The “new” normal

At noon today, the Coronavirus Monitor reports 15,000 confirmed people in Germany who are currently suffering from Covid-19. Altogether, 175,000 infected people have been registered since the first incidents in Stockdorf. Nearly 8,000 people died in Germany who were suffering from Covid-19 at the time.

Next Monday, all shops will be re-opened. The gastronomy is allowed to run the beer gardens again in Bavaria. A week later, the restaurants follow. All of us, at least the overwhelming majority,

accept the rules and have become accustomed to covering our mouths and noses.

Starting on April 2nd and including today’s post, we have built a diary of 20 articles, which we will summarize for you again.

Also on April 2nd, the economic institutes predicted a decline in the gross domestic product of five to eight percent and estimated the cost at 750 billion euros. It was feared that between 1 and 1.8 million people would be unemployed and an additional six million short-time workers. At this point, ConMoto had already predicted a 12 to 15 percent decline in manufacturing and related services – with a peak in May and June, followed by a recovery period of five months.

Illustration from our post on April 2nd, 2020: GDP and Industry Production in Germany 2020

GDP and industry production in Germany 2020

As early as April 3rd, we announced that the Corona crisis will be with us for a long time to come and that we must learn to live with it. At that time, we were already calling for an integrated view of medical, ethical, social and economic issues. We also pointed out very early, that the hospitality and gastronomy sector will be affected above average, including the risk of a third of the businesses becoming insolvent. Unfortunately, the actual development took an even worse turn than initially expected.

Only very late, on May 12th, a joint study by the Ifo Institute and the Helmholtz Centre for Infection Research was completed, which looks at both epidemiological and economic variables as well as the impacts. The conclusions of the study in brief excerpts:

  1. “At best, a slight, gradual relaxation of shutdown measures is likely to reduce economic costs without jeopardizing medical objectives.”

  2. ”Furthermore, we cannot perceive a conflict between economic and health costs in terms of a strong easing – the costs would be higher in both dimensions.”

  3. “Too much easing is therefore not preferable. This kind of policy would allow for more economic output in the short term, but according to our simulation analyses, it would prolong the phase of slight constraints to such an extent that the total costs are going to increase in 2020 and 2021.”

Politicians certainly acted correctly and consistently in the first phase. Exiting the lockdown was understandably much more difficult for policymakers than the decision to initialize the lockdown.

At last, now we may restart! Are we going to restart?

Of course, we restart! But what about the pace – and the costs? Which lessons will we have drawn from the biggest economic crisis of the last almost 100 years?

In recent days, we have learned a great deal about an economic sector and its precarious conditions that affects us all: slaughterhouses and meat processing. Most plants are certainly safe from a hygienic perspective, whereas regarding the spread of epidemics, especially the housing conditions of the predominantly Eastern European workers are not acceptable! The schnitzel from the discounter now incurs follow-up costs that are not included in any price. Occupational health and safety are fundamental things that are non-negotiable! It makes no sense to introduce minimum wages if they are being reduced to an effective four euros per hour by work contracts and gagging leases for inhumane housing.

When the heavy blows are over – also thanks to very effective state aids such as tax deferrals – strategic issues are on the agenda:

What needs to be changed in which way to make us more resilient to such events? How does a production in Europe look that will ensure our prosperity? What are the growth areas? How do we maintain the competitiveness of our products? How are organizations changing? From an economic perspective, we must significantly reduce the cost of infrastructure in order to avoid tax increases.

We wish you the best of success with your activities and would be pleased to accompany you on your journey.