The pre-Covid global economy evolved over centuries. Economic prosperity initially was based on natural wealth in the form of raw materials, fertile lands, water and population. This is referred to as economic comparative advantage. National wealth was created through trading materials from one area of the world with particular comparative advantage to areas which did not have the same advantage. The great European empires, the greatest trading nations, evolved and developed by exploiting various comparative advantages driven by shipping and maritime dominance.
Over centuries and because of industrialization economies developed based on competitive economic advantage. Competitive advantage is built on the managerial and production efficiencies as well as the creative and innovative capabilities of individual countries. Competitive economies are built on adding value to raw materials through design innovation and production capabilities.
Free and unrestricted trade is an essential prerequisite for countries to benefit and prosper from both comparative and competitive economic advantage.
Fundamental Impact of Covid-19
The global Covid-19 pandemic has had an indiscriminate and random impact on the global economy. Primary fundamental requirements such as unrestricted trade and transportation have been disrupted at local, regional and global levels. This has led to clear disruptions of global business processes. Global, regional and local supply chains have been disrupted thus restricting the physical movement of goods (raw materials and value added goods) at local, regional and global levels. In the information age this also affects the movement of natural people (experts, consultants, etc.) at a global level. This of course will affect global economic growth and traditional economic integration which globalization aspires to achieve.
Opportunity in Crisis
Sustainable business success depends on directing resources (time, money, efforts, knowledge, etc.) to meet the identified and validated needs of customers while competing with other firms. Crises change the status quo of economies. What succeeded in the past may not succeed now.
Things that were may no longer be relevant such as international supply chains, freedom of travel and increasing global economic integration.
Thus, crises create new states (new states quo), new needs and priorities, new realities and new economic and business structures. Successful businesses will be the ones that identify and understand post Covid-19 changes and the potential underlying opportunities.
Likely Impacts of Covid-19
Globalization will likely decrease the physical exchange of goods. Physical interdependencies will become weaker. Supply chains will be disrupted. Free trade flows will decrease. This will drive changes of industry within countries. There will be increasing unemployment in sectors and job growth in new or other sectors.
Vision and multiple integrative skills required
Surviving and thriving beyond Covid-19 will require creativity and the ability to integrate skills across several fields. The IT and communication revolution and its intersection with virtually all economic sectors and sub-sectors will empower people with various skills to work and cooperate together to create new products and services. Successful entrepreneurs will be able to identify important cross-sectoral linkages which will create value and competitiveness.
Additionally, the way in which successful companies will work will change. Companies are likely to become closer to design and idea houses, sufficing to identify and subcontract technical interventions to third parties. This will require a deeper understanding and appreciation of technical certifications and standards enabling disparate inputs to seamlessly integrate at a company level.
This will fundamentally change the way companies are organized and work and the way teams will work together.
Where to look
The negative impact on global supply chains will likely increase the importance of national food security. There will likely be national focus on intensive technology driven agriculture. Agriculture is likely to become more urban as agricultural production comes closer to population centers as a means to mitigate supply chain interruptions and reduce cooling and storage costs.
Many service sectors such as education, entertainment and tourism will also likely go be developed and built in the virtual world. New successful start-ups will develop and use technology, arts and communications to create effective academic lessons, memorable tourism experiences and unforgettable entertainment. Successful companies who serve these types of service markets will require talents and skills across multiple fields which will be brought together in the short term to execute well defined, well scoped and well integrated projects.
Import substitution is likely to increase, accompanied by an increasing need to maintain existing national capital stock (production equipment, transportation equipment, telecommunication equipment, etc.) and facilitate an increase in distributed manufacturing for spare parts using CAD/CAM and 3D printing. Thus manufacturing is likely to become increasingly decentralized, technology driven, and supported by high speed telecommunications and partnerships based on clear technical standards and quality control methods. Sustainable decentralized manufacturing will be based on the nexus of engineering, IT, 3D printing, CAD/CAM, material science and skilled and certified technicians.