How has the global covid pandemic affected economies? Well, the evidence seems to be that – as one outstanding NBER paper seeking to understand the effects of the virus on economic life puts it – ‘no country is immune to the economic fallout of the pandemic because of interconnections’, so that even economies that have been relatively successful in halting the direct effects of the pandemic will feel the effects. Oxford Economics forecasts ‘long-term [global] GDP losses of 5%, or US$4.9tn.’, while the World Bank describes the effect of the pandemic as ‘a global recession whose depth was surpassed only by the two World Wars and the Great Depression over the past century and a half’. Even with a hypothecated rebound in growth with vaccine rollout, the effects will be long lasting: lowered interest rates, possibly upward nominal wage pressure, disrupted supply chains, delayed investment.
Is, though, the effect of the pandemic evenly felt within our economies? Obviously the experience of living with the virus will differ between economies, and we know that agglomeration centres (typically cities) tend to be hard hit, but what of the regional economic differences in impact? A recent summary paper in Regional Studies argues, convincingly, that ‘A regional analysis is essential to fully understand and manage the unequal impacts of the current pandemic, not least because Covid-19 is unlikely to be the last of its kind’. The authors show a number of effects on regional economies, but one is particularly compelling for those of us interested in building regional competitive advantage through research. It is that the pandemic will ‘irrevocably transform the role and meaning of proximity’.
If proximity means anything in the economic life of knowledge regions it is surely positive: proximity yields spillovers, the anticipation of network[ed] externalities, economies of scope in the generation of new knowledge. If, though, proximity is no longer defined by information technology (the speed of a fibre optic broadband connection to a supplier on the other side of the world) but much more the transportation and buffer stock location specific safety net of continuous supply, what does that mean for knowledge regions? Well for one thing, as the Regional Studies paper suggests, a lot will depend on how quickly we rebound from covid, repair interconnections between regions and national economies and swap resilience for growth. Supposing, though, that the exposure experienced during covid – that even vaccine supplies experienced ‘realtime cross-border supply issues’, however high-tech vaccine manufacture was itself – leaves a permanent mark on the collective psyche of regional economies, what might it mean for us?
Well for one thing, one suspects that national resilience will turn to localisation. Hubs will become strategically vital, shoring them up and protecting them essential. Building networks and ensuring the percolation of spillovers will become less important, even though these are the very effects which in a knowledge-driven economy raise growth. If ‘proximity’ is seen rather less as a potential for spillovers from agglomerated centres and more as a watchword for security of supply, how will that change the language knowledge regions will need to use?
In one sense, not much needs to change. Spillovers will occur; information rich network effects will be felt. Agglomeration tends to sit comfortably with diffusion. However, it may be in the interests of knowledge regions to think again about how they describe the strategic national case for their being. a ‘gene tech valley’ as a national security resource. An ‘ICT corridor’ as an insurance against the fracturing of global information networks. ‘Logistics and supply centres’ as a guarantee against JIT failures and last mile bottlenecks. We may need to start talking, too, about ‘proximity’ meaning something very immediate – as an emotional comfort blanket.
All of this many come to pass, or global growth (now, in 2021, set to rise with vaccine rollout) may render these effects transitory. For a generation, though, it may be the case that exposure to the experience of covid has made people more keenly aware of regional centres as insulation against the cold wind of economic fragility.