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Salvo 03.04.2022 15 minutes

Long Covid

Manhattan, New York City, Park Ave South by Union Square, Rush Hour, May 8, 2020. Very, very empty at just a few minutes past 1 PM!

The societal effects of the pandemic will remain with us.

This is a disease one should not underestimate, but let’s assume that the worst of the Covid-19 pandemic is past us, at least for now. The disease’s impact on economy, our way of life, the state of democracy and the world will resonate for years to come and could have some unexpected wrinkles.

Covid-19 was a major disrupter of virtually everything, but it also accelerated many things that were already in play. From the growth of the tech oligarchy to the dispersion of population to suburbs and to smaller cities, to a wide range of political impacts, it will continue to be felt here and around the world.

Great pestilences disrupt societies and economies. The plague undermined the Roman empire, as shown by historian Kyle Harper, creating the conditions that boosted the barbarian warlords who later became the Medieval aristocracy. The even more lethal plagues of the Middle Ages disrupted the great Mongol empire, at the time the largest in history, and, in conjunction with cooling temperatures, undermined the great Silk Road and ended the Pax Mongolica.

Yet not all effects were negative, at least in the long run. The mass die offs from the Plague undermined the old social order. “In an age where social conditions were considered fixed,” suggested historian Barbara Tuchman, the sudden shortage of labor was “revolutionary.” The plague may have killed upwards of 40 percent of Europe’s population, but it also precipitated the rise of the Third Estate, and often raised wages for scarce labor. “People were fewer,” noted Tuchman, “but they ate better. The pandemic also led to greater emphasis on long-distance navigation.

Big Winners

The recent pandemic has been far less lethal, but it has reshaped our economy and society. It has to date largely favored big companies, which could deploy far greater resources and make the necessary transition to social distancing and on-line ordering, and the rich, who could cluster in their big homes and fly on private jets. Big Pharma companies have made lucrative profits with vaccine revenue that added an estimated $26 billion to their bottom lines by the end of 2021.

But the biggest initial winners were top digital companies —Amazon, Apple, Tencent, Microsoft, Google, Meta, Ant, Netflix, Hulu—all feasting on record profits in both 2020 and 2021. Leftist author Naomi Klein has dubbed this tech ascendancy “the Screen New Deal,” which seeks to create a “permanent and profitable no-touch future.” In contrast, the pandemic ravaged Main Street, eliminating over 100,000 more businesses than would occur normally, notes the Federal Reserve.

Millions of surviving businesses now increasingly have to rely for services and products via what analyst Mike Lind calls “toll booth” companies like Google and Amazon, which charge a fee for transactions once performed by small business owners. Even today, according to an Alignable.com survey, only 16 percent of small business owners – who have been particularly hard hit by inflation and labor shortages—feel the government has done much to help them. Martin Kulldorff, a professor at Harvard Medical School, summarized the impact: “Lockdowns have protected the laptop class of young low-risk journalists, scientists, teachers, politicians and lawyers, while throwing children, the working class and high-risk older people under the bus.”

Yet if many established businesses failed, a whole new generation of entrepreneurs have begun to emerge. Many small businesses may never get back to pre-Covid levels, as people have gotten used to the convenience of on-line purchases, but some are finding new uses for abandoned malls and have discovered new ways, using social media and technology, to reach more customers. For the first time in years, there’s been a rise in startup activity at the grassroots level. After years of decline, new business formations rose from roughly 3.5 million in 2019 to 4 million last year. Self-employment, pummeled at first, has recovered more rapidly than conventional salary jobs, as more Americans reinvent themselves as entrepreneurs.

These include firms that have found new niches and ways to serve customers. The market, for example, for personal service and good food did not disappear with the pandemic, but the rules changed, with far greater emphasis on web-based facilities for selling wares. The restaurant industry is probably set for permanent change with the rise of ghost kitchens that only produce food for delivery and takeout with no dine-in area. CNBC reports that this market is set to grow to a 1 trillion-dollar industry by 2030.

The tech oligarchies also now face competition from future decentralized networks, including those based on blockchain technology, which is less vulnerable to domination by giant firms as its distributed design eliminates the incentive structures that lead to central node control or monopolistic behavior. Even Google’s near-monopoly position web browser supremacy is set to be challenged by data privacy-conscious alternatives such as Duckduckgo, which has seen growth from 20 million to over 100 million daily searches in the last few years.

The pandemic has also accelerated changes in how and where Americans live. Even before the pandemic, the vast majority—over 80 percent—of job and population growth took place in suburban areas. The early rise of the pandemic in dense cities led wealthy New Yorkers to seek relative safety, like their Medieval counterparts, in the countryside, where the chances of infection, although not negligible, were generally less. This, Fernand Braudel observed, created “a separate demography for the rich.”

Location, location

Even as the pandemic’s wrath spread to less dense places, it has continued to engender what Zillow calls “the great re-shuffling,” an acceleration of an already-decided trend towards suburbs, the sunbelt, and smaller cities. Between 2019 and 2021, preference for larger homes in less dense areas grew from 53 percent to 60 percent, according to Pew Research Center. Concerns about space are likely to continue, particularly if other pandemics follow. In 2020, exurbs enjoyed a 37 percent growth in migration and price increases twice the national average, according to a Wall Street Journal analysis.

Yet its not so much fear that is driving the new geography, but the growth in “work from home.” Stanford economist Nicholas Bloom suggests that remote workers will constitute at least 20 percent of the workforce, more than three times the pre-pandemic rate.In a recent survey of over 5,000 employed adults, four in ten American workers expected some level of remote work flexibility post-pandemic. McKinsey & Company reports that more than one-half of surveyed employees would like their employers to adopt more flexible hybrid working models. More than one quarter of employees indicated that “they would consider switching employers if their organization returned to fully on-site work.”

Of course, many people will come back to work in great cities like New York, but likely not near pre-Covid levels. Tech is particularly vulnerable. Studies from the National Bureau of Economic Research and from the University of Chicago suggest that on-line could become the norm for one-third of the workforce, and as high as 50 percent in Silicon Valley.Leading tech firms, including Facebook, Salesforce, and Twitter, now expect a large proportion of their workforce to continue to work remotely after the pandemic. This may just be the beginning: Some three quarters of venture capitalists and tech firm founders, notes one recent survey, expect their ventures to operate totally, or mostly, online.

To many urbanists, not to mention investors in high-end office and luxury towers, this shift may be terrifying but it’s somewhat inevitable; both the Partnership for New York and Bay Area Council survey predict a significant decline in office use. Yet from a societal point of view, the dispersion of jobs, particularly tech, has benefits, allowing more parts of the country to participate in the digital economy, and allowing tech workers to convert their earnings into houses.

More important still, for many millennials, the hybrid and dispersed model, including suburban satellite offices, addresses issues like enhanced “life-work balance,” something generally held critical to millennials, and particularly to women with children trying to get back into the labor force as schools reopen, according to a Conference Board survey.

Eventually, the post-Covid environment could prove beneficial to cities as well. Unable to force people to live in closer-in areas, cities will have to compete on the basis of amenities and intrinsic appeal. If this gets cities to address their most pressing issues—crime, schools, sanitation—they could restore at least some of their historic role, and become once again beacons for the aspirational working class.

Laboring

Yet not all the key impacts of Covid involve high-end office or tech employment. The pandemic established the vast dependence of the upper and “laptop” classes on the grunts of the factory, warehouse, and delivery systems. Labor shortages—in part due to less low-end immigration during the Trump years—brought about higher pay for such workers, the first time in decades.

In particular jobs have grown in both a resurgent manufacturing sector and the logistics industry, great news not only for companies like United Parcel Service, DHL, and Federal Express but also smaller suppliers. The shortages of drivers and independent contractors have become so severe that Amazon has set up its own incubator for new trucking companies. “It’s a workers labor market now, and increasingly so for blue collar workers,” notes Becky Frankiewicz, President of Manpower, Inc. “We have plenty of demand and not enough workers.”

The key question facing the economy is how to make this kind of work more rewarding, particularly once inflation slows. The left’s answer—unionization of giant firms like Amazon or Starbucks—may be a partial answer but unions, outside the public sector, are at a low ebb. Last year the number of strikes was well below levels the previous years. More revealing, private sector union membership continued its long decline through the pandemic; among younger workers total unionization rates now approach 4 percent of the workforce.

But perhaps the biggest opportunity lies in sectors like medicine, construction, and manufacturing that have the greatest demand, and need skilled workers. In 2019, for the first time in a decade, the percentage of United States manufacturing goods that were imported dropped, notes a recent Kearny study, with much of the shift coming from east Asia. Since then, the trend to reshoring has accelerated as a reaction to our Covid experience where we first learned about our lethal dependence on China for medical supplies, followed by an import supply chain disruption that has led to persistent shortages and higher prices.

With manufacturing employment expanding more rapidly than in almost four decades, job openings in the industrial sector are up 75 percent since last February. For many young people, it makes increasing sense to learn a trade rather than get a four year degree given that college grads suffer an underemployment rate of nearly 50 percent; those with a technical education enjoy a higher chance of their preferred employment, according to the U.S. Department of Education, and are more likely to be employed than their counterparts with academic credentials.

Politics of the future

Covid has already reshaped our politics. Joe Biden sits in the White House because of the pandemic and Trump’s often ham-handed public response. But now that Biden is in office, he has failed to focus on critical economic issues rising from the pandemic. As long time party strategists James Carville and Ruy Teixeira have pointed out, he has made a disastrous decision to appeal primarily to the party’s progressive wing and have focused not on lunch pail issues but what Carville scathingly describes as “the politics of the faculty lounge.”

This does not suggest the left do not have opportunities from Covid, which, among other things, provided governments with unprecedented powers. But rather than focus on racial quotas, “net zero” absolutism, defunding the police ,and imposing wokeness on schools, Democrats could seize on public health concerns—given that future pandemics are likely—to embrace something akin to early twentieth century “sewer socialists,” who were more socially conservative than contemporary conservatives, but left a legacy that helped all.

Americans, having experienced repeated shortages, particularly in medical equipment, might also boost support for an industrial policy that, as both Trump and Biden have suggested, seeks to bring industry back home. Of course, globalists of the right and left, powerfully situated in Washington, will object to any management of trade, but a potential majority of progressives and populist conservatives would favor this course. Whether in politics or business, it’s clear America, after Covid, is not the same country it was even two years ago, much less a decade or more. The country has experienced a period of rapid government expansion that needs to turn from padding the oligarchic rich and fortifying the administrative state, and instead seek to expand the grassroots economy, and the new towns and suburbs, arising from the wreckage. Post-Covid America’s challenges are extreme, but so too are the possibilities.

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