From racial and gender inequalities to the dominance of tech giants in the stock market, the Covid-19 crisis has accelerated trends that long preceded it. Jean-Hugues Monier, senior partner at McKinsey & Company and co-leader of its Strategy & Corporate Finance Practice for the Northeast United States, offered insight into this phenomenon and offered predictions about a post-Covid-19 world in a virtual talk sponsored by the Julis-Rabinowitz Center for Public Policy & Finance and live-streamed on YouTube.
Monier began by highlighting the shock of Covid-19 to the American economy–the greatest since World War II. The total draw-down from the previous peak of U.S. real GDP was over 10% at the end of the second quarter of 2020, a staggering drop. Yet, despite the economy’s crash, the stock market has recovered and has even reached new heights, a development that speaks to rising inequality, loose monetary policy, and speculative markets that are divorced from the everyday life of many Americans. "What we are capturing in the stock market is a little bit of a different dimension than the real economy," Monier noted.
Covid-19 as an accelerator of pre-existing inequalities emerged as the central theme of Monier’s talk, as he discussed the disproportionate impacts of the crisis on women around the world. Women are bearing the brunt of childcare and homeschooling during workdays throughout the crisis in the U.S., U.K., and Germany, he said, and 1 in 4 American women have considered leaving the workforce or downshifting careers since the emergence of Covid-19.
The crisis has also hit racial minorities especially hard in the U.S., not only with regard to health outcomes but also economically. Low-income essential and service sector workers have disproportionately and severely faced job losses, with significant adverse effects for racial minorities. "The income group that has been affected the most is the group that is nonwhite,” Monier said.
These inequalities are not new, Monier emphasized, but their collective and severe acceleration is notable and troubling.
In the second half of his talk, Monier focused on other trends accelerated by the pandemic and subsequent economic crash, specifically the growing dominance of the largest global corporations. The 25 largest global companies by market capitalization–the “Mega 25”–have recovered more quickly and made outsized gains as compared to the rest of the stock market. These companies--mostly technological giants from North America and Asia, as well as electronic vehicle and semiconductor producers–and the sectors they operate in will continue to play enormous roles in shaping the economy and world in the years to come, Monier said.
Monier concluded his presentation with a summary of his findings and predictions for the future. Although important long-term uncertainties remain, the future will be centered on “health,” “tech,” and “sustainability,” he said. The Covid-19 crisis also carries implications for our larger social contract, he predicted. “I think corporations, more than ever, feel like they are not isolated,” he said, adding that solving for the “massive inequalities” highlighted earlier in his presentation would be central to what lies ahead and that corporations will have important roles to play.
A recording of the talk is available here.