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Speculating on the “new normal” in the post-pandemic global economy

Author(s): Stephen Poloz

Dec 13, 2021

Everyone is making plans for the “new normal.” But what will that look like?

When the pandemic started, we imagined an economy that could be stopped and then simply restarted, perhaps six months later. Now, we are approaching two years in semi-lockdown and the economy has evolved in many important ways. Restarting it is not like starting a train where everything is connected and must follow, perfectly spaced. It is more like getting a group of young children to play their appropriate positions in a soccer game.

As it turns out, restarting an economy is far harder than stopping it. Think about the refrigerator in your kitchen. It may be assembled in Mexico, the U.S. or in Canada, but it has components from many more countries than that. Those pieces are embedded in a complex inventory system, a global supply chain that is only as strong as its weakest link. If the factory that makes the plastic drawers for fruits and vegetables must close for four weeks due to the COVID-19 pandemic, or the factory that makes the computer chip that reminds you to change the air filter closes a couple of weeks later, those parts simply do not arrive when needed (if at all)...