It has been several weeks of shelter-in-place orders for the entire globe. While both the economic and psychological toll have been discussed, the economic one is receiving more coverage recently. The number of small businesses and startups that are on life support is growing by the day and many are increasingly worried not only about the short term economic costs but the long term ones as well.
With the economic carnage that is occurring, calls to reopen the economy have been growing. Some have stated that the mental toll of unpaid bills and interrupted livelihoods is just as bad if not worse than the mental stress from isolation and quarantine.
What proponents of reopening the economy, particularly economies driven by consumer spending, fail to realize is that even if the economy were to be reopened, individuals will not miraculously return to their free spending ways. Consumer spending will be tempered by the justified desire to remain physically and mentally safe.
Experts have been consistently repeating the refrain that society will not return to the normal that once was. There will be many months of medical testing and monitoring that will wear on the psyches of individuals. From personal protection equipment requirements to social distancing, individuals will have more to worry about when they step out of their own homes than ever before. The added stress of just walking outside of one’s home is not conducive to creativity or innovation.
The constant worry about catching COVID-19 and potentially passing it unknowingly onto others will limit the return to economic normalcy let alone growth. Individuals will continue to be wary of returning to normal behaviors such as riding public transit or working in open office environments. Corporations will be wary of forcing any of their employees to return to office environments until they can ensure the safety and welfare of their employees and limit potential liability.
With limited growth options due to the lack of market demand, expect individuals and corporations to adopt a “bunker” mentality. The growing job losses across all business sectors from startups to corporations will lead to a significant amount of soul searching and re-evaluation over the next few months.
Businesses will re-evaluate and re-focus on their core competitive advantages leading to painful decisions. Some businesses will jettison money losing divisions while others will decide to completely shut down in light of the increasingly difficult business environment. All of this means a reduced appetite for long term risk adoption with a laser focus on short-term profitability. In other words, if a proposed innovation or concept does not provide immediate financial payback, there is a high likelihood that it will not get off the drawing board.
This laser focus on short-term profitability by businesses will have a significant impact on individual psyches. Already rocked by shelter-in-place and social distancing orders, individuals will adopt the same defensive approach that businesses are taking. Whether they are still gainfully employed or have been swept up in the COVID-19 related layoffs, individuals will take actions that are similar to businesses. They will reduce spending to the bare minimum and focus on short-term income versus long-term gains.
Ultimately, for everyone from startups to businesses to individuals, this means a long and arduous road to recovery. Restarting the growth economy will take more than lifting shelter-in-place orders. It will mean rebuilding the ecosystem and environment to reignite businesses and individuals to take long-term risks again. Indeed, rebuilding consumer confidence will be the hardest it has ever been.
Decades of economic norms have been upended because of this pandemic. From open borders to international trade links to just-in-time supply chains, all assumptions are now out the window and no one knows what the future will hold other than there is no return to the old normal.
As such, we enter a period of uncertainty not only due to the inability to predict the timing of a vaccine but because of the need to re-establish norms across the board. Some individuals and businesses will see this as an opportunity to reshape norms for the better. Others will advocate for a return back to the old normal.
While many would state that they would prefer to wait and sit back and let others determine the direction society is moving, I strongly disagree. This is the time to make a difference and to plant a flag. It is a time to advocate for positive change and to help others see the benefit of such change.
Everyone has been told to help others and ourselves during this unprecedented time. We must continue to do that even as shelter-in-place orders are lifted. Like it or not, there is a long road ahead to “stability” and we must be willing to advocate for positive change. Otherwise, we may end up on a path that leads to a global “lost decade”.
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