What is happening to the world economy

When it is all over and people can lead a normal life again, business enterprises will be asked: "And what did you do in the war?" At least that's what Mark Carney, once the powerful Governor of the Bank of England, believes. Values ​​would play a different role in the post-corona economy than they have before, he writes in the UK Economist. When it comes down to it - as the crisis has shown - societies put health first, and only then do they address the economic consequences. One expects companies not to hoard but to share in times of need. Public spirit is a duty.

One can argue about the conclusiveness of Carney's predictions as well as about his war metaphor. But his theses show what is currently changing in the economy. The deepest recession since the war is looming. Nobody who bears responsibility today - entrepreneurs as well as politicians - has ever experienced anything remotely comparable. The result is fundamental uncertainty. Everyone agrees that the world after Corona will look very different than before. How we will all do business specifically in the future remains an approximation.

There are well-founded assumptions about the post-corona economy. For example: When people are insecure, they want to protect themselves. In economic terms, this means that security is becoming more important for companies and that people are happy to cut back on efficiency or growth. Companies and entire economies have learned that it can be dangerous to depend too much on others, especially when those others are from China. So companies try to get more competing suppliers, for example, and preferably those that do not involve political risks. As it is called in managerial German, they will "shorten their supply chains". And that can definitely cost efficiency. In any case, the result is a piece of deglobalization. Not without danger for the export nation Germany, which is dependent like hardly any other on the international division of labor.

The crisis has massively attacked the substance of most companies. Those who survived (often with government help) need to renew their reserves and build up equity. You will therefore save and, if in doubt, invest less. That costs growth. The whole economy is becoming more conservative. The pursuit of security makes life difficult for the so-called locusts - a side effect that is pleasant for many. The term was once used by the SPD veteran Franz Müntefering for investors who buy companies on credit and then pay interest and repayments from the profits of the rationalized company. So the locusts' business model is to sacrifice safety for efficiency - an anachronism these days.

More digital, more conservative, growing more slowly

The escalating national debt is a central issue. In order to curb the collapse of the economy, governments everywhere have made massive use of the capital market. In Germany, the federal budget has a high deficit again after years of black zero. According to calculations by the International Monetary Fund, national debt will rise worldwide from $ 61 trillion to $ 66 trillion this year. There was nothing like it even during the financial crisis.

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That was all right, the governments behaved as the macroeconomic textbook for economic downturns foresees. It just can't go on like this forever. The turnaround must by no means come too early, otherwise there is a risk of a relapse into recession. At some point, however, the governments have to start saving, if only to maintain confidence in the ability of the states to act. The question of when to return to austerity is likely to split politics in the not too distant future. The conditions are not very good for ambitious investment projects, such as the plan to use the corona crisis to make a fresh start in climate policy.

But if the state, companies and private households save at the same time, the consequences are weak demand and low prices. For the foreseeable future, the inflation rate and interest rates will therefore remain low, believes Clemens Fuest, President of the Munich Ifo Institute. The worries about the threat of inflation because of the national debt and the large amount of money printed by the central banks would therefore be unfounded.

A digitization surge is to be expected in the entire economy. Millions of people these days are experiencing everything that is possible with the Internet, how easy it is to replace business trips with video conferences and how easy it is to work from home if the employer provides the right equipment. Such experiences are not forgotten.

The economy of the post-Corona era will be more digital, but otherwise more conservative, more dependent on the state and probably growing only slowly. The big question is whether it will also be a fragmented economy in which national egoisms will rule. So whether the shortening of the supply chains is not the only thing, but globalization will also be reversed. That is probably not possible, but it is also not impossible. The crisis is fueling national egoism, populists are trying to use it for themselves - from Matteo Salvini to Donald Trump. The coronavirus shows that the big problems are global and need global solutions. That should also teach economic pragmatism.