Post-Covid: More of the Same

Winners and Losers: The Global Economy After COVID

The COVID-19 pandemic has transformed the world economy in ways that will be debated by pundits and future historians for decades to come. Yet, as hard as it is to predict a disrupted future accurately, the pandemic (not to mention its probable successors) looks likely to produce clear economic winners and losers. The top digital companies—Amazon, Apple, Tencent, Microsoft, Google, Facebook, Ant, Netflix, and Hulu—have thrived during quarantines and the ongoing dispersion of work. These are the most obvious winners in what leftist author Naomi Klein has called a “Screen New Deal” that seeks to create a “permanent and profitable no-touch future.” Since 2019, Facebook, Apple, Amazon, Microsoft, and Google have added over two-and-a-half trillion dollars to their combined valuation, and all enjoyed record breaking profits in 2020.

As I predicted and wrote about, all Covid did was extend and accelerate the pre-2020 trends outward:

-Increased wealth inequality. Wealth inequality widened even more so as tech billionaires and Walmart/retail billionaires saw their wealth balloon during and after the pandemic, in large part due to small businesses being closed and economic activity forcibly being funneled through these large, highly-productive firms. This is also why the US economy recovered so quickly from the pandemic compared to the rest of the world, because the productivity boost from these companies helped provide a massive tailwind to the US economy.

The population of tent cities has exploded over the past few years, coinciding with billionaire wealth making new highs post-covid.

Although this trend predates Covid, it has only accelerated since. And although extreme wealth inequality is not unique to America, it’s interesting how there are so many people who are not contributing, either being permanently unemployed, retired, or on disability. A single Jeff Bezos or Elon Musk in terms of economic value is equal to millions of marginally productive people. You have people in the top 10% of so with good professional careers and high standards of living, and 20-40% in the middle, and the rest have fallen between the cracks.

-Increased productivity. Despite a lot people leaving the workforce, the stock market keeps going up, GDP forecasts are very strong, and so are corporate profits. It goes to show the remarkable ability of companies to adapt in the face of adversity, and also the resiliency of the US consumer, especially the high-end consumer. “If 50% of employees quit, fine, we’ll just boost the productivity by 100% of the 50% who remain using cloud, zoom, and other services.”

-Rising commodity and gas prices. Gasoline and oil prices have gone up a lot and will keep rising, continuing the pre-2013 trend of higher commodity prices, especially for oil and gas. $4/gallon gas is coming up, and Biden will be blamed for it even though there is nothing he, Trump, or anyone can do about it short of there being another crisis or recession. The fed could aggressively raise rates and maybe that could cause prices to fall, but don’t except the fed to do anything, not until after the 2024 election. The CPI won’t budge as much as people are expecting though, even with commodity prices rising and a lot of inflation in healthcare and tuition.

-Stocks will keep going up, making the post-2009 expansion the longest ever surpassing even the 80s and 90s on an inflation-adjusted basis. Multinationals are generating fatter profits than ever before, with reliable recurring revenues protected by intellectual property and network effects that are nearly impossible for smaller competitors to replicate.

-Big tech gets bigger. Big tech got only bigger as a consequence of the pandemic, again, continuing pre-Covid trend of bigger, more profitable tech companies. Same for more censorship and de-platformings, such as for questioning Covid’s origins, for proposing non-mainstream treatments, and or for questioning the efficacy or safety of vaccines. You cannot even debate this stuff without risking being banned or having your stuff taken down. It sucks how these companies have so much unearned, undeserved control over discourse. Any conservative who runs on this issue stands a good shot at winning in 2024. Trump, if he runs again, needs to make ‘big tech’ and censorship the defining issue of his campaign.

-As I also correctly predicted, the college wage premium will keep widening despite Covid forcing some colleges to hold classes online; remote learning and temporary campus closures amount to no more than a speed bump in this long-term trend of both tuition and the college wage premium going up.

On a related note, Noah tweeted:

Except he didn’t predict anything. And there is no evidence to suggest such an apocalypse either. Declining attendance does not imply falling prices or shrinking wage premium. Similar to 2008, it was mostly low-skilled jobs that were hurt the most by Covid, as further evidence of the rising value of higher education even as much as pundits wish it weren’t so. Conservatives and liberals seem to be in agreement about college being too expensive and creating unnecessary barriers to social mobility, yet as long as the economic system keeps being stacked in favor of college grads, there is no reason to expect anything to change.

-Healthcare costs and health insurance: same as above.

-More political division and unrest, especially in 2020 before and in the months after the election. Police now have to contend with going to jail and cities burning for doing their jobs.

-Rising home prices. Home prices, especially in high-income suburban areas such as the Bay Area, surged after Covid, again, continuing the pre-Covid trend of rising home prices in spite of the media’s insistence since 2012-2013 of housing being a bubble. Same for rent. I predict that any purported decline of rent prices in SF and NYC will be short-lived. Already, rents in major metro areas are rising again.

The expansion of government under Covid exceeded that of even 911. I do not see world governments relinquishing their newfound power so easily. Even with vaccines, some restrictions will remain, similar to how post-911 restriction are still extant two decades after the precipitating event. Studies show that remote workers are more productive than at the office, so this trend will continue, especially in tech. Concerts will resume but under the condition everyone is vaccinated. Masks and social distancing, even if not enforced, will remain commonplace. The assumption by pundits is that with crisis comes change, and while Covid is no exception to this having created new winners and losers, many things have remained the same.