Technostructural and economic lessons from the pandemic

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To close out the year, I've scheduled two articles on the lessons learned from the pandemic. In the first, I emphasized the lessons related mainly to psychosocial aspects. In this one, I focus more on the technostructural e economic and that an important lesson to learn is that social interaction involves economic consequences. The economy depends on social interaction.

Similarly, without understanding the psychosocial, it is difficult to understand the technostructural aspects. To talk about the pandemic and its consequences, people tend to go straight to the technostructural aspects. But what is the background to this? What has changed in human behavior that has caused this? It's the result of civilizational behaviour at the moment. Considering this background, perhaps we can address the technostructural part.

1. The focus on health actions

The world has discovered that health status is a prerequisite for tackling and preventing health situations at local and international level. Health habits will take their course in 2021 and perhaps become part of our behavior. At the same time, the pandemic has shown the fragility of countries' health systems and sent a clear message to governments about the need for adjustments to provide the population with dignified and efficient care.

2. Remote working

Given the need for social distancing, the home office effect was enhanced, ensuring that economic activity had a smoother break. Migration was almost instantaneous, which ensured continuity in the flow of activity.

3. Opening for renegotiation

In credit, it was understood that it was much better to renegotiate than to break the relationship, which would have consequences for the technostructure. The financial flow may have been delayed, but the economic flow was maintained. People continued to act, they renegotiated to save time. And the actions of the private sector, both in terms of credit and collection, were decisive. In addition, a renegotiation policy was adopted with a much more accurate assessment than in past situations, when uncertainty inhibited credit. In Brazil, the Cadastro Positivo (Positive Registry) was fundamental in this process, so that current assessments could be weighted given the historical information. As a result, the flow of the credit process was maintained. In this process, information and analytical capacity also increased considerably, which helped to assess the predictability of the phenomenon's impact on the ability to pay back the loans taken out.

4. Government action

Faced with the risk of the economic flow breaking down and the risk to social welfare, governments have acted very strongly to implement programs to mitigate the effects of the pandemic, unlike what has been seen on other occasions. All over the world, there was a consensus that the state should provide mechanisms to guarantee a minimum flow of income for both individuals and companies.

Since this revenue stream was affected by consumer behavior, a number of instruments were put in place:

Welfare aid to guarantee family income and stimulate consumption.
Government initiative to postpone tax payments. As some individuals and companies had revenue problems, the state decided to postpone payments to avoid committing people to revenue shortfalls.
Subsidized credit for micro, small and medium-sized enterprises. These were direct and indirect credits, to help maintain jobs and guarantee a source of income to stimulate the economy through consumption. As a result, the government also collected associated taxes.

These measures were taken in each country looking at its fiscal space. Some were conservative, others more aggressive. Brazil was one of the most aggressive, raising the public deficit from 75% to close to 100%. The government also adopted quantitative easing, a monetary policy that increases the money supply in an economy. By providing more liquidity to financial agents and reducing the need for compulsory deposits, it encouraged private credit agents to increase the availability of resources for lending. Central banks also reduced interbank rates, providing lower interest rates, incentives for stock markets and smoothing fiscal debt servicing.

5. Rethinking globalization

The lack of a transparent flow of information and central coordination of actions to deal with the pandemic, which has occurred in many countries, has led to uncertainty regarding a series of socio-economic guidelines, such as globalization. Countries have come to the conclusion that they should avoid relying solely on foreign production, and that each country needs to have local capacity, especially in key activities. At the same time, a crisis has arisen in global organizations, as they have lacked the efficiency and preparation to deal with the situation created by the pandemic.

The bet on China as a provider has shaken up the globalization process. It was noted that it is necessary to avoid placing essential services in a risky country or region or in a single location. A country with a major health problem is a risk, and countries are rethinking their strategy to diversify. There are countries thinking of splitting production between China and elsewhere, and countries wanting to take on part of the production locally and the rest in another region, among other alternatives. Japan, for example, is moving part of its production in China to other places and even within its territory.

The pandemic has shown that essential services need safety, quality and guaranteed delivery, and that the cost optimization strategy puts the need to provide the product or service at risk.

6. The outputs of each activity

Many companies are also looking for ways out of the issue of cost optimization to the possible detriment of the need to provide products and services with safety, quality and guaranteed delivery.

Some sectors have reinvented themselves, such as entertainment, which has migrated to streaming, while food and retail have leveraged delivery. Another advance has occurred in medicine, which has improved, adopted the remote version and ensured that needs are met safely.

7. The profile of the upturn

There is already intense debate about how to shape the recovery. It's clear that each segment will have a different speed and format, given people's behavior and coping measures. Many businesses that have gone digital have ended up benefiting sectors, especially those that have met psychosocial needs, whether in communication or technology.

8. Humanity's awareness of nature.
The pandemic has also alerted civilization to what is known as ESG (Environmental, Social and Governance). The health crisis and the reasons behind it ended up accentuating the proposition of ESG in the sense of greater investment in the environment and sustainability, greater care for governance and social action. Many companies began to adopt these concepts more firmly in order to preserve their base now, but with an eye to the future.

9. Technology and its innovative role

Technology has been a great instrument of innovation during the pandemic.

Instant payment platforms have accelerated their deployment, and technological literacy has accelerated due to the need for remote interactions. In Brazil, this awareness is also evident. PIX, for example, was the right initiative to accelerate the digitization of services and will benefit consumption and credit, including investment.

Artificial Intelligence has made its contribution by optimizing processes and simulations in the development of vaccines that normally have a cycle of around 10 years, but which are already being evaluated in just nine months. At the same time, another lesson that the pandemic has taught society is the need to verify information and guard against cyber attacks, especially in relation to their assets, due to the accelerated process of digitizing activities.

10. The certainty of uncertainty

It's still too early to assess all the consequences and, above all, all the changes that a crisis of these proportions leaves as its legacy. But it is certain that we will have uncertainties on the horizon, and that the uncertainties must be dealt with through prompt and transparent communication and coordinated actions at various levels, in the city, the country and the world.

But, as you can see from the changes related in these last two articles of the year, the world and humanity will be different. Let's hope that the lessons of the pandemic are a positive legacy. That would be a good start for 2021.

Happy Holidays to all, and may 2021 be a year in which we resume our activities in full social terms.