A rebounding economy won’t mean a return to the status quo
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This summer the phrase “Roaring Twenties” will be bouncing around corporate boards, investment groups and political strategy meetings. As Covid-19 lockdowns are scaled back, economic optimism is rising and investors and advisers are contemplating a boom decade. Judging by Manhattan’s packed restaurants, a rebound is in full swing.
However, despite all this sunny chatter, it is worth policymakers taking a cool-headed look at a striking survey that recently emerged from the Pew Research Center in the US. This suggests that economic dissatisfaction, given an outlet in the pandemic, has bred a broad desire for reform.
Late last year, Pew’s pollsters asked 4,100 adults in Germany, the US and UK whether they liked the structure of their economy. You might have thought that the development of vaccines and thus the prospect of an exit from fresh lockdowns would have sparked an upbeat mood. Other surveys from groups such as the business think-tank Conference Board suggest that, in the US at least, consumer confidence has recently soared.
But it isn’t so. Roughly two-thirds of respondents in France and exactly half of those in the US, UK and Germany said they wanted either a “major overhaul” or “complete reform” of economic structures. Only a tiny minority – as low as 3 per cent in France – said they backed the status quo.
Maybe that discontent has been intensified by the psychological toll of the 2020 lockdowns and will eventually dissipate. Time will tell. But it is leading to some eye-catching demands. The survey suggests that the British – whose ruling Conservative party just had major success in local elections – are even more eager than continental Europeans to see higher levels of government control and redistribution. In fact, 67 per cent of British people strongly support more regulation of business, whereas it is 58 per cent in France, 53 per cent in Germany and 46 per cent in the US.
The British desire a much more expansive role of the state. Sixty-two per cent of Brits deem it “very important” for the government to build more public housing and 53 per cent for it to increase benefits to the poor, higher than other countries. A full 50 per cent want a universal basic income, much higher than elsewhere. Margaret Thatcher might spin in her grave.
Now, like all surveys, these findings need to be examined in context. The fact that the British are expressing higher levels of support for government regulation and redistribution than the French and Germans might reflect the fact that they have had less of this than their peers on the continent in recent decades.
Yet even allowing for caveats, it would be foolish to ignore this survey; if it is only half-right, it implies that we cannot assume that any economic rebound and return to “normal” will automatically lead to voters embracing the status quo. On the contrary, it is possible that the Pew poll is showing a bigger zeitgeist shift, partly driven by the pandemic but with deeper roots, which could reshape policy attitudes for a long time.
I suspect, for example, that one reason there is high demand for government intervention is that Covid has not only exposed inequality but reminded people just how uncertain the future is. There is a search under way for protection.
James Manyika, chairman of McKinsey Global Institute, agrees. “There is this sense of inequality, of people, of place – work security has declined for so many,” he says. Indeed, a separate survey of 25,000 Americans that McKinsey published this week suggests that “half of Americans reported being on the financial brink and unable to cover more than two months of living expenses in the event of a job loss”. Rural respondents reported “feeling that they are at risk of being left behind”.
Hilary Cottam, an honorary professor at University College London who works in post-industrial communities in Britain, describes how a similar pattern of insecurity and marginalisation is spurring calls for change. “The [post-pandemic] flourishing we want can’t be brought about by postwar institutions,” she told a Stanford University seminar this week. Indeed, Jenna Bednar, a political science professor at the University of Michigan, told the same seminar that the social fabric has decayed so far that a complete overhaul of our institutions is needed to create a more collaborative, inclusive system.
However, there is a positive factor that may also be prompting calls for change: the scramble to develop and distribute the vaccine has not only shown people that governments can – sometimes – do good things, including collaborating with the private sector, but that companies can sometimes work together too, instead of just competing. This could lead to more collaborations in other fields, such as climate change.
Either way, the key point is this: if (or when) we do emerge from Covid this summer, do not just look to the economic data to track what is going on (say, how fast the economy is growing); keep an eye on whether a subtler shift in the zeitgeist is also under way.
Returning to “normal” – be that in offices, schools or restaurants – does not necessarily mean re-embracing the old systems. Political and corporate elites should be warned.
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