May 15, 2020
We are going to see a record-breaking drop in second-quarter GDP. Fiscal stimulus is going to produce an equally astonishing rebound in the third quarter. But this is not the typical recession/recovery scenario. The government caused the recession by shutting down the economy. Fiscal stimulus will help get it back on track fairly quickly. But what happens in the fourth quarter and beyond? We anticipate GDP growth of 5.3% next year in part because of our belief that technology will grease the wheels for an economic makeover. This will be a technological revolution at warp speed.
Consider the medical industry. The development of a vaccine typically takes 10 years. But epidemiologists think we could have a vaccine ready for widespread distribution by January. We have compressed the normal 10-year development process into a single year.
The same is true for therapies to assist the seriously ill. Almost 300 are in some stage of development. We have convalescent blood plasma donations, Remdesivir, and hydroxychloroquine. We also have blood plasma tests to determine immunity, and tests to determine if we have been exposed to the virus. All of this in two months.
Then there is telemedicine. It is going to be a permanent part of the economic landscape. No need to drive to the doctor’s office, sit in the waiting room for an hour with other sick people, see the doctor for 10 minutes, and go home. It is far more efficient for the patient, and perhaps more cost effective for the physician. Two months. And it will continue to improve
We have quickly gotten used to working from home. Everybody has become relatively familiar with video conferencing and will become more comfortable with it in the months ahead. The software will continue to improve. Tech companies recognize that their employees may be working from home permanently. We may lose some face time with co-workers, but we can eliminate that grueling two-hour commute. There is no need to rent or buy an expensive property in the city. Buy something outside and save both time and money. Companies may not need that glitzy expensive corporate headquarters building in the city. While they will need to figure out how to measure the productivity of those employees working from home, they can already track every keystroke we make so surely they can easily determine our productivity. Some city dwellers might move to a rural area. If enough of them do so they will help that rural community migrate into the 21st century. Companies could save money by adjusting downward worker compensation to reflect the lower cost of living. We may not want to work from home five days a week, but suppose we go into the office twice a week?. Less traffic. Less pollution. Working from home is here to stay.
Higher education has taken a huge hit during the shutdown. This virus may be the wake-up call that college and universities need to make fundamental changes. For years people have questioned whether a college education was worth its rapidly rising costs. Now, higher education is in trouble. As the stock market has declined, college endowment funds have shrunk commensurately. Every type of expenditure is being scrutinized – including sports. Integral parts of the campus environment like dorm living, huge student unions, large lecture halls, and football stadiums appear to be petri dishes that allow the virus to spread. Are students sufficiently worried about the virus that they choose to take a year off before returning to school? Given that so many parents have at least temporarily lost their jobs and blown through their savings, can parents even afford to pay for a college education? These types of questions have college administrators re-thinking everything. Some colleges and universities were able to teach classes and have students get and complete their assignments online. The effort may not have been seamless but it managed to work. Online learning will become a permanent part of the college experience. And it is not just higher education. K-12 classes can also benefit.
Nobody expected a virus to upend the global economy but it did. We chose to adopt drastic measures to halt its spread and the economy collapsed. But technology helped make an awful situation less unbearable. We began to shop on-line. As a result, Amazon and Walmart have hired more than 200,000 workers. Technology helped us all see a doctor when necessary. It allowed companies to conduct at least some business. It helped teachers to teach and students to learn. It gave us things to do while we were quarantined at home. We are in the midst of a technological revolution which is occurring at warp speed.
Economists tend to be a pretty pessimistic group. But their models rarely adjust for the fact that science, business, and finance are all working together to find solutions. We have heard the doomsday forecasts. But somebody in the tech world is already be working on the problem. Keep the faith.