Throughout our history, America has largely developed from crisis and response. Colonial rebellion birthed our Constitution, the Great Depression led to the creation of Social Security, and the Great Recession led to the Consumer Financial Protection Bureau.
COVID-19 has yet to gestate a new government agency, but the nearly $3 trillion in stimulus funds authorized has ushered in an entirely new fiscal operating system referred to as Modern Monetarist Theory (MMT). These structural governmental responses to crises perfectly time-capsule the concurrent milieu in the nation. Undoubtedly, COVID will alter the structure and shape of government policy, but there are other, more subtle transformations happening as well.
The media have progressed from fireside storytelling, to sovereign decrees, to printed pamphlets, to telegraphs, telephones, terrestrial television, cable television, and now internet ubiquity. There are 3.5 billion audience-coveting global inhabitants with smartphones who snap photos and broadcast information. Media without curation has become crowd-sourced and histrionic. COVID broke new ground as sourceless pictures, charts, conspiracies, and testimonies flooded our apps. Perhaps curation will return somehow, but until then, the force of public opinion has become a new leaderless regulator and judiciary.
David S. Waddell
The COVID-based shutdown of the “non-essential” small business economy has transferred enormous market power to the “essential” large business economy. We experienced a similar phenomenon within the banking industry during the Great Financial Crisis. Pre-crisis, the FDIC insured 7,400 commercial banks in the U.S. Today it insures 4,500. This year through May, small business bankruptcies have surged 50 percent. Simultaneously, valuations across the five largest U.S. companies have surged more than $1 trillion. Small business is in crisis. Big business is booming.
Remember when leading computer scientists warned us that the calendar flip from 1999 to 2000 would deactivate all of our computers? That fear kicked off the largest desktop upgrade cycle in the history of the world and helped fuel the tech bubble that burst in early 2000. In our current COVID version, social isolation mandates have initiated mass adoption of virtual workplace technologies and forced us to source nearly everything digitally.
In fact, as I write this, Zoom Video (ZM) has a larger market value than the world’s seven largest airlines — combined. Society has leapfrogged and our digital utilization rates will not retreat from here. This is Y2K 2.0 and virtual has become the new reality.
While China will remain the world’s dominant exporter by volume for years to come, its share will surely shrink as global supply chains diversify. While last year’s trade war created shipping frictions, COVID created shipping halts. Upstart exporters like Vietnam and Mexico will benefit. Pressure, or political mandates, may also force U.S. companies to build our source within the U.S.A. The bi-polar order built around America consuming what China’s producing will become multi-polar, reordering wealth and power globally.
Bottom Line: COVID registers highly in our national crisis rankings. Each previous crisis of this magnitude ushered in significant societal changes. While we will create a vaccine for this coronavirus, its legacy will remain within the cells of our society.
David S. Waddell is CEO of Waddell and Associates.
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