12 Leaders The EconomistNovember 28th 2020
the governing Conservative Party won Labour seats in the Mid-
lands. That mixing is just what politics in both countries needs,
because it encourages parties on the left and right to break out of
their tribal redoubts and to tilt the balance of political effort
away from identity and back towards outcomes.
Democracy is, for good or ill, also linked to the fortunes of the
superpower that is most closely tied to it. America supports de-
mocracy partly through example and advocacy. At home Mr Bi-
den will attempt to restore norms such as the independence of
the Justice Department. Abroad, he will not indulge autocratsand tyrants as much as Mr Trump has. And America could boost
democracy through power politics. If Mr Biden wants to create
an alliance to help America keep ahead in the race against China
for tech dominance, democracy will help define it.
Above all, democracy is something people strive for. Every
weekend Belarusians risk their liberty and their lives by taking to
the streets to defy the dictator who refuses them the right to
choose who should govern them, just as Hong Kongers, Suda-
nese and Thais have. It is an inspiration that voters everywhere
should carry with them to the ballot box. 7A
s the prospect of a widely distributed vaccine draws
nearer—this week AstraZeneca and Oxford University an-
nounced results for their jab (see Science section)—bosses and
investors are turning one eye away from the immediate struggle
of coping with the pandemic and looking instead at the longer-
term competitive picture. Who has won and who has lost? Like
viruses, recessions usually come for the weakest first. Compa-
nies with sickly balance-sheets or frail margins quickly suc-
cumb. As promising startups become crushed closedowns, it is
often the incumbents that have the resources to wait it out.
Yet the covid-19 recession has been sharper than normal, and
more complicated. The world economy is expected to shrink by
over 4% this year, the deepest downturn since the second world
war, and there is still a risk of a double-dip recession (see leader).
Bail-outs, central-bank stimulus and forbearance by banks and
landlords have slowed the process of creative destruction and
cut the number of defaults. Social distancing is laying waste to
some industries while boosting others, as peo-
ple find new ways to do old things.
As a result the normal pattern in which pow-
erful firms gain more clout is less emphatic than
you might expect—so far. Investors are strug-
gling to get to grips with such an unusual out-
look. This is partly why, although anticipated,
the news on vaccines in the past few weeks has
caused gyrations in financial markets as fund
managers bet more heavily on firms they feared to touch just a
few weeks ago.
What, then, is a good way to assess the winners and losers? In
many businesses the incumbents will remain on top, because
their entire industry has proved immune to online disruption.
In other cases the incumbents will win—but because they have
mastered new digital innovations. Finally, in some parts of the
economy where technological change seems to have been speed-
ed up, the running is being done by new entrants.
Live music is one industry that the pandemic has completely
unplugged (see Business section). With concerts and festivals
banned, Live Nation, the largest concert organiser, has seen its
sales fall by 95% compared with a year ago. Yet with no way to
replicate a mosh-pit online, the industry is not being disrupted
so much as put in the deep freeze. As Live Nation’s buoyant share
price suggests, it can afford to wait until life returns to normal.
Many other industries, such as air travel, cannot move online.This year will do grave damage to airlines’ balance-sheets—their
total debt has reached half a trillion dollars. (British Airways is
literally selling off the family china to shore up its finances: half
a dozen first-class teacups can be yours for just over $30.) But
those that survive will find the skies less crowded.
Elsewhere there has been more digital disruption—but it is
the incumbents that have benefited. Advertising has shifted
even further online, where the duopoly of Facebook and Google
rules. Likewise, much office-based work has moved to the home,
leading to empty office buildings and abandoned photocopiers.
The upshot of this disruption is that people are more reliant than
ever on big tech firms that provide cloud services. Though the
pandemic will cause permanent change to all such industries,
the dominant names in each will be familiar.
Yet there is a third group of industries which have been dis-
rupted in ways that threaten the incumbents. Live sport has
more or less continued throughout the pandemic, as teams have
found ways to test or quarantine players. But the
absence of crowds has contributed to a plunge
in tvviewership, the financial engine of the
sports industry. Instead, people are tuning in
more often to highlights clips, betting sites and
other interactive ways of enjoying sport on so-
cial apps, threatening the cable-tvfirms. In ca-
tering, a growing appetite for delivery services
such as DoorDash, whose revenues this year
have more than trebled, points to a future in which eating at
home becomes more common. Food retailers and restaurants
will have to adapt, or see their profits nibbled away.
And what is the picture for the economy as whole? If you look
at America’s stockmarket, the shares of the biggest companies by
sales have outperformed this year—but only in 33 out of 59 in-
dustries, and by a median margin of just two percentage points.
In many areas the battle for supremacy is still raging. Thus, in e-
commerce Amazon’s sales have surged but it faces revived com-
petition in the form of Walmart’s online operation and Shopify, a
digital upstart. Covid-19 has brought with it economic damage
on a vast scale. Yet the rapid changes that have been forced on
many industries are leading to innovation that will outlive the
pandemic—and in some cases are leaving incumbents less
mighty than before. Consumers and trustbusters alike must
hope that these newly competitive parts of the economy remain
hotly contested long after the pandemic abates. 7What doesn’t kill you
Has the pandemic made incumbent firms stronger?Covid-19’s corporate winners and losers2