So hello and welcome. This is
the first video in a series that
we're entitling COVID-19
understanding the economic
implications. I'd like to take a
brief minute before we get
started give some special thanks
to some people who helped
organize this session. Professor
Jane Benner from the University
of Wisconsin or excuse me,
Professor Jane Benner from the
University of Birmingham in the
United Kingdom, Derek Edwards of
aegs data systems. Ryan Madson
of West Texas a&m University,
and of course myself of the
University of Wisconsin River
Falls. Today we have three
panelists, and I'd like to
introduce each one of those. So,
if each panelist could raise
your hand as I say your name,
Joe Folsom is the executive
director of the Pierce County
Economic Development
Corporation, which is located
here in Wisconsin. David Bailey,
he is professor of Business and
Economics or Business Economics.
At the Birmingham business
school in the United Kingdom and
Senior Fellow of the UK in a
changing Europe program. Law Kay
Adams is a doctor of veterinary
medicine as well as a professor,
as well as a region's professor
of agricultural and Business
Economics at the Paul anger
angler College of Agriculture
and Natural Sciences at West
Texas a&m University. As a brief
introduction to the format we're
going to take we have three
questions. each panelist will
have an opportunity to respond
to those questions. And we will
have a brief roundtable
discussion. Right, so let's
begin with the first question.
And that first question is How
To what extent is the economy of
our region being affected by the
COVID-19 virus? And we'll begin
with Dr. On almost and then
proceed with other panelists.
Good morning, everyone.
Thank you Logan for this
exciting opportunity.
I'm going to
respond to this question
with specific, specific
reference to our region, which
is Texas Panhandle. Texas
Panhandle regional economy
depends on agriculture and as
well as medical industry.
Agriculture, basically crop
production as well as livestock
industry has a significant
economic impact. Actually,
agriculture industry contributes
almost $6 billion every year in
the value added.
beaned out of that 6 billion
4 billion more than 4 billion is
from the livestock and livestock
products every year, if we
include the multiplier effect.
So the agriculture industry
contributes almost $10 billion,
two words regional economy and
more than $12 billion towards
the state economy. So this
covert 19 pandemic is going to
have a significant effect on the
regional economy, especially on
agriculture, because 90% of the
farmers or ranchers are going to
be affected. I will mention too,
main points especially related
to livestock industry. One is
meat in the meat industry. The
other one is dairy. But of
course you know the Wisconsin
people they know more about the
dairy industry, how this
pandemic is going to affect the
dairy farmers. The as you know
that some of the meat processing
plants are either closed or they
are operating at a reduced
capacity. For example, Tyson
which is one of the world's
largest meat processing company,
they have suspended their
operations at its Columbus
junction, Iowa poor plant and
they plan to divert livestock to
other facilities in the region.
We have one plant owned by Tyson
in our region,
the other company JBS USA, they
have also stopped their
operations of course, due to the
you know for take for the safety
of their employees, their beef
plant in Pennsylvania and they
plan to reopen that after two
weeks. Similarly, Cargill, they
are also you know they have
passed their operations in
Pennsylvania. So, with the
interruptions in the meat
processing plants, the
suppliers, the farmers and
cattle ranchers, they are going
to be affected. Of course, we do
not have shortage of media As
yet, for the consumers, so
consumers are unlikely to see
any shortages because of
production disturbances. But
because food suppliers are
essential businesses, the
consumers have to have the food.
So meat producers, cattle
ranchers are going to be
affected. Of course, US has
large enough meat inventory to
prevent the shortages for
consumers. But the processes
that were selling to restaurants
now they are selling to
retailers. As many of you know
that consumers in the US they
spend half of their budget for
food away from home. But that is
Darren The case right now 80% of
our consumers, they are locked
down. So their consumption
patterns, their spending
patterns have changed from going
out out away from food away from
home to food at home. So there
has to be some changes. And some
of the as we all know that
restaurants or small businesses,
they are being affected. And
some of the restaurants they
have even started selling
grocery or meat directly to the
customers just to survive or
take care of their expenses. So,
personally, I don't anticipate
any real shortages for the
consumers as long as they do not
get panic You know, sometimes
because this situation is
uncertain, we don't know how
long it's going to continue. So
some of the customers they are,
you know, stocking the food
items are other food supplies.
So, but I'm concerned and many
people are the economists. They
are also concerned that if the
situation prolongs it could put
a significant strain on the food
system and further harm our
producers.
Yeah, I think we've seen similar
things in Wisconsin with respect
to the milk supply, and farmers
are having a difficult time
actually marketing their milk.
Yes, we all know what's going on
with the essentially supply
chain compatibility, not being
able to supply enough toilet
paper at the time that we want
it now, because everybody's just
decided to increase their
inventory, their personal
inventory of toilet paper. Yeah.
If I could,
could I move on to David, we'll
have a chance to come back to
you. Okay, I promise. But Dr.
Bailey, I wonder if you could
further
discuss this issue.
Oh, very interesting. Listening
to that. I'll talk a bit more in
a sort of macro sense if that's
okay. So, I would describe this
very much as the kind of the
economics of a sudden screeching
stop. If you imagine an economy
normally going along in a car
and it might go quickly at some
times and then slow down and say
that the drivers are losing
losing constant confidence. In
this case, the government is
literally slammed the brakes on
and the economy is as a car has
come screeching to a stop.
Quickly Now, of course, we've
done that, in an attempt to save
lives and stop our healthcare
system being completely overrun
with possibly hundreds of
thousands of deaths. But this
has had a profound impact. So
France has already into
recession, Germany's forecasts
to take a 10% hit just on the
basis of what we've seen so far.
Here in the UK, just over the
last couple of weeks, a million
people have signed on for what's
called Universal Credit, a form
of welfare payment. And of
course, we've seen a very big
spike in unemployment in the
United States. The OECD suggests
that for every month of
shutdown, takes off around 2% of
annual growth. And their leading
indicators suggest the biggest
ever, monthly fall in economic
activity. So you know, profound
shock to the economy
deliberately in juice to save
lives, with a real impact on
businesses which are as we
speak, running out of cash, so
Some estimates that one in five
small and medium sized
enterprises, for example, in the
UK risk literally running out of
cash within the next few weeks.
So these impacts are working
through both on the demand side
and people aren't buying as much
because they're either
unemployed or they're very
fearful of the future. And on
the supply side, because non
essential activities have been
shut down. And even before the
lockdown there was already
supply chain disruption,
causing, for example, automotive
firms to shut down anyway.
Remember, all of this in the UK
case comes after a period of
slow economic growth anyway,
because of the uncertainty
around Brexit. So at the back
end of 2019, the economy wasn't
growing. At the beginning of
this year, it was shrinking
slightly. So we've got
considerable economic
uncertainty about how much of an
economic shock this will be how
deep an economic shock how long
it will go on for And also what
the shape of a recovery might
look like. So initially, many
economists were talking about a
possible V shaped recession, you
know, a big shock, and then a
very rapid economic bounce back.
That's not so clear anymore. And
we might have a U shaped
recovery where we bounce along
the bottom for a while, or an L
shaped one where recovery takes
a very long time. And that's why
it's important for governments
of certainly in Europe, to agree
a degree in the US have put in
place all sorts of quite
extraordinary measures, you
know, job retention schemes to
try and keep workers in place,
loans to companies. The
chancellor, the finance minister
of the UK, I think has had now
for budgets in the last few
weeks, we were waiting ages for
one and then four came along at
once. So huge uncertainty. I
think the other point is we
don't really know how long this
will take and there's a debate
that is starting we've seen it
most prominent in the us about
how quickly should think reopen
in the economy. Now, Trump
obviously seems very keen to get
things opened up again, partly
for real election purposes,
probably. But I think this idea
that somehow you sort of trade
off the economy and business
against health isn't a very good
way of looking at things. If we
were to open up too quickly, we
might see another wave of
infections, we could see a
considerable hit to the labor
force in terms of illness.
People may continue to self
isolate, and also confidence
could be badly affected. Now,
remember, in many economies, two
thirds of economic activity is
usually consumption expenditure.
So unless there is confidence to
underpin that, the economy is
not going to grow again, very
quickly, so you know, huge
uncertainty and impact on the
demand side and also on the
supply side.
Right, well, thank you very
much. I'm Joe. I'm wondering or
Mr. balsam, I'm wondering if you
could comment a little bit on
This idea of how this is
affecting our local,
particularly our small
businesses, what is this impact?
And yes, and locally, that
impact is significant. But
what's been interesting also is
just to see how they have
responded on them. And what I'll
do is I'll first talk a bit
about on the manufacturing side,
we're fortunately here in the
St. Croix Valley, we do have
some diversity in, in our
economy. But in working with and
talking to some of my
colleagues, we're finding that
manufacturers, particularly
those with 25 plus room,
employees at the moment, are not
significantly impacted from the
standpoint of the that
basically, they're generally
doing okay, they've had to make
adjustments to accommodate the
the hygiene standards, the
social distancing all of those
things in order to protect their
employees, ie keep their
workforce able to continue to
work. But it is a significant
shock that one manufacturer had
in February record sales. And I
learned last week, the purchase
orders were zero. So we're
talking about, as mentioned
earlier, a significant shock to
the system. But Main Street is
where the major, major impact
is, and really with those 90
Central businesses that hair
salons, the bars, the
restaurants, and contexts of the
restaurants of those that
haven't been able to adapt to
find ways to better serve and
reach out to their customers,
either through changes in
products or delivery methods.
Another significant piece that's
happened is the cancellation of
Some events going forward. The
in Pierce County where I work.
The Ellsworth cheese Festival,
which is in the third week of
June, the committee this past
week canceled that event which
in small rural community pulls
in over the course of a weekend.
So we actually are started,
we're expecting that we will see
some impact on the tourism
sector as a result of that. And
the question is, when we are
able to get back to some sense
of normality, Will those
businesses be there and how can
we recover help me come back to
a level of productivity and how
can we get our customers
to engage?
Me we mentioned earlier that the
the milk PC worked in Wisconsin
to significantly increase the
the simple fact that we no
longer have students in schools.
You know, has resulted in an
overabundance of fluid milk and
so all of a sudden we have this
shift in the usage of the
product that the plants and the
processes haven't been able to
accommodate. And so we've had
requests to work basically
dispose of milk rather than push
or flood the market with me
talking with one of the chamber
directors, the some of the not
his perspective, is it some
businesses deem non essential
that we're probably lose
significant numbers and he's
thinking 25 to 50% of those,
particularly those that operate
in sectors with very low cash
reserves, especially if they're
not able to get additional
working capital quickly.
Next to the women have on mute.
So
Logan, you are muted.
Thank you.
Now if we could if Joe I'm sorry
if I interrupted you, but
if we could, could we take just
a few minutes to maybe discuss
amongst the panel? Overall, our
response to this question, I
know one word or term that came
up was the word supply chain.
And I wonder if maybe you guys
could define that and give a
just maybe a brief understanding
of why supply chain might be so
important in this, at least the
initial stages of the economic
impact of COVID-19.
And you guys can jump in
whenever you like.
You know the supply chain is
going to be affected and it's
currently being affected because
you know the people are shelter
in place. So, they have the
labor force is a problem in many
sectors. From producers of
course, through the processors
and to the to the retail and
especially for food. As I
mentioned earlier, there are you
know, food away from home in
food at home. So food at home is
being delivered are through the
retail sector, but food away
from home through the
restaurants. And so, there is a
lot of things going on which is
impacting our creating
interruptions for supply chain.
Of course the demand is there.
supply is there, but it's in a
different form, for example, as
Mr. Paulson mentioned that, you
know, in case of dairy, the
school and colleges, they they
are close. So there is issue in
milk supply. That's why I mean
in the form of different
products and the processes, they
are unable to convert their
production
deems
your local This is locally here,
it's significant piece would be
you take the food distributor
that supplies the restaurants
and the bars, their businesses
virtually zero. Yes, you look on
the other side, the grocery
stores can't provide enough
product because the food
consumption has shifted and how
they access it. So it's how do
the distribution channels and
the type and type of product
being distributed, adapt to the
changing environment. And with
trust us on on the supply chains
in such a quick manner that
we're seeing these shortages and
in some cases surpluses because
of that. Yes.
Sorry, if I could have an
example. Yeah. So where I live
in, in Birmingham in the
Midlands is the Center for the
automotive industry in the UK.
So the entire auto industry in
Europe, and very much the US is
now shut down. That just just in
terms of the stoppage in output
through until the end of April,
that's probably going to cost
the auto industry in the region
of 100 billion dollars. Jaguar
Land Rover, which is a major
company here in the region. It
stopped production I think
through until about the 20th of
April, it will be taking
something like a 1.2 billion
pound hit just from the Now, of
course, beyond Jaguar Land Rover
within the region, there's
probably about 50,000 workers
just dependent on the automotive
supply chain. So as Jaguar Land
Rover shuts down, that has a
profound impact on the tier one
assembles the tier two, the tier
three, and there's this kind of
cascade effect down the supply
chain. There's a real worry
about ads that shuts down how
many of them will survive. So
despite the government putting
in place various support
mechanisms, loans, job retention
schemes, there's going to be a
real cashflow problem for a lot
of these companies. Some of them
may not survive, and even when
the industry comes to restart,
there's going to be a question
whether they'll have the cash to
get things going again. The
other point is that a lot of
these supply chains these days,
particularly manufacturing are
often cross Europe. So the UK
has been a part of the European
Union for a long time, it's now
leaving, but there's a flow of
components that crosses European
countries in and out of the UK
components could cross the
English Channel. Four or five
times. So, you know, you already
had a shot down and shut down in
Italy for some time. That's a
affected component supplies.
We're about to shut down in
Germany and in France and so on.
So, as this has become more
extended, the supply chain
disruption has become more
profound and car companies were
shutting down production even
before the government was
telling them to do so. Simply
because our economies are now so
interdependent.
All right, well, thank you for
some really good discussion. If
we could I think we'll move on
to our second question. And
we'll get our first response
from Dr. Bailey. How is this
crisis different from the recent
recession? That is the recession
that resulted from the financial
crisis. Okay, thank
you, Logan. So I've described
the current slowdown as a kind
of the economics of a sudden
stop in the global financial
crisis. says it was instability
that started in the financial
sector, which eventually
essentially became a kind of
credit crunch, which then spread
throughout the real economy. In
the case of the UK, the
peak to trough
led to a fall in GDP of about 6%
GDP, you know, the broad measure
of active activity in the
economy about 6%. But that took
over a year. What we've seen is
in the space of a few months, a
similar or greater decline
already in Germany, 10%. UK,
probably similar. There's
forecast at the EU, the US could
contract by 30% in that
particular quarter. Similarly,
in terms of unemployment in the
global financial crisis, it took
over three years for
unemployment to peak at about
6%. We've seen something similar
in a matter of weeks, and it's
only going to get worse. So the
profound nature of the shock,
the intensity and the speed of
it is I think, interesting.
dented since, certainly since
the 1930s. And there's an issue
there of when whether a
recession becomes a depression,
now a deep, long lasting
downturn in the economy that's
kind of interconnected through
economies and difficult to
escape from, with possible kind
of scarring effects on the
economy, what economists call
history says effects and long
run damage to the economy. The
World Trade Organization, for
example, talks about a decline
in trade of about 13%. And in a
worst case scenario, over 30%
that would be similar to what
happened in the Great
Depression. I think the other
sort of difference with the
global financial crisis or the
scale of government
interventions that we are seeing
so, you know, not only things
like quantitative easing from
the Bank of England, the
European Central Bank buying
bonds, but also the Bank of
England, basically creating an
effective overdraft For it to
buy bonds being issued by the
British government. We've seen
the government intervene with
loans to businesses, or whether
they, whether they really get to
businesses i think is going to
be a big issue. And we've seen a
whole series of different
government interventions. And I,
I do wonder whether this is kind
of going to be a sort of a reset
moment for us. We did talk about
this during the global financial
crisis as to whether we sort of
rewire the economy and do things
differently. We didn't really.
So I think there's going to be
questions about how the banking
system functions, is it getting
support to the businesses that
need it on the scale that we
want? Who are the key workers in
the economy? I think that some
of the people really doing the
hard work at the front line in
social care and health in
deliveries are often very low
paid, we might reevaluate who's
important in the economy. There
are going to be issues about
fairness and inequality and who,
who gets impacted most by this.
There's going to be discussion
about the nature of a welfare
system. I think in Spain, for
example, they're talking about
whether there should be a
universal basic income,
everybody's paid a basic salary,
those sorts of discussions will
come back. And then sort of
longer term, I think there are
issues about well, who bears the
burden government is going to be
stacking up big debt throughout
this process? Who's going to pay
for it in the future? Will there
be issues like maybe a wealth
tax back on the agenda,
questions about the resilience
of our economic system as well?
It certainly in the case of the
UK, and I guess the US, we
weren't very well prepared in
terms of our economic system,
being able to produce the things
that we want, quickly, whether
they're ventilators or
protective equipment for nurses
and doctors. So there's a
broader question, I think about
how the market works. And I
think some of these issues are
going to come out because of the
severity of the crisis and what
a profound effect it's had.
Well, thank you very much. I'm
wondering,
Joe,
do you have a thought on?
Do you have thoughts on this?
And you're currently muted?
Okay. Yes, I concur that it's
really, you know, the the scope
and the speed with which we've
entered into this, which is
unprecedented. I mean, as one
business owner shared with me in
the prior recession, we, we kind
of knew it was coming and we
could plan for it. This thing we
couldn't plan for and, and make
the needed adjustments to our
business operations. And so that
was that was significant, I
think, you know, for us locally
here in the St. Croix Valley,
and I was one chamber director
shared with me as we we did not
go into the last recession very
deep. And we actually came up
Have it a lot quicker and with
the with really only the
construction sector being
significantly impacted. This
particular event has impacted
our whole sector. And it's taken
us in deeper. I think that one
of the questions is going to be
you know, from the standpoint of
when we do come out, you know,
what are excuse me, I'll just
share the last thought the the
impacts on some of our
businesses what what will they
look like when they come? What
will be the new norm? As you
know, will restaurants be the
same? If we are into this for
eight weeks, habits change, and
instead of going to your
favorite restaurant on Friday
night, your your Doing the order
out from that restaurant, will
you revert back to going to the
seat that situation? there will
be changes in the supply chains
and the distribution, how you
approach your customer. And
there will be those sorts of
adjustments happening to your
products and services. And
interesting is there. They
happen in this case overnight
and so you have Mainstreet
businesses who are adjusting the
products and services almost
overnight in order to be able to
stay open, as opposed to again,
having the prior session
recession an opportunity to feel
a little more planning and a
little more thought into how to
cope with the situation.
Right. Thank you, Joe.
Law. Do you have a perspective?
Yes, I agree with my other
panelists. You know this, I
think that this crisis is
different because of the
magnitude of the people that
have been affected and the
sudden nature. You know, a lot
of people are out of workforce.
For example, in us more than I
think it's the last week's
report that more than 10 million
people they have filed for
unemployment insurance. So small
businesses are going to be
affected significantly. And even
the stimulus package is not
going to help you know, many
people So the previous
recessions you know, they were
they were, they were having
different impact on regional
economy or on workforce
differently. But the magnitude,
as well as the certain nature of
this pandemic is going to have
different impact.
And everyone is going to be
impacted one way or the other.
Well, initial claims for
unemployment benefits for the
last week so the week ending
April 4 just came out and it was
6.6 million, which was followed
by the previous week at six
point
it looks like 6.9 million it's
been revised up slightly
which
just dwarfs the the maximum It's
been in the history of that
series. Before, I believe the
maximum that we we had seen was
somewhere in the neighborhood of
around 680,000. Once peaking at
about that level during the
financial crisis, and then once
the fairly significant recession
in the early 80s. And so this, I
think, provides a strain not
just to our, the economy, from
the standpoint of a number of
people out of work, but also
from the institutions within the
economy. Like for example, if a
system designed to handle about
300,000 applications every week,
is suddenly inundated with 6.6
million. You start to have just
other practical issues. I wonder
if we could take just a minute
or two, maybe to talk about some
of the practical issues that are
different about this recession
than some The others that we've
seen in the past,
Logan could step in and just add
a couple of things here. One of
the things here in the upper
Midwest that is different than
this recession, as opposed to
the last the last recession.
Like I mentioned, we did not go
in as soon and we and we came
out quicker. But the
diversification and the ability
to export an array of products
here in the upper Midwest really
insulated us to some degree from
those impacts. And we don't have
that level of protection this go
around because of the Minister
of Health. This has hit us. It's
interesting, but in that
respect, so I
just wanted to add that little
piece out there.
And if I can, if I can add You
know, the oil crisis also is
kind of deteriorating the
Scituate current situation,
because you know, in our state
most of the revenue comes out of
oil industry. So, you know, if
you don't have revenue, how you
are going to support our fund
all the activities in the future
years. So that is also a
concern, because I have heard
that in taxes if the oil price
is kind of $60 per barrel, then
they can have sufficient revenue
to take care of all the budget
issues, but now it's a what 25
or below $25 per barrel. So, you
know, the people in the budget,
they are concerned that you
know, how we are going to have
revenue to find all the
activities.
Yeah, just to follow up Your
earlier comments, Logan's
similar situation in the UK. So
the I was hearing some figures
on the television last night
that normally the UK government
would expect maybe 50,000 calls
in a day. On the helpline
regarding Universal Credit,
which is a kind of key welfare
payment. One day recently there
are over 2 million calls. And
the queue to get to speak to
somebody was over 160,000 long.
So you've got a system that is
completely overloaded. Equally,
some of the support really good
natured supports being put in
place by the government. I don't
think it's necessarily hitting
the target. The chancellor has
had to keep coming back with new
offers to try and fill the gaps,
you know that they're trying to
respond to things. But for
example, earlier this month,
there were figures saying that
was there'd been loads of
interest and requests from
businesses for loans only 1000
had been made, you know, so it's
it's really small scale stuff.
actually getting through So
they're having to redesign the
schemes to make more firms
eligible, change the nature of
the guarantees required. Say
that, whereas initially they
were saying, Look, you've got to
go through whatever the banks
can come up with normally to see
whether you're eligible for a
loan, they've had to cut all
through that because of the
crisis and golfing many firms so
constantly having to rethink
what it is that the state does
to try and plug gaps.
The other part is really the
scope of the need for the
capacity to deliver some of
these services and, and pools
that we've put out there. When
we think about the paycheck
protection program that the
Small Business Administration in
the US has ended the delivery
system that that is being
delivered under which is really
I think, from my perspective,
having formerly worked there is
the ideal conduit, that system
would go in the course of the
year, process and neighborhood
50 to 58,000. loans and hear in
period of less than a week.
We're getting the getting
criticized for having only
processed 170,000 in the first
four days. And so we have
systems that are not designed to
accommodate this rapid change
and ramp up or scale up even
though and the magnitude is so
much greater than what was
originally planned. I know that
this magnitude was not in, in
the agency's sort of surge
capacity when they did their
disaster preparedness.
Yeah, another thing another
constraint, you know, in
delivering services for the I
have heard yesterday in the
news, some of the states for the
unemployment insurance claims,
they are still using COBOL
framework, the COBOL language
and and we don't have that was
developed in 60s and 17th and we
don't have many quarters for
that language to process that
many claims. So how we are going
to deliver that that's an issue
with many states. Just for to
just to process the claims.
I would suggest it's also an
issue with a number of federal
agencies.
Yeah.
They're not integrated modern
age.
All right, wonderful discussion.
But alas, I think we need to
move on to our third and final
question. And we'll we'll start
with Joe Folsom on this question
to begin with, and that is, what
businesses local to our region
will be able to survive and
which will fail or struggle.
From my perspective, those that
are able to adapt their products
and services distributions can
continue to connect and serve
their customers have an
increased likelihood of survival
in other words, that are
innovative and nimble on their
feet in sense how they can best
move in the existing environment
that thrust into the ones that
will not survive are those that
decided when the shutdown order
came, we'll just close our doors
and not look for the
opportunities to move forward
and to keep businesses viable
and open. I have a sense our
major employers will be okay.
That's beat smaller and being
non essential businesses to
where we're going to have a race
challenge. As I mentioned
earlier, I think one of our
chamber directors 25 to 50% of
them will be lost. Forever
suppose had been ordered to
close, namely that salons, the
bars or restaurants, boats that
did not adapt to the current
environment. We're going to lose
those, as we move through this
will likely add to that
distances that may be seasonal
nature that are tourism related.
Those are going to have
significant challenges. And if
they, if we do have a social
distancing, continuing to a
significant degree over the
course of the summer, we'll be
waiting some time to recover.
Okay, lol. I wonder if you have
a
take on this as well.
I agree with Mr. Paulson. But,
you know, this is a challenging
question. With no 130 data, we
cannot quantify that you know,
which businesses will not be
able to survive or will be gone.
But of course the small
businesses if they don't have a
cushion you know our ability to
adapt quickly they will be
unable to survive especially you
know for the dairy industry,
they are all already facing so
many constraints the dairy
farmers future market price for
even the third grade milk or is
for the front of the future
price for the May 2020 is $12 88
cents and their cost of
production is more so, they are
already losing money. So, that's
why they are dumping you know,
they have been told to dump
their their product. So, how
long it depends how long you
know, this continues if it
continues for a longer period,
many businesses they will not be
able to survive. Of course, the
you know, higher education is
also going to be impacted food
industry is going to be impacted
restaurants, small businesses,
shops, you know, they are going
to be impacted. So, in summary,
I would like to say that, you
know, we cannot we cannot
quantify, but of course, you
know, there there is also help
on the way through the cares
act, but I don't know, to what
extent that help is going to
help the small businesses to
continue.
And, David, I wonder if you have
a perspective?
Yeah, I would agree very much
with what we've heard. And I
think Joe summed it up very
well. I think those businesses
that can change their business
model that can adapt, often go
online, for example, and offer
consumers something in a
different way are more likely to
be able to survive and prosper.
Just to give you a local
example, I bought some face
visors today, you know, in case
I have to go out. We're not
we're not really going out very
much, but they're kind of
plastic shields for your faces.
It's a it's a company that makes
window blinds, they've stopped
making those, they're reorient
ated into something where
there's a demand. So they've
thought about how they can use
the skills they've got to meet
particular market needs. And you
know, it's been very creative.
I've learned a lot lots of
examples of that of companies
that having to be innovative. I
agree. And where were the other
comment that the university
system is, particularly in the
UK is going to face some major
challenges. We rely very much on
international students to come
to the UK. Many students from
all over the world at the
University where I teach, are
they going to come next year?
Are they going to even be able
to do the English language test
account There's going to be a
big issue about how how we do
offer our services in the
future. Is it going to be more
online? Are we going to have to
do things more virtually? Are we
ever going to find different
markets? And I think that those
are the sorts of questions that
affect us. And of course, whilst
this really sudden, grinding to
a halt of the economy has
affected many sectors, there are
some that are doing very well.
So the supermarkets here are
working absolutely flat out
trying to keep the shelves
stocked, keep the supply chains
running, they've taken on 10,000
thousands of workers as
deliveries and are constantly
trying to struggle to keep up
with consumer demand as people
stockpile things. If we think
about the agricultural sector,
we heard about how the fact that
some, you know, shops,
restaurants in particular may
and schools may have shut down
impacting on dairy similar sort
of thing here, with an added
problem with the agriculture
relies massively on immigrant
labor. Which has disappeared. So
a huge issue about whether we
can reorient eight people laid
off from hospitality say into
picking fruit and vegetables.
And suddenly the manufacturing
sector shut down. And in many
cases having to try to think
about well, how can it re
orientate towards things like
protective equipment for doctors
and other parts of economy. So
now those companies that can
survive this that have got the
cash to do that, and that's a
big issue, the cash flow
problem, if they can reorient
eight and find new markets, they
have a chance to survive.
All right. Well, very good.
Thank you very much. I wonder if
we can just open this up for a
bit of brief discussion picks
the three of us or the three of
you. And I might ask one follow
up question. Of course, in
economics, we have a term it
goes back to the beginning of
the 20th century called creative
destruction. And part of what
we're going to see is we're
going to look Certain things. So
we've talked about this idea of
supply chain, which I think of
is just that process by which we
get input from their raw form
into the final form that goes to
the consumer and get those to
the consumer. So that whole
process by which that happens,
and thinking about the
disruptions in that once we
disrupt it, how fast do they
come back? And what comes back
and what doesn't? And and we've
talked about some of these non
essential businesses being
things that are lost, at least,
at least temporarily, the
particular businesses lost, but
how long does it take for that
to come back? But I wonder, is
there a silver lining to this
and is there going to be new
opportunity at the end of this
once we get through it? For new
innovation, new product lines,
new new supply change to happen?
Can we
it's terrible to think of a
positive to a pandemic but Can
we at least try to see a little
bit of the silver lining to a
lot of the bad news that we have
is do you think that any of that
is possible? could that happen?
This is go I just got a comment.
I wanted to interject here. It's
actually on the operation side,
we've had so many businesses
that have had to adjust their
business model so that their
employees are working from home.
And my stance is, is that we're
going to find, especially as we
continue through this, and the
longer we continue through this,
that those businesses when
things get back to the norm may
not necessarily bring those
employees back into those
expensive office suites, they
may continue to leave them at
home because they have been able
to not only provide an
opportunity that that protects
in, in the employee, but also
it's a way that they can lower
their costs and get some
efficient So we may find some
changes in the financial
institutions. We're doing our
banking from our home offices
Now, why do we need a brick and
mortar walk up institution to
walk to? So I think those are
some things that that are going
to take place, that those
businesses that see those
advantages and opportunities to
get some efficiencies in
production on integration side
will have a competitive
advantage.
If I could come in as well, I
think it's a very good point. If
If we think about previous
shocks, they impacted in
different ways on different
cities in the UK so that you
know, the city that I'm in
Birmingham, underwent a profound
deindustrialization from the
1970s onwards, and it's taken a
very long time to recover to
that when we when we think about
resilience in economics. It's
not just resisting a shock. And
we heard from Joe about how in
previous shocks they were able
to resist things better, but
also how quickly you recover and
also reorient and renew. How can
you get on to a new development
path? How can you embrace new
technologies and business
opportunities? So I think if
there is a silver lining, it's
in that reorientation and
renewal into new business
opportunities. I think the
danger here is that a lot of
efficient, valuable, other
otherwise good companies are
going to be taken under so yes,
there are opportunities. There's
also a real risk, we lose some
very valuable parts of the
economy as well.
Okay, any remaining thoughts
that any of you would have over
any of the material we've
covered that we haven't gotten
to yet?
We, this is Joe and I think one
of the things that I have
appreciated in the conversations
that I've had with community
leaders is how they're
approaching this in a positive
context. And I think the fact
that we can approach it in a
positive context and look at it,
from the perspective, how do we
find solutions and opportunities
to move forward in the best way
possible? I think that really
bodes well for our recovery.
All right, well, very good. And
I think that might be a good
note to end our conversation on.
Obviously, this is an ongoing
situation where what we say and
think can be changed by new data
from minute to minute. But I
really appreciated each of you
being willing to give your
perspectives if we're nothing
else, giving us a little bit of
an idea of what questions we
need to ask, even if we don't
know the all the answers yet. So
thank you very, very much.
