The IMF and World Bank hold their annual meetings this week. The greatest focus is naturally on the pandemic and the prospect for recovery from the deep economic downturn it has caused. But in the long term, both economics and politics may depend as much on how the composition of the economy changes as its aggregate ups and downs.
So it is good to see that many top policymakers are taking the challenge of restructuring as seriously as the imperative of recovery. In her "governor talk" at the meetings this week, European Central Bank president Christine Lagarde gave a clear-eyed explanation of how the economy was likely to change, with some telling examples.
We are, in her words, likely to see a permanent shift in the ways we work, shop and pay — with greater use of digital solutions in each case. Lagarde said that in Europe, 50 per cent of employees worked from home in the deepest lockdown, and of those only 10 per cent "have the urge to go back to office work". Physical retail is being significantly replaced by ecommerce, which in Europe has increased by one-fifth in volume since February, and she thinks that is also likely to stay with us. And cash is giving way to digital payments. Lagarde confirmed the ECB was "looking very seriously" at a digital euro, the topic of our previous Free Lunch.
Lagarde also predicts "a new wave of service-driven globalisation", giving the example of an oncologist in her family who carried out remote consultations during the lockdown, a practice both the doctor and patients would like to stick with when possible. The pandemic, in short, vastly accelerates deep structural shifts already in train — including, one hopes, the carbon transition — and may add some new ones.