The COVID-19 outbreak has had a serious and widespread impact on the global economy. Different countries’ issues resulted in economic failure as most economies depend on international trade, tourism, raw materials exports, and external financing. Governments in many developed countries have taken effective stimulus measures, while lower-middle-income and emerging countries do not have the funds to implement such proposals as needed. It is crucial to evaluate how different authorities and global companies have overcome the 2020 COVID pandemic’s negative impacts, analyzing policy measures, online and offline business features, and innovations.
Scale and Impact of COVID-19 on Economies
One year after the first case of the COVID-19 infection, the spread in estimates of the pandemic-induced decline remains high. The International Monetary Fund warned that the coronavirus outcomes would be more serious than those that occurred after the great recession in 2008 (McKibbin and Vines, 2020). At that time, global GDP increased by 1.83%, and in 2009, for the first time since World War II, it decreased by 2.3% (McKibbin and Vines, 2020). At the end of 2020, the Organization for Economic Cooperation and Development (OECD) expected a six percent fall (McKibbin and Vines, 2020). By the end of 2021, according to OECD forecasts, the total damage to the world economy from the coronavirus pandemic might reach $7 trillion (Leach et al., 2021). This compares with the US’s combined annual budgets – $4.1 trillion, and China – $3.2 trillion (Brooks and Geyer, 2020). Developed country governments have invested trillions of dollars in support measures to get economies back on track, but this was insufficient (Ashraf, 2020). The service sector was significantly affected, including transport, entertainment, tourism, and hotel industries. As a result, there is an extensive loss of jobs, an increase in poverty and inequality; emerging market economies remain mostly at risk.
Theoretical Approach
The coronavirus pandemic has resulted in the current economic crisis, but it began in a more profound economic failure dating back to the 2008 financial downturn. Concerning the Keynesian model, the situation forces the government to intervene in the economy to completely contradict the concept of “free market” (Pollitt et al., 2020). This includes measures to support demand, such as providing money directly to employees (McDonald, 2020). A clear shift towards Keynesian measures appeared when an editorial in the Financial Times called for radical reforms in the coronavirus pandemic face (Financial Times, 2020). In terms of crisis, the government should take on a more active role in the economy.
Concerning non-intervention in economic matters, the Hayek model emphasizes the importance of economic liberalism. According to Pennington (2020), this approach’s adherents argue that market pricing is the best mechanism for allocating resources. The context of economic production is continuously changing, and each person has individual needs and preferences (Irving, 2018). According to Hayek, prices are the only way this widely dispersed information can be efficiently processed (Pennington, 2020). However, these days, nations are leaning towards the Keynesian model (Cooper, 2020). At present, under the direct impact of the coronavirus shutdown, individual government spending could decrease the crisis’s worst aspects.
Fiscal and Monetary Policy
With regard to different political systems, level of economic development, and global power and position, the reactions and measures taken for national economic support are different. Most developed countries take several steps to diminish financial outcomes. For example, within a few weeks, stimulating measures approved by the U.S. Congress, governments of different developed countries, including France, Germany, Italy, Japan, and the UK, exceeded 10% of yearly GDP (International Monetary Fund, 2020). In the USA, the vast majority of the measures aim to support American banks and corporations (Williams and Kayaoglu, 2020). In Britain, Boris Johnson’s conservative government has adopted a program according to which workers who have lost their jobs can receive up to 80% of their income if it is not more than 25 thousand pounds (Williams and Kayaoglu, 2020). Most of the government activities consider economic and social institutes.
Concerning other countries with authoritarian leadership style and global power, these measures are almost the same. For instance, the Brazilian government announced a set of steps to pay social assistance to the population’s most vulnerable portions (Ponce, 2020). In Saudi Arabia, the authorities announced the allocation of 120 billion riyals to support the economy (Nurunnabi, 2020). The measures introduce support to the banking and financial sector, small and medium-sized businesses, particularly the deferral of tax payments and exemption from various government fees and duties (Nurunnabi, 2020). In South Korea, the officials also sent emergency financial assistance to companies in crisis due to the pandemic (Liu, Lee and Lee, 2020). Therefore, there are several options on how different countries try to diminish COVID outcomes. In a crisis, the laissez-faire principle does not help achieve satisfactory results, so the state should support demand and help the economic profit.
Empirical and Critical Approaches
Offline and Online Business
During the pandemic, the rise of e-commerce became one of the leading retail trends because online was the only viable sales channel for several product categories. According to Digital Commerce 360 (2020), the online sales volume in the world in 2016-2019 grew by an average of 20% per year. Simultaneously, offline retail sales increased by 3.5% over the year (Digital Commerce 360, 2020). If this trend continues, then the global e-commerce market volume will exceed traditional retail by 2036 (Digital Commerce 360, 2020). Besides, there is reason to assume that the coronavirus pandemic can serve as an additional impetus for online commerce evolution (Maital and Barzani, 2020). In this situation, more customers worldwide are forced to buy on the Internet and get used to making one-click purchases; there will be an upward trend.
Innovations
In terms of the COVID-19 crisis, most companies try to implement IT solutions that contribute to the enrichment and revitalization of technologies that virtually interact with the product. There is an increased demand for technological solutions related to entering trading platforms (Sharma et al., 2020). Due to a vital internal innovative element and the onboarding team’s strengthening, companies should effectively cope with new issue solutions (Rigby, Elk and Berez, 2020). According to Sharma et al. (2020), digital and sustainable development will be the main trends in 2021. The human experience during the pandemic will lead to rapid changes in technology and business.
Boohoo, Debenhams and Arcadia
One example is the Boohoo retailer, which bought the Debenhams department store chain. The latter’s transaction will be performed online; Boohoo acquired all of Debenhams’ intellectual property rights, including customer data, contacts, and related business information, for $ 75 million (Davey, 2020). The purchaser plans to relaunch the Debenhams online store in the first quarter of 2022 to expand its customer base with network customers in such categories as sports, health and beauty products, and household goods.
Debenhams, employing more than 12 thousand people, has experienced economic failure due to the coronavirus crisis. According to Davey (2020), department stores faced severe financial problems in early December as their largest tenants, including Arcadia Fashion Group stores, shut down, being stricken by the pandemic. Further, online retailer Boohoo Group acquired the remaining brands from the bankrupt Arcadia Group from the Asos deal (Davey, 2020). Concerning the Porter model, with the development of online commerce, such large retailers began to lose customers, and they could not compensate for it through their online sales. The pandemic had a disastrous impact on their financial condition, which was already in an urgent state (Davey, 2020). As a result, even though it seemed a year ago that the companies had a chance of survival from significant losses, the business was ousted from the market, and online sellers acquired their multiple brands.
UberEats and Restaurants Closure
Quarantine restrictions have affected the profits of pubs and restaurants around the world. Many catering businesses are compelled to operate only for delivery, but these measures do not compensate for the losses (Brizek et al., 2021). Besides, traditional establishments cannot compete with food services that already have a well-established customer co-operation (Mullen, 2020). For instance, UberEats has become a significant profit source for the company when its main business has scaled back (Swothi, Bertle and Shehnaz, 2020). Uber has reported the results of the second quarter of 2020, which is a net loss of $ 1.78 billion, but the delivery outperformed the taxi service (Swothi, Bertle and Shehnaz, 2020). Due to the pandemic’s global impact, Uber experienced a significant drop in demand for the taxi business in March (Swothi, Bertle and Shehnaz, 2020). In the first quarter of 2020, the drive amounts fell 5% compared to 2019 (Swothi, Bertle and Shehnaz, 2020). However, the company managed to get out of the crisis as the food delivery business Uber Eats recorded a more than 50% increase in orders (Swothi, Bertle and Shehnaz, 2020). Quarantine measures led to many restaurants offering delivery services and more people ordering food on the house, and changes in consumer behavior can last.
Evaluation
Business
The pandemic has acknowledged the value of digital business transformation. At present, long-term survival depends on the level of information development. For instance, the companies that were already advancing the digital field could survive the economic failure with minimum loss (Bhatti et al., 2020). Profitability relies on global trends in digitization, such as platform solutions and artificial intelligence technologies. Since most companies’ priority was implementing innovative solutions in separate processes, the pandemic allows corporate leadership to realize the need for a comprehensive digital transformation (Bhatti et al., 2020). For example, to save the market share, Twitter, Facebook, Google, Amazon, Spotify, Shopify, Salesforce, and Uber provided opportunities for employees to work online (Kelly, 2020). Businesses have recognized the importance and benefits of digital transformation.
Global Value Chains
The economic crisis primarily affects global value chains’ functioning as production, international trade, and investment. It cannot be considered a cause of the pandemic as, over the past forty years, production processes around the world have been organized into so-called global value chains (Strange, 2020). The global value chain and China’s pivotal role has been severely disrupted by the COVID-19 outbreak, and adverse economic impacts are expected worldwide (Strange, 2020). Nevertheless, the value chains in the worldwide economy tended to be localized even before the pandemic. COVID-19 is not the only factor prompting this radical change (Kano and Oh, 2020). The crisis caused by the pandemic is superimposed on the previous significant challenges facing the global production system due to the new industrial revolution, expanding economic nationalism, and the need to balance development.
Authoritarian Governments Success
Strong centralized governments in China, South Korea, Singapore, Hong Kong have had sufficient success in the fight against the coronavirus. For example, the Chinese economy was the first in the world to win back all the losses caused by the COVID-19 pandemic (Alon, Farrell and Li, 2020). At the beginning of the disease outbreak, China was quarantined, while high economic growth was still maintained in other countries, supporting the export industries (Alon, Farrell and Li, 2020). When other countries plunged into a pandemic, the economy’s incentives and partial opening have already been practicing in China (Zhang, 2021). The Chinese economic recovery’s fundamental factor is proactive containment of the coronavirus, allowing factories to reopen quickly and capitalize on global demand for medical equipment and teleworking technologies (Zhang, 2021). However, the authoritarian government’s success does not indicate its effectiveness (Dempere, 2021). The economic reopening is facilitated by the absence of setbacks, the introduction of strict quarantine measures, and timely steps to restore the economy.
Conclusion
Emergency measures have been taken in many countries to support the population and stabilize the economy. The assistance is displayed through direct budgetary allocations, reduction of tax payments or their postponement, provision of government guarantees to the financial sector. Moreover, the business had to implement many remote mechanisms and digital solutions, the launch of which, in the absence of extreme conditions, would be a matter of a relatively distant future. However, the pursuit of GDP cannot guarantee the prosperity of a nation’s life. It is complicated to assess the macroeconomic results of 2020, primarily from an ethical point of view – the dynamics of a country’s economy was mainly determined by the level of restrictions imposed on it due to COVID-19.
Reference List
Alon, I., Farrell, M. and Li, S. (2020) ‘Regime type and COVID-19 response’, FIIB Business Review, 9(3), pp. 152-160.
Ashraf, B. N. (2020) ‘Economic impact of government interventions during the COVID-19 pandemic: international evidence from financial markets’, Journal of Behavioral and Experimental Finance, 27, p. 100371.
Bhatti, A. et al. (2020) ‘E-commerce trends during COVID-19 Pandemic’, International Journal of Future Generation Communication and Networking, 13(2), pp. 1449-1452.
Brizek, M. G. et al. (2021) ‘Independent restaurant operator perspectives in the wake of the COVID-19 pandemic’, International Journal of Hospitality Management, 93, p. 102766.
Brooks, E. and Geyer, R. (2020) ‘The development of EU health policy and the Covid-19 pandemic: trends and implications’, Journal of European Integration, 42(8), pp.1057-1076.
Cooper, R. (2020). ‘The start-up economy is fundamentally broken. The virus will make it worse’, The Week.
Davey, J. (2020) ‘Debenhams set to shut shop after 242 years as pandemic hammers UK retail’, Reuters.
Dempere, J. (2021). A recipe to control the first wave of COVID-19: more or less democracy? Transforming Government: People, Process and Policy.
Financial Times (2020). ‘Virus lays bare the frailty of the social contract’.
Irving, S. (2018) ‘Limiting democracy and framing the economy: Hayek, Schmitt and ordoliberalism’, History of European Ideas, 44(1), pp. 113-127.
Kano, L. and Oh, C. H. (2020) ‘Global value chains in the post‐COVID world: governance for reliability’, Journal of Management Studies, 57(8), pp. 1773-1777.
Kelly, J. (2020) ‘Digital nomad: the new and cool trend of working from paradise—or anywhere in the world’, Forbes. Web.
Leach, M. et al. (2021) ‘Post-pandemic transformations: how and why COVID-19 requires us to rethink development’, World Development, 138, p. 105233
Liu, Y., Lee, J. M. and Lee, C. (2020) ‘The challenges and opportunities of a global health crisis: the management and business implications of COVID-19 from an Asian perspective’, Asian Business & Management, 19, pp. 277-297.
Maital, S. and Barzani, E. (2020) The global economic impact of COVID-19: a summary of research.
McDonald, I. M. (2020) ‘Macroeconomic policy to aid recovery after social distancing for COVID‐19’, Australian Economic Review, 53(3), pp. 415-428.
McKibbin, W. and Vines, D. (2020) ‘Global macroeconomic co-operation in response to the COVID-19 pandemic: a roadmap for the G20 and the IMF’, Oxford Review of Economic Policy, 36(1), pp. 297-337.
Mullen, A. (2020) ‘How to future proof our local shopping strips from uber eats’, Planning News, 46(7), p. 14.
Nurunnabi, M. (2020) ‘Recovery planning and resilience of SMEs during the COVID-19: experience from Saudi Arabia’, Journal of Accounting & Organizational Change, 16(4), pp. 643-653.
Pennington, M. (2020). ‘Hayek on complexity, uncertainty and pandemic response’, The Review of Austrian Economics, pp. 1-18.
Pollitt, H. et al. (2020) A Post-Keynesian approach to modelling the economic effects of Covid-19 and possible recovery plans. Cambridge: University of Cambridge
Ponce, D. (2020) ‘The impact of coronavirus in Brazil: politics and the pandemic’, Nature Reviews Nephrology, 16(9), pp. 483-483.
Rigby, D. K., Elk, S. and Berez, S. (2020) ‘Develop agility that outlasts the pandemic’, Harvard Business Review.
Sharma, H. B. et al. (2020) ‘Challenges, opportunities, and innovations for effective solid waste management during and post COVID-19 pandemic’, Resources, Conservation and Recycling, 162, p. 105052.
Strange, R. (2020) ‘The 2020 Covid-19 pandemic and global value chains’, Journal of Industrial and Business Economics, 47, pp. 455-465.
Swothi, S., Bertle, T. G. and Shehnaz, S. R. (2020) ‘A study on customer preference towards food delivery applications’, Advance and Innovative Research, 7(3), pp. 29-34.
Williams, C. C., and Kayaoglu, A. (2020) ‘COVID-19 and undeclared work: impacts and policy responses in Europe’, The Service Industries Journal, 40(13-14), pp. 914-931. Zhang, X. (2021) ‘Broadband and economic growth in China: an empirical study during the COVID-19 pandemic period’, Telematics and Informatics, 58, p. 101533.