We Won’t Go Back to “Business as Usual”

I think it’s going to be very hard to just go back to business as usual—as though the world will simply snap back to everything the way that it was just a couple of months ago.

Not that the world is going to completely change and not go back to anything like it was. I think a lot of it will go back. But in many areas, particularly in the consumer-facing areas, it’s going to be very different.

I also think it’s going to be very different in terms of supply chains. I think the risks to supply that can come for a whole variety of factors are now much more apparent. Those can be health risks, those can be policy risks. And so, even though people were broadly aware that some of these things could happen, I think it’s much more immediate now. I think it’s much more fundamental now that people understand that.

That’s going to change business behavior, that’s going to change supply chains, that’s going to change where manufacturing occurs, that’s going to change also how consumers act, how they interact with the world. How much do they go out? Do they go out to restaurants? Do they fly? Do they go on vacations? Or do they speak to their family members through electronic means instead?

And so, I think in the short run it’s going to be a very slow return to anything that’s close to normal. There will be some steps in that direction, but it’ll be, I think, much slower than many people had hoped for.

I think that it’s also going to be a fundamental change in the longer run. I think there will be changes to the supply chain, I think there will be changes to the way consumers behave. And I think this is actually going to be a much deeper change than we saw after the tragedy of 9/11 or what we saw after the financial crisis.

When the financial crisis hit, that was primarily a financial crisis. It was about the financial system, and it was about funding for the operations of firms, as well as individual households and their mortgages. Postcrisis, certainly there was a lot of tumult in the economy. The unemployment rate went to 10 percent in the US, gradually came back down, there were a lot of transitions in different parts of the economy, but really there wasn’t a fundamental change.

The main changes were a much smaller construction industry and a smaller financial services industry. But otherwise life largely has come back to be similar to the path that it was on before the crisis.

Now, many people have faced terrible challenges. I fully understand that it is not as simple as just, “Oh, things came back to normal.” There was a lot of dislocation. But if you look at overall economic activity and the kind of categories of economic activity, besides a much smaller construction sector, and especially on the household side, and a somewhat smaller financial services sector, the economy has evolved a decade later largely as it had been evolving before that, with those two exceptions.

I think this is going to be different. I think people’s behavior is going to be quite different, and I think, in particular, things related to hospitality, and also sporting events—I mean, a whole variety of things where people would be eager to get together and really wanted to get together—there’s going to be much more wariness of doing that.