As the world attempts to imagine what the day after COVID-19 may look like, esteemed economist Prof. Lawrence Summers – the former President of Harvard University, and the former U.S. Secretary of Treasury – sheds light on the unprecedented changes to our economies and societies that COVID-19 has spurred, if not accelerated.
From the state of capital markets, to the future of education and healthcare, Prof. Summers shared his assessment of this unique moment in history with investor Dan Senor, coauthor of bestselling book Start-Up Nation: The Story of Israel’s Economic Miracle, in the recent New Digital Age online conference, hosted by Start-Up Nation Central. The two spoke about the effects of COVID-19 on our economies and societies, to get a better understanding of what Prof. Summers calls “a hinge in history.”
“COVID-19 is unlike any other crises experienced in this century”
It is almost impossible to anticipate which of the moments that we live through will make the history books. From the 9/11 terrorist attacks to the 2008 financial crisis, there are obviously seminal moments already recorded in the 21st century, but where does COVID-19 fit into this picture? Prof. Summers asserts that COVID-19 is unlike any crises already experienced in the current century.
“The larger significance of COVID-19 is that it is going to reinforce what were already profound structural changes in the global economy,” he said at the conference. Some of the structural changes he names include a shift towards “more public sector orientation, and less support for the ideology of the individual market,” and a “profound acceleration of trends towards decentralization, associated with information technology.”
Many of these changes are accelerated by the nature of countries’ COVID-19 responses, namely testing and various containment mechanisms, which have brought to the forefront that “central public responsibilities simply cannot be met by decentralized markets,” according to Prof. Summers.
The ‘Zoom sector’ of the economy
Among other reasons, COVID-19 will go down as a hinge in history books due to accelerated adoption of information technologies – the “Zoom sector” of the economy – that has allowed certain aspects of life to continue unabated. “Companies are increasingly recognizing that they can ask their worker to work from home and economize on real estate costs,” he said. “People are increasingly realizing that delivered goods are often pretty good goods. Some of that will reverse itself, for sure, and people will go back to old ways, but I don’t think 100% of it will reverse itself, and so, I think that we’re seeing 5-10 years of progress in the acceleration of information technologies’ application in a year, and that will have a durable effect.”
The sped-up adoption of information technologies – such as Zoom for our professional, educational and social needs in the context of the pandemic – also has a notable impact on the state of capital markets. According to Prof. Summers, while high-tech companies’ stocks continue to outperform and carry the brunt of the current burden on the market, “the remainder of the market, about 60%, is down by perhaps 10%-15%.” In total, Prof. Summers predicts that in the immediate future, cash flows will be down by 30%, but that thanks to the proliferation of information technology, the market should be quick to recover.
Profound impact on education and healthcare
Prof. Summers also shed light on the impact of information technologies on our education and healthcare systems. The world-renowned economist believes that COVID-19 will likely impact education systems in terms of their delivery methods – online classes and mentorship – as well as the nature of admissions processes, which information technology has exposed are outdated in an era of mainly online interactions.
“I think that universities’ tendency is to define their specialness by the number of people they exclude – how hard it is to get in – rather than the scale and number of people that they include,” said the former Harvard University President. “I think that the greater efficacy of information technology will help to solve that problem.”
Education is not the only social structure that COVID-19 will profoundly impact. Prof. Summers believes that healthcare, which is currently facing some of the greatest structural challenges, is likely to see a rapid adoption rate for new technology that will alter its delivery structure, and for the better. “The practice of primary care is going to be profoundly altered to a house call. And it is not the same as going to the doctor’s office, and it’s not the same as the doctor coming to your house – it’s a different kind of hybrid, and I think that this kind of primary healthcare will be very important, particularly in remote areas.”
Prof. Summers also believes that sensors and monitoring devices are likely to completely transform healthcare delivery, creating the ability to continuously monitor problems and develop and deliver medicines and potential cures directly into the patient’s bloodstream.
Despite social distancing, and amid structural changes in the wake of COVID-19, Prof. Summers believes that we will emerge stronger, not only in terms of our immunity, but in terms of our humanity and capacity for human connection. “In the context of COVID-19, I think that there are broad trends of scientific progress, of enhanced human connection, of extended sympathy – thanks to information technology, as people know more of each other and know more of people farther away,” he concluded.
To read more about the world in the post-coronavirus era, explore our interactive report entitled The New Digital Age.