16 Aug The New American Renaissance: Covid Becomes the Driver for Growth
While Covid has disrupted our lives in ways that few emergencies have before, it has also cleared the way for an economic boom and social revival. The New York Times’ David Brooks is calling it the “American Renaissance”.
Brooks describes how West Germany and Japan endured widespread devastation during World War II, yet in the years after the war both countries experienced miraculous economic growth. Britain emerged from the war with its institutions more intact, yet entered a period of slow economic growth and lagged behind other European democracies.
Disruption becomes the engine for growth
Germany and Japan enjoyed explosive growth because their old arrangements had been disrupted. The devastation itself, and the forces of American occupation and reconstruction, dislodged the interest groups that had held back innovation. The old patterns that stifled experimentation were swept away. The disruption opened space for something new.
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We’ve endured grievous loss and anxiety during this pandemic
Many have also used this time as a preparation period, allowing them to burst out of the gate when things opened up. The result?
- 4 million new businesses were started in 2020, by far a modern record.
- A report from Udemy, an online course provider, says that 38 percent of workers took some additional training during 2020, up from only 14 percent in 2019.
After decades of rampant spending, Americans socked away trillions of dollars in 2020, reducing their debt burdens to lows not seen since 1980, putting themselves in a position to spend lavishly as things open up.
The best job market in 25 years, the economy has already taken off
- Global economic growth is expected to be north of 6 percent this year, and strong growth is expected to last at least through 2022.
- In late April, Tom Gimbel, who runs the recruiting and staffing firm LaSalle Network, told The Times: “It’s the best job market I’ve seen in 25 years. We have 50 percent more openings now than we did pre-Covid.”
- Investors are pouring money into new ventures. During the first quarter of this year, startups raised $69 billion, 41 percent more than the previous record, set in 2018.
Socioeconomic rebalancing takes three forms
- Power has begun shifting from employers to workers. In March, U.S. manufacturing, for example, expanded at the fastest pace in nearly four decades. Between April 2020 and March 2021, the number of unemployed people per opening plummeted to 1.2 from 5. Workers are in the driver’s seat. Employers are raising wages and benefits to try to lure workers back.
- A rebalancing between cities and suburbs. Covid-19 accelerated trends that had been underway for a few years, with people moving out of big cities like New York and San Francisco to suburbs, and to rural places like Idaho and New York’s Hudson Valley.
- Finding balance between work and domestic life. Stanford economist Nicholas Bloom expects that even when the pandemic is over, the number of working days spent at home will increase to 20 percent from 5 percent in the prepandemic era.
Millions of Americans who could work remotely found that they liked being home, dining every night with their kids and not having to commute. We are apparently becoming a less work-obsessed society. We’re looking for ways to make a living and stay connected with our families and our communities. To be more present. Nobody knows where this national journey of discovery will take us, but the voyage has begun.
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