Public health business models

from Jamie Morgan

Part 4 of Pandemic aware economies, public health business models and (im)possible futures

One optimistic point of view hopes our economies bounce back (a deep sharp ‘v’ shape). But this seems increasingly unlikely and is now a minority position. This is partly because of a path-dependency governments are not well-equipped to quickly or easily shift. No  effective treatments are available yet for Covid-19 and even as some become available we will still be living in more or less fearful societies that require governments to impose or organizations to voluntarily adopt ‘public health business models’. A socially distanced economy affects the potential for work and consumption and this affects different sectors in different ways.

Distrust radically reduces willingness to use public transport and social distancing radically reduces the volume capacity of that public transport.  Costs soar and revenues fall, and in the UK case, a typical business model predicated on fewest transport units (least carriages for trains etc.) cannot easily respond. The problem is exacerbated in a privatised system of franchised transport, and from a profit-loss point of view these entities become reluctant to respond. So, a system transporting commuting workers to work and consumers to places of consumption faces significant problems in conveying both when contrasted with past numbers. The immediate response is to divert traffic elsewhere (cars, cycles, foot) and stagger public transport use or access through the day and on different days. The net effect is to reduce activity and this problem feeds through to other sectors.

Once at work, office workers confront office spaces that require uncluttered ‘deep-clean’ friendly environments, wide berths, spread out single designation desks, one-way traffic systems, and different points of entry and exit, as well as appropriate ventilation, access to sanitisers, washing facilities, and single toilets to ensure good hygiene can be maintained. Modern ‘hot desk’, cramped office spaces do not look-like this, and resources for sanitation do not seem likely to be freely available to all offices in the near future. So either safety is compromised (leading to new waves of infection as ‘R’ spikes) or workers work from home or numbers are radically reduced. Best practice compliance in ideal office spaces affects costs most, but all office spaces change anyway if a public health business model becomes the goal, and the problems of office spaces might be magnified in manufacturing, processing and assembly organizations, since ‘line’ work cannot necessarily be spread out if the function requires materials to be passed from person to person or the machinery that each works with cannot be separated without breaking the system itself. Again, any short term public health solutions are liable to reduce output and increase costs.

Fewer people in spaces that previously had many people means fewer people ordering from or frequenting the cafes, sandwich bars and coffee shops that service urban and industrial park workforces. So, problems initiated by lockdown do not end with lockdown for the catering, restaurant and ‘hospitality’ sectors. They too face public health business model problems of use of space, compliance, reduced capacity and increased costs. Moreover, a socially distanced economy means reduced incentive to visit restaurants in the evening, less likelihood of socialising in pubs and clubs, and reduced capacity in all of these, as well as, eventually in leisure and fitness sites. All of these have ‘break-even’ models based on average revenues related to numbers of customers and it seems unlikely that most can respond, even if demand is there initially, unless prices rise significantly, in turn, affecting what economists call effective demand (ability to pay). Then, of course, if people are more likely to stay at home, they are less likely to buy as many ‘going out’ outfits. So, the problem feeds through to online clothing retailers as well as high street locations (why visit the high street if you can no longer try on the clothes and no longer have as much use for them?). And some barriers are not just psychological, they are legal. Closed borders, quarantines and just more tightly controlled borders all impact tourist and holiday destinations, and an airport and aviation industry run according to a socially distanced public health business model’ surely runs differently than it did in the past. Again, either safety is risked (R is affected and fear is augmented) or prior ‘carrier-load’ business models (that determined break-even calculations) become broken business models.

I could go on (having said nothing about major sectors such as construction or universities) and most of the above has probably occurred to you. But collectively and cumulatively the above is sufficient to illustrate that a public health business model is different and its initial path-dependency consequences seem likely to systematically reduce net economic activity after any first formal lockdown period. Clearly, given the ripple effects related to use of space, some of the greatest impact (in wealthy economies at least) is likely to be in economies where final consumption of products and services is a larger part of the economy and where some significant part of this is discretionary spending.