Once again we have come across the concept called “new normal” in the wake of covid19 aftermath. The term new normal was most widely heard in the in wake of the global financial crisis in 2009 that brought about global recession. It was a way to caution against the prevailing (and dominant) market and policy view that post crisis industrial economies would revert to their most recent means.
The research rather indicated that economic normalization as opposed to financial normalization could be more complex and uncertain indicting a two-path analogy of an uneven journey and a new destination. The new normal concept was not an attempt to ponder what ought to be, but a prediction of the future given “the contemporary configuration of national and global factors comprising of the existing as well as new choices being made..”. It postulated the world “that would evolve in absence of a significant change in policy and business approaches”.
Since then, this term has been used by various authors and speakers in varied contexts, the most recent being the covid19 impact on the world economy which is being considered as even worse than even the Great Depression.
Whither New Normal?
As this term gains more widespread adoption, there have been various interpretations of its meaning. At the same time there are discussions in terms of how normal the new normal would be? Whether the new normalcy would vary from sector to sector? There are also concerns about how long it will take for business and society to settle into a new normal following a large-scale economic disruption.
However, there are contrary views as well which caution that “the New Normal pessimists can probably achieve a self-fulfilling prophecy”. Further, they comment that “A “rational optimism” that acknowledges hard realities and rebuilds the foundations of innovation and invention, however, can obliterate the New Normal” as a means to relaunch an era of growth. Also, the term the new normal has been used in the context of a particular economy. while some ponder whether “recent economic developments and the emergence of a “new normal” mean it’s time to challenge the conventional industry wisdom and elements of business economics?”
New normal is contingent on underlying new conditions
There have been several attempts to pinpoint the underlying drivers behind “the new normal” of slow growth in the context of the erstwhile global recession phase about six years ago. And now there are concerns about “the new normal 2.0” for the post covid19 era resulting in “low, insufficiently inclusive growth and artificial financial stability”.
Unlike cycles of recession around a normal level of economic activity affecting the financial health of the business, households and government, covid19 has adversely affected the physical and psychological health too of executives, workers and the policy makers.
In a world that had only just started moving back to its pre-recession normal, covid19 has ushered in a new definition of normalcy. However, issues like geo-political concerns and trade wars, which were far from normal in the pre-covid19 era have only worsened. We may have to be thus careful when we use the term “new normal” when it suggests “all is going to get worse” or conversely makes us believe that “everything was normal” before.
We must move away from treating massive changes as the bringers of a new normal. Every change can be termed as a new normal with reference to a previous phase that was different.
New normal: A regressive approach?
In my opinion, the concept of new normal is a regressive approach that may normalize our current situation and lead people to accept things as they are. In the Covid19 aftermath the term new normal is being used extensively not only in reference to the economic or financial markets but to include other aspects such as psycho-social behavior, health infrastructure, income inequalities and digital divides.
But the issue is whether the unprecedented efforts at the institutional, regulatory and government levels aimed at getting back to business as usual are not going to show any results? Well, when we talk of future, there is always an element of risk. Our economic systems are based on rational decisions or choices made by households, businesses and the governments under a given decision environment which is reasonably predictable for the decision makers amid all uncertainties that exist around. Whether you talk about business cycles or price mechanism there is one thing that is certain, they are prone to changes on either side.
Covid19 is just a bad phase that will eventually end
As covid19 recovery rates are improving in many countries, economic activities have resumed with safety measures. The uncertainty remains but when in the history of mankind, we ever had absolute certainty? The sustainability of any system, be it economic, political, social or environmental depends on the ability to cope up with the changes that are bound to occur as naturally as these systems are postulated to work.
Our main effort should be to take measures that will help us return at least to the same state of economic activity as existed before this pandemic. The problem of unemployment, poverty, widening inequities, NPAs, gender inequality, trade wars and faltering growth rates were all there in the pre-pandemic world also. Can we call that normal? No, not at all.
However, on the other hand, we saw increase in global trade, uplift in economic activity in general and rapid strides in the field of information and communication technology in so many countries. Was that not normal? Oh! No! That is rather something we would always like to look forward to.
So post-pandemic our first priority should be that the things don’t get worse where we performed badly and to build on the positives we achieved. We need to take well-coordinated multilateral policy measures at national and international levels, be it strategic lock-downs, or filling gaps in our testing and medical infrastructure and prioritizing certain sectors of our economies.
Recently, it is observed that Indian economy has started showing signs of going back to normal as of now, but “policy action in medium-term would require a careful assessment of how the crisis unfolds”.
I think it is a very apt approach to look at Covid19 pandemic as short to medium term crisis and focus on all that is required to mitigate its impact and using flexible strategies on real time basis till it subsides or a vaccine is found. And it’s pretty much normal to respond to exigencies as they occur. Covid19 has come as a bundle of threat as well as opportunities for many countries. It’s time to act accordingly.