The Insightful Troll

Rants and ruminations.

Full Recovery Unlikely

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Alec Levenson for the MIT Sloan Management has a bleak pessimistic view on an eventual economic recovery from the Corona virus pandemic.

It takes time for business and society to settle into a new normal following a large-scale economic disruption. Even if the health care challenges from COVID-19 are solved before the end of this year, which seems highly unlikely, businesses will face many more months, and likely years, beyond the anticipated adjustment periods budgeted in their scenario planning and operations.

The shifts in consumer demand will require expansion in some industries and contraction in others. Future growth in consumer spending is likely to be slower than it has been for many years. Increased government regulation of gig and other nonregular work will require adaptation and changes in work practices. The disruptions in face-to-face work will be a drag on economic efficiency, leading to slower growth in revenues, lower profit margins, and reduced cash flow. And reconfiguring business models for greater resiliency will require significant investments of working capital into operations in ways that will not show any ROI until the next pandemic hits.

We will get to the new normal eventually. The corporate leaders who recognize these new challenges now and move quickly to adapt to them will put their companies in the best position to thrive throughout the 2020s.

I’ll take a much more optimistic view. This will force issues such as the need for universal healthcare, workers rights, and corporate regulations to be strengthened and enacted.

While this will take the better part of the decade, we will recover from this.