Several regions in the world are seeing a resurgence of the coronavirus while some countries are still battling to spread the contagion. What is your reading of the global economy in the coming six months?
First, we have to recognize that the human toll of the coronavirus pandemic has been a once-in-a-century tragedy. The impact on human life and the quality of life has been unthinkable.
As much as keeping safe distance has separated society physically, I feel strongly that the spirit of connection, community and collaboration, that serves as foundation for business continuity is quite strong, perhaps stronger than ever. From an economic standpoint, many industries have suffered deep wounds and may never be the same. But time and time again, history has shown us that there is great opportunity on the other side of great pain. That is not just a nice thing to say to make us feel better – it’s actually true of the mind-set and attitude that grows from tough situations. This has been an opportunity for businesses, industries, governments and even some economies to re-set in a sense, to revaluate processes and procedures, or entire lines of business.
It is far from over, but the ability of business and economies to weather this storm as we have thus far, gives me confidence we are on the other side of the deepest pain. I’m not alone; a recent survey suggests that 51% of respondents expect the global economic conditions to be better in the next six months. Notably, India has the second highest confidence level, second only to China.
Corporate leadership has stepped up in a big way through the past eight months, to tactically respond to the changing dynamics across their business and to instil confidence in their employees. At a company level, confidence from employees around profits and demand are at an all-time high since the pandemic set in. (link)
We have been forced to leap ten years into the future in terms of digital capabilities and process efficiencies. Vaccine development and testing have never been this fast as development and regulatory organizations worked closely and chose to skip bureaucratic steps to expedite the process. Economies and businesses have changed forever, and things will not look the same when this is all behind us. From a business and economic standpoint, it will be better than it ever was.
The coronavirus has forced countries to seal off borders and stifle trade. How do you see these conditions affecting corporate earnings?
Coronavirus has impacted the earnings of entire hospitality industry including airlines, cruise lines, hotels, restaurants and it may be until 2022-23 when we see the earnings back to pre-virus level. Early in the pandemic we were abruptly reminded how interconnected of our world is, and the intricate nature of our supply chains and sales channels. Businesses around the globe were put in a position to scramble for parts from vendors and partners, or to get products to international destinations. Businesses were forced without preparation to immediately do things very different than they ever have before.
Some good has come of that. Much conversation has taken place in board rooms around the world, to stand up supply chains, with strategies that involve more diverse and flexible networks.
Further, we have seen a “zoom” toward digital transformation. Analog institutions were forced to pivot toward digital solutions, for continuity. What started out of necessity will now reap rewards in efficiency moving forward.
We have also seen a rapid acceleration in areas like ecommerce, digital payments, contactless/touchless technology, telemedicine, and more. In India, for example, the overwhelming majority of the population – 72% — is still operating primarily out of the home. This has resulted in a vast changed how consumers spend their money, with online spending increasing 30%. Necessity has put tech-enablement at scale, and there is no pulling back after adoption.
All that said, the globalization genie is out of the bottle, and it will take more than a global pandemic to undo a sophisticated global supply chain and the widespread benefits we have gained. To reinvigorate and realign global trade, businesses and governments must collaborate, implement long-term, cause-based models, and embrace innovation without borders.
Working together today to repair the world’s economy during this time of crisis will generate reliable and lasting global growth tomorrow. In India, reduced foreign investment led to significant market capitalization decline across all industries outside of pharma/biotech and telecom. Working to undue that damage will be tough, but vital. We need to keep a long-term view.
Millions of people have lost jobs around the world due to the “Hunger-Virus” (Coronavirus). The divide between the rich and poor is getting wider. How can corporates, governments help in restoring the balance?
This virus has made existing inequality in our society even worse. Most governments around the world have acted swiftly to pump fiscal stimulus to give lifeline and support the small businesses and unemployed workers. Corporations and companies have also done their part in supporting employees working from home and providing financial support. However, the problem is deep rooted and needs a fresh look. The coronavirus health crisis has provided visibility into how disproportionately vulnerable lower income individuals are in our society. In fact, in Least Developed Countries, the economic impacts of Covid-19 have been more detrimental than the virus itself. Growth prospects shrank from 5% to -.04%, which is completely attributable to the pandemic. The devastating financial impact on individuals is disproportionately effecting lower income demographics – threatening to further widening the racial wealth gap. Areas of the economy that we completely shuttered were jobs with the most concentration of black and minority workers. We are currently at a tipping point, and we can create a more level playing field by working together, or risk slipping further behind.
While globalization has enabled higher standards of living in some places, it has also fostered unprecedented income inequality in both developed and developing economies. Just as it requires cooperation to slow climate change and universal collaboration to flatten the COVID-19 curve, global action focused on long-term societal benefits is required to address the income gap and other shortcomings of globalization.
When globalization became all about short-term economics, it stifled the greater societal benefits. To maintain the benefits of cross-border development, we cannot afford to leave some geographies and key constituencies behind. As such, governments and businesses must become social stewards by moving towards a system with built-in compensation mechanisms for those who benefit the least.
Training and reskilling talent, for example, will help prop up newer global economies so that they become self-sufficient and can independently maintain their newfound international presence. I believe that corporations must work with universities to identify which business skills will be most in demand when the world settles into its new normal so schools can invest in teaching the skills that will best prepare students for the workforce.
The world stands divided today. The US has undergone the most divisive election in its recent history. Countries are employing new diplomatic and trade relations to be ready against future shocks. How do you read the global economic situation from the context of a changing political environment?
The noticeable impact that severing trade, travel and open communications between nations has had during COVID-19 demonstrates why both the public and private sectors, as well as developed and developing markets, must continue to work together and share information to sustain growth and distribute wealth more evenly. Just like a smart investor that diversifies her stock portfolio, economies must vary their supply chain networks so that they’re not too heavily dependent upon a single trade partner or location.
Even before the pandemic hit, assumptions underpinning decades of international cooperation and trade were being challenged, as shown by nationalist movements from Brexit to the Trump administration’s America-first mindset. I firmly believe that nationalism is not the answer. According to the Business Roundtable, 95% of the world’s population and 80% of the world’s purchasing power is located outside of the U.S., indicating that we must work together to survive. Coronavirus restrictions have proven what economists have known for decades: that we live in an increasingly connected world in which decoupling economies has a disastrous effect on industrial growth.
With international power dynamics constantly shifting thanks to globalization winners and losers, we must maintain consistent communication between nations and regularly redefine international rules.
The Coronavirus has unfortunately given us visibility into the weaknesses of our global network, but it also provides a unique opportunity to reshape and rebuild in the months ahead. We are currently at a regulatory tipping point, and we can create a more level playing field by working together to rethink outdated policies.
‘America First’, as coined by President Trump, is new and unfortunate development but this sentiments has been followed by China for decades and that has hurt the global sentiment. Major developed economies have supported developing economies with favorable trading terms, offering technology and know-how. This seems not to be followed by fast growing #2 economy of China which has shown less respect to free and fair trading terms and supporting underdeveloped countries without too many strings attached.
There has been a big push from the global organisations such as the United Nations on Climate Change and Sustainable Development Goals (SDGs). As we enter the “Decade of Delivery” for SDGs, how can corporates contribute to sustainable growth and move from shareholder capitalism to stakeholder capitalism?
An organization’s character is illustrated in its commitment to a strong set of values, including how it approaches society, ethics, and culture.
The basis of stakeholder capitalism is trust. Built over time, trust is illustrated when a company can adhere to a clearly defined, authentic vision that aligns with stakeholder views. Corporate citizenship and ethical practices drive affinity.
For many years now, business has been moving toward the tenants of stakeholder capitalism, but now it’s catching on with great vigor. It’s widely understood that the companies who do good are able to do so in ways that are great for their bottom line. By understanding and addressing the needs of all your stakeholders, businesses can stand for something. Platforms drive integrity and integrity drives the perception I want others to have – knowing they can trust our products, our people and our positions.