Minouche Shafik on how business will approach risk after Covid-19

One effect: supply chains will get shorter. …

It took a global pandemic and stay-at-home orders for 1.5 billion people worldwide, but something is finally occurring to us: The future we thought we expected may not be the one we get.

We know that things will change; how they’ll change is a mystery. To envision a future altered by coronavirus, Quartz asked dozens of experts for their best predictions on how the world will be different in five years.

Below is an answer from Minouche Shafik, the director of the London School of Economics. Her past positions have included: vice president of the World Bank, deputy managing director of the International Monetary Fund, and deputy governor of the Bank of England.

I see three connected trends accelerated by the global coronavirus crisis—localization, digitalization, and socialization of risks.

Supply chains for trade will become shorter and more local as companies place greater importance on security over cost and speed. Global trade was already moving in this direction before the pandemic, with automation reducing the importance of wages, enabling the re-shoring of facilities, and use of local suppliers acting as a defense against trade wars and protectionism.

While physical supply will become more local, the crisis has boosted digital globalization. We have already seen a big increase in the flow of international data with a growth in online working, shopping, entertainment, and financial services. This is likely to continue and, with it, the importance of finding effective ways to manage issues such as digital taxation and cross-border digital crime.

The coronavirus crisis has also exposed how many citizens do not have an adequate safety net to support them and their families. Even in some of the most developed countries, millions do not have adequate savings or welfare provision. And the rise in the gig economy means risks relating to work, ill health, and old age are increasingly placed on individuals rather than shared between workers, employers, and government.

Even before the pandemic, this was causing dissatisfaction and a strain on the social contracts between citizens and their governments. I expect to see a stronger and enduring reaction against inadequate provision, as citizens increasingly demand the risks are more evenly shared, and they are provided with greater economic security.

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