Getting through to the other side

Singapore Skyline

We enter a week, and the final month of the year, with a global economy tipping wildly between extremes of optimism and pessimism. Part of our job is to carefully observe the granular developments in the gaming industry, and the industries which support it, in an attempt to discover which of these attitudes is the more justified.

No one can deny that news in recent weeks about the development of promising Covid-19 vaccines has served to lift some of the psychological gloom attending the pandemic, but at the same time many observers are pointing out that any declarations that the crisis is now over are quite premature.

Mohamed El-Erian, president of Queens’ College University of Cambridge, discussed some of these issues in an interview with Yahoo Finance Live at the end of last week. Commenting on the impact of the vaccine news, he observed, “I can see why the market has embraced the better destination and has embraced this improvement in the journey. But we still have quite a bumpy journey left. And I suspect we’re going to see unfortunately some companies come under a lot of pressure in the next few months.”

At a later point, he emphasized, “That’s why you’ve got to think about the journey as well as the destination. And the destination is going to be a function of the journey.”

The destination is the function of the journey–there’s quite a bit to ponder in that statement, perhaps even more than El-Erian intended.

Part of his suggestion is that how firms have chosen to handle, or have been forced to handle, the pandemic throughout its darkest period may profoundly shape what ultimately emerges when effective vaccines become widely available, presumably over the course of the coming year or two.

There may be a “recovery” of some description, but there will not be a return to the status quo ante.

El-Erian also highlighted another issue that many observers have become concerned about when he noted that “we have decoupled finance from the economy excessively. The gap between Main Street and Wall Street is very, very large, and it is increasing. And that’s not healthy for society, and it’s not healthy for the markets longer term. You should worry about a reckoning longer term.”

Although few people enjoy staring directly into this particular abyss, the pessimists may prove to have the upper hand when considering the possibility that the Covid-19 pandemic may only be the first in a series of major economic disruptions in the 2020s.

We, too, choose not to stare too far down this abyss on a Monday morning, but it is a useful reminder that, in the long run, businesses can only be healthy when the societies that host them are also healthy, and due attention needs to be given to those who may have been left behind, and not only on those at the cutting edge.