Sunt Lacrimae Rerum

 

First: there has been much immediate coverage of the airlines' failure to refund money for cancelled flights, providing offers of flight vouchers instead. (Governments are so far backing the airlines rather than the consumers, because they want a functioning airline industry.) There is also some coverage of the reduced density which will be part of airline travel no rms for the next year or more. There is little recognition that the industry is in for a fundamental shakeup.

 

The reason that airlines are not returning money where they can avoid it (contractual terms) is that they do not have the money, and are currently bleeding red ink like blood; but those same terms require them to offer credit for the future rather than simply walking away from the contracts. (Even then, they're vulnerable to clawbacks from credit card companies if they, and not the passenger, initiated the cancellation.) But pushing all that obligation into the future is not good for them either, as it means that on returning to fuller operation their revenues will be impacted by loads of customers flying on the vouchers. And they won't have as many customers - between less density, individuals who decide that flying is now too risky, and businesses which are more comfortable now with meetings over WebEx relative to face to face, passenger numbers are going to be down.  The price of flying will also go up, but it is unlikely to make up the difference.

 

They have been, at present and broadly, refusing bailouts to retain independence. Some, at least, will have no choice, and governments who in some sense need a passenger airline system, will probably provide assistance - but it will have to be ongoing, and (outside, perhaps, the US, which has an allergy to this sort of thing) probably will involve governments taking over some measure of direct control.

 

Secondly: there's a steady drip of news stories about individual restaurants closing, and the odd story of one which has made a success of a delivery/pickup business.

 

Cities are encouraging reopenings with patios and widely spread tables, but a typical restaurant runs on narrow margins and part of that has been packed Thursday and Friday evenings, or midweek lunches for the business district. (A few very high-end restaurants work with exclusivity and high prices instead; in principle, that will continue to work.) Some, even a significant cluster, of restaurants will probably make a successful transition to a model where pick up/delivery plus off-licence sales makes up for fewer dine-in customers; the premium for dining at a restaurant will go up. But that sector us going to look very different in a short while in both numbers and what are s offered.

 

Thirdly: demand for petroleum is down, and there were already intrinsic pressures driving towards a collapse of the petroleum industry. There are indications that the stresses of the pandemic may push it across that threshold. If that happens, a lot of other dominoes will fall as a massive amount of capital value evaporates very quickly, including financial institutions and governments which have become too entangled in their petroleum-extracting corporate citizens.

 

Fourth: you don't have to assume that everybody will continue to work from home to anticipate a collapse in commercial real estate demand in the downtown cores. Even a drop in the number of people working on-site on a daily basis will shrink the footprint of larger lessors, and the idea that there will be a flood of smaller ones to make up the gap seems to me to assume that the desirability of being physically downtown will be much higher than it really will.

 

My previous employer had a pilot project well before the pandemic aimed at pushing its technical employees into a model where they would have notebooks and lockers and no dedicated desk space on-site and would have to work off-site a couple of days a week; the rhetoric was about increasing flexibility but the real aim was to reduce the real estate footprint. And prudent employers who have had the experience of transitioning a workforce to off-site work may very well require workers to work from home a day or so every couple of week just to ensure continued Disaster Recovery capability.

 

If many employees don't want to take transit and live in the suburbs, that may result in more, smaller-footprint, satellite sites where suburban workers can be "on-site" with a local commute for more of them. This may take a while as the ability to move commuters around in any directionvand not just from suburbs to the centre and back, gets put in place. It's not much good putting an office in for the block of your employees who live in Oakville if most of the rest live in Richmond Hill.

 

All this may have some counterbalance in the need to lower the density of workspaces - fewer employees may be in the office, but there will be bigger air gaps between them. However, my guess is that this won't be enough to make up for a centrifugal movement of workers out of the centre.

 

A smaller number of downtown workers means a smaller market for goods and services, and many people are developing patterns of ordering things online that they used to shop for in person. So commercial retail real estate will also be affected.

 

So will the tax bases of cities, already stressed with the need to provide more services.

 

This will be a slow-motion, gradual change, like the proverbial frog in heating water.

 

Fifth, and slightly different, consider major phone companies, which happen to be the major internet providers. They're doing relatively well out of the pandemic, but the extreme reliance it has revealed that everyone has on internet access now is already calling for internet access to be a "right". The Ontario government has just announced funds for subsidizing building out rural internet access.

 

It is not unlikely that internet access will be regulated -- federally, telecommunications being a federal responsibility - in much the same way that POTS was when I was young: an enforced low flat rate for access at least at certain times (say, from 9 to 6), but with supports for it being universal (rural areas, poverty, etc.), with cross-subsidization from other sources. (Telcos stop being growth-oriented companies and go back to a regular-dividend-stream model that they used to have.)

 

On top of that, there are obvious public-sector issues in healthcare, long-term care, policing, transit, and social work which have been popping up like gophers.

 

Locally, we don't see a lot of this yet for political reasons. The Ontario PCs, although they get reasonable grades for initial action to shut things down  - Doug Ford gets credit for empathic reactions when concrete examples of certain sorts of difficulties are presented to him - has largely squandered the breathing space they got by shutting things down. Ideologically, they have no appetite for sustained changes in government involvement in the economy, or for raising taxes to provide the revenue stream to support a more activist role, and deep down they're still at a Keystone Kops level of competency for actually getting things done.  They have put their problems on hold but not actually solved them. The federal Liberals have a minority government, limited jurisdictional powers in many of the areas under mist stress (except airlines and telecommunications) and a recent track record of promising much and delivering little, slowly. But that doesn't mean that change is not going to happen.

 

Governments have already discovered that where they had a policy of "flattening the curve" for the pandemic, the population has generally not followed them. A minority don't seem to care and are possibly the core of the reason that cases of Covid-19 stubbornly refuse to drop below a certain level (plus, probably, not shutting down enough activity); the majority, though, missed the message about getting Covid-19 in a spread-out and manageable fashion and take the shutdown as "not getting Covid-19 at all", particularly themselves, and don't want to go out and restart the economy if it means risk to themselves. And with that level of pushback, governments are scrambling to respond and frequently making things up on the fly.

 

These are specific changes, even if, all together, they amount to an economic upheaval. The question of systemic change is more obscure. Certainly one of the secondary effects of the pandemic has been to show more of the implicit inequities generated by class, racial, and economic distinctions, and government responses, especially in the USA, have tended to show more of the iron fist than the velvet glove, and we're seeing responses to that at a relatively broad level. But whether the current set of disruptions are enough to push enough people off their pre-existent local maxima into a place where there is a gut realization that the alternatives to systemic change are all worse - that's another question.

 

I'm dead certain that, economically, the landscape will look very different two years or so from now. I am not sure, in general (aside from the US where the election is guaranteed to deliver change no matter what happens), whether we will see significantly different social and political landscapes.