From the Editor: pandemic economics

As of early December, WHO reports nearly 65 million confirmed cases of COVID-19, and confirmed deaths approaching 1.5 million. In addition to the extraordinary loss of human life (the early 2000s SARS outbreak, a strain of the same coronavirus, infected 8,000 and killed just under 800), there has been massive collateral damage across the global economy.

The effects of lockdowns, quarantines, and border closures have been devastating. Yet personal deprivations and lockdown fatigue have resulted in rioting across the globe, prompting many to say, after Virgil, aegrescit medendo: the cure is worse than the disease.

COVID-19 Has Accelerated Corporate Consolidation and Monopolisation 

On the other hand, the crisis engulfing the high street – business closures and bankruptcies, early retirements and the loss of jobs – has provided a boon for e-commerce.

The dominance of online retail, for want of an alternative during lockdown, has enriched the likes of Jeff Bezos beyond imagination. The FT has published a list of 100 companies prospering from the pandemic that makes for a sobering read.

New partnerships aimed at leveraging each other’s clientele/visibility, maximising marketing efforts and bolstering sales are being forged, with some unlikely bed partners announcing hastily arranged marriages. 

Mergers and acquisition have resulted in an unprecedented concentration of power, with cash-rich companies snapping up competitors, simply because their coffers are swollen by both capital investment and accelerated growth during the pandemic.

While we celebrate the ever-inventive and resilient spirit of private enterprise, a rather more dramatic phenomenon is taking place at a speed only ever observed during economic cataclysms of great proportions: the rampant consolidation of entire industries, assets and capital in the hands of global conglomerates.

Even before pandemic, few SMEs had a meaningful control of their supply chains, with giant e-retailers (i.e. Amazon) assuming de facto control of distribution and sales. The rise and rise of Amazon as a global retailer/service provider of virtually everything and anything has further transformed it into a data-hoarding behemoth.

Few small and medium businesses have had the nous – or resources/deep pockets – to act with the speed required by changing marketing forces, adapt to a new reality, or simply pivot. Vast numbers have been obliterated or absorbed by conglomerates.

Easily the most worrying aspect of this is the inherent difficulty for any start-up (other than a high-tech one) to become a player. Consolidation is creating monopolies in most industries, but particularly in e-commerce, pharma, technology and aerospace.

This is bad news for the consumer who ends up paying inevitably higher prices for goods and services.

The size, infrastructure and power of the big four –  Amazon, Google, Apple and Facebook – and their respective counterparts in other industries makes competition a non-starter.  These mega-companies are also the new data czars, whose capacity to influence and shape our lives is redoubtable.

The ‘Haves’ and the ‘Have-Nots’

Free-market proselytisers would disagree of course, but these trends are certainly reshaping the global economy, as well as cultural and social attitudes.

Entertainment has rapidly shifted away from live venues towards at-home video streaming, piped in by monopolistic providers and content creators:  Netflix, Apple, Disney, Amazon. These habituating activities are not new, but they have become entrenched during this pandemic – with fewer social gatherings, decreased dining out and, with one exception, no travel.

Private jet-setting, also thriving at the expense of charter airlines, is one of a number of industries dedicated to serving the ultra wealthy that will continue to flourish.

The consolidation of capital has created an unprecedented chasm between ‘The Haves’ at the very top and everyone else, effectively doing away with the middle class. 

The Haves are prepared to pay for exceptional products and services, unique experiences, and for privacy – another rapidly decreasing commodity for the ‘Have-Nots’.  Ultra high end brands and providers can afford to name their price to a demographic that values exclusivity and variety. 

We are also seeing a rapid propagation of peer-only clubs whose membership is both limited and priced to match. 

The vertiginous rise in wealth inequality is further exacerbated by technology making many jobs obsolete, and work-from-home becoming a long-term reality which saves industry giants a great deal of money and fuelling profits for large shareholders. 

The pandemic is merely accelerating this process. 

Social responsibility, sustainability, and green practices have all been hijacked by a corporate culture that tries to capitalise on Millennials’ preoccupation with global justice: climate change, escalating inequality, racial ostracism, water or energy poverty, and absolute poverty.

The pandemic has underscored inequality but momentarily shifted attention away from the effects of global warming and rampant consumerism that depletes the planet’s dwindling resources. All of these will be back in sharper focus with the next natural disaster, which will surely be compounded by the virus.

Rescuing the World, One Compassionate Capitalist at a Time

No, I am not using an oxymoron for comical effect.

Just as charity morphed into philanthropy in the 18th century, which in turn morphed into impact philanthropy, and more recently into social engagement and environmentalism, capitalism has to reinvent itself – not least because it has strong survival instincts.  

Its instincts dictate that vast wealth disparity foments mass unrest and that some expression of corporate empathy, a demonstrable strive for a common good, will mitigate destructive unrest. 

Individuals who define themselves loosely as liberals or politically as left wing do not have a monopoly on caring for humanity and/or the planet.

The compassionate and educated capitalist understands the need for a (somewhat) fairer distribution of wealth and appreciates (and more often than not subscribes to) the major challenges facing humanity.

Some scions of old-moneyed families are each steering their corporate ship, slowly but irrevocably away from obvious political partisanship and towards issues that better define their generation. 

Many espouse the tenets of conservation and biodiversity – the new breed of capitalist is, outwardly at least, more Greta Thunberg than Gordon Gekko. 

We believe and trust that they will define the future of capitalism and humanity itself, one compassionate capitalist at a time. 

Post-Pandemic, Opportunities – and Threats – Abound

The one silver lining of corporate consolidation is that quality and resilience will trump kiss-me-quick brands, copycat technologies, Johnny-come-latelies, and mediocrity in general. 

The middle has been marching towards oblivion for some time now, but its accelerated obsolescence has been underscored by the demise of established brands – either directly because of the high street lockdown, or failure to secure a lifeline. 

Many have simply become irrelevant in a post-pandemic reality, with its new imperatives, and a transformational generation of tech-savvy consumers.

Cash-rich, opportunistic buyers (with the nerve to go against the tide and invest in a contrarian fashion) will amass greater fortunes by investing in vastly discounted stocks underpinned by intrinsic value, and a less tangible but equally potent brand and IP capital. Venerable old brands who have failed to adapt will be absorbed by smart investors at the ready.

Times of great trials and uncertainty are also times of great opportunities. 

In the weeks to come we will be interviewing industry leaders and investors who will shape the post-pandemic future of the world.