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COVID-19: A Social Recession with Severe Economic Implications

Updated: Dec 9, 2020

I think I can safely suggest that there is global awareness that we are in the middle of a health crisis. What many of us including world leaders and analyst remain very hazy on is the impact of this crisis.

It is important however that our conversation on this matter is not limited to any impending challenges arising from what World Health officials have declared as a global pandemic, but as well be extended to appreciate this phenomena as a “health crisis that has given rise to what I wish to describe as a social recession with severe economic and financial implications.

The harsh reality, whether we wish to admit it or not, is that the world is currently in a “social recession” which has disrupted life globally as we know it. The collapse of social norms has already had a devastating effect on social interactions and leisure activities, an experience unknown to us in our modern era.

What is undeniably clear as many of us watch in trepidation from the sidelines is the telling importance of social connectivity to the advancing of every facet of life, productive opportunity and economic development.

Of note and very evident from the debate that has ensued on this recent wave of turbulence is the common view that this health crisis will give rise to an economic recession. To accept such as an entrenched and defining position, is to miss a very important correlator and key factor to this global issue. Categorically, this health crisis has plunged the world into a social recession from which valuable lessons on “social cohesion”, as a vital factor of economic and financial well-being must not be missed.

What are some of these lessons?

While they are several, two are of considerable importance at this particular time, namely:

1. Economic volatility and risk are indispensably correlated to social interaction and

2. A Divided World will quickly die

Lesson 1 - Economic volatility and risk are indispensably correlated to social interaction

Economic activity is highly dependent upon an engaged society. In fact, social interaction is a major pillar upon which humanity functions and secure financial and wider emotional stability. If this was forgotten, or previously went unregistered, there is no question that practically every policy maker or business owner is being re-schooled on the important correlation between an engaged society and economic outcomes.

There is no doubt that at the end of this social recession, economic losses will be in the billions due to reduced air travel, inability to attend sporting events and unprecedented spontaneity to social distancing. Already, reports of significant losses are being recorded within retail and other sectors due to the fear of contamination and contagion on account of social interaction. Clearly, triggered reductions in social interactions can give rise to and have social recessionary effects with negative economic consequences.

It is not hard to notice as well that major travel and leisure companies which are typically occupied with high demands to satisfy the craving for social happenings are in a state of panic, on account of reduced social interface. In effect this is prima facie evidence of not just the onset, but actual effects of the world in an unparalleled social recession.

There can be no doubt in our minds that “business, financial and economic activity move when people move”.

Tackling the effects of this health crisis as a social recession, should consequently be high on the agenda and prioritized as a key strategy for managing economic and financial recessionary impacts. Global risk and recovery management protocols, to contain and manage social recessionary impacts must by all means be part of the narrative and global conventions going forward.

Lesson 2 - A divided world will quickly die

I raise this point to particularly highlight the sensitivity of the "world of wealth" to its dependence on "humanity and social systems". A planet of intelligent beings in less than optimum or unproductive mode due to a prolong social recession, can only result in a depletion of global wealth.

“Social globalization”, which I wish to frame as the integratory element (social recessions, being the interrelated element) that’s necessary to properly effect global production, trade and prosperity, when compromised or threatened, can and often result in varying degrees of social dislocation and unrest. In nations where labour laws are weak or not adhered to, the capacity of the nation to unify the workforce and function at optimum is endangered, resulting in the compromise of business, weakening economic outcomes and increase incidences of poverty.

At no time within our recent history have we seen this level of threat to the fragmentation and disruption of the workforce and consequential impacts on global supply chains. Clearly, this has resulted in grave concerns at national, business and household levels. regarding their ability to meet a wide range of essential needs.

Evidently, the high level of globalization that dictates our way of living, together with accompanying protocols governing trade and a myriad of other interconnected global activities, has demanded attention to the reality that “a divided world will quickly die”.

Make no mistake, the idea of a self-sufficient nation died and was buried several decades ago with the signing and enacting of wide-ranging global trade agreements. The world’s workforce in effect was also globalized and with the adoption of specialized areas of production in goods and services at national levels, the emergence of interdependent nations and the highly integrative nature of our social and economic space became the norm. This in effect has fueled the current social recession.

An Important Conclusive Lesson

Clearly, we need each other. Nations need each other. The wealthy need and have an obligation to the poor. Across ethnic and class-conscious boundaries, it is copiously clear that we need each other and that “a divided world, under severe social recession, for an extended length of time, will quickly die”.

Jerry DaC Blenman, Executive Director of the Caribbean Center for Organizational Excellence, is an experienced financial analyst, organizational development and change management specialist.

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