This article by Dr.Gerstenfeld was first published at the Begin-Sadat Center for Strategic Studies (Besa), and republished here with the author’s consent.
POST-CORONA SOCIETIES – WHERE WE ARE AT
The Coronavirus pandemic has created, even if temporarily, radical new realities in Western societies. One structural problem this outburst poses concerns scenarios for the future. These are usually based largely on extrapolation of the past with an assessment of expected changes. Before the outbreak of the Corona pandemic if a corporation or an institution took into account the occurrence of a pandemic in its plans, it would have been considered science fiction.
With the extremely rapid societal changes the only way to understand reasonably what is happening is to frequently take stock of the situation. This is necessary both to comprehend which occurrences are major and in order to assess the future. One overarching issue is that state interference in society has greatly increased. This will have to remain so for a significant period of time. Yet democratic governments were not elected to issue the measures that were taken in the past weeks. They now must assess which of these were effective and which not. This is in particular important in view of a possible second wave of the pandemic.
The radical measures taken and the broad obedience to them by populations do not fit the traditions of liberal democracies. People respecting these measures can be explained only by the widespread fear of possible consequences from the virus. Yet more and more citizens are now reflecting on what happened. That brings with it increasing resistance against government measures such as lockdowns, wearing masks and social distancing. This attitude is also fed by an understanding that governments did not know enough about the impact of the measures they adopted.
In some countries there are already important protests against government measures. These are particularly significant in Germany where demonstrators have taken to the streets in tens of cities to protest the lockdown. This is sometimes accompanied by expressions of antisemitism. This phenomenon is frequent in Western societies. For decades, antisemitic rhetoric and incidents have occurred in mass demonstrations on subjects totally unrelated to Jews and Israel.
Within government planning for a possible second wave, it will be necessarily to greatly increase medical preparedness. These plans will have to include an action program, which identifies measures to take in case a second wave indeed occurs. Yet, in the meantime a number of countries have already re-imposed restrictions amid fears of increased coronavirus.
If a second wave occurs, popular resistance against some future governmental measures may in some countries take on a force of its own.
A major priority for governments is the revival of the economy. The decline in economic activity was rapid and the return should be as quick as possible. Ideally, governments wish for a V type of return. As the pandemic continues at a lower level, this is not simple. A number of businesses will fall by the wayside. In some cases, a rapid return cannot be expected. This is the case for instance with the airline and tourist industries. If governments cannot get their act together, there will be a U type of return. The length of the bottom of the U will largely be an indication of the competence of the authorities.
Government money has been made available to a variety of economic operators during the pandemic. Now governments will have to establish policies and priorities for who gets money, how much, and on what conditions. For major industries the question will be what mix of government grants, loans and possible state investments in companies will there be? What associated conditions come with this? The French government has placed major conditions on its financial aid to Air France. These are mainly environmental in character. One is that the airline has to drastically reduce inland flights that compete with railways. These demands may well be an additional economic burden on the company’s operations.
France has also announced measures to support the country’s automobile industry. This industry plays a crucial role in the country’s economy. Four hundred thousand people in France are employed by the automobile industry and part manufacturers. This industry has been hit hard by the problems resulting from the virus outbreak. Also here government help will come with conditions. Economy and finance Minister, Bruno Le Maire, has indicated that there will be incentives for the purchase of cleaner cars and for a broadening of the French effort to develop electric car batteries.
Le Maire also spoke about bringing car manufacturing back to France. Such re-localization may occur in a number of industries in various countries. The most obvious is manufacturing of some pharmaceuticals.
The German government has plans to offer a premium to buyers of electric cars. Manufacturers have also asked for purchasing grants for cars with an efficient combustion engine. Yet the government has not met this demand.
Investments are an important factor in economic recovery. Yet to invest money, corporations require predictability about the societal environment. Predictability is at present lower than it has ever been in the past decades. On the other hand, the restarting of the economy provides a good occasion for industrial rationalization. The pandemic has made it easier to justify and tell trade unions that a certain number of employees have to leave. Some examples: Lufthansa has announced that it will have to reduce employment by 10,000 out of 130,000. British Airways intends to cut up to 12,000 jobs of its 42,000 employees. French car maker, Renault intends to cut 15,000 out of 180,000 jobs worldwide. Forty-six hundred of these will be in France. Renault will also not increase production capacity in Morocco and Romania.
We will see an acceleration of economic trends from before the pandemic.
The New York Times had forecast the demise of major department stores. Some of this has already materialized in the past few weeks. The one in the top of the market, Neiman Marcus, has filed for bankruptcy as it struggles with debt and fallout from the Coronavirus. The same is true for JC Penney. These companies may come out of bankruptcy, but on a smaller scale.
Another acceleration forecast is the decline of glossy magazines. They were already losing subscribers. Will all their advertisers continue to support them in print? The British Restaurant group intends to abolish up to 90 sites before their other restaurants reopen.. Swissport Belgium handles ground services at Brussels Zaventem airport. It had restructuring plans before the pandemic outburst. Now it has announced bankruptcy with a possible loss of 1500 jobs.
One area where we are only seeing the beginning of what may develop into a huge trend is court cases. This manifests itself in a variety of ways and covers very different issues. At the end of May, a French court ordered the AXA France insurer to make an initial payment of 45,000 EU to a Paris restaurant. This was to cover business losses resulting from the Corona virus interruption.
A huge court case might possibly be brought against the Austrian town of Ischgl. A well-known Austrian lawyer, Peter Kolba, claims that the authorities in the town closed the winter sport location a week too late in order to keep tourism going. This delay has led to thousands of infections which could have been prevented. He considers this to be a failure of the Austrian state. In his view the victims who got sick are entitled to compensation for damages by the Austrian government. Already in March, a criminal case was brought against a variety of politicians, entrepreneurs and tourism operators in the province of Tirol where Ischgl is located.
Another very different issue was raised by the chief executive of Ryanair, Michael O’Leary. He said that the possible 9 billion Euro German state bailout for Lufthansa will distort the market by allowing that company to sell cheaper tickets than its competitors. O’Leary stated that Ryanair will appeal against this state aid. These examples are an early indication of what is likely to develop into a huge stream of court cases.
Many corporations and their leaders will have to ask themselves what conclusions have to be drawn from the totally unexpected interruption of activities. They have to do this while there is much uncertainty in view of the threat of a second wave.
One of the non-economic areas where major rethinking is required is religion. Religious leaders played no leading role during the pandemic. There have been persistent questions about how it was possible that protest demonstrations were permitted with so many participants – not respecting the rules of gatherings – while religious services were prohibited. This question has become more pressing with the onset of the massive anti-racism demonstrations.
The Pew Research Center, in a survey released April 30, showed that nearly one-fourth of all Americans say their faith has grown stronger during the pandemic, while only 2 percent said it had grown weaker. Catholics, according to Pew, are very much in line with the overall survey results. Among Catholic respondents, 27 percent said their faith had grown stronger with 2 percent saying it had gotten weaker. Among Protestants, 38% said their faith has grown stronger and less than 2% said it had grown weaker. Among Jews, 7% said their faith had grown stronger while 69% said it had not changed much and under 2% said it had grown weaker. These developments may result in greater religious practice.
One very important theme which has not received much attention during the pandemic is that modern advanced societies were confronted with their major vulnerability to the unforeseen. This is something radically different from a local unforeseeable event such as the 9-11 terror attacks in the United States or the tsunami destruction of a nuclear plant in Japan. These emergencies are single events that occur within a limited time-frame and affect a defined population. Societies cannot close their eyes to the overarching problem of vulnerability even though they may be reluctant to devote the necessary attention to it. As time passes, much more thought will have to be given to this subject.
In the shadow of the Corona pandemic, there was another occurrence of major societal vulnerability, which did not receive much international attention. It appears that Iranian hackers attempted to attack a large part of Israel’s water system. It seems that Israel and the US afterwards retaliated and paralyzed the functioning of the major Iranian Shahid Rajaee port. This is a new type of major technological vulnerability of societal infrastructure. This attack is the first of its kind, but unlikely to be the last. Its target states and perpetrators may vary.
The above is a very partial assessment of where we are at. Such assessments have to be repeated frequently in order to keep track of the extreme dynamics in post-Corona societies.