Introduction
Our way of life will change radically as a result of the ongoing global
pandemic and the likely recession (or worse) that will follow. In this essay,
a group of Stikeman Elliott partners have collected some of our early
thoughts on the challenges and opportunities that may emerge. We
recognize that, at times like this, it is even harder than usual to resist the
lazy reflex to seize the moment as an opportunity to show why what we
already thought has been proven to be true. Hopefully, our readers will
challenge us on this!
It’s impossible to predict the future. We hope that by sharing with clients
and friends some of our thoughts and musings/speculations, those of
you inclined to do so might respond in kind with your own. Over time, we
hope to “drill down” on some of these issues (and others). We would also
be happy to consider the implications of our predictions, and others, for
those interested in such discussions.
This Too Shall Pass –What Will Life be Like on the Other Side of COVID-19?
Milton Friedman famously commented that:
Only a crisis – actual or perceived – produces real change. When that crisis occurs the
actions that are taken depend on the ideas that are lying around. That, I believe, is our basic
function: to develop alternatives to existing policies, to keep them alive and credible until the politically impossible becomes the politically inevitable.
A Changing Social Contract
Through the course of this crisis, the vulnerability of
segments of our own society (and of individual and
global inequalities) will be thrown into even greater relief.
Think, for example, of the elderly who lack social care or
of the low paid and self-employed who have no financial
cushion to fall back on and upon whose work society
relies. Older workers who have lost much of their savings
will likely have to work longer (which, in turn, will impact
younger workers for some time to come). The pandemic
is placing a dangerous strain on pre-existing inequalities
— in personal and national wealth, labour forces, and
intergenerationally (as we borrow heavily from the future
to try to maintain current standards of living).
A stronger sense that we are members of a collective
whole could lead to increased public demands for more
interventionist measures to protect our disadvantaged —
a development that governments will find harder to resist
after their current readiness to override the primacy
of markets. Likewise, the massive public expenditures
being made could lead to a wholesale redesign of tax
mechanisms with an increased focus on issues such
as equity, taxing out of country suppliers, and reducing
global opportunities for tax avoidance.
In the world of business, companies will increasingly
be expected to play a different role than one of pure
value maximization. There will be increased demands
on companies to address the greater good and act
as leaders and in ways that serve a broad range of
stakeholders, often when governments are not up to
the task2. Those who understand and can effectively
respond to this insight, already reflected in the tendency
of our courts to respond and give meaning to such
expectations, are more likely to survive and prosper.
Changing Nature of Work, Education, Health Care and other Services
It is likely that many of the new forms of behaviour we
adopt through necessity during this crisis will prove to
be sticky. Most involve staying at (or closer to) home or
how and what we consume, and will likely have profound
impacts on how we work (remotely and with substantially
less need for commuting), how we are educated, and
how we receive health care. A slew of businesses that
have hesitated to embrace digital technologies are being
forced to do so in order to survive (and are unlikely
to revert to traditional operations). This will introduce
extraordinary opportunities to innovate and develop
more cost-effective business models, while potentially
allowing most businesses to be “global” simply by being
local. The importance of robust telecommunications,
financial and public service delivery infrastructure has
become paramount, and the monopolies of localized or
geographically concentrated service providers (think, for
example, of education) will be contested. The disruption
to certain sectors will be extreme while the opportunities
that will be afforded to others are virtually unlimited. These
macro changes will introduce other changes. Think again
here, for example, of shifts in energy usage patterns.
While innovation is continuous, the singular focus
on the pandemic and the responses to it is uniquely
engaging the medical and healthcare industry, which
is already facing a large population of “baby boomers”
with longevity expectations and the means to pursue
“healthfulness”. This focus should yield startling results
that transcend the current pandemic, potentially altering
society in significant ways.
Systems Thinking
One unique aspect of the current crisis is that virtually
all systems (including medical, economic, social,
governmental and geopolitical) are seeking to cope,
both in defining and responding to it. In that sense,
the crisis is likely to become a public laboratory for
systems thinking — the use of mechanisms such as
redundancy, homeostasis (i.e., information and feedback
loops that allow a system to adjust to disturbances in its
environment and stay within the parameters necessary
for its continued functioning), self-organization (i.e.,
the ability of a system to learn, diversify and evolve in
response to shifts in its environment that might otherwise
threaten its survival), and resilience. We are also learning
how tightly coupled and interdependent systems have
become — that the overall health of a system depends
on the continued health of each of its essential
subsystems, as well as of the larger systems in which it
is embedded. Of course, this has been exacerbated by
technology and globalization. This awareness is likely to
have profound impacts on public policy as we focus on
designing better, safer systems.
Epidemics are not the only systemic risk we have turned
a blind eye to. Think of the risks to our financial system
before the 2008 crisis, or the ongoing risks to our
environment. It is reasonable to expect that the pandemic
will change perceptions of risk for generations to come
(the equivalent to living through WWII) and that we will
pay more attention to these systemic risks in the future.
De-Globalization
We believe it probable that supply chains will
become more “localized” (i.e. with fewer international
dependencies and a reduction of long “just-in-time”
delivery systems), resulting in a shift of manufacturing
(and potentially agriculture) and energy to domestic
or regional sources. This could very well lead, in turn,
to employment and wage gains (at least in the short
term), but also an increased focus on the deployment of
automation and artificial intelligence to maximize capital
and operational efficiencies, accelerating a trend towards
the displacement of employment and highlighting the
need for effective public policy in response. A related risk
is the entrenchment of exclusionary political narratives,
with calls for new borders overseen by leaders who have
the political will and legal and technological capacity to
enforce them. This may be juxtaposed with immigration
requirements as citizens age in certain economies.
Digital Infrastructure and Surveillance
A remarkable feature of the current crisis is the degree
to which governments throughout the world, including in
the democracies with a long liberal tradition of individual
rights, have enacted measures to restrict their citizens for
the common good, with little social resistance. With the
ubiquity of digital infrastructure and surveillance, the use
of these tools as a necessary public sector measure is
likely to become normalized and prevalent. Governments
may be reluctant to yield these types of measures,
once implemented, and the temptation to use them for
other public purposes may be too great to resist. Given
the ability to use these tools to collect and analyze
extreme amounts of personalized information, the related
privacy concerns will likely become a dominant focus for
regulation and an even greater source of innovation.
Environmental Sustainability
The current crisis will continue to dominate public policy
(and Main Street) as we deal with immediate challenges.
However, the attitudes embraced by society as the
pandemic shifts to the rear-view mirror should reinforce
and accelerate the currency of sustainability issues
generally. Political choices will have to be made between
competing demands.
Accelerating Qualitative Standard Setting
Another outcome of the current crisis is likely to be
increased sensitivity to and utilization of qualitative
standards and metrics to measure performance.4 Until
recently, the template has been climate change — with
growing acceptance of the need for more comprehensive
disclosure of climate financial risks, better climate risk
management and a focus on opportunities for firms and
investors in the transition. This logic is likely to extend
to other systemic issues and help drive the transition to
more sustainable economic frameworks.
Conclusion
Confucius is credited with saying, “The humane do not
worry; the wise are not perplexed; the courageous have
no fear.” In extraordinarily challenging times few aspire to
such a high bar, but it’s a good reminder that this type of
situation has happened many times in the past. We know
that life after the crisis will be very different than what
we have come to take for granted. But we also know that
the crisis will pass, and in its passing will present many
challenges and opportunities.
We are keen to hear from others thinking about the
challenges and opportunities that lie ahead and we
encourage you to reach out to any of your Stikeman Elliott
contacts to continue the dialogue. As noted above, a
number of Stikeman Elliott partners contributed to this
essay, which may not necessarily reflect the views of all
members of the firm.