Drop in consumerism warrants positive change during this time of upheaval
At first, the coronavirus pandemic was far away. Then it arrived in full-force and tore through economies and societies, forcing entire nations into lockdown and grinding consumerism to a halt. During quarantine, it is natural to imagine the way in which life will resume — and the differences there will be — when restrictions finally lift.
The unprecedented impact of COVID-19 makes it difficult to predict with certainty what this will look like. That said, some things are becoming more apparent as the economic effects of the pandemic take hold of businesses and the consumer mindset. The impact on the stretched healthcare services will almost certainly warrant positive change. Air travel will be slow to restart and the peak of global jet-setting could be over. People will be more aware of their health and personal hygiene as they carry personal protective equipment (PPE) wherever they go.
Consumerism slowdown and the impact on commerce
Many experts are already labelling the projected global recession “The Great Lockdown” as national economies show signs of slowing. This April, the International Monetary Fund (IMG) projects global growth to fall to -3 per cent. Emerging from lockdown will be a winding path, with consumers and businesses exercising caution. A stop-start productivity pattern will hinder efficiency while businesses will be adjusting to new health regulations. Economists are making three post-coronavirus predictions:
- The adaption of new, post-coronavirus technologies
- A decline in the globalisation of supply chains
- And an increase in industry monopolies
In the UK, the effect of cautious shoppers is already being felt. In April, The Office for National Statistics (ONS) reported a drop in the Consumer Price Index (CPI) from 1.7 per cent in February to 1.5 per cent in March. The decline is attributed to falling fashion prices, brought on by the coronavirus lockdown coupled with the drop in global oil prices.
Unlike the 2008 financial crisis, consumers appear to be at the epicentre of the current one. In Europe and Northern America, staff face the risk of being laid off or furloughed, let alone contracting COVID-19 and becoming critically ill.
The consequence of businesses closing to protect workers is that commerce has slowed. Glenn Hubbard, Chairman of the White House Council of Economic Advisors from 2001 to 2003 describes the situation as an “aggregate demand doom loop”. Consumers can’t spend, so more businesses are forced to close and the cycle repeats. Dr Matthew Slaughter, Member of the Council of Economic Advisors (CEA), says: “The problem is radiating from consumption demand by households. It’s unprecedented — an involuntary shock to consumption demand. The magnitude of it is huge.”
The mindset built up during lockdown measures will continue in some form once restrictions lift. This “quarantine state of mind” could go on for weeks or even months after lockdown eases. As people resume work and daily activities, there is a high probability that concerns over infection will persist, especially while antibody tests are still in development.
Sheva Rajaee, Founder of the Center for Anxiety and Obsessive-Compulsive Disorder (OCD) in California, explains: “We’re going to have to work through this quarantine state of mind even when the physical quarantine has lifted.” This state of mind is heightened by the fact that COVID-19 can be asymptomatic and transmitted to others.
Cautious startups with creative as an asset
The post-pandemic world will see fewer people opening their own business or venturing into the entrepreneurial space. Those that do are destined to be online and they will exercise caution over financial outgoings including hiring and borrowing.
Creativity and innovation will become a business asset to rival financial backing. Companies that find original and nimble ways to operate as they reboot will return to full capacity sooner and could gain a competitive advantage in doing so. Imagine factory lines and offices configured for social distancing, remote monitoring and routinely scheduled deep-cleans. Picture companies that deal with the public reassuring customers of their compliance with new health guidelines and openly showing it. Consider arriving at a conference and receiving an N95 mask with the agenda, or seeing restaurants being required to publicly display their cleaning and virus-testing schedules.
Thriftiness at home
Similar habits as those almost one hundred years ago during The Great Depression look set to return. Kitchen gardens full of vegetables and herbs were a common sight in the US in the 1920s and 30s, as were community-led “thrift gardens” as families and communities strived for self-sufficiency. Laurence Kotlikoff, Economics Professor at Boston University, explains: “Rather than buy it, we’ll return to growing our own food to the extent we have space or can move somewhere that does.”
This waste-not-want-not trend will extend beyond the dining table just as it did in the years following the “Roaring Twenties” in America. People may choose to socialise at each other’s houses rather than venture out to restaurants, clubs and entertainment venues to save money and in part due to the lingering “quarantine state of mind”.
Positive change to consumerism, economies and societies
Citizens may receive “free” money in the form of universal basic income (UBI) following the coronavirus pandemic. The notion that everyone should receive a regular income was merely a topic of debate before 2020. Now, in the wake of the economic chaos brought on by COVID-19, several countries are indeed trialling schemes to test the effectiveness of a national government wage and preparing to gauge its effect on consumerism.
UBI could potentially restart consumer spending and stem the “aggregate demand doom loop” currently gripping economies. In April, Spain announced plans to introduce basic income “as soon as possible” to help its citizens. Nadia Calvino, the Deputy Prime Minister, highlights government plans to introduce a UBI scheme that “stays forever, that becomes a structural instrument, a permanent instrument”. In the UK, over 170 Members of Parliament have stressed the need for a similar scheme to help lift Britons out of the pandemic, although no definitive action on the matter has been taken.
The coronavirus pandemic is set to alter several areas of enterprise and daily living fundamentally, although the manner and extent of the change are not completely understood at this point. Many of the changes could eventually be for the better, as many people step back from rampant consumer-spending to reevaluate finances and identify what matters to them.