WORLDVIEW: The truth about how coronavirus will reshape the world

The novel coronavirus is causing a panic that may – or may not – be out of proportion to its potential for devastation. There are too many unknowns for us to properly assess its likely impact. But however deadly it turns out to be, the odds are good that the coronavirus is going to permanently reshape our world..Health risks unclear.At this point, we don't know enough about the coronavirus to guess how deadly it's going to be. For a start, we don't really know how lethal it is. Our best data estimates a mortality rate of around 2% – about 20 times more deadly than the regular flu. But that may not be a good guess, because it's based on how many people with confirmed coronavirus have died. It's possible that a) there are many more infected people that we don't know about who didn't get terribly sick and the mortality rate is much lower or b) there are many infected people who died without being confirmed cases and the mortality rate is much higher or c) the virus will mutate as it spreads and become deadlier..We also don't actually know how widely the virus has spread. In the US, UK, and Italy there are confirmed cases that cannot be traced to contact with someone who travelled to an infected area. This means that the virus is spreading quietly in communities, probably through the mechanism of people who don't get terribly ill but are ill enough to be contagious..___STEADY_PAYWALL___.Finally, we don't really know how infectious coronavirus is. It seems that the average sick person will infect about 2.5 to 3 other people, making it much less infectious than measles (an infection rate of up to 18), but more infectious than seasonal flu (an infection rate of about 1.3). However, this is just a best guess – since we don't know how many people are infected, we can't really know how infectious it is..With no real sense of how far the coronavirus has spread, how infectious it is, and how deadly it is, then, we don't really know exactly what the health risk looks like. It's possible that 2% of all the people on earth may die. It's also possible that the virus will fade over the next few weeks. There is simply no way to know..Economic risks rising.Here is what we do know. We know that the coronavirus has been a test case of something that health experts have long warned about: An infectious and lethal virus could very quickly emerge and spread around the world, causing massive economic and social dislocation..Even if the novel coronavirus doesn't kill millions of people – which seems likely given the scale of governments' response – it has had a major economic impact. The shutdown in China has led to significant supply disruptions. Factories around the world are facing shortages of components, and it's quite likely that many will have to close, at least temporarily, while they wait for Chinese production to pick up again. Many companies have also decided to delay investments because of the uncertainty caused by the virus. This means that future production will be lower than it would have been if those investments had been made. Even if investment picks back up in the next few months, the supply crunch will linger..Read also: A rational look at coronavirus threat to SA – analysis.On the flip side, the virus is also dampening demand. People are cancelling their travel plans and avoiding restaurants, bars, cinemas, and sporting events. They're also avoiding shopping malls and shopping less (other than buying up epic levels of hand sanitiser and baked beans, of course). Many workers are facing the possibility of being furloughed from work or sent into self-isolation if they're sick – or at the very least, working from home for a time – which is discouraging spending and raising fears of missed income..All of that adds up to a demand crunch. The coronavirus means people just aren't shopping like they should be. And that is further dampening business investment in a vicious circle..Policymakers have all said that they stand ready to support the economy. Mostly, this means that they are ready to cut interest rates. But further interest rates cuts aren't going to do anything about this situation. The problem isn't that there's no access to credit – heck, most of the world is swimming in credit. The problem is that no one wants to spend or invest because they don't know what's going to happen. Lowering rates will have no effect on this problem..A massive government spending program could help, especially if governments focused on productive spending like investments in infrastructure. But with construction supplies taking a knock from the China shut down and workers afraid to leave the house, even that may have a limited impact. The economic challenge is complex and hard to fix..Long-term realities.What this all means is that the coronavirus may have some long-term impacts. First, it could reshape global supply chains. Many firms have noticed that their reliance on a single supplier – namely China – makes them very vulnerable to any problems in China. Some are going to be thinking about the need to diversify and branch out, to invest in new suppliers that would make the supply chain more resilient..Second, the coronavirus could lead to a painful and potentially long-lasting recession. If the virus continues to spread or gets out-of-control in a big market like Europe or the US, it could trigger a serious recession. And the fact that policymakers don't have a lot of tools to deal with the recession could mean that it lasts a long time..Finally, the coronavirus will test our way of life – our just-in-time manufacturing, our reliance on news (often fake) delivered through social media channels, our use of apps like Uber that rely on gig workers, our expectations for quick delivery of anything we order online. It's the first major global crisis to hit since the app revolution, the social media revolution, the digital revolution of the last five or so years. We may be about to learn how the sharing economy reacts when things go wrong.

WORLDVIEW: The truth about how coronavirus will reshape the world

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