The coronavirus pandemic changed the world. Leaving aside the more than 731,000 deaths and the 19.8 million confirmed cases, economic inequality -an already disturbing phenomenon- will grow at all levels. Rich countries are doing better in mitigating the pandemic’s brutal economic impact than poor ones. Thanks to greater access to credit and to a more diversified economy; large companies will be able to survive better. Just a fraction of the world’s population can afford to stay home under lockdown. There is also a clear digital divide that reminds us about how many household do not have access to the internet, and will pay the consequences
In the business world, the pandemic accelerated changes that were already in motion. Online shopping was already undergoing strong growth particularly among young people who had begun to consider brick-and-mortar stores as places where to have an experience rather than places where to go shopping. Quarantines and lockdowns have been the death knell of dozens of long-standing department store chains around the world.
Digital adoption also accelerated, driven by Covid-19. This explains why the combined value of companies such as Apple, Alphabet (Google), Amazon and Facebook -which are enabled by technology – now exceeds US $5 trillion: 4 times the size of Mexico’s nominal GDP. All these US companies have achieved extraordinary growth, despite the US economy undergoing its worst quarter in history. Apple’s iPhone sales were up 25%. Meanwhile, Amazon’s Q2 2020 revenue increased 40%. And, despite stumbling upon a boycott of more than a thousand advertisers, Facebook’s Q2 2020 revenue grew 11%, reaching US $18.7 billion.
Like other times in history, this crisis will offer unexpected opportunities. Better-managed and financially healthier companies will acquire their struggling rivals, invest in technology, increase their market share, and accelerate their growth. Using more efficient and modern business models, new companies will emerge replacing those going bankrupt. The most creative entrepreneurs will be able to read correctly what is coming and new business ideas will be born, along with the new companies that will be dominant in the next decades. General Electric (1892), IBM (1911), Disney (1929) and Uber (2008) were all founded in the midst of great crises.
For the world’s most developed economies, the dilemma will be when to offer lifelines to existing companies presenting liquidity problems to prevent a solvency crisis, but at the same time avoiding to inject money into zombie companies that are unlikely to survive the complex environment that is coming. Creative destruction must be accelerated and not prevented, so that capital flows towards those sectors of the economy where it will have greater impact generating jobs and wealth.
And what about Mexico? It is more important than ever to change course. If the most devastating economic crisis in a century does not make Mexicans reflect, reach out to experts and question the chosen course, the country will be condemned to decline towards perennial underdevelopment and irreversible impoverishment, given its demographic profile.
Let’s foster Mexican creativity to integrate into the world! This is not the time to tout old ideas like oil refineries and horse-powered sugar mills (like President Andrés Manuel López Obrador has done) but to provide young Mexicans with marketable skills that allow them to compete internationally. This is not the time for dogmas and politicking, or to seek political advantage by dividing Mexican society. We have to face this brutal crisis together. As a country, let’s seek to position ourselves by maximizing Mexico’s capabilities and strengths. We do have them, but many are becoming obsolete. Mexico’s competitive advantage based on offering cheap labor will come to an end as automation and robotization processes accelerate, amidst an international economic environment that will demand higher levels of competitiveness and efficiency.
That is why Mexico urgently needs to move away from the old-fashioned energy policy model in place, through which the country squanders resources that it doesn’t have. Generating dirty and expensive energy by burning fuel oil and coal is suicidal: it kills Mexican industry’s competitiveness and makes it impossible for foreign companies to establish themselves here.
This is the time to be flexible and to adapt to the new environment. It is not the time for rigidity. Otherwise, stiffness risks becoming permanent: rigor mortis.
* Jorge Suárez-Vélez is an economic and political analyst He is the author of The Coming Downturn of the World Economy (Random House 2011). A Spanish version of this Op-Ed appeared first in Reforma’s newspaper print edition. Twitter: @jorgesuarezv