Summary of this week's article by former Governor of the Bank of England, Mark Carney, in The Economist.
Carney observes that our digital and local lives will expand and our physical and global ones will contract during the pandemic, and that this seismic change will both create and destroy value. Also, that creativity and dynamism will continue to be highly prized, but new considerations will shape value: economic, financial, psychological and societal. In ascending order, Carney considers that:
The crisis will probably accelerate the fragmentation of the global economy. Even afterwards, local resilience will be prized over global efficiency.
The financial relationship between the state and the private sector has already deepened dramatically. What if states remain enmeshed in commerce, thus restraining private dynamism?
The extraordinary 'black swan' experience of the simultaneous health and economic crises will change how companies balance risk and resilience; firms will be expected to prepare for future shocks by valuing anti-fragility and planning for catastrophe.
Entire populations are experiencing the anxieties of the unemployed and sensing the fears that flow from inadequate or inaccessible health care. Carney believes that these lessons will not soon be forgotten and will likely have lasting consequences for economies that rely on aggressive borrowing by households, a booming housing market and a vibrant gig economy.
Carney says all this points to a final, deeper issue: in recent decades we have been relentlessly moving from a market economy to a market society. The price of everything is becoming the value of everything.
Carney goes on to suggest that, after the covid crisis, it’s likely that people will demand improvements in the quality and coverage of social support and medical care, that greater attention to be given to scientific experts and that more focus should be placed on managing tail risks.
Carney thinks that the great test of whether this new hierarchy of values will prevail is climate change. After all, climate change is an issue that (i) involves the entire world, from which no one will be able to self-isolate; (ii) is predicted by science to be the central risk tomorrow; and (iii) we can only address if we act in advance and in solidarity.
In conclusion, he notes that many have compared the covid crisis to armed conflict. After the first world war was won, the rallying cry was to make Britain “a fit country for heroes to live in”. Once this war against an invisible enemy is over, our ambitions should be bolder—nothing less than to make “a fit planet for our grandchildren to live on”.
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