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Esmond Birnie

We should expect a different world on the other side of coronavirus pandemic

Esmond Birnie


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Staff from the Belfast Health and Social Care Trust continue testing of Health service workers for Covid 19 at the the Balmoral MOT Centre in south Belfast.  Photo by Kelvin Boyes / Press Eye

Staff from the Belfast Health and Social Care Trust continue testing of Health service workers for Covid 19 at the the Balmoral MOT Centre in south Belfast. Photo by Kelvin Boyes / Press Eye

Photo by Kelvin Boyes / Press E

Staff from the Belfast Health and Social Care Trust continue testing of Health service workers for Covid 19 at the the Balmoral MOT Centre in south Belfast. Photo by Kelvin Boyes / Press Eye

The immediate priority is obviously to get through this health crisis, but what sort of world may appear on the other side?

We do not know for certain, but it will be very different, with the pandemic set to have far-reaching consequences.

Locally, expect a smaller Northern Ireland economy.

Even if the lockdown lasts 'only' three months, it is quite plausible that this year we will see a decline of up to 10% in the size of the local economy.

The main explanations will be a collapse in household consumption of non-essentials alongside lower investment.

Non-food manufacturing and retail, much of construction, tourism and hospitality have practically shut down for a while.

It is unlikely that the restart will be a smooth process.

Politically, the consequences will be long-lasting.

Having beaten Labour in the December 2019 election, it is ironic that it is now the Conservatives who preside over a growth in the Government deficit towards £200bn alongside the likely quasi-nationalisation of some of the former commanding heights of business - airlines and railways.

As we go through the 2020s, expect a difficult debate about tax rises - at the UK level, income tax, and here in Northern Ireland in terms of rates and water charges.

Most politicians will probably conclude the principle of a National Health Service has been endorsed

Britain's Second World War borrowing was followed by decades of relatively high inflation - is that a picture of what the 2020s and 2030s will look like?

It will not be a great time to be a saver or an investor in Government bonds.

Some domestic institutions will enjoy an increase in esteem.

Notwithstanding questions about virus testing and the relatively low spare capacity in terms of acute hospital beds, most of the public and most politicians will probably conclude the principle of a National Health Service has been endorsed.

The performance of America's private insurance model looks patchy. Having said all of that, one of the best performers has been the German healthcare system which relies on compulsory social insurance.

The crisis may make it more likely that some form of public service broadcasting funding continues for the BBC.

Lockdown has cleared skies but this cannot be a long-term and sustainable approach to producing less carbon.

Instead, look to something comparable to the current international and urgent research efforts to discover a vaccine.

Similarly, we need to prioritise low or zero-carbon technologies.

War has been described as the "great auditor of institutions" by historian Correlli Barnett.

Some institutions face a trial in terms of how well they perform in the war against Covid-19.

The evidence is mixed as to whether the crisis is going to produce the sense of common purpose in the Northern Ireland Executive, which has been lacking since 2007 or 1998.

North-South co-operation has also sometimes been lacking and the responsibility for that has sometimes been as much in Dublin as in Belfast.

Time will tell how well and speedily the banks act as channels for some of the forms of Government assistance to business (loan guarantees).

As for US President Donald Trump's administration, perhaps the most charitable judgment is that his messaging has been erratic.

The balance sheets of institutions ranging from newspapers to universities are going to be severely tested by the crisis.

It may have displayed how much we share with people in other countries in terms of our vulnerability, but normal politics continues.

The EU faces a major crisis and last week's half-a-trillion-euro package only papered over the cracks. Eventually, either troubled Spain and Italy will pull away from the rest of the Eurozone or Germany will have to guarantee the Government debt of those countries by backing common Eurobonds.

Importantly, the negative impacts of the virus will not be felt equally.

Here in the western world, richer families are much more likely to have adapted to working from home - for some poorer families it will not have been an option.

US-China relations have hit a noisy low with each trying to blame the other as the originator of the virus. If the forecasts are correct, both countries are in a Covid-19 recession but the American one will be deeper.

By implication, the crisis may speed up China's overtaking the US as the world's dominant economy.

For sure, it will be a very different world post-Covid-19.

Dr Esmond Birnie is a senior economist with Ulster University

Belfast Telegraph