Coronavirus crisis recovery is on the way but firms and governments must do their part to protect workers
- Returning to status quo while ignoring underlying issues like inequality, protectionism and exploitation of workers will hold back recovery
- Governments must not turn a blind eye to firms engaging in radical overhauls and laying off more workers in pursuit of productivity and profits
It’s been a brutal last few months, but at least last week’s US employment report showed a surprise 2.5 million jobs added to payrolls in May, evidence that the world might have turned the corner on the coronavirus crisis. Recovery could be on the way.
Global equity markets are certainly bullish about recovery, but what’s the shape of things to come for ordinary people in the street, for employment, wages, real incomes, consumer demand? Ultimately how will it all pan out for global growth? If the world is heading towards a more lopsided sharing of the spoils and a greater inequality of wealth, then the outlook for recovery – and humanity – could be in deep trouble.
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For consumer-driven economies like the United States, where consumer demand typically accounts for nearly 70 per cent of gross domestic product, confidence is the be-all and end-all of growth going forward.
While there may be a need to slash costs and restructure in response to the downturn in global demand, it could not come at a worse time. It could mean lower employment growth, reduced wages, weaker consumer spending power and a more compromised outlook for global growth.
While the shift away from labour to capital may be good news for stock market valuations, it will do little for industrial relations, easing social tensions or making the job any easier for global policymakers desperately trying to stoke a sustainable recovery.
It would be fine if the world corporate sector intends to lead a productivity-driven, capital-intensive dash to growth, but most business sentiment indicators around the world show investment intentions are down in the dumps right now.
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The key question is whether governments turn a blind eye or step in to discourage more drastic corporate cutbacks. At the moment, governments and central banks are bending over backwards to improve corporate cash flows, providing cheap and easy money, improved state aid and generous tax breaks to get global production going again.
Consumers, companies, investors and governments all have a part to play on the road to recovery. Things may look bleak at the moment, but humanity can pull through in the post-coronavirus world if the world sticks together. Sacrifices have been made and companies and governments both have a duty of care to protect their workers and boost job creation as much as possible.
David Brown is chief executive of New View Economics