| Next | Section menu | Main menu | Previous |

The recession is shaking up the world of business—and the rules of capitalism

Shock and awe

Prepare to see the extent of the creative destruction left by the pandemic, says
Patrick Foulis

RECESSIONS ARE capitalism’s sorting mechanism. Weak businesses shrink or

fail and stronger ones expand. But in 2020 the process of creative destruction

did not take place in the typical manner. Because the downturn was the result

of a health crisis rather than, say, a financial crash or inflation scare, there

were some idiosyncratic corporate winners and losers: think of the boom in

video streaming, or cruise-liner firms being wrecked. Meanwhile vast state

handouts propped up companies around the world, masking the scale of the

corporate carnage. In 2021 the toll will become clearer as stimulus tapers

down and more firms fail. Healthy businesses will ramp up investment, giving

them an enduring advantage. These top dogs will, however, face a new climate

in which three tenets of modern business—the primacy of shareholders,

globalisation and limited government—are in flux.