Q&A  | 

The evolution of the economy under lockdown, by Belén Romana

"We will see many changes, like increased automation of production lines and even the development of “do it yourself” models, where customer can install the consumer goods they buy (in a way similar to Ikea furniture). It looks like we are heading into a “contactless everything” world."

Tags: 'Teleworking' 'Tourism sector' 'Turismo'


Reading Time: 5 minutes

Belén Romana is an Independent Non-Executive Director of Banco Santander and Aviva and a member of the advisory board of the Foundation Rafael del Pino and chair of the Global Board of Trustees of The Digital Future Society.

In 2000 she was promoted to Director-General for Economic Policy, with responsibility for coordinating macroeconomic and microeconomic policy across several industry sectors. In 2003 she was appointed Head of the Spanish Treasury, reporting directly to the Minister of Economy and Finance.

She has significant knowledge of financial services, including insurance and regulation, and a broad European experience working with European Commission, the International Monetary Fund (IMF), the European Central Bank (ECB), and the Organisation for Economic Co-operation and Development (OECD).

Belén was formerly President and Chairman at Sareb (asset management company), where she managed various stakeholders with interests in Spain’s economic stability across Europe.

Can you give us an overview of your work?

I have a portfolio of activities: I am on the board of Santander and Aviva plc. (the largest insurer in the UK), I chair the Global Board of Digital Future Society and I am also an advisor to several tech companies like the French GFI or a start-up called Tribaldata.

Prior to that, I was the Executive Chair of the Asset Management company set up to deal with non-performing loans of 50% of the Spanish financial sector and I have also been Director General of the Spanish Treasury.

Spain is a country highly reliant on tourism and services, which suffer particularly under the lockdown situation. Will the coronavirus economic blow hit harder states like ours?

This is a global shock that has very specific features, quite different to those we have seen in the past: it is happening worldwide in a very short period of time, it is impacting almost all economic sectors and it is having effects simultaneously on both demand and supply.

Spain is indeed more exposed than other countries to the collapse of tourism, since it accounts for around 15% of our exports, and the IMF´s Spring economic projections show it. However, the final impact of the crisis will depend on several things, like the duration and intensity of the lockdown combined with the impact of the economic measures being taken.

This crisis will not only impact international mobility, but also will most likely accelerate some of the trends that were already there, like the regionalization of industrial trade or the slowdown of Foreign Direct Investment. It will hence impact many business models and all countries.

Companies that only months ago looked like ever-rising stars like Airbnb are also suffering. Industrial companies as well, given the disruption in global manufacturing chains. This crisis will impact everyone and may well even have enduring effects on the geopolitical landscape.

Some businesses are reinventing themselves through technology, catering their services to the necessities of a population under lockdown. Will this be anecdotical or will it foster the surge of new businesses?

The increased role of technology is a trend that is here to stay. It was already there before this crisis, and the current situation will only accelerate it. There will be changes in business models, with connectivity to the customer being the key, rather than decentralized, isolated models. Not only that, we are seeing how other trends are becoming more acute, like the interest in streaming live events (with growth significantly higher than the consumption of information via social networks in these past months) or video gaming.

It will take time for us to see a return to full mobility, and we are all learning that sometimes we can live with less mobility, increasing the role of e-commerce or virtual meetings. All of that will stay and foster the rise of new apps, new companies and new business models.

Not only that, but the significant disruption of global manufacturing chains will have impacts of its own. During the past five years, long before COVID19, a regionalization of industrial trade was becoming stronger, with China increasing its industrial independence from the rest of the world and Foreign Direct Investment flows were weakening. The current disruption will accelerate those trends.

We will see other changes, like increased automation of production lines and even the development of “do it yourself” models, where customer can install the consumer goods they buy (in a way similar to Ikea furniture). It looks like we are heading into a “contactless everything” world.

You have broad experience in finances both in the public and private sector. States are working as safety nets for national economies worldwide. Will this result in stronger social-economic policies in the future?

In my view, the States will play a much larger role in the economy, not only as regulators but also managing an increasing portion of the economic activity.

We are already seeing some countries thinking of nationalizing certain companies (for example, airlines), something quite rare only a few months ago.

Of course, the final model will depend on several things: from the real impact of all the measures that are being taken to the different economic and social models around the globe.

Unemployment, as well as other subsidies, are being put in place in massive numbers and at great speed thanks in part to digital application and management systems. How important is the role of the digital technology in the governmental management of this crisis?

In a world under lockdown, digital technologies have become a key tool for everyone, Governments too. South Korea developed several apps to track the contagion threats and other countries have followed suit. From some US States, like California, to the European Union initiative to use a common app to control the spread of the virus within its borders, we are seeing how digital has become key.

Going forward, these tools will become widespread, which of course raises a number of issues, not the least everything that has to do with privacy, since these apps track key aspects of our lives, like where we go or with whom we have had contact.

Though it will be a useful tool to control the pandemic, it also entails major risks in terms of the potential of States to create a surveillance environment that may become dangerous for individuals. Hence, we will have to reinforce privacy rules to prevent such risks from materializing.

Furthermore, as some papers are already highlighting, health data can be potentially weaponized by other agents, increasing cyber risks on a global scale.

Gig and ghost workers are two employment categories brought along by the digital platform economy in urgent need of regulation. The current shift in the workspace from the office to the worker's home, can result in employers overstepping workers' rights?

Not necessarily. Long before this shift, there were rules already in place to limit access to workers outside the working place. Rules that came both from companies and Governments, to ensure workers have time to spend with their families or on leisure. 

Governments are also putting in place a number of policies to help workers and unemployed deal with the economic impact of the crisis.

Unlike Silicon Valley, where remote working is commonplace, many countries in Europe are reluctant to this kind of shift. Would you vouch for it?

Remote work is also here to stay, in my view. We all have discovered that many of the job activities can be done remotely, with substantial savings in term of time (commuting or traveling) and money. That brings with it many advantages for workers.

But we cannot forget that the possibility of tele working is not evenly distributed. There are many jobs where such arrangements cannot work. On average, more high-skilled individuals can work from home (education, financial services, corporate jobs) than low-skilled workers. Indeed, most workers in manufacturing, retail, leisure, construction, transport or utilities cannot work remotely on a permanent basis.

In general, will this crisis lead to a more digitalized society?

Absolutely. As said, many of the trends that will be reinforced were already there. Both at personal and work levels. Most of the consumer companies, if not all, had already ways to interact digitally with their customers, and the lockdown has created an accelerated path to increase e-commerce and digital payments. And those are only some examples of a digitized economy and way of living.

How can we, as individuals, get ready for it?

As it is the case at a business level, we have entered a world where personal adaptability is the key. As individuals, we need to understand the deep changes our societies are going through and, besides an open mind, the best way of achieving that is through learning.

For many years, we have been speaking about life-long learning; more than ever, we all will have to be open to learning about new ways of working, new skills and even new ways of interacting at social and political levels.