24. březen 2020 / Jan Klesla
Love in the Time of Coronavirus
Commentary by the director of the Institute for Digital Economy Jan Klesla for Lidové noviny.
The dreaded “black swan” can deprive hundreds of thousands of Czechs of their jobs, the shock may be worse than the fall of Lehman Brothers, the coronavirus crisis will change how we live, do business and invest. Getting more headlines with similar statements today is more than easy. People and entrepreneurs in particular are justifiably worried not only for health but also for livelihoods - and painting black scripts is so easy to read. The state of the economy is undoubtedly serious; it is something that in our modern history can only be compared with the year 1968, and it cannot be reduced in any way. But like any exceptional situation, it can also be a huge opportunity.
In the past, such events have exceptionally transformed the world economy, be it wars or global pandemics. The Black Death killed a third of Europe's workforce, but at the same time, wage increases triggered innovation and the break-up of the feudal system. The cholera epidemics in the 19th century accelerated the industrial revolution extremely and brought the golden age of Art Nouveau. The ensuing First World War and the Spanish flu brought the golden 1920s. Recently, the SARS epidemic in 2003 has stimulated Asian and, above all, Chinese growth in technology, especially in the e-commerce field. In short, such pressure leads to technological leaps which, on the other hand, can lead to considerable prosperity after the initial shock. We just have to do it right.
We can’t just consume the budget deficit
Virtually today there is no economist who does not want to warm up the soup in the media and missed the opportunity to give good advice to the government. With few exceptions, everyone is actually saying the same thing - as quickly as possible, it is necessary to ensure that companies have wages and that demand does not stop. And it does not matter whether it is interest-free loans directly from the state, or even from the financial sector itself, or subsidies through the social system. The same rank also includes the ideas of US ruling Republicans to send a check directly to every US citizen according to his or her income, a kind of basic (un) conditional income. The key is not only to allow companies directly affected to retain employees and not to lay off in the coming months.
This is true for small and medium-sized businesses, as well as for the larger and large ones, including modern industries such as internet sales of services that have virtually only fixed wage costs and which are difficult to dampen production. For example, just a few days ago Oliver Dlouhý from Brno's Kiwi ticket search engine, a company considered to be the Czech digital champion, was awarded the Entrepreneur Of The Year award. But after jumping from the famous zero to one, they can quickly fall back. Internationally, those who depend on the supply of goods and parts mainly from China suffer most, and of course a huge question mark hangs over industry.
The most affected enterpreneurs in restaurants, entertainment, culture and retail have a chance to recover after the quarantine measures have ended and people set out to catch up on neglected consumption. But they must be allowed to survive without looking at the budget deficit. Today is simply an extraordinary time when it is necessary to hack ax without hesitation into our low debt, but at the same time we must not just pass the money borrowed from our children. Most should invest in modernizing our entire economy.
Digital Marshall Plan
There is no doubt that our lives will change, we will all be much more committed to digital technologies and learn to be more productive than sitting on meetings and traveling to often unnecessary conferences. At such times, a number of inefficiencies are revealed, and years-old and survived systems are removed. It is not by chance that companies like Zoom, which develop and offer Internet conferences, have resisted stock turbulence for the longest time. It will also speed up the work with data and the deployment of artificial intelligence. In a few weeks, we will simply get used to things that we would otherwise have to live in for years.
On the other hand, our entire economy is based on subcontracting to the car industry, which is now suspended - and it is a big question whether and how it will start. Companies themselves experience the discussed future without work, not because humans are replaced by robots, but simply because it is not. It is robotics, automation, digitization and transfer to the final products production that we have to invest in now. Not only in production but also in stores where many people already prefer automatic cash registers without cash registers, limited human contact will become the new standard.
It is therefore crucial that all packages become a new and digital Marshall Plan, not a new privatization. Even in our lives, it can free up space and time for something other than work, perhaps we can be replaced by machines, shorten the working week while maintaining the current wage and we would rather be with someone close to us. Even without pulling out a quarantine flag for cholera or coronavirus.