David McKay is chief executive of Royal Bank of Canada
Canadians have worked together to flatten the coronavirus curve. We need to do the same to bend the economic curve back in our favour.
Over the coming weeks, we will begin to see the extent of economic damage caused by the pandemic and the necessary lockdown of our society. This quarter alone will likely see the biggest economic decline any of us have witnessed, with job losses and business closings that could affect our communities and country long after the virus is contained.
In moments like these, it’s natural to think only about the immediate challenges, but we also need to think about the next stage of recovery, so we don’t lose that opportunity when it comes.
Since the onset of the COVID-19 crisis, I’ve talked with dozens of clients – from the country’s biggest companies to retail mortgage holders – and worked closely with my global peers and our governments to understand the complexity and risks we’re facing. Many of us are now recognizing we are unlikely to see a V-shaped economic recovery, as we were hoping just a few weeks ago, and will need to work hard in the coming months to bend the downward curve back to a narrow U.
It won’t be easy. Even if social restrictions are largely gone by summer, the economic scar tissue will remain and take time to heal. To its credit, the federal government has put together critical relief packages, worth more than $100-billion, and more will be needed from Ottawa and our provinces.
Now it’s time to execute, without a moment to lose. Over the coming days, we need to pull together as Team Canada to get these historic commitments to owner-operators, innovators, social entrepreneurs and families in every corner of the country and the economy. Many companies have just days left to keep their payrolls intact. Many families will struggle to make ends meet in the coming months.
The purpose of these historic investments, though, is about more than surviving today; it’s about shaping the economy of tomorrow. And that means moving from defence to offence, as the best Team Canada always does.
To make that shift, we need to think about the next normal, as there won’t be an old normal to return to. Global trade migration is not likely to go back to the old model. International movement won’t press a “resume” button any time soon. Shoppers, diners and tourists may choose to stay away from each other for a while. Even the sharing of technologies and innovations may not flow again like they did only a few months ago.
For a relatively small country such as Canada, which has benefited in so many ways from an open world, those are significant challenges. That doesn’t mean we should give up on globalization. But it does mean we need to think, for the first time in decades, about how to be more self-reliant in the areas that matter most to our competitiveness and prosperity.
Here are some of the tools we have to do that:
Canada has a strong balance sheet, one of the world’s best. The federal government is starting to leverage it more ambitiously and will need to continue to do so, which means Canadians need to be comfortable assuming more collective debt. We also have many of the world’s strongest banks, insurance companies and pension plans, each with good, well-regulated balance sheets that can be harnessed for our economic recovery. Canadians have worked hard since the global financial crisis of 2008 and 2009 to strengthen those foundations and to preserve and protect capital; now is the time to get that capital to work and invest in the entrepreneurs and innovators who can build the markets and supply chains of tomorrow.
We’ve been able to take for granted the free flow of critical supplies, from medical equipment and drugs to food and agriculture products. That may not be so true in the next normal. Our governments, leading enterprises and academic institutions need to determine how to best develop and protect more resilient Canadian supply chains. Of course, a more self-reliant Canada could become a more expensive Canada, as we don’t have a significant domestic market. We’ll need the best of our innovators to develop and apply technologies to drive the next generation of productivity gains, and with it a new Canadian competitiveness.
The crisis has given many organizations the chance to see how to work differently, and connect with customers differently. If we harness new technologies across all sectors – including government – we can accelerate our shift to a more competitive and inclusive economy. And we can ensure these technologies help us better prepare for future public-health challenges. It’s not just organizations that need to evolve, though. Using its balance sheet, Canada has the chance to invest in the next generation of infrastructure – satellite-driven rural broadband, for instance, and smart cities – that will foster more ingenuity, resilient communities and secure livelihoods. We need to see the coming recovery as a digitally driven recovery, powered by data and engineered by Canadians with skills to take on the 2020s.
To make this shift, we need to transform the way we learn and train, so our companies and communities are better equipped for a new paradigm of disruption. Through Royal Bank of Canada’s $500-million Future Launch commitment and Humans Wanted research series, we’ve spent the past few years engaging employers, educators and students to focus on the future of work. Our schools, colleges and universities have responded with important strides that make Canada’s education system among the world’s best. But if we’re teaching and learning after this crisis as we did before, we will have failed.
Unfortunately, a new generation of Canadians will be bearing the economic scars of the COVID-19 crisis here for many years. If we get behind them now, they can help lead the recovery and the rebuild. As a digitally savvy generation, they’ve been fast to adapt to this new normal. It’s why RBC has committed to keeping the close to 1,400 students we offered summer jobs to, even though some won’t have workplaces on Day 1. That’s okay. Most will be working from home and help us reimagine all we can build together. They are the future; they can help take us there.
Over these trying and tumultuous months of this crisis, I’ve been inspired by RBC’s 85,000 employees who have transitioned a global operating system with remarkably little disruption. Beyond just doing things differently, I see us doing things better, which will be critical to ensuring a successful recovery that accelerates into a vastly changed world. That’s why I’ve asked every one of our leaders to keep notes on what they’re learning and how they’re thinking about the next normal.
I’ve stressed to them two words: speed and scale. We need those twin forces to drive our business forward. We need them in public policy, too, to develop solutions at the speed of our shared problems and to ensure solutions get to a scale we’re seeing elsewhere in the world.
Over the coming weeks, we will need to move faster than we may be comfortable with and strive for a scale that’s bold and ambitious. We’ll also need to keep pace, even as we’re confronted by questions that give us pause about how we can collectively move from crisis to recovery.
We will need to lay out plans for re-engagement, to determine which parts of society can open up first and how we can approach that narrow door without sparking a social stampede.
We will need to invest aggressively in mass testing for COVID-19 and adopt new approaches to monitoring, to better understand where the virus is and how best and most humanely to contain it.
We will need to protect all Canadians as we come to grips with the prospect of co-existing with the virus, domestically and globally, before a vaccine or effective treatment is developed and produced at scale.
How we respond to those questions and work together in the weeks ahead will be remembered for years. How we rebuild from there will be remembered for generations.
We know this crisis is already different and deeper than anything we’ve seen. We should also know it can be the beginning of a new economic chapter for Canada, one that allows us to thrive and prosper in a digital age.
We’ll need to work together – something Canadians are good at, even under stress. We’ll need to think about offence as well as defence. And we’ll need to see this not only as Canada’s challenge but also Canada’s moment.
That can be our next normal.
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