The world after Covid-19

This post is written by Emilio Zevallos Vallejos. Professor and Researcher in ULACIT, UCI and Flacso Costa Rica.

• The problem: How will economic recovery happen? Will it be sustainable?

• Why it matters: The future of the economy and societies will depend on how the economy recovers.

• The solution: Change the economic paradigm to that of the bioeconomy.

The recovery from Covid-19 will be slow and we will not go back to January 2020. What we will see in the future are new ways of integrating into the labour market - something we already started to see before COVID 19.

Technological change (virtualisation), the development of the internet, social networks, communications, and the increased power of mobile devices, have changed the world in just over a year and a half. At the same time, we will continue in a battle between the model of consumerism and programmed obsolescence, versus the bioeconomy model of lower consumption and the production of more durable goods.

The former condemns us to continue using resources disproportionately and brings us closer to a possible scenario of economic collapse. The second is the one that could pull us out of the abyss, but it presupposes structural changes in the prevailing economic model, which does not seem to be of interest to most businessmen worldwide. However, we see that in several developed and developing countries, recycling models, the return of repair shops (clothing, shoes, electrical devices, etc.) and even upcycling are beginning to become visible. There has also been a significant increase in local consumption of fresh, seasonal, local products. They have allowed farmers to have income and consumers to have access to fresh products at lower prices due to geographical proximity. This has been a consequence of the economic situation, so why not make it permanent?

"What we see today is an improvement over the 2020 results, but it is highly likely to be the "rebound effect" from the steep drop in 2020."

What the future looks like

On the other hand, the pandemic has shown that business travel can be replaced by video calls. This is likely to reduce travel to business meetings dramatically. Videoconferencing has shown that it can be a good substitute for them. In the case of education and virtual classes, they have shown their enormous potential. What is needed is more people skilled in virtual work tools. Digital nomads have demonstrated in this time that you can work not only from home, but from any place that has a good internet connection. But we are only talking about formal jobs that require a certain level of qualification. For them, the post-pandemic world offers a whole world of possibilities. But what about the lower-skilled jobs?

We are at a crossroads; on the one hand, companies are looking to incorporate more and more technology and therefore reduce their costly payroll (due to social security charges). But on the other hand, these workers are also consumers, and to the extent that they are excluded from the labour market without real possibilities of rejoining it, what we are doing is reducing demand, and that strikes at the heart of the market economy. If there is no demand, there is no production, jobs are reduced, and we fall into a recessionary spiral. So, should we incorporate labour-saving technological changes on a massive scale? Should we be selective to avoid a drastic drop in demand? That is probably the biggest challenge facing companies with low-skilled workers on their payrolls today.

So, what will happen with the economic recovery? What we see today is an improvement over the 2020 results, but it is highly likely to be the "rebound effect" from the steep drop in 2020. Will the improvement in growth really be sustainable? To find out we can only wait to see what happens in the following years. However, we believe that the recovery in the modern sectors will go hand-in-hand with a greater incorporation of telework, and this will imply business decisions regarding a reduction of their infrastructure. The less dynamic sectors will have to start incorporating changes in their business models that will allow them to adapt to a new context of less human integration (associated with the need for social distancing), or their collapse will be imminent.

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