From the desk of our CIO

June 2020

Creating a new economic model

At the end of the first quarter we stared into the abyss of the Covid-19 pandemic with markets in freefall and central bankers priming the liquidity pumps to facilitate financial markets operations. It seemed to have worked! Markets have rallied off the March lows to test previous market highs, but the breadth of the rally has been narrow with technology stocks leading the charge higher. Whilst many may cheer the market’s reaction, the economic impact on ordinary people has been dire.

The pandemic has exposed deep inequalities in health care systems across the globe, coupled with an increased awareness of political will, or lack thereof, to address the underlying issues. A recent Johns Hopkins University study revealed the following:

while Black Americans represent only about 13% of the population in the states reporting racial/ethnic information, they account for about 34% of the total Covid-19 deaths of those states.

These issues are not unique to the USA but have been echoed across the globe under the Black Lives Matter movement, highlighting inequalities facing many societies across the globe.

Whilst central bankers support Wall Street, the growing deficits and debt burdens will ultimately have to be funded by future taxpayers. Some politicians remain tone deaf to these realities, but through social media taxpayer voices can become a force for change. President Trump’s Tulsa rally provided a glimpse of the effect of a social media protest with many seats left empty by TikTok and Instagram users in what was consider a well-co-ordinated social media action.

As most governments look to fiscal policies to restart the economy, South Africa faces a debt burden with structural reforms desperately needed. As we embark on these reforms, we need to address critical issues about the society we want to create and how these reforms will tackle historical inequalities that persist. Have we reached a tipping point where systemic inequalities need to be addressed or do we risk facing increased social unrest?

Can we create a future where Capitalism is not about an I but rather an US (society)?