The COVID-19 Long Haul

We could be in for a long haul with COVID-19. Here are a few predictions for what that might look like.

As COVID-19 numbers continue to climb around the world, researchers are raising the possibility that we could be in for a very long haul: instead of weeks of isolation, we could be in for up to a year and a half. If normal life has to be put on hold for that long — albeit with pauses to release us from our seclusion — the effects on society will be far-reaching and fundamental. Here are just a few of them.

Commercial real estate vacancies increase as small businesses go under.

  • Small businesses cannot endure being shuttered for months on end: we’re already seeing the effect. Most are struggling to survive, and unfortunately many won’t. As the spectre of bankruptcy looms, much commercial real estate will become vacant. In order for owners to try to keep revenue from those properties flowing, many will be flipped to the residential rental market, especially in cities with rock-bottom residential vacancy rates, such as Toronto and Vancouver. Commercial real estate is generally more valuable per square foot than residential, so owners won’t want to see these properties stay residential forever; they just want something to continue to generate revenue for the length of the downturn.
  • Since they’re already as tight as a drum, residential vacancy rates in cities such as Toronto and Vancouver won’t skyrocket as a result of this, even with the usual recessionary pressures.
  • As  people lose their jobs, many will have to make tough choices, moving back in with parents or relatives, or subletting or share their units to make ends meet. This will further increase the inventory of rental properties, and rents will decline even further. In Toronto and Vancouver, this will be seen as a rebalancing. In other places — especially those already reeling from the collapse in oil prices — another blow to already beleaguered landlords and investors.

Whole sections of the economy will need to be put on life support.

  • Anything that caters to groups of people (airlines, bars, restaurants, gyms, etc.) might fail if not thrown a lifeline. The government will extend that lifeline to many, because of the potential disruption to society and the economy if they don’t, not to mention the enormous cost of rebuilding whole industries from scratch if they collapse.
  • Some of these industries are essential to the functioning of our society (airlines, for example) and some aren’t (gyms). The ones that aren’t will, unfortunately, be allowed to contract indefinitely, as scarce resources are allocated to keep the essential ones treading water until they can swim again in 2021.
  • Unfortunately, this risks creating resentment, as the government picks winners and losers among industries. This will inevitably breed resentment among employees of the “losing” companies, who will increasingly feel like victims of an economic system stacked against them. This will result in a bump in support for unionization and left-wing parties associated with them, such as the NDP in Canada.

Pop-up shops become an essential part of the economy, opening up during quarantine gaps.

  • Businesses can’t afford an 18-month lease if they’re only going to be open 1/3 of the time, so many will pop up for a couple of months during gaps in quarantine, and go back into hibernation.
  • The public will become accustomed to this cycle, even after COVID-19 is beaten, and the trend will continue well past the end of the crisis. Pop-ups won’t threaten the eventual resurgence in permanent brick-and-mortar shops in 2021, but will become a bigger part of the retail landscape.

The death of malls accelerates as people avoid open spaces.

  • They’re already reeling, and unfortunately COVID-19 will accelerate the process.
  • These spaces are are already being reimagined for residential and other uses, and this trend will continue.

Industries that have resisted delivery embrace it

  • Previously in-person businesses such as dry cleaners will move to a 100% pickup and pick-up/drop-off model to survive. Athletic trainers, music teachers and others are going online, some permanently. Most things that involved dreaded face-to-face human contact will either be delivered (such as meals), move online (trainers) or be learned (haircuts) so that people can do them on their own without the much-feared human contact. If you want a template for this kind of self-resiliency, check out the 1930s.

Robots replace more and more farm workers

  • Closed borders around the world, possible reductions on inner-state travel, and workers getting sick en masse will reduce the labour supply during harvests. Harvesting robots will see a surge in demand to compensate, and some laid-off workers from other industries will fill the gap.
  • In the short term, until robots can be manufactured and deployed in greater numbers, harvests will become a stressful time for supply chains, and rely more on displaced human employees than on robots.

Businesses, individuals and our economy will face enormous challenges if social isolation drags on, even with pauses built in. The good news is that many societies such as Canada’s have the financial stability and health to be able borrow or print enough money to make it through even an extended period of economic strife. Other economies that are more heavily indebted and slower-growing, such as Italy’s, face a far more uncertain future. In the end, COVID-19 will bring a financial reckoning unlike any we’ve seen for a very long time, followed by a period of austerity, as many countries try to bring their balance sheets back into line, even if only partly. Austerity may not be the best prescription for a recovery, but many countries will adopt it.

It’s important to remember that the world will make it through the crisis. The main question will be what it learns in the aftermath, and whether it’s willing to commit the resources and planning to ensure this doesn’t happen again.

Being Trump Means Never Having to Say You’re Sorry

Pundits are convinced Donald Trump is set to fail, now that he has to cash the cheques his mouth has been writing for the last year. This underestimates and misunderstands the power of narrative: the Donald will talk his way out of his failures indefinitely.

President Trump (Yes, you have to use those words now) has a long, rich history of making things up. Most recently it was at his inauguration, where a crowd of 250,000 (the lowest in recent history) magically transformed into “a million, million and a half people.” Such shenanigans are nothing new for The Donald, whose penchant for pulling numbers and facts out his derriere has been rigorously documented.

Pundits far and wide are convinced that now that The Great Pumpkin has to walk the talk, he’s in trouble, given that most of what he says is impossible to achieve, including increasing prosperity by killing trade, making another country pay for a wall the U.S. builds, and more.

This assumption that Trump’s about to hoist himself on his own petard ignores both how Trump got into office and how people like him get away with murder: the power of narrative.

Trump swept to power not on the strength of any truth in his cuckoo-for-Cocoa-Puffs policies, but on the narrative he sold people:

  • I’m going to make life better for you.
  • I’m going to make our country great again.
  • I’m going to get your jobs back.

These narratives got someone with four bankruptcies and serial business flops elected on a campaign of somehow being an ace businessman, which tells you all you need to know: narrative trumps facts every time. Because of that, Donald Trump will be able to wiggle his way indefinitely out of failures to deliver on his promises.

He’s already wiggled his way out of his claim that Mexico will pay for the wall he wants to build: they’ll just pay for it later. Remember how he was going to lock up Hillary Clinton? Turns out the country “owes her a debt of gratitude” and she can roam free for now.

This is how Trump can avoid paying the piper indefinitely: change the narrative.

  • Factory jobs not flowing back to America? Expect to hear that it’s thanks to foreigners cheating on trade, not because homegrown automation is eliminating the need for people on production lines.
  • ISIS still around in 2021? Certainly not because you can’t bomb an ideology into submission; instead, wait for a narrative about how local governments are aiding and abetting the terrorists. Expect bombs to start falling on said governments shortly thereafter.
  • Gays still marrying gays? Not through any failure of Donald’s stated policy, but because the homo-loving Supreme Court opposes the will of the American people, or a narrative to that effect.

The belief that truth will ride in on its big white horse and kick Trump’s ass once he takes office is comforting, but naive: narrative rarely fails to trump facts, and this will continue for the foreseeable future.