A guest post by Deane Jessup:
I am a firm believer that where there is demand, the market will find a way to supply. Covid-19 has mostly accelerated digital change that was already happening. Some will adapt, some will not; and most taxpayer subsidies are counterproductive. At best they are acting as a band-aid, at worst a form of trade protectionism.
Imagine company (a) that does not take the subsidy; instead, they adapt their business model to the new market. Sure, some staff will be made redundant, but at a time where the welfare net is equipped and motivated to catch them. They will have the time to reflect, retrain, and adapt. The company itself might survive, thrive, or close. Still the sooner that happens, the sooner everyone affected has the time to find a new way of working, to adapt. I am certain that, Covid-19 or not, the market was already changing. I don’t just see it, I am a driver of it; and what better time to explore new options than when you have enforced time on your hands. If company (a) fails but market demand is still there, new companies will spring up to replace them. Best case, company (a) adapts and becomes successful; an outcome much more likely if they are not artificially keeping their existing busines model alive.
The other side is company (b) – they take subsidies and keep staff on furlough, whilst waiting for a return to ‘normal’. By supporting this we are running up billions of taxpayer debt and company (b) is still burning their cash reserves, preventing affected people from shifting to new education and development options. Best case, things return to a semblance of normal (looking unlikely), and their business is at risk of a faster death next time. Worst case, this company is out-maneuvered by competitors who find a way to operate and the end occurs for them anyway, near immediately.
This situation is not unprecedented or unpredictable; every major technological change has caused this throughout history. Look up Boulton and Watt, Kodak, Polaroid, Blockbuster, Borders Group, etc. Don’t believe it was happening anyway? Read this from 2013. Could we predict the human impact? Watch Humans need not apply from 2014. Who knew a pandemic could accelerate this? Read this Atlantic article from 2018. We missed all this, and had to make hard decisions with limited information! Sure, but we could still recognise and adapt – this is a good read from five months ago.
Why am I worried about the economy? Billions of dollars of debt funneled into the wrong place only delays the inevitable, especially when we are already overdue a change to thinking. We could be investing in digital education for those displaced; incubating innovative startups with models that work, and embracing this horrible event for long term benefit not cost.
And don’t get me started about huge investments in physical education campuses, public transport, and the wrong kind of housing. Most are zombie industries already holding us back. The lack of plan around Covid-19 is one thing but squandering our response by not treating it as an opportunity is a whole other level of disaster. One we are poised to feel for decades.
I would be planning as if this is an opportunity, and my investments would be in completely different areas. If there is interest, I may write a follow-up piece on where and why.
One thing gives me hope for change; every time see a Labour campaign billboard, it says “let’s keep moving”. After the last few weeks, the irony will not be lost on many.