Part Three: Recovery
Canadian communities are now about two months into the COVID-19 crisis, and the passage of time has started to give us some insights into the pandemic’s impact on the economy – and what we can do to prepare for economic recovery. I’ve been running a series of online workshops for communities with the Economic Developers Association of Canada (EDAC), and this article – the final piece in a three-part series for The Niagara Independent – draws on materials from sessions I ran for about 125 communities in April and May.
Our initial gut reactions and our more carefully planned responses to COVID-19 have dominated our efforts and our thinking so far, but even the phased re-opening plans that provinces and states are introducing now are mostly responses to the current emergency. The economic impacts of this pandemic will be wide and deep, and getting the economy back on track won’t be like flicking a light switch. Recovery is a process that will unfold over an extended period of time.
Right now, massive handouts and bailouts are keeping thousands of small businesses afloat… as those programs end, it is likely that we will see an unprecedented wave of closures and bankruptcies. Many business owners having been hanging on by their fingernails, and although their doors may soon open, factors such as social distancing and consumer fear will mean that revenues and profits may never fully recover.
Then there’s the danger of second (and third, and fourth) waves of the virus. In Thomas Pueyo’s ground-breaking article “Coronavirus: The Hammer and the Dance” (discussed in part one of this series), he describes the “dance” – a period of 12 to 24 months where we will continue to face medical, civil and economic challenges and constraints due to the pandemic.
All of this means that although everything from beaches to bars may soon be re-opening, the crisis is far from over. With re-opening efforts only days old in North America, we are already seeing signs that infection rates may be trending back upwards in states including Alabama, Arkansas, and North Carolina, as well as in Ontario. All of this means that the economic impacts of this pandemic are just beginning, and that full-blown recession is likely (Japan formally entered recession recently).
For major economic downturns like the one we will probably face, there are a number of possible outcomes. Economists frequently draw on the alphabet to help describe the patterns of potential recovery, and we all hope that the current downturn is characterized by a V-shaped recovery. This is a sharp drop, followed by an equally sharp rebound. This is the kind of rebound the North American economy experienced after the 1953-54 recession, but most economists consider it unlikely that we’ll see a V-shaped recovery this time around.
Much more likely is a U-shaped recovery, like North America last experienced in the 1970s. This is the kind of recovery we see when problems come in recurring waves, as Pueyo suggests with his “dance” analogy for the coronavirus. This means the downturn lasts longer, and we have several false starts before recovery really takes hold. Most worrying of all is the possibility of an L-shaped recovery, like we experienced in the early 1990s. This kind of recovery can take years before an economy rebounds to its initial strength.
Whatever shape the recovery takes, we should realize that we’re currently in the calm before the storm. That may seem counterintuitive, as we struggle with isolation, outbreak and unemployment – but the reality is that we probably have more capacity to think, strategize and plan right now than we will have moving forward. As we sit in our basement offices and plexiglass cubicles, the lack of normal work has opened a mental space for us to really plan for what comes next, to think creatively about our pathways to recovery.
The shape of our recovery plan must be shaped by the nature of the pandemic’s economic impacts. For example, we know that one of the biggest impacts so far has been job loss, as unemployment levels meet or even surpass the records set in the Great Depression nearly a century ago. This means that jobs must be the top priority of any recovery plan. Already, some organizations like the Canadian Chamber of Commerce are rolling out new tools for the post-COVID environment, including a new Talent Pipeline Management program modelled on U.S. initiatives. Successful recovery strategies will be based first and foremost on workforce development approaches.
The second aspect of our recovery will be to recognize the massive number of business closures we are likely to face. These are being masked right now by government loans, grants and the illusion of “temporary closures”. In another couple of months, we will start to see a different story. For economists, this is not necessarily a bad thing. The economic concept of “creative destruction” tells us that the loss of older, more traditional businesses opens up new opportunities for innovation, market growth and entrepreneurship. But this means that our recovery strategies should be focused very heavily on entrepreneurship support, including training and financing.
A third piece of the puzzle will be consumer confidence. Right now, while people’s economic prospects have been hit hard, government grants are supporting sustained levels of consumer spending. That’s a big part of what is keeping the economy moving at this stage… but if that consumer willingness (or ability) to keep spending declines, we could be in trouble. That probably means we need to find innovative and creative ways sustain consumer income, while moving away from traditional EI unemployment-style handouts. Maybe we can tie future government funds to actively retraining or reskilling for new jobs, or to providing a guaranteed income for those launching a new business. In any event, the current shotgun approach to financial support will have to give way to more targeted and nuanced efforts.
Finally, though, we have to recognize what a unique moment in history this actually is. In the face of the COVID pandemic, our economy has ground to a halt, and given us a once-in-generations opportunity to actually rethink what our economy is for and about. In the past, we’ve been so busy maintaining our economy that we’ve never really had the opportunity to think about designing it. Is this our opportunity to build an economy that is much more environmentally friendly? Could we tool up for a post-carbon, climate-positive future? Could we build out our digital infrastructure, or bring home the manufacturing elements of our supply chains, or redesign our downtown office spaces for a work-from-home world? Suddenly, these discussions are all possible, and if we fail to talk about them we are burying our heads in the sand.
Closer to home, what could Niagara be doing? Could we link our disparate resources in food, wine, greenhouses, cannabis, beer and agriculture to build a new cluster of industries? Could we actually think about unveiling practical new binational initiatives to link our export, education and innovation capacity? For the first time in a long time, the sky is the limit. If we truly understand the unique position we’re in – despite the current stresses and hardships – we have an opportunity to do something truly transformative.
After all, this is Niagara – and we’ve done it before. The construction of the Welland Canal was the kind of creative project that showcases the grand visions our region is capable of. But we often forget that the impetus for the building of that first canal was an economic crisis. The Great Panic of 1825 kicked off a multi-year recession, and the Welland Canal was Niagara’s visionary response. As we begin to think about Niagara’s recovery plans today, what’s the big vision that will carry us into the future?
Brock Dickinson is a serial entrepreneur and innovator who has worked with hundreds of companies and communities in more than 30 countries. He holds a number of innovation support roles, including his work as and Adjunct Professor and Entrepreneur in Residence at the University of Waterloo, and as an Executive in Residence with Innovate Niagara. He lives in the Niagara Region.