Last October while discussing ‘Solidarity and Common Good’ at Krakow, the humanistic management scholars did not assume that it would be so close call for action. Today the G20 commitment to suspend debt repayment of 76 low income countries for a year, which is also matched immediately by the private creditors, reminds how the world is preparing for solidarity through collective action at the time of crisis. However, this is the beginning, a lot more is required to have the humanity from the ongoing challenging times.
The recent Forbes article highlights four lessons that we should learn from the current global pandemic COVID-19. While stressing on the pivotal role of private sector in forming a global multi-stakeholder cooperation, author Georg Kell stresses that ‘growth at any cost’ mentality has no longer validity for sustainable growth and holistic development of the world. This signifies that we must move beyond the conventional ‘greed-focused’ development model that has led to separation of ‘humanity’ with the ‘mother nature’. The fundamental question remains how to foster the cross-border, cross-sectoral collaboration to respond to the current crisis amidst conflicting preferences and approaches of the different stakeholders?
As per an estimate by UN Department of Economic and Social Affairs, COVID-19 may cause nearly 1% shrink in the global economy by the end of the current year instead the pre-pandemic projection of 2.5% growth, which implies the net economic contraction of 3.5% globally by the year end. Although it may be early to exactly estimate the economic impact, the poor people and low-income countries are considered to be the most vulnerable ones.
The reduction in demand in a number of products and services coupled with increase in demand for health-care and food-supplies is likely to produce the mixed effects across the different country contexts. International Labour Organization (ILO), with the base unemployment level of 188 million in 2019, projects an increase in global unemployment of between 5.3 million and 24.7 million. The unemployment projection for ‘lower middle income’ and ‘upper middle income’ countries is between 0.7 to 2.8 million and 1.7 to 7.4 million respectively. In addition, increase in underemployment due to changes in demands in certain sectors/industries is also projected.
World Trade Organization (WTO) reports 13% to 32% projected global trade decline in year 2020. The analysis by US Congressional Research Service indicates the possible impact of investors’ withdrawing money from stocks and searching options for safer investments. Also, the value of US Dollar, which accounts for nearly 88% of the global foreign exchange markets, could severely impact businesses and economies. The current crisis is shifting the economies towards mega VUCA situation in which uncertainty is the driving force at all the levels from macro-economic indicators to industry, sector and company specific trends.
How these trends could impact the social and economic development across the different contexts? While hope for the most optimistic scenario for the global as well as country economies, there are certain trends which will be certainly impacted by how Governments and Private Sector responds to the emerging challenges. The degree of increase in unemployment as well as decrease in income would directly be influenced by what assumptions and business models are guiding the corporate decisions during these challenging times. The companies and organizations should be ready with short-term as well as the long-term strategies to deal with the crisis. For example; many companies in hospitality and aviation sector has been hit hard due to sudden reduction in the demand for the services but it does not imply that the companies should jump to extreme cost-cutting majors and reduce the work-force. Corona virus crisis does not have to lead to employee layoffs. Even in case of extreme major, which would also depend on the financial health and available cash-reserve, those who are drawing higher pays can share the pain proportionately rather shifting the load to those who are working at relatively much lower wages. For example; the large hotel chain like Marriott and academic institutions like Harvard and MIT are preparing their cost-cutting plan with significant reduction in high-level or C-suite executive salaries. At the same time, there are also examples of companies, which are focusing more on employee well-beings than on cost-reduction. This is quite evident that such decisions are quite contextual, which are largely influenced by the cash health and projected future demand scenarios of the organization, however, the ‘moral responsibility DNA’ will be a central driver of how companies anticipate, interpret, prepare and respond to the crisis.
Time to remember $5 a day wage program by Henry Ford, not assuming the counter argument of the story. The assumption, ‘richer workers, more cars’ fits completely to the current situation, which could lead to long-term changes in the consumer behavior across many industries and economies. Could we imagine a sustainable world with 32% lower trade and with significant reduction in paying capacity of the individual customers, majority of whom are ‘employee’ somewhere?
As being reported in most of the analysis, the situation would have varying impact in different economies and industry contexts, however, despite the contextual variations in terms of the impact of the crisis, the mega change is inevitable. This mega change will happen not only in terms of the GDPs and Stock Prices but also on how do we live in this world as student, employee, customer, leader or entrepreneur. The most important factor that would shape our future is ‘how do we respond to the crisis as an individual, organization, society, country and one ‘humanity’. The Private Sector, which is the major contributor to drive the global economy, has to come forward with stronger commit to the ‘solidarity’ for ‘common good’. The time calls for: coming out of conventional ‘growth focus’; and to work collectively for addressing the issue as ‘one world’.
The Private Sector has a very serious responsibility to work actively with the Governments in addressing the crisis and minimizing the impact of the current crisis. This would require significant shift in corporate decisions and actions with focus towards broader ‘moral purpose of existence’ or ‘corporate moral responsibility’ through innovation in the business models and priorities. We must understand that the sustainability of the business is directly linked to the sustainability of humanity and nature. Hope we soon will come out from the crisis and become one stronger world with many learnings and of course, with greater happiness and human well-being!
By Wolfgang C. Amann, Academic Programme Director at HEC, Paris, Qatar (individual member of CEEMAN) and Shiv K. Tripathi, Professor and Dean at IIHMR University, India. Both authors are CEEMAN IMTA program alumni and UN PRME Anti-Corruption Working Group members, and have been engaged in actively publishing in the area of ethics, humanism, business and leadership interface.
You might find interesting another article by Wolfgang and Shiv that appeared recently in the UN Academic Impact: COVID-19 and Higher Education: Learning to Unlearn to Create Education for the Future