Supposedly, the new normal will be what happens after the current mess clears out and things get back to being stable and predictable. Good luck with that.

What if instead we are experiencing one of the major transitions from one system to a new one – something that has happened at various times since approximately forever?

I read recently about COVID being simply a part of a broader and deeper economic collapse rather than its trigger. A pretty strong case can be made, as for example, that the collapse was well under way long before COVID added its assistance.

So, COVID aside, which is it? A world-scale collapse into some kind of abyss from which recovery is impossible, or simply yet another, albeit major, economic transition such as has plagued mankind routinely since civilization began?

The case for total unrecoverable collapse

COVID-driven lockdowns and associated restrictions have already decimated brick-and-mortar retail, restaurants, hotels and other hospitality providers, airlines, car rentals, healthcare providers, sports, higher education, movie theaters, cruise lines – and many more.

However, Amazon, Walmart, Costco, big Pharma, and many food markets are doing very well. For them, the “collapse” has been just great for business. As just noted in a Medium post:

“427,300: That’s how many employees Amazon added to its workforce between January and October this year. The company now has 1.2 million employees, 50% more than last year, making its recent hiring spree the most rapid workforce expansion in corporate America ever, according to the New York Times.”

“No company exemplifies how much the pandemic has favored large corporations as much as Amazon. The e-commerce giant has pressed its advantage in several different ways this year: launching pharmacy services; expanding its catalog of private label goods; replacing the USPS with its own delivery network; and turning recently vacant mall space into fulfillment centers.”

“While many workplaces have shifted to remote work, Amazon seized the opportunity to dramatically expand its real estate footprint, paying $1 billion in March for the iconic Lord & Taylor building in Manhattan, and announcing in September that it would be leasing 2 million square feet of office space in Bellevue, Washington while also planning to build a skyscraper there, amid other expansions of office and warehouse space.”

I don’t know about you but this situation looks to me a whole lot like the world changing as it always has. Some (big) winners, some (many) losers.

Big change happens in bursts. Between these, life goes on and people adapt to whatever the changed world brings. Humans are very adaptable and resourceful.

Total unrecoverable collapse just doesn’t seem to be in the cards.

The case for this being just another period of great change

Not any doubt about this being a period of great change, with the endpoint aka new normal as yet invisible. But is such change going on forever? Not likely.

A return to some sort of stability seems inevitable. People can’t exist for long in chaos. Leaders will emerge to make this stability happen. One way or another.

George Orwell’s classic book 1984 painted a very bleak picture of one kind of stable future. Never-ending wars between three great powers but otherwise a life of severely-restricted stability.

World War III offers another possibility for concluding a period of great change. Probably not a happy outcome for survivors but all wars do end or fade away.

So, perhaps what we are experiencing today is simply a painful transition to whatever comes next. Many things will collapse but many new things will be created.

The almost unbelievable growth of online businesses, online working, and online living seems to be part of what’s coming. Brick-and-mortar businesses may become far fewer and more local as people try to recover their lives. Government control over many facets of life seems likely to prosper as well.

Recovery seems certain but probably not happily

By “recovery” we mean the return of some degree of stability – enough for us to resume to some degree the normal range of human activities. People don’t change fundamentally. Only their life context changes.

The nature of our recovery seems likely to be unclear for a while, possibly for quite a while. After all, we have just begun the collapse, or transition if you prefer. We are far from bottom based on current happenings.

Looking at the current situation as a transition may be a much more constructive and positive way to deal with what is happening.

Collapse or transition?

Terminology matters here. Collapse is apocalyptic, unrecoverable. Transition, even huge transition, is what people have experienced so often in past and from which people have recovered. At least the survivors have.

Much has been written lately about the extremely fragile state of economies, financial systems, governments, … – the list goes on. A common theme is that some kind of major collapse is inevitable.

The term “collapse” covers only the downward, nasty part of what is almost certain to be a huge transition. It ignores what happens post-collapse, which is always some kind of recovery. Not recovery to what once was but recovery to some new state of existence.

Perhaps the collapse is actually a good event in the sense that it paves the way for a better future. Broken systems can rarely be fixed by those who broke them. It takes collapse by an external situation to prepare the ground for a new beginning.

Of course one has to be among the survivors to participate in the new beginning phase of transition. But that’s often really tough to do.

Being among the survivors

This challenge is far beyond what preppers and bugging-outers aim for. There are two challenges here:

  1. Living through the downturn or collapse phase
  2. Preparing well ahead of time for the new beginning

Who knew?

Businesspeople will recognize this challenge as just what they are dealing with daily in managing their businesses. Maintaining cash flow and focusing available resources are among the ways of surviving what is truly a permanent collapse for many. But most are putting great effort as well into their futures.

Many major retailers, for example, have already experienced collapse and are presently struggling through bankruptcy proceedings. Chapter 11 reorganization was designed specifically to help a business restructure its finances so as to emerge as a reasonably solid going concern. That is, to survive its collapse.

An integral part of most Chapter 11 processes is preparing the business for its recovery. This may mean shedding weak and unnecessary assets, selling off business units to raise cash, and making big staffing changes.

Not to be recommending bankruptcy as a survival strategy but this model can be followed even by a struggling but still-viable business.

The overall economy may “collapse” but you don’t have to participate

There are many examples of businesses in partially-collapsed industries that are managing not just to stay afloat but to stage for a strong recovery. It may not be exactly a new beginning but instead adapting to what the collapse has created.

Collapse viewed as transition makes it just another, albeit huge, period of change. As I have argued in previous posts, change always bring opportunities. But only for those who are looking for them.

Most businesses serve a real and continuing market need. People will always need food, clothing, shelter, entertainment, transportation, medical services. None of these needs are going away. They may well be greatly reduced in terms of ability to buy, which increases competition for what remains.

Virtually every market will still be there post-collapse (or transition phase one). Your markets for the most part will survive but competition for customers will be far more intense. Winners will be those who are smarter and more adaptable.

Assuming no apocalypse

As almost everyone knows today, an apocalypse is an event causing destruction or damage on a catastrophic scale. It need not be the end of the world but just something so overwhelming that survival for most is not possible or even desirable.

Think dinosaurs who experienced the aftereffects of the Chicxulub asteroid hitting the Yucatán Peninsula in Mexico. Extinction for all of the big guys. Good time to be a mouse.

The Black Death or bubonic plague ravaged Europe for several hundred years beginning in the 1300’s and killed up to 50 percent of the population. This did not end the world but changed the surviving world hugely and permanently.

Let us hope that our present mess does not become apocalyptic. 

Huge US economy has a lot of inertia

Absent WW III, which would make all of these considerations moot, I cannot see any way that the economy might collapse. Big downturn probably, but not much worse than what has happened so far. Too much economic inertia.

Financial markets seem likely to get hammered regardless but they are not the economy that buys food and clothes and keeps our water and electricity running.

Most likely to me is a quite rocky 2021 as the never-ending election gets sorted out for worse or for worse. There will be a great deal of foundation rebuilding by the majority of business survivors in 2021 so the stage may well be set for a strong rebound – not recovery – in 2022.

Job #1 is being among the survivors, along with a major effort to position your business for the upturn.

Bottom line:

An economic collapse for an economy as large as the US has just does not seem likely. Absent WW III, of course. There is simply so much economic inertia that will keep productive activities moving while some essential foundation rebuilding occurs. Focus on being among the survivors and on steering a course for success in whatever is coming.

Closing note:  I am working on some ideas for “steering a course” confidently as you navigate through the largely invisible whatever. This should be ready shortly. Absent WW III.

Kimberly Amadeo writing in the balance makes a good case for collapse being unlikely: “US Economy Collapse: What Would Happen? There’s a difference between crisis and collapse”:

“The U.S. economy’s size makes it resilient. It is highly unlikely that even the most dire events would lead to a collapse. If the U.S. economy were to collapse, it would happen quickly, because the surprise factor is a one of the likely causes of a potential collapse. The signs of imminent failure are difficult for most people to see.”

“Most recently, the U.S. economy almost collapsed on September 16, 2008. That’s the day the Reserve Primary Fund “broke the buck”—the value of the fund’s holdings dropped below $1 per share.1 Panicked investors withdrew billions from money market accounts where businesses keep cash to fund day-to-day operations.2 If withdrawals had gone on for even a week, and if the Fed and the U.S. government had not stepped in to shore up the financial sector, the entire economy would likely have ground to a halt.”

“Trucks would have stopped rolling, grocery stores would have run out of food, and businesses would have been forced to shut down. That’s how close the U.S. economy came to a real collapse—and how vulnerable it is to another one.”

MarketWatch cautioned about confusing a rebound with a recovery: ” This ‘dire’ economic situation ‘deserves to be called a depression — a pandemic depression’”:

“That’s the bleak assessment delivered by economists Carmen Reinhart and Vincent Reinhart in an article published online Thursday that will appear in the September/October issue of Foreign Affairs. Carmen Reinhart, a well-known Harvard economist, was appointed chief economist at the World Bank after completing the article. Vincent Reinhart was a top staffer at the Federal Reserve under Alan Greenspan and is now chief economist at BNY Mellon.”

“The memory of the Great Depression of the 1930s has made many economists reluctant to use the term to describe the current situation, they wrote. While the Great Depression was “wrenching in both its depth and its length in a manner not likely to be repeated,” they said, the 19th and early 20th centuries were, in fact, “filled with depressions.””

“They noted that in recent global downturns, some engines of growth remained intact. Most recently, for example, emerging markets, notably China, were a key source of growth in the 2008 financial crisis. “Not this time,” they said. “The last time all engines failed was in the Great Depression; the collapse this time will be similarly abrupt and steep. ”

Katie Wilson writing in CrosscutIs the COVID-19 recession a prelude to major economic collapse?” saw the current situation as part of an inevitable, long-term structural crisis:

“Extreme financial risk-taking, combined with the effects of the pandemic, may spell disaster for the U.S. economy. But the coronavirus isn’t the only source of uncertainty about our economic future. Doubts about the underlying health of the economy raise another worry, namely that the COVID-19 recession could stir up deeper financial troubles.”

“Last week, I dusted off two hypotheses of economic doom and gloom put forward in the wake of the Great Recession: William Robinson’s 2010 argument that capitalism, now truly global, had entered a new period of “structural crisis”; and Larry Summers’ 2013 diagnosis that the weak recovery following the 2008 financial crisis reflected a chronic condition of “secular stagnation.” But all that was eons ago in 21st century political terms. How do those ideas hold up in 2020?”

50290cookie-checkIs Our Economic System Collapsing, or Just Changing?