Testing capabilities remain limited, but drug treatments that help patients with symptoms are quickly becoming available. The lockdowns that plunged their economies into the deep freeze are lifted slowly, but major restrictions remain through June in many states. At the beginning of June, states say they have driven down the virus infection rate to well below zero. (Known as the reproduction ratio (R0).)

New deaths in states that imposed shelter-in-place measures in early March are rapidly shrinking in mid-May. At the end of June, deaths attributed to the coronavirus exceed 100,000.

Even before the lockdowns are lifted, the numbers of new homeless and families without money for food in all the major urban areas are beyond what local agencies can handle.

As states restart their economies with strict healthcare restrictions, some 40 percent of small retailers fail to open. Air travel and mass transit are severely limited. A flood of large and small companies in travel and retail declare bankruptcy. Large companies that furloughed and laid off workers begin to bring back workers slowly. There’s great uncertainty about market demand in all industries.

Global trade is down significantly. Trade flows In Q2 2020 — measured by WTO’s volume index — are off 50 percent from Q2 2019.

There are major disagreements in the US over what the government’s role and priorities should be during the recovery and what changes should be made in the US over the long term. After the sacrifices made in the lockdowns, there is despair over the hardships being faced.

Experimental vaccines begin to rollout in September 2020 for high-risk groups. Hospitals try to resume normal operations, but many have been impacted by the lockdowns and must cut costs. Gilead’s drug remdesivir shows benefits for some sick Covid-19 patients and is available throughout the US by July 2020.

Strict safety and social distancing requirements for schools, businesses, retail stores, senior living facilities, and large public venues put in place in June will remain in place until a mass vaccine is available or herd immunity is developed. This looks like it will be well into 2021 before requirements are lifted.

US deaths from Covid-19 top 140,000 by the end of 2020.

US GDP is down 8.3 percent for 2020. It’s clear the world is in the Great Depression of 21st Century and that the downturn and recovery isn’t “V-shaped” or “U-shaped” but “L-shaped.”Half of the workforce is unemployed or underemployed. Official unemployment reaches almost 20 percent by July 2020 — unofficial numbers are higher as a percent of the working-age population — and remains at that level through the end of the year.

Official temporary homeless shelters (tent camps) are widespread on county and city land. Many apartments have non-paying occupants. Cities and counties can’t provide minimal support to the homeless and families struggling with basic health and food needs and are forced to cut all but essential services as tax receipts decline and social services costs explode. Many are facing bankruptcy.

Mass transit passengers are down 50 percent across the United States. Many people have switched to cars or are staying at home.Across all industries, 40 percent of small businesses have been forced to close their doors. 55 percent of small retailers that were open in February 2020 have been forced to close. Among restaurants and bars, 60 percent go under.

In many sectors, furloughed workers have returned to work, but companies are operating at reduced capacity and no one is hiring. The consumer discretionary sector has been hit particularly hard. Large retailers and airlines continue to seek protection from creditors by declaring bankruptcy. Business travel is off significantly. Boeing survives, but must make massive job cuts. New car demand is much reduced.

The impact on industries is very uneven. High-tech companies are stable, enabling the country to function. Shopping online is double what it was before the crisis. In Europe, shopping online rates before the crisis were between 15 and 20 percent; the rates in the US were likely similar.

Around the world, nations emerge from the lockdowns with national grievances and adopt protectionist policies. For 2020, global trade flows are down 40 percent compared to 2019. Demand for China manufactured goods has dropped, and China’s economy is decimated.  Chinese consumers aren’t spending either. China’s GDP decreases 7 percent in 2020. The EU is in similar disarray.

Since the beginning of the crisis, China has been concealing from its people and the rest of the world the disaster’s costs on its people’s health and economy, while whipping up nationalist sentiment. China abandons the one country, two systems principle for Hong Kong, declaring military law in the territory in order to ensure social order during the crisis. The United States and EU stand by.

Year: 2021

Strict social distancing requirements put in place in the summer of 2020 remain in effect until the end of Q2 2021. A vaccine is approved for mass production in January 2021, and supplies begin to have their intended effect beginning in Q2 2021.

By the end of 2021 another 40,000 people have died in the US from Covid-19, bringing the total from the pandemic to 180,000 deaths.

Real GDP growth for the US is a negative 0.2 percent in 2021. Cities and counties are overwhelmed by the large numbers of homeless and penniless people. Cities and towns across the United States declare bankruptcy. Many are forced to make cuts to public-sector pension benefits. Labor strikes in essential services (transit, law enforcement, schools) paralyze regions.

For the world, 2021 global trade volume is still 30 percent less than the peak in 2019. The World Trade Organization loses authority to arbitrate global trade and becomes a coordinator and information service on global trade. It’s clear that demand for China manufactured goods will never be the same because of trade barriers, and China’s economy falls another 2 percent in 2021.

US foreign policy is not to get pulled into any military confrontation that would divert financial and political capital away from domestic problems. In the winter of 2020/21 Russia overruns the three Baltic states, Estonia, Latvia, and Lithuania, and NATO stands by. China asserts that it controls the South China Sea; and China attempts to blockade Taiwan. The US Navy escorts ships in and out Taiwan waters, but can’t stop China’s expanding military presence in the Southeast Asia.

SCENARIO: RESILIENT

Themes of Resilient:

• Covid-19 battle is won. States, operating as generals in the field, undertake different approaches fighting Covid-19. State lockdowns work initially to contain the virus, but the approaches for lifting lockdown measures and restarting their economies don’t work equally. However, the states show they are fast learners and drive Covid-19 infection rates down to safe levels. Total US deaths reach 250,000 at the end of 2021.
• The US economy is knocked down, but it gets back up on wobbly feet. The pandemic causes significant damage to the US economy, but it’s functioning. A quick recovery is out of the question because of new safety restrictions, the high-unemployment levels, and the back-breaking debt loads everyone is carrying. Real GDP in the United States decreases 6.1 percent in 2020 and grows 2.1 percent in 2021. China’s economy has zero growth in 2020 and grows 5 percent 2021.
• National and state policies to coordinate efforts on the healthcare and economic sides of the crisis emerge after ugly, drawn-out partisan debates. The federal government establishes a crisis council to coordinate US foreign-policy efforts for helping the rest of the world deal with the crisis. China attempts to expand its presence in Southeast Asia, but Southeast Asia countries, supported by the US defend their positions.

Three Months: April, May, and June 2020

Lockdowns continue in almost all US states into early May 2020 when the states say they have driven down the virus infection rate — also known as the reproduction ration (R0) — below 1.  The states implement plans with strict restrictions to reopen their economies. In states with large urban populations, masks are required in public, including indoors. Six-feet separation is required in schools and workplaces. After initial lockdowns are lifted, Covid-19 cases flare up across the country, but response efforts are good enough to manage the flare ups.

At the end of June, deaths attributed to the coronavirus exceed 120,000.

Some 30 percent of small retailers can’t reopen when the lockdowns are lifted, but other small businesses can. Large companies quickly restart, but plan to operate at reduced capacity for some time. Financial markets are functioning, but everything is dynamic.

Global trade is down significantly Q2 2020. Trade flows — measured by WTO’s volume index — are off 40 percent from Q2 2019. China efforts to restart its economy sputter, as the world isn’t ready to resume ordering supplies and products from China, and Chinese consumers aren’t spending yet.

Six Months: July through December 2020

Gilead’s drug remdesivir shows itself effective for broad use in sick Covid-19 patients and is available throughout the US by July 2020. New therapeutic drugs that show promise also begin to appear in July.

US deaths from Covid-19 top 180,000 by the end of 2020.

The US was fortunate that the Covid-19 crisis hit the country when its economy was in good shape. US GDP growth falls 6.1 percent for 2020.

Ridership on mass transit systems doesn’t return to pre-crisis levels. On average across the US, passenger levels are 20 percent down. There’s a dramatic shift to telecommuting by many workers, but the freeways are full of commuters.

Local governments struggle to create housing for the homeless, driven by newly displaced families. County social service programs are restructured to focus on essential services. Local government agencies undergo intense budget cutting efforts.

While a surprising number of small businesses were able to restart, only 40 percent of all small businesses survive until the end of December. Among the retail, entertainment, food services, hospitality, and personal services industries the survival rate is just 55 percent. Everything is different because business owners are adopting new processes and technology when they re-open, making them less costly, and more dependent on online systems.

Air travel is slow to recover. Personal and business travel are off significantly. New safety/health restrictions restrict cabin capacity. Boeing survives, but must make massive job cuts. Car demand is down.

Global trade decreases 30 percent in 2020 compared to 2019. All the G20 countries are suffering except China. China’s GDP growth is zero in 2020 despite the drop off in trade. Real GDP growth for the Euro area is a negative 8 percent for 2020, and EU member states confront the reality the EU was ill-equipped to help members during the crisis.

Geopolitical relations around the world worsen as nations erect trade barriers and reduce their dependence on Asian manufacturing. While the US attempts to rebuild its own manufacturing capability in certain industries, it still supports globalization and strives to bolster international trade. By default, the US is the global economic leader and endeavors to coordinate efforts to rebuild the global system.

Year: 2021

New therapeutic drugs begin to appear in January 2021, and the FDA approves a vaccine for mass production in May 2021.

New deaths from the virus in the US are 70,000 in 2021, bringing the total to 250,000 from the pandemic.

US GDP growth is 2.1 percent in 2021.

States and local governments survive by making large cost cuts, and with the help of a new federal government program, re-structure public-sector labor agreements on pension benefits.

For 2021 trade volumes are still 20 percent less than the peak in 2019. The US renegotiates trade agreements with major partners with the aim of increasing the country’s resilience during crises.

China’s GDP grows 5 percent in 2021.

SCENARIO: CHASTENED

Themes of Chastened:

• A fierce battle continues to contain the virus. Much remains unknown, but facing severe economic hardships, states move to lift lockdowns as soon as possible. The nation learns to live with it. Covid-19 remains deadly for all of 2020 and much of 2021. US deaths from the virus hit 400,000 at the end of 2021.
• The US economy absorbs a significant blow, but it is fighting. The measures to stop the virus in the first half of 2020 damage the US economy, but as lockdowns are lifted, local economies are rebounding slowly. Q2 2020 real GDP is 8.2 percent less than it was Q2 2019. As At the end of 2020, real GDP in the United States for all of 2020 is 4.1 percent less than it was in 2019. The US economy grows 3.8 percent in 2021. China’s GDP actually grows 1.1 percent in 2020, and 7 percent in 2021.
• US government aid programs set up in the initial stages of the crisis — while expensive — help many small businesses stay alive until they can reopen. By the end of the summer 2020, the US is in recovery mode, stimulated by the states’ concerted efforts to get everyone back to work and federal cooperative efforts with the other G20 economies to stimulate trade. G20 countries lower trade barriers, improve technology protections, and rebuild some of their manufacturing capabilities.

Three Months: April, May, and June 2020

Many states and counties are experimenting with less-strict lockdowns in early May. As the lockdowns are lifted, communities are beset by flareups, some larger than the initial wave.Public health officials develop capabilities for rapidly re-imposing restrictions when outbreaks occur. While the R0 appears to be below 1 for most urban areas, the uncertainty surrounding the estimate remains high.

At the end of June, deaths attributed to the coronavirus exceed 120,000.

Mass transit systems implement measures to limit virus transmission, mandatory masks, train-car occupancy limits, etc. Ridership levels start low but grow. The freeways fill up quickly.

Government aid enables key industrial sectors and population segments to reopen immediately. The lockdowns spark innovations in government and industry. The use of online services explodes. A number of US companies begin building new manufacturing capabilities in the United States. The lending activities of financial institutions, both large and small, support the recovery. Many state government officials and insurers agree a way for business disruption insurance to cover pandemics.

Even though many survive, small businesses are hard hit by the virus. Many didn’t have the cash liquidity to survive weeks without any business. At the same time, everything is different. Business owners are adopting new processes and technology when they re-open, making them less costly, and more dependent on online systems. The overall survival rate of small businesses appears to be 75 percent.

In May and June, China ambitiously initiates a public-relations campaign to get foreign customers and companies to resume their China activities. Global trade flows — measured by WTO’s volume index — are down 40 percent in Q2 2020 compared to Q2 2019.

After most of the G20 countries open their economies by the middle of May, geopolitical-relations trends resume their course. For China and the US, relations are uneasy but there is good cooperation on health and trade issues. Global humanitarian efforts are focused on Africa and Latin America’s crisis needs.

Six Months: July through December 2020

Covid-19 remains very active and dangerous throughout the United States for all of 2020. Regions have widely varying incidents and experiences. In some, hospitals and intensive-care units are overwhelmed, and resources must be rushed in. Gilead’s drugs are better than nothing, but only reduce fatalities some.

Cooperation among the states and federal government is good. New clusters in senior living locations continue to be a problem, and strict measures are implemented by states for all complexes. Testing capabilities remains woefully inadequate throughout 2020. A different approach toward testing emerges in every region. Google/Apple’s second effort to set up a national database succeeds.

US deaths top 250,000 by the end of 2020

For all of 2020, US GDP growth shrinks 4.1 percent.

Local governments struggle to create housing for a growing homeless population, driven by newly displaced families. County social service programs are restructured to focus on essential services. Local government agencies undergo intense budget cutting efforts.
As regions open up, more workers telecommute, and college students spend less time in classrooms. Freeways are full, but mass transit systems are not. Ride-sharing businesses rebound well as people avoid mass transit.

US consumer spending picks up as the economy opens. Online sales do well, although much of the initial increased spending is at retail establishments. By the end of the year, it appears 65 percent of small businesses that were open in February 2020 have survived. Air travel increases quickly, but traffic levels are much reduced. New safety measures reduce the capacity of each plane, and discretionary travel for business and pleasure are down significantly. Boeing’s defense and civil aviation divisions emerge as independent companies. Car companies ramp up production after the shutdown, but recovery is slow as consumers delay making big ticket purchases.

China’s GDP grows 1.1 percent in 2020. The Euro Area suffers more than the US and China, shrinking 6 percent. Overall the global economy contracts by 4.7 percent in 2020 as the coronavirus pandemic caused nations around the world to close down. 2020 global trade flows are down 20 percent compared to 2019. Instead of following routes of national grievances and protectionism, country after country embraces the need for cooperation and shared solutions. China’s actions in Q2 2020 serve as a stimulus to the global economy and helped maintain China’s role as the manufacturing hub. The US and China modify their tariff agreements to lower most of the tariffs.

Year: 2021

New therapeutic drugs don’t appear until early 2021. No vaccine is found, but the heavy wave of infections across the country hopefully means a herd immunity is being developed.

Deaths in 2021 from Covid-19 are still high, topping out at 150,000 for the year. The two-year total is 400,000.

The US economy shows real GDP growth of 3.8 percent in 2021.

In the second year, the economic outlook for G20 economies is optimistic as global trade picks up. The United States asserts its leadership of the global economy by adopting policies to lower trade barriers, improve technology protections across borders, and still build nation-economy safeguards.

US/China relations are relatively stable. China still treats all discussions of re-structuring the global trade system as threats. 2021 global trade volume is up 10 percent over 2020.
China’s GDP grows 7 percent for 2021. The EU’s GDP is a positive 2.5 percent for 2021, while Japan grows 3 percent.

What Would You Do?

The scenarios are extreme, but plausible. Every household, business, nonprofit, or government agency can use the scenarios to help them figure out what they should do over the next two years. Ask yourself with each scenario, how well would my current plan fare in this scenario? What would I do differently if I knew this scenario were going to occur?  After thinking about each scenario’s challenges, what should my plan be knowing that any of these scenarios could occur?