Part of the corporate focus will be on shoring up and shortening supply chains shredded by rolling economic shutdowns from China to the U.S. That effort -– already underway pre-Covid-19 -- will raise companies’ costs as they source supplies based on considerations other than price.
The drive to bring production home will get added impetus from President Donald Trump, who has already seized on the spread of the virus from China to press his America First trade policy. He also has used the crisis as justification for temporary restrictions on immigration –- a step that, if broadened and extended, would limit labor-force growth and so restrain recovery, according to economists.
Mohamed El-Erian, a leading proponent –- and originator in his own right –- of the new-normal thesis, sees reasons to worry about the outlook. The Allianz SE chief economic adviser fears a combination of slack productivity, higher debt and government support for zombie companies will lead to slower growth and more inequality, barring policies to address it.
“We don’t want to repeat the mistake of just stopping after we win the war against depression and we don’t pay attention to securing the peace,” the Bloomberg Opinion columnist said.
--With assistance from Enda Curran, Kate Krader and Steve Matthews.
This article was provided by Bloomberg News.