With the spread of coronavirus (Covid-19), organisations across the world have adopted novel ways of working. Internet and the virtual world came to our rescue as we all tried hard to stay afloat and relevant.

Working from home, Skype calls, Zoom video meetings and huddles became an integral part of the new ways of working.

Certainly, this helped us remain afloat and many organisations were able to either completely prevent or at least minimise lay-offs and job losses.

The problem, though, arises when this starts taking the shape and size of a bandwagon. A wagon, that everybody wants to jump into. Tata Consultancy Services (TCS) made the first move and announced that 75 per cent of its employees will continue to work from home even post Covid-19.

Other organisations are ready to follow suit, in full swing. Top executives are looking agape at the mouth-watering savings on operating costs and the swell in bottom line. Everyone is hailing this as the ‘new normal’.

But, are we going to ride a tiger not knowing how to get off it without being bitten?

Are we really aware of what we are committing to?

Are enhanced profits, the only motive for existence of organisations?

If yes, who would be the guardian of the economic wheel?

What will be the larger impact of this ‘new normal’ and who exactly is responsible for it?

To sum it up all, is this good news?

The answer is a straight ‘no’. This is a classic case of poor economics in poor times.

The Economic Perspective

To put things in perspective, as more and more employees start working from home, the vast number of people at the bottom of the pyramid — the cleaners, the office boys, the canteen staff, the receptionist, the security guards — will be the first ones to bear the brunt.

Rest assured, they will not be the only ones. As these people lose their jobs, their consumption expenditure will come down steeply.

This means, they will buy less of rice, less of vegetable oil, less of toothpaste, less of detergent and soaps, less of nail polish and talcum powder — in essence, less of everything.

As the consumption of these products reduces, companies manufacturing them will be forced to produce less and a cut in production will now result in a further cut in employment.

There will be a different strata of society — technicians, production and maintenance engineers, supervisors — that will start losing jobs.

This will again reduce consumption expenditure of a vast number of people further inducing production cuts and job losses.

Let’s move further up the pyramid.

Skilled and educated people working from home will buy less of deodorant, perfumes, cologne, dresses (formal and casual) etc.

Also, the life of consumer durables will increase considerably. Vehicles will last longer due to less use and less wear and tear.

First-time vehicle buyers will, perhaps, avoid buying one due to less utility of the same.

This will not only impact the automobile industry but also the allied upstream and downstream industries like iron and steel and plastic and paint industry.

This also means that a less number of people will take a car loan and insurance premiums, and insurance holders will also come down.

This is the recipe of how economies enter into the vicious cycle called the ‘downward spiral’.

Be sure, there is no end to this spiral as it reinforces itself. No section of the population will remain untouched by this spiral.

The Paradox Of Thrift

In an economy, when individuals (citizens, corporates or government) increase autonomous savings this leads to a decrease in demand and thus a decrease in output.

The decrease in output results in a decrease of individuals’ incomes which means that they now save lesser than what they were saving earlier because now they have lesser incomes than what they had earlier.

Hence, such autonomous, inorganic, enforced savings by corporates will result in lesser income generation and lesser real savings.

The savings in operating costs eyed by the corporates are inorganic savings in the sense that they are not derived out of product engineering or higher level automation or enhanced productivity.

Such inorganic savings are to be avoided otherwise what we will be left with is the paradox of thrift, that is we end up saving lesser than usual which means lesser investment going further.

The Social Perspective

We are all social animals and we have a basic need for social interactions. As against that, this new normal of working from home is making us work with people whom we have never met.

We don’t know whether they like tea or coffee. We don’t know whether they dress up well or not. Some of them, we don’t even recognise as we haven’t ever seen them (yes, sometimes on camera).

This new normal comes at a great cost and can potentially make us abnormal. Business leaders must recognise that Covid-19 is just a phase and this too shall pass. We must not take it too seriously and make it a way of life.

Otherwise, the Internet and the virtual connectivity – two of the greatest inventions of the last century which were made to keep us connected – will turn back on us like Frankenstein’s monster and we will be left with perennial social distancing.

Aditya Narayan Roy

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