{"id":2468,"date":"2021-04-06T11:09:26","date_gmt":"2021-04-06T11:09:26","guid":{"rendered":"https:\/\/blog.uantwerpen.be\/business-economics\/?p=2468"},"modified":"2021-04-06T11:25:34","modified_gmt":"2021-04-06T11:25:34","slug":"on-the-winners-and-losers-of-the-corona-crisis-a-k-shaped-recovery","status":"publish","type":"post","link":"https:\/\/blog.uantwerpen.be\/business-economics\/on-the-winners-and-losers-of-the-corona-crisis-a-k-shaped-recovery\/","title":{"rendered":"On the winners and losers of the Corona crisis: a K-shaped recovery"},"content":{"rendered":"\t\t
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Politicians and pundits regularly call the current Corona pandemic the biggest crisis since World War 2. A few months ago, the Economist<\/a> reinforced this metaphor by analyzing their entire archive of articles since the magazine\u2019s inception in 1843.\u00a0<\/span><\/p>

The Economist found that no less than 47% of all articles written in 2020 were related to the coronavirus<\/b> (see figure 1, red line). There are only two events in the history of the magazine that received more attention: World War 1 and World War 2. For the New York Times, the situation is even more striking: the Covid-19 pandemic is the most covered issue in the history of the newspaper (blue line in figure 1).\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Figure 1: Share of articles mentioning key word in each year in the Economist and the New York Times<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Unequal impact<\/span><\/h2>

It might be no surprise that almost half of what journalists write these days is Corona-related. The Corona pandemic is a major public health crisis with millions of casualties, an economic crisis that leaves tens of millions unemployed and a social crisis that impacts everyone. <\/span><\/p>

However, it is important to keep in mind that the pandemic has a very unequal impact on different industries, companies and individuals. While many, predominantly small<\/a>, business lost large fractions of their sales other, predominantly large<\/a>, firms broke revenue records.<\/b><\/span><\/p>

Table 1 shows the growth in EBITDA (a metric of the operating profitability of a company) for a selection of large companies between 2019 and 2020. Technology firms like Amazon or Microsoft saw their EBITDA rise by double digits during the pandemic. Even the EBITDA of Apple, a firm with relatively expensive products which consumers might be less likely to buy during a major catastrophe, rose significantly. Large investment banks like Morgan Stanley and Goldman Sachs had a wonderful 2020 as well.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Table 1: EBITDA growth of selected companies<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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V-shaped or U-shaped?<\/span><\/h2>

Overall, in the U.S. 45 of the 50<\/a> biggest firms were profitable during the largest crisis since WWII. This is good news for the economy, but it stands in sharp contrast to how most individuals experienced the pandemic.<\/span><\/p>

When nations first went into lockdown in March last year, economists argued about what the subsequent economic recovery would look like (see figure 2). Many were wishing for a V-shaped recovery.<\/b> This would mean that we can put our economy in the fridge for a few weeks during lockdown, and quickly bounce back to previous levels once the restrictions were lifted. Others feared a U-shaped recovery: <\/b>our economy would partly rot during lockdowns as people lose their jobs and companies go out of business. As a result, it would take longer before we are back up to speed.\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Figure 2: The different letter shapes of a possible economic recovery<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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K-shaped recovery<\/span><\/h2>

Today, we mostly see a K-shaped recovery: a part of the economy quickly recovers, and sometimes even performs better than ever (big tech firms for example), while other industries do not recover at all (tourism for example).<\/b> Or as John Donahoe, the CEO of Nike, put it: \u201cthese are times when the strong can get stronger\u201d<\/a>. <\/span><\/p>

\u201cFor whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.\u201d (Matthew 25:29)<\/span><\/i><\/p>

If we look at people instead of companies, we can see the K-shaped recovery as well. Consider the following facts:<\/span><\/p>