Don’t take this the wrong way but if you were a young, hardline environmentalist looking for the ultimate weapon against climate change, you could hardly design anything better than coronavirus.Unlike
www.thetimes.co.uk
Coronavirus can trigger a new industrial revolution
The disease could be the shock we need to harness new technology and new ways of working
Ed Conway
Thursday March 05 2020, 5.00pm GMT, The Times
Don’t take this the wrong way
but if you were a young, hardline environmentalist looking for the ultimate weapon against climate change, you could hardly design anything better than coronavirus.
Unlike most other such diseases,
it kills mostly the old who, let’s face it, are more likely to be climate sceptics. It spares the young. Most of all, it stymies the forces that have been generating greenhouse gases for decades. Deadly enough to terrify; containable enough that aggressive quarantine measures can prevent it from spreading.
The rational response for any country determined to prevent loss of life is to follow China’s lead and lock down their economy to stem its spread.
And so airlines are cancelling flights; companies are scrapping travel. Factories in China and, presumably soon in Europe, are being mothballed. The chimneys which once belched smog into the skies of Beijing and Shenzhen are smoking no more. Perhaps you saw the satellite map produced by Nasa showing that pollution across China, usually visible in dense patches blanketing the country, has almost entirely gone.
Hardcore climate activists have long railed against economic growth and in the months ahead they may have their wish granted as GDP growth from China to Europe and the US is hammered by coronavirus.
Yet this would be no normal economic slump. It’s not as if most companies have become insolvent. It’s not as if the plumbing of the financial system is broken. Even if the outbreak triggers a recession one can expect the economy to bounce back in the coming quarters. Along the way some companies and households will be unable to keep things ticking over. What these companies need isn’t necessarily money but time: time to pay bills, time for affected staff to recover and for mothballed units to be restarted.
And since this is no normal economic crisis it’s not clear that any of the normal remedies like cuts in interest rates or taxes will help. Far better will be forensic measures to ensure those businesses and households temporarily unable to pay their bills are given time to pay.
One bold idea would be to set up
a natural disasters insurance fund to support those who lose their jobs or their businesses as a result of this and future crises. America’s Federal Emergency Management Agency has something called Disaster Unemployment Assistance, which could provide a blueprint. And while the Bank of England can (and probably will) cut interest rates, far more important will be other below-the-radar schemes such as financial help for companies whose supply chains are fracturing.
Most downturns are Darwinian moments for capitalism: out go old, lumbering companies that failed to move with the times; in come their disruptive rivals in a blaze of creative destruction. Hardship focuses the mind, and companies find more efficient ways of running their businesses.
The economy that emerges should be more productive than its predecessor. Yet in this crisis the opposite may be happening.
The most efficient, which is to say the cheapest, way companies have found of manufacturing products is to use supply chains that straddle the globe in search of cheap labour. If something could be made for less on the other side of the world, so be it.
Yet
coronavirus, which
threatens to constrain the free movement of people and goods, will deny companies this cheapest avenue. Companies will have to think long and hard about whether intercontinental supply chains make sense. Already some companies are shifting production back home and opting for home-built components.
On the one hand that spells enormous disruption and could make all our lives more expensive. Yet there is also a silver lining which need not only appeal to Extinction Rebellion.
What if this is the nudge we need to embrace a new model of globalisation?
For the dirty secret about today’s economy is that it is actually a product of yesterday’s technologies: the foundation of just-in-time supply chains is software and internet connectivity.
The ultimate energy source is fossil fuels, in ships and planes. Today’s new technologies — 3D printing, AI, robotics — could enable a very different form of globalisation. Combine them and it is possible, as the economist Richard Baldwin says, to
imagine hotel rooms in London being cleaned by robots controlled by cleaners in Poland, or lawns in Texas mowed by robots steered by gardeners in Mexico.
Yet for all the hype, the industrial revolution driven by these technologies still feels a long way off. Many offices are not that different from their 1950s ancestors; much manufacturing revolves around factories and supply chains which, save for the fact that they are split between different countries, Henry Ford would feel at home in; 3D printing has taken the hearing aid sector by storm but is still an irrelevance in most parts of the manufacturing world.
But coronavirus is
one of those shocks that could force business to take the leaps they were hitherto too nervous to make. When supply chains are down and households are quarantined, suddenly the fourth industrial revolution, or whatever you want to call it, looks a lot more attractive. When physical cash is spreading the virus, using electronic money seems far smarter.
When travelling and mingling is a risk, working remotely could become the norm rather than an aberration. That this will all help to diminish carbon emissions is an added bonus.
Of course, it’s quite possible life returns to normal after coronavirus. But one consequence of this disease could be t
hat it forces us to take a long hard look at the way we run the world, and change it.
Ed Conway is economics editor of Sky News
. It's weird!
