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World After Pandemic: Society and Economy (Interview Kanal 77)

Uploaded 1/6/2021, approx. 12 minute read

My name is Sam Vaknin. I'm a professor of finance in the outreach programme of the CIAS-CIAPS-Centre for International Advanced and Professional Studies. Thank you for having me.

We know two things about each and every pandemic that had ever happened in history.

Number one, pandemics are always self-limiting. Even without medications, even without vaccines, pandemics stop. They end.

The Black Death had ended after two years in continental Europe. The Spanish Flu had ended after two years globally, and there was no vaccine, no medication, nothing.

So pandemics are self-limiting.

Number two, in the wake of each and every pandemic, we have an identical pattern. The aftermath of each pandemic in the 14th century as well as in the 20th century, the aftermath looks the same and it is composed of several elements.

There's a social rebound and there is an economic rebound.

Let's talk about the social rebound first.

During the pandemic, people are locked down. They're quarantined. They're isolated. They're afraid to meet each other. They know that something is in the air in the 14th century. They knew that something is in the air in the 20th century, bacteria or viruses, and so they were afraid to meet each other.

And the social rebound simply means that after the pandemic, people socialize much more.

There is an explosion of extraversion. Introversion is out of fashion. People go out. People travel. People socialize. People party.

One example is, of course, the roaring 1920s after the Spanish Flu in the United States.

And so we should expect this. Instead of staying at home, people will go out much more.

And certain industries like the tourism industry, the entertainment industry, the hospitality industry, these industries will benefit. Bars, restaurants, hotels, airlines, these industries will benefit from the social rebound.


There's another type of rebound that's the economic rebound.

Pandemics, invariably, have devastating and shattering effects on economies. Trade collapses. Investment disappears. Jobs evaporate. People become much poorer.

They are in a state of uncertainty. They are afraid to consume. They are afraid to invest.

And so everything slows down and grinds to a halt. When the pandemic is over, there's an economic rebound.

And every economic rebound in history had, again, the same features.

The social rebound and the economic rebound have the same features because human nature is the same.

And so the economic rebound is the result of rebuilding the economies.

When the pandemic is over, people begin to investigate. They begin to over-consume, to compensate themselves for a period of slow consumption. As they over-consume, factories and manufacturing revive. People travel. Various sectors of the economy revive, etc.

So there's a period of rebuilding and reconstruction. And it is coupled with wealth distribution.

After each and every pandemic, there is a period of prosperity in what Ellen Greenspan had called irrational exuberance. Asset bubbles, stocks, real estate, other types of assets, bonds, increase in value, increase in price to unrealistic levels.

So we should expect this to happen as well.

Period of prosperity, asset bubbles, happiness, investment, trade, consumption, the world is going to look very good economically. But this is going to lead to income inequality.

Now, when we say income inequality, we usually think about money going from the poor to the rich. But this critically depends on the nature of the pandemic.

For example, in the 14th century, after the Black Death, after the plague, the bubonic plague had ceased, after it ended, there was actually a transfer of wealth from the rich to the poor.

Because so many of the poor working class people had died, there was a shortage of workers, wages escalated, and rich people had to pay much more to hire laborers. And so the result was the formation of a middle class or proto middle class. The poor got richer, the rich got poorer.

Today, we are witnessing the opposite effect. The rich are getting richer, and the poor are getting even poorer.

During this pandemic, something like 60 new billionaires were created. And existing billionaires have increased their wealth by close to $2 trillion.

Today, the 100 richest people in the United States have more money than all the African Americans, all the Blacks, all the Hispanics in the United States and 15 million poorest white people. That's 100 individuals.

Income inequality is here to stay and will be severely exacerbated by the pandemic.

The pandemic had exposed the gulf, the schism between high skilled, highly educated workforce and the low skilled, low educated workforce. We'll come to that in a bit.

During this pandemic, we have transitioned from physical workplaces to remote work, remote work and automation. These trends have started long before the pandemic, but the pandemic served as a catalyst. It hastened these processes. It made them faster and much more all pervasive.

Already, most of the tech giants like Twitter, Google, Facebook have announced that after the pandemic, most of their workforce will work from home and they have given up their office space. This is going to have a huge impact on commercial construction and commercial real estate. Office space will become obsolete and about half the workforce will work from home.

Of course, this will tend to minimize social interactions, increase atomization in society and people will try to compensate by socializing after work and by increasing the leisure time. Work will become flex time.

In other words, people will work throughout the day, even into the night, but will take breaks in which they will tend to interact via digital platforms or socialize face to face.

Work will no longer be continuous. As automation increases, as remote work increases, so will globalization because electronic means allow us to outsource and farm out work to workers anywhere in the world.

They don't have to be in the same country. So employers, big multinationals and even small and medium enterprises will be able to hire people via remote channels anywhere in the world. Globalization will become a daily feature of each part of the experience of each and every one of us.

And as workers, we will be competing with workers in the same profession in dozens of other countries. We better be good. It will force all of us to invest in lifespan risk-killing, in studying, increasing our knowledge, investing in our acumen, in enhancing our profession.

We need to get better if we are to compete with this global pool of workers.

One thing that will happen after the pandemic, because people will become much poorer, the vast majority of humanity following the pandemic will become much poorer.

Additionally, life expectancy will collapse, is already collapsing. Life expectancy has gone down by three years in the United States in the last 12 months. So life expectancy is down, income is down, savings have been abolished, demolished by this pandemic.

No one has savings anymore. So people will be, especially young people, will be very hesitant to form families. They will not get married. They will not have children. Some industries will be very badly affected by this demographic development. People will stay single well into their 30s and 40s. People are going to live with their parents much longer until the 30s and 40s.

These are known as boomerang kids because they return home. People will not travel far away from their base, from their home, for example, to study.

So this will have a very, very negative impact on education and especially higher education. It also will have severe negative impact on residential construction.

Generally, construction and real estate will suffer mightily after the pandemic. And so will higher education.

The university, as we know it today, will have to change dramatically in order to survive. We'll have to go online. We'll have to fire a lot of faculty. And we'll have to collaborate with students who will teach other students. So we will see a much more stratified and equitable and egalitarian, non-hierarchical structure of higher education, which is not so much based on expertise, based more on what I would call higher education crowdsourcing.

Similar to Wikipedia, let's say. Health care, on the other hand, will skyrocket. Will skyrocket because in the aftermath of the pandemic, about 10% of pandemics suffered, people who got sick with COVID-19, 10% of them are what is called long haulers. These are people who have symptoms many, many months and up to a year after the pandemic. That's one thing.

Nursing homes have been decimated. Many, many old people have died. Other conditions such as cancer, heart diseases have not been treated. There was a neglect of other conditions, other medical conditions because the hospitals were busy with COVID patients. The ICUs, the critical care units, were totally, totally full with COVID patients. Stroke patients, heart attack patients didn't get the treatment.

So we're going to have a population that is much sicker, much sicker than before. And health care is going to become by far the biggest industry in the world. So health care.

But health care pays very low wages with the exception of some type of doctors, mostly private doctors. And so the vast majority of workers in health care from the level of a doctor to the level of the cleaning woman in a hospital, janitors, they don't get paid well. It's a low paying industry.

And this leads me to the next observation.

During this pandemic, the impact on the middle class and on the working classes will be horrendous.

The process called hollowing out. It's like the middle class will become poor and the poor will become destitute, will become homeless, will need food assistance.

Generally a huge chunk of the population will deteriorate into poverty and work will no longer provide a solution, a viable, sustainable survival solution. There will be a gulf, the gulf between Main Street, Main Street and Wall Street will become an abyss, unbridgeable. Most people will live in Main Street in poverty, in destitution, homelessness, unable to afford health care, unable to afford education.

And so the vast majority of people in a tiny elite will live like kings.

And this is going to be the picture of the future.

The thing is that the workforce will be comprised of two segments. About 90% of all workers will be low income, unskilled, and they will be working in dead end jobs. What is known as make jobs like a job in McDonald's.

This will be the typical job of the future. Automation, computers and the elites will take over jobs that require brain power, intellect. What will be left to all others are dead end jobs which pay almost nothing, minimal wage, unlivable wage, wage that a salary that you can't live on. And there will be no investment in education and no investment in skills and this will be the major landscape of the workforce in the future.

And there will be a tiny, tiny minority. They will be making huge salaries. They will have university degrees, they will have higher education and they will be reinvesting and investing in new skills throughout the lifespan. So they will be constantly reskilling. They will also be much more entrepreneurial. They are likely to form companies or form corporate entities and then leverage for example intellectual property and make huge profits. Income will gravitate towards this tiny group. Wealth will accumulate with this tiny group and these people are going to invest their money in financial assets.

We will find the members of this elite in several specific industries, in retail, in high-tech technologies and in finance. In these industries there will be very rich people with very high salaries, with very high education. These will be the elites and they're going to invest their money in the capital markets which will create bubbles.

Now we have seen this happen during the pandemic. As the economy was collapsing, as tens of millions of people found themselves out of a job, as tens of millions of people moved into the ranks of the poor, as poverty increased exponentially, as millions of people were dying, as whole industries disappeared like the retail industry, airline industry, hospitality industry. As all this devastation, the apocalyptic scenario was unfolding, stock exchanges went up to record levels. The prices in stock exchanges increased and stock exchanges broke records day after day after day.

Why? Because the money of the elite, the money of the economic elite is invested in the stock exchange. Stock exchanges no longer reflect reality, no longer reflect manufacturing or agriculture or the working classes or the middle classes or even pension funds. Stock exchanges now are the exclusive reserve, the exclusive playground of multi-billionaires and very rich people.

And so it is there that we see the divergence, the breakdown of the global economy into two mutually exclusive non-interacting parts.

There is the economy of the very rich and there is the economy of the rest of us. There's the economy of the 1% and the economy of the 99%.

And if we want the barometer, the barometer for the economy of the 1%, that's a stock exchange. And all the rest are too poor to eat and many of them are becoming homeless, sick and dying. It's a dystopian world and it probably will lead to severe bouts of social unrest.


By all economic and social parameters, we are today in a period that is equivalent to the 1760s in France, just before the French Revolution.

Thomas Piketty had written a book about it comparing the two periods and it's very true.

We are on the way to such a tsunami of social unrest that it could easily be described as a revolution. And in this revolution, the masses, the working classes, the middle classes, probably will try to overthrow the elites and install instead another elite.

It's a typical cycle in human history. Will it succeed? It's an open question. It's an open question because today, as opposed to the 18th century, the masses have access to power via democracy, via democratic processes. So they can put Donald Trump in the White House, Bolsonaro in Brazil, Putin in Russia, Orban in Hungary, Duterte in the Philippines, they can put their own people everywhere, the masses.

And the second thing is that the masses are bribed. They are exposed to the drug of consumption. So they buy things and there is cheap entertainment via television channels, cable, TV, internet.

So in the 18th century, the masses didn't have any political say and they could not consume.

French revolution started because the price of bread went up dramatically. Today, that's not the case.

So I think the social revolution, which is forthcoming for sure, the antagonism between the masses and the elites will fizzle out. I don't see any meaningful change occurring. I think the revolution will fail. And it will fail because the masses are too heavily invested in the very same system that the elite elites benefit from.

We are all colluding in this conspiracy. We are all collaborating in enabling the rich to become richer and keeping the poor as poor as possible. And yet giving the poor the delusion and illusion of participation and well-being via consumer goods, materialism and capitalism, when they are combined, they are an irresistible force philosophically and in reality.

Thank you.

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