However long the social, political and economic fallout of the coronavirus pandemic may last, humanity and its economic systems have weathered the storm exceptionally well, said David Frum, a political commentator and senior editor at The Atlantic, during the keynote address at the Canadian Investment Review‘s 2021 Investment Innovation Conference.
“We just put the entire world on furlough. ‘Work from home using these amazing technologies — some of which are brand new. Maintain your productivity, because the creation of goods and services creates the optimism about the future that will drive capital markets through this pandemic. Some of you are going to have to be paid to stay home. We can afford to take a big bunch of our workforce for two years because we can borrow the money from the future in amounts never before seen. The future will lend it to us at one per cent interest,’ we said. We did it, too. That is a stupendous achievement.”
Despite the resilience of the world’s political and economic institutions, the turbulence of the era could last far longer than the threat posed by the virus itself, he cautioned. “There has never been a time like this to be alive and what we demonstrated was the power of resilience and creativity. But the future is a time of opportunity and of apprehension.”
This doesn’t mean the pandemic’s fallout will be easily managed. According to Frum, one of its biggest impacts on institutional investors is how it will affect the world’s youngest and oldest workers. As schools took their classes online, North America’s secondary students dropped out of school at rates not seen in decades. Without high school diplomas or tertiary education, he’s concerned these dropouts will struggle to find well-paid work through the entirety of their careers.
On the other side of the age divide, the work-from-home era brought an early end to many careers, with many people born in the middle of the 20th century choosing to leave their careers behind. “When COVID-19 came, many baby boomers said, ‘You finally sent me home and it’s not so terrible. I’m enjoying the walks and the extra freedom so I will not return to work.’”
With actuarial predictions on life expectancy adding two decades to men’s and 25 years to women’s retirement years, this trend presents a particularly acute challenge for defined benefit pension plan sponsors.
Frum suggested the best approach to dealing with this problem is through a profound culture shift. “How do we get people excited about the idea about working into their early to mid-seventies or even longer? How do we change the workforce so that we can extend the working lives of people?”
He also shared his own thoughts on the likely trajectory of politics in the U.S., noting one of the simplest and most effective ways to judge the political tea leaves is to assess whether a president is lucky.
“There are lucky presidents and there are unlucky presidents. Bill Clinton wasn’t a tech guy, but during his first term, somebody asked, ‘What would happen if I put pictures on the Internet?’ This ended up creating the World Wide Web and pushing productivity up by three points. Lucky. Jimmy Carter wins the presidency in ‘76 because of the severe recession of ‘74-‘75. But in ‘78, prices began rising and the U.S. was hit by another supply shock. Unlucky.”
As a direct result of the uncertainty in the time in which he serves, President Joe Biden falls squarely into the unlucky camp. For that reason, Frum said he suspects the Democratic Party won’t hold onto its majority in the House of Representatives during the 2022 mid-term elections.
“It’s not Biden’s fault that there are these supply constraints. The surge in demand may be a little bit his fault, though most of those decisions that led to it were made before he took office. He’s trying to add more demand, but he’s only moderately successful.”
With former President Donald Trump, who Frum said was “haunting” the Republican Party, looking like a possible contender in the 2024 presidential election, one possible consequence of the pandemic may be a second Trump term if the sitting president is unable to turn his luck around.
“Lurking in the wings is Donald Trump, who wants to return to politics. . . . He talks about prices and border issues. He makes fun of Biden for his relatively few public appearances. But the thing that is on [Trump’s] mind, above all, is revenge. He thinks the presidency was taken away from him and he has no respect for the rules and process by which the people actually own the election — the voters, the citizens of the country.”