The Economist USA 03.28.2020

58 Business The EconomistMarch 28th 2020

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ample. Another 24 are health-care firms.

Many have spare cash and a captive market

of people in need of drugs. Plenty of the

weaklings are in the ailing transport, retail

and recreation industries (think Marks &

Spencer or American Airlines).

Clear winners and losers are emerging

within sectors, too. In tech, Amazon is add-

ing 100,000 workers in America to meet e-

commerce demand. Meanwhile SoftBank,

a Japanese conglomerate which bet big on

flaky startups (including smaller e-mer-

chants), has been forced to announce

$41bn in divestments to raise cash, among

them, perhaps, the sale of part of its lucra-

tive stake in Alibaba, China’s biggest listed

firm. In energy, the shares of giants such as

ExxonMobil, Royal Dutch Shell and bphave

outperformed smaller firms by a vast mar-

gin. Occidental Petroleum, an aggressive

medium-sized company that has tried to

acquire its way to the big league, now has a

hefty $40bn in debt. L’Oréal, a big French

personal-care group, has done vastly better

than Coty, an American rival. Even among

beleaguered aircraft-makers a gap has

opened up. On March 23rd Airbus, Europe’s

champion, said it had about $32bn of liquid

funds available. Debt investors view it as

less risky than Boeing, which may seek a

bail-out from the American government.

The top dogs’ resilience should eventu-

ally translate into an enduring advantage,

allowing them to win market share over

time. Their cost of capital will be lower.

Suppliers will favour them over feebler

customers. With higher margins and big-

ger cash buffers, they will be able to afford

higher investment even as other firms cut

back. Some will pursue takeovers, encour-

aged by governments which put the surviv-

al of foundering firms (and jobs) ahead of

antitrust concerns. As valuations fall and

capital gets pricier, the ability of loss-mak-

ing startups to nibble away at big firms’

profits will recede for a while.

Not everything may go the top dogs’

way. Calls for a new social contract may get

louder after the virus passes, with firms

pressed to offer vital products for lower

prices and to give workers more security.

Capitalism may become less Darwinian, as

weak firms are propped up by bail-outs and

subsidised loans. The amount earmarked

for cheap business loans and guarantees by

governments in America, Britain, France,

Germany and Italy is at least $4trn, or a fifth

of their outstanding non-financial cor-

porate debt. Some industries may tempo-

rarily be run as officially sanctioned car-

tels, colluding in order to stabilise prices

and production. That will make it harder

for strong firms to assert their advantage.

Covid-19 won’t only have lasting effects on

society and people’s behaviour. It will also

alter the structure of global business. 7

M

an doesnotlivebybreadalone,

even in confinement. Sections of

the world’s high streets have been spared

from national edicts to shut up shop

until covid-19 passes. Supermarkets,

pharmacies and banks remain open just

about everywhere. Other exemptions

reflect which industries politicians feel

voters cannot do without.

Is booze a basic need? Not in Penn-

sylvania or India, where alcohol retailers

have been shuttered. France, predictably,

has spared its wine merchants. Cavistes

had originally been ordered to close,

then permitted to stay open even as the

French lockdown was tightened (cheese-

mongers count as food shops, in case you

were wondering). Dutch and Californian

cannabisdispensarieswerealsoallowed

to reopen. Weed sales in California re-

portedly tripled as tokers pondered life

cooped up with their families.

Bookshops remain open in Belgium

but not Britain, despite an appeal by

James Daunt, boss of Waterstones, a big

chain, that they were “no different to a

supermarket or pharmacy”. By contrast,

when France’s finance minister, Bruno Le

Maire, wanted to exempt booksellers,

their association beseeched him to keep

them closed—but also to stop Amazon

and supermarkets from selling books.

Dry cleaners and launderettes have

usually remained open, including in

New York. But the need to look dapper

does not extend to coiffures. Barbers and

hairdressers closed in much of Europe

(though Germany let them stay open at

first). Their trade group, too, pleaded for

them to be forced to stay shut, pointing

out that hairdressers could scarcely

avoid coming into close contact with

customers. Also, being closed can help

trim expenses by putting staff on govern-

ment wage-replacement schemes, and

perhaps other handouts.

South Korea at no point strictly en-

forced closure of commerce. But gyms

and night clubs that want to stay open

must keep a visitor log and enforce dis-

tancing rules or be held liable for medical

bills of anyone infected on their pre-

mises. Non-food establishments from

Lucknow to Los Angeles might anyway

see few clients even if they kept going.

People must juggle child care with re-

mote work. They have lost their income,

or are about to; confidence is plummet-

ing. Until it rebounds, shopkeepers may

prefer to seek government life-support.

Stillopen

Confinement shopping

PARIS

Retailers vie to be considered “essential” in a lockdown—or not

Critical infrastructure

W

hen thefinancial crisis rocked the

business world in 2007-09, board-

rooms turned to corporate finance chiefs. A

good cfo could save a company; a bad one

might bury it. The covid-19 pandemic pre-

sents a different challenge—and highlights

the role of another corporate function, of-

ten unfairly dismissed as soft. Never have

more firms needed a hard-headed hr boss.

The duties of chief people officers, as

top human-resources executives are some-

times called, are critical. They must keep

employees healthy; maintain morale; over-

see a historic remote-working experiment;

and consider whether, when and how to lay

workers off. Their in-trays are bulging.

Once derided as “pay and parties” man-

agers, by the early 1990s hr chiefs turned to

compliance, keeping firms out of the

courts (and newspapers). A subsequent

string of corporate imbroglios raised their

status, notes Patrick Wright of the Univer-

sity of South Carolina. Executive-pay scan-

dals in the 2000s at firms such as World-

AMSTERDAM

The coronavirus crisis thrusts

corporate hr chiefs into the spotlight

Human resources

The importance of

people people