Dan Lennard-Jones, Assistant Investment Manager
When we look back through the history books at the 2020 coronavirus pandemic, it is likely that the story so far will only represent the first few chapters. As we continue to face this monumental challenge, we are witnessing profound changes to society and our current way of life. It is without doubt that in the coming months and years, human beings will triumph in the fight over Covid-19 and with hope, we will learn some important lessons along the way.
The current global economy is primarily focused around enabling the exchange of money and with this, the smooth functioning of the market. The dominant idea is that the market mechanism of buyers and sellers will arrive at a price and from that we can attribute a value to a good or a service and derive how 'useful' it is. In this way, markets allow the flexibility for suppliers to match up their capacity to consumer demand, rendering the market a valuable and efficient tool in organising production. As a result, the market has played a fundamental role in the advancement of human kind over the past century.
As capitalism has continued to develop, the role of the market has become increasingly entrenched in day-to-day life. In his book, 'What money can't buy', Michael Sandel argues that in the past few decades we have unwittingly drifted from having a 'market economy' to a 'market society'. In such a society, in order for us to value something it has to be in a market, with a price ascribed to it, and as a result pretty much everything is up for sale. Market values and incentives govern all aspects of life. The rainforest, for example, has no 'value' until it is carved up and used as farmland. The market principles of efficiency and dynamism have been prized above all else and value and price have become synonymous.
This trend could be reversed by the current crisis. As a population, we have chosen our health and the health of our community as a priority, and are only now beginning to deal with the economic consequences. Some large corporations who opted to shut down their warehouses and halt all online orders to protect the health of their workforce have received praise, whereas others, who tried to stay open, have received heavy criticism. Over half a million of us have chosen to give up our time to volunteer for the NHS and help those that are most in need, and countless numbers have taken part in local schemes and reconnected with neighbours and those around us. The values of community, compassion and fairness that are all functional traits of humanity have become increasingly important.
Altogether, this leads to an increased focus on 'Stakeholder capitalism'. The theme of the 2020 World Economic Forum, stakeholder capitalism is the idea that companies are fundamentally concerned with the interests of their key stakeholders; customers, employees, local communities, suppliers and shareholders. Under this system, the focus is not solely to enhance shareholder value and maximise profits, but to increase the long-term value for stakeholders. As companies face greater scrutiny during the crisis, they will increasingly be judged on how they treat these stakeholders, whether they share and act with compassion or whether they succumb to greed and self-interest.
The greatest test of any change in societal attitude to value is the imminent global threat of climate change. Throughout the past couple of months, it has been drilled home to us that we are being guided by the science. Scientific experts have shaped our response to the coronavirus and it is realistic to expect that in the coming years, the population will demand more kudos be given to the advice of the experts.
The scientific experts have been warning of the climate crisis for years yet the pursuit of profit has been championed and has put the brakes on most large-scale meaningful action. Much like coronavirus, advanced community action is the only way to address the problem, however unlike with the virus, no one will be able to self-isolate.
The coronavirus is far from over; for some the impact is sadly irreversible, and for us all there are many more challenges yet to face. However, in the long run, there is a possibility that our experience will lead to a deeper understanding of the human values that bind us on a global scale. This may prove to have positive implications for how we behave as society and deal with other challenges, not least the threat of climate change.