It has been said that what goes around, comes around. In some ways Bob Dylan’s 1964 song seems prophetic.
Come gather ’round people, wherever you roam
And admit that the waters around you have grown
And accept it that soon you’ll be drenched to the bone
If your time to you is worth saving
Then you better start swimmin’ or you’ll sink like a stone
For the times, they are a-changin’
Come writers and critics who prophesize with your pen
And keep your eyes wide, the chance won’t come again
And don’t speak too soon, for the wheel’s still in spin
And there’s no tellin’ who that it’s namin’
For the loser now will be later to win
For the times, they are a-changin’
Come senators, congressmen, please heed the call
Don’t stand in the doorway, don’t block up the hall
For he that gets hurt will be he who has stalled
The battle outside ragin’
Will soon shake your windows and rattle your walls
For the times, they are a-changin’
While the mainstream media understandably focuses on the here and now of the pandemic, some commentators are looking at the long-term consequences.
Indirect effect: the profoundly negative impact of a hyperspecialized economy that is suddenly disrupted. In this case, the specialization is tourism, but there are other examples, many driven by hyper-globalization.
Specialization has long been central to capitalism’s relentless drive to increase efficiencies and thus profits, and globalization has pushed specialization to extremes globally dominant corporations can arbitrage currencies, wages, political corruption and lax environmental standards in ways that localized competitors cannot.
The net result is increasing reliance on one globally competitive industry for jobs, tax revenues, etc.–in essence, the modern-day equivalent of a monoculture plantation or single-industry factory town.
When the plantation or factory closes, there’s no economically diverse ecosystem to pick up the slack.
If tourism doesn’t rebound very quickly, all the local economies that became hyperspecialized to serve global tourism (enabled by low-cost airfares and credit cards) will be gutted.
The second order effect of the pandemic will be the wrenching transformation of these local economies into a much broader economic ecosystem that will have to be moated from globalized competition. For example, grapes flown in from locales 3,000 miles away will be banned or heavily taxed so local grapes can compete.
The cost structure of most small enterprises was burdensome even in the best of times: rent, utilities, fees, taxes, regulatory compliance, insurance, labor overhead and so on are now crushingly costly, and once revenues decline by even modest amounts, the small businesses are no longer viable.
Costs such as rent, healthcare insurance, local fees and taxes are notoriously “sticky,” meaning the default setting is to ratchet ever higher. These costs don’t drop unless there is a full-blown crisis such as mass bankruptcies of commercial landlords and cities.
Thus we can anticipate a culling of all the marginal, struggling small businesses in the pandemic recession, and a weak or non-existent emergence of new businesses in the future to replace those lost, as revenues will remain weak while costs will only increase.
This will most likely be accelerated by the draconian measures instituted for “the greater good” such as mandatory masking and social distancing.
The world has changed, and the only things we know with certainty are 1) a return to the pre-“pandemic” status quo is not possible and 2) this is not a positive development.