A dark scenario an invisible enemy paranoia and isolationism

August 7, 2021 â€" 12.15am

Under normal circumstances a booming sharemarket, record corporate activity and soaring property prices would be a time for celebration.

But during a global pandemic that has put 16 million Australians into lockdown, it feels surreal.

High liquidity combined with low cost of capital lifts asset prices. With interest rates at almost zero and loose credit, money is cheap.

Anti-lockdown protests in Sydney’s CBD turned chaotic on Saturday.Credit:Brook Mitchell

An unintended consequence of asset booms is that the gap between the haves and the have nots widens, increasing the likelihood of social unrest.

Throw lockdowns, which hit low-income workers harder, into the mix and the gap gets even wider.

It goes a long way to explaining the recent surge in protests in Sydney and Melbourne, which could well become a symbol of a more sinister social backlash, festering away while the country waits to be fully vaccinated.

Taken together, it makes a mockery of Prime Minister Scott Morrison’s Team Australia mantra or putting the onus on Australians that reaching a national adult vaccination rate target of 70 per cent depends on all of us.

That might well have been the case if the vaccination rollout hadn’t been so badly botched. From a failure to have enough vaccine supplies to the confused messaging, Morrison is looking seriously inadequate.

His embarrassing performance is a chilling reminder of a scenario analysis conducted by Deloitte and Salesforce in the early days of the pandemic to consider how businesses and society may develop in the next three to five years.

Four scenarios were developed, ranging from positive to negative. Focussing on Australia, the way things are heading, it is moving closer to the most negative scenario.

The first scenario, described as “The Passing Storm”, assumed COVID-19 wreaked havoc on the economy and society but an effective health system and political response resulted in its eradication early on, followed by a rebound in the economy by late 2021. This stellar achievement rebuilt trust in public institutions.

When it comes to scenario one, Australia has missed the boat. Its disastrous vaccine rollout, its poor quarantine solution, a confusing and slow response to the NSW outbreak by the Berejiklian government and the need for the states to continually lock down due to the low vaccine take-up has damaged trust in our leaders and hurt consumer confidence.

Scenario two - “Good Company” - factors in the pandemic persisting, which puts strains on governments. In this scenario big companies step into the fray to help governments fix the problem. This results in a growing concentration of power among large companies. “Social media companies, platform companies, and tech giants gain new prestige,” according to the scenario analysis.

Put simply, the previous “techlash” would be replaced with people increasingly embracing technology, triggering an innovation explosion. This scenario assumes economic recovery in late 2021.

Mounting deaths, social unrest, and economic freefall become prominent. The invisible enemy is everywhere, and paranoia grows.

Lone Wolves scenario

A third, less optimistic scenario - “Sunrise to the East” assumes the pandemic unfolds inconsistently across the world and China and other East Asian nations manage the disease more effectively.

“The global centre of power shifts decisively east as China and other East Asian nations take the reins as primary powers on the world stage and lead global coordination of the health system and other multilateral institutions,” scenario three suggests. “The ability of China, Taiwan, and South Korea to contain the outbreak through strong centralised government response becomes the ‘gold standard.’”

The fourth and grimmest scenario - “Lone Wolves”- creates a scenario where the pandemic is prolonged, and the global recovery is delayed until mid-2022.

“Mounting deaths, social unrest, and economic freefall become prominent. The invisible enemy is everywhere, and paranoia grows,” it says.

This scenario factors in nationalism rising and survival of the fittest prevailing.

“Nations put strict controls on foreigners and force supply chains home in the name of local security,” it says. “Countries grow isolationist in the name of domestic safety. Government surveillance is commonplace, with tech monitors on people and their movements.”

This grim scenario posits a world where physical distancing becomes a daily reality and individual freedoms are eroded as governments adopt strict measures to contain the virus. An increasing reliance on technology creates vulnerabilities to cyber attacks â€" something that is already happening - and countries become increasingly isolationist as they attempt to halt the spread of the virus using travel bans, border lockdowns and cancellation of visas.

Of all four scenarios, it is this scenario which is looking increasingly real.

The longer the virus remains, the greater the risk of long-term social and economic damage. It will also increase the risk of more sustained and violent social unrest, as the wealth gap blows out.

As one business leader said, “How long can governments go on printing money without severe financial impact? How long can super profits be generated by global conglomerates essentially at the expense of government money supply? How long before segments of our population challenge the moral authority of government to consider the interests of the many over the few? And during this period how will or can our institutions respond to wanton greed and value destruction by the unscrupulous?”

Its an interesting take on things, and one that needs to be taken seriously, before it is too late.

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Adele Ferguson is a Gold Walkley Award winning investigative journalist. She reports and comments on companies, markets and the economy.

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