The world is changing fast and to keep up you need local knowledge with global context.
The numbers are in – the Covid-19 Depression is going to be the worst economic downturn since the Great Depression.
Already, the International Labour Organisation estimates that job losses around the world amount to the equivalent of 305 million full-time jobs. The IMF is predicting that the global economy will shrink by 3% this year, more than four times the 0.7% contraction recorded in 2009 and the worst fall since the Great Depression.
While many hope that the economic situation will turn around once lockdowns are lifted, early evidence from China suggests that recovery will be a slow and uncertain process. Battered consumers are unwilling to spend and frightened businesses are holding off on investment – in the EU, business borrowing for investment fell 15% in the first quarter. The longer the downturn lasts, the more lost jobs, shuttered businesses, and bad loans we will see.
So, we’re looking at a bad situation that will last for an unpredictable length of time. What does that mean for our day-to-day lives?
To answer the question, we can look back to the lifestyles of Americans during the Great Depression. Faced with mass unemployment and plummeting incomes, the Americans of the 1930s lived very different lives to the ones we enjoyed today.
The new world of work
During the Great Depression, millions were unemployed and even those who held onto their jobs faced salary cuts and reduced working hours. Falling incomes prompted women to go to work and salary increases were rare.
As South Africa (and the rest of the world) grapples with job losses, we can expect to see households lose some ground on income. To cope, household members may need to have two working parents or to find supplemental income through gig economy jobs or side hustles.
One positive thing is that companies will be more reluctant to hire new full-time workers, so there should be more opportunity for part-time jobs and contract work, which could be great for those who have to combine caregiving responsibilities with work.
Use it up, wear it out, make do or do without
The slogan of many American families in the 1930s was “Use it up, wear it out, make do or do without.” Objects were reused. Torn clothes were repaired, not thrown out – and when they couldn’t be repaired anymore, they served a turn as cleaning rags or materials for new clothes sewn at home. Meals became cheaper and simpler – less meat and a big emphasis on using up leftovers in things like soups or casseroles. Gardens were repurposed into working kitchen gardens filled with herbs and vegetables. Leisure time changed – instead of visits to the movies, families played board games and young couples went for walks in the park.
We can expect to see similar lifestyle changes in the months to come. With the travel industry devastated, family holidays will become more local affairs – think a trip to Durban rather than to Mauritius. Little extras will be cut from budgets, and we’ll all think more about our spending. Even families that don’t lose income will be feeling poorer if house prices and stock markets don’t recover, and people’s lack of confidence in the future could hold back the recovery, especially if Covid-19 cases and deaths continue or increase.
It’s no secret that the economic deprivations of the 1930s ended in World War Two. People frustrated with their lack of economic progress turned to populists and nationalism and protectionism rose, culminating in the loss of millions of lives in a bloody, multiyear war.
We have already seen the rise of populism around the world, as well as falling support for globalisation, the rise of new trade barriers, and decaying support for multilateral organisations. These trends will doubtless continue and accelerate if the Covid-19 economic downturn is prolonged or painful. While we can hope that the world avoids a hot war – and recent rising tensions between China and US threaten that hope – we are certainly looking at a less open and connected future.
For your family, the best advice is that old saw: Hope for the best, prepare for the worst. Now is the time to embrace gratitude, to hold on to those you love and to look for simple joys and pleasures.
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