Danny McCoy: Rapid economic recovery from crisis is possible
As a society, we need to agree how to reboot economy when Covid-19 crisis ends
This crisis is unprecedented in terms of its pandemic qualities and different to anything we have previously experienced. The response from our society has been incredible in its unity and solidarity as exemplified by our public health experts. The economic response from the Government in recent days also is to be complimented in its credible, incremental and confidence-inducing measures. Nothing can ever be perfect in response to a moving crisis, even more so when there are dual crises. But the initial approach is impressive in contrast to other jurisdictions.
What has happened in the wake of necessary measures to deal with the public health crisis is clearly a huge shock to the economy. While this has been catastrophic in the short term, we must now ensure that the long-term narrative defines this period as a V-shaped phenomenon rather than a more extended recession.
We need to put our economy and business model into the freezer to avoid any long-term structural damage
Achieving this rapid recovery is possible. Crucial is that the structure of our business model and economy remains unchanged at the other end of the crisis. Others speculate on the end of capitalism as we know it. They might be right but for now we need to put our economy and business model into the freezer to avoid any long-term structural damage. When we emerge, while our behaviour may change, our economy remains robust, so that it is capable of defrosting and rebooting at an unprecedented scale. We retain our innovation, our intellectual property and our educated and dedicated workforce. This approach puts the sustainability of our society at the heart of our economic actions and requires a public policy focus on four pillars:
1. Implementation of social distancing measures;
2. Delivery of emergency wage subsidy and welfare programmes;
3. Doing everything possible to preserve vulnerable business; and
4. Planning an economic reboot on an unprecedented scale.
Confidence and credibility
The Government will continue to be heavily tested in the coming months not just on the public health dimension but also on how it guarantees its citizens’ income and welfare. The nexus of instilling confidence and credibility is paramount. The economic response in recent days was considered and has provided both of these elements. We know from previous experience in the banking crisis that humans didn’t trust each other – this evaporated confidence and trust in our institutions. This time around it’s humans versus virus with no competitive advantage from trying to outdo each other both nationally and internationally. It is fundamentally different.
The Taoiseach is correct in his assessment of the term lockdown. The terminology we use to define what happens in society and business in this crisis must be more nuanced. Those of us who don’t need to be on the streets must be off the streets and working from home. Allowing those who must go about essential work must continue. Even in Italy there are swathes of industries which continue to produce.
Infrastructure and inputs
The business response is important both for the emergency and the economy. We think of examples in the biopharma and medtech industries, critical as they are, but it’s not just our medical and care system that are essential. To fight this virus there are many other essential businesses including our utilities, the making and distribution of our food, the cleaning of our hospitals and laboratories, the maintenance of our infrastructure and all of the inputs into those systems. The wisdom of Solomon is needed to define which business is critical and which isn’t.
A knee-jerk reaction may be to localise and simplify supply chains, to put up borders and move towards self-sufficiency
There is also a challenge to avoid changes in our behaviour seeping into a dismantling of our business model. Globalisation and the complex network of supply chain and connectivity has brought about great changes in modern living standards. A knee-jerk reaction in the wake of this period may be to localise and simplify supply chains, to put up borders and move towards self-sufficiency. In these circumstances, no country can retain the standards of living that we now take for granted nor would most societies tolerate the drop. The preservation of our business model and business construct is the answer to financing the ultimate bill at the other end of this emergency.
The need for social dialogue is more urgent than ever. After the recent general election, I spoke at length about the need for social dialogue as a way which would allow government to collaborate with key stakeholders in society to address major challenges. While we now wrap ourselves around the flag in the national interest, we still don’t have a structure for stakeholder dialogue to withstand the crisis and bring us into recovery.
Danny McCoy is chief executive of the Irish Business and Employers Confederation