthier people will have the knock on consequence as clusters expand. With social isolation impacting high density populations, the stress will have to be on community healthcare for all. Large hospitals will not cope and cannot accommodate all of the sick, so home treatment will become a rapid norm. Obviously, this means that shared resources in hospitals cannot be used and demand for additional and different equipment, medical professionals and supports will inflate the size and complexity of health care short term.

Finance and Banking...hmmm well, banking and financial models are already in prolonged transformation and digital payments will rise rapidly. Physical banking will probably disappear at the retail level, while consolidation will reduce choice.

Investment will take several years to calm down, with a surplus of business related assets being offered for sale, making acquisition cheap, but benefits harder to define. Obviously, cash rich businesses will hunker down and work to kill off competition, inevitably leading to less choice. This said, we are not near the bottom of the tailspin and will not get there until transnational leadership gets its act together, by who I mean IMF, EU, US , China and possibly India.

Natural resources, minerals and mining are linked to economic and social well being, they will need to debt defend, reduce assets, become more efficient and use machines more than people, but as a downstream sector, it is too early to predict what will happen in any great detail.

Anyway, these are just a few thoughts on a grey and wet morning in Ireland on St Patrick's Day 2020. They are by no means definitive or all encompassing but it is a start.

Remember: No one changes into a vacuum, it is vision which is needed for people to change, align and develop. Leadership will have to generate certainties which people can strive towards, otherwise social unrest becomes radicalism and war. Just like in Germany, which suffered greatly as a result of the WWI and the Spanish Flu in 1918-1920.

It was February 24th 1920 that Hitler delivered his Nazi Party Platform in Munich, just as the Flu pandemic was ending. NOT a good day!

Plenty of wannabe Hitlers in the world today, most especially Putin who has become Fuhrer of Russia till at least 2036 and will expand his wars to more and more countries, using more and more techniques.

Let me know your thoughts.....