Covid-19 Weekly Update From Grenoble Ecole de Management’s Experts
Grenoble Ecole de Management brings to you its third Covid-19 update, with opinions from its Experts, on the global evolutions they foresee in: labor loaning, universal basic income, cultural models, bank rescue plans and the luxury industry.
1/ The current economic dilemma lays the foundations to test the universal wage
“Faced with an unprecedented social and economic upheaval, countries have been taking increasingly widespread measures to respond to the Covid-19 crisis. Among these measures, are plans to continue paying wages to workers and contractors confined at home and unable to work. These measures aim to protect citizens from poverty and to ensure social cohesion. They also have various characteristics in common with the Unconditional Basic Income (UBI).
In research published with Geneviève Shanahan and Priya Srinivasan just before the crisis, we highlighted an increase in initiatives similar to the UBI. This showed a certain feasibility of a basic income, yet the motivation required to further develop it was still lacking. The Covid-19 crisis has provided the impetus needed to test the impact and consequences of a future universal income.”
Mark Smith, Expert in HR Grenoble Ecole de Management
2/ A health crisis to revisit cultural and governance models of countries and areas around the world?
“The way the world health crisis linked to the coronavirus is being understood, experienced and managed, allows us to take a new look at the social, cultural and governance dimensions of our societies. One of the first dimensions that has stood out is the difference in term of “crisis management” between autocratic and democratic regimes. China has shown how the authority of a Single Party rules with an iron fist at all times during this health crisis – denial of the situation, repression for those who dare to speak out, a quasi-military organization of containment and use of the crisis as a mean of global propaganda. For the countries we may consider as democratic, we have seen a hesitant yet generous, criticized and objectionable approach, with certain difficulties in making people adhere the rules of confinement, as they are open to each person’s interpretation of their freedom. Another dimension is that of the most collectivist cultures have shown their capacity to seal a common destiny despite different objectives and approaches. For example, the South Korean collective protective mask operation, systemic screening for the virus and “tracking” citizens via mobile applications, ultimately is a very different collectivist manifestation from what is happening in China. Powerful cultural models for very different types of crisis management….”
Pierre-Yves Sanséau, Expert in HR Grenoble Ecole de Management
3/ How is Covid-19 driving France to think differently about its survival?
“On March 31st, France announced a mass labor loan operation. Employees from all types of companies, including the French automobile group PSA, were sent to Air Liquide, specialized in the manufacture of artificial respirators, for training so that they could learn to manufacture respirators in their own companies. Conversely, some organizations are also lending some of their employees to Air Liquide on a voluntary basis, to help them in manufacturing new artificial respirators. Labor leasing, which has been practiced very little in France until now, depends on payroll reductions in companies that are in financial difficulty, to thus lease their employees. It also helps to develop employees’ skills, as they learn new ways of working and develop their skills in a new context. In this very particular context, the great demonstration of solidarity from all these employees working twice as hard, not necessarily in their usual positions or areas of expertise, to make up for the lack of artificial respirators…, should be highlighted. A fine example and a new facet of labor subleasing. Well done to all these French employees!”
Ludivine Calamel, Expert in HR Management and Innovation at Grenoble Ecole de Management
4/ Resilience or transition?
“Once the health emergency is managed, the question of how our economies put on hold due to the coronavirus will be restarted will be raised. Undoubtedly this will require an ambitious recovery plan, perhaps the most ambitious ever carried out since the great crisis of 1929. Hundreds or even thousands of billions of Euros could be injected into the European economy just as the EU has relaxed some of its budgetary constraints. What objectives should this future plan set for itself: resilience, that is to say more or less return to the pre-crisis situation or an accelerated transition to a model of a sustainable and inclusive society? If the latter option is chosen, the recovery plan will need to be selective and encourage producers of essential services and goods to make the transition:
- Food: support the elimination of plant-health products proven to be dangerous and accelerate the shift to organic farming.
- Mobility: build a network for recharging electric vehicles throughout the country, massively produce Bio-NGV from wastewater treatment plants and composting centers, and build train lines.
- Housing: strengthen the thermal renovation plan of existing buildings.
- Education: revalue teaching professions, and invest in all priority areas of education.
- Health: provide quality care for all; and allow fragile people to stay at home.”
Thibault Daudigeos, Coordinator of the Inclusive Sustainability & Territorial Ecosystems in Transition Chair at Grenoble Ecole de Management
5/ From dividends to bankruptcies….why we will have to save banks once again!
“In 2008, the general public discovered the different types of abuse being practiced by banks: extreme over-financing, speculation, tax evasion etc. Nothing has really changed since. Even today, the monetary authorities are obliged to raise their voices so that banking institutions postpone their dividend payments! However, we cannot let the banks get further into difficulty. If banks become unable to provide liquidity to their customers, to grant credit, or even go bankrupt, the economy is at major risk! A banking crisis could involve a liquidity crisis, paralyzing economic transactions, and even people running to the bank. If bank accounts are guaranteed up to 100 000 Euros, less than 1% of accounts could actually be compensated.
Moreover, central banks are working to keep banks afloat thanks to several emergency measures by easing constraints, regulations and enabling repurchasing of assets. So once again, despite everything, we will have to support banks. We did it in 2008, it did not change banking practices…This time we are being given the opportunity to rethink support systems for banks and this model of privatizing profits and socializing losses.”
Virginie Monvoisin, Expert in Monetary Economy at Grenoble Ecole de Management
6/ How Covid-19 will profoundly transform the luxury fashion industry
“According to the Boston Consulting Group, fashion and luxury sales could drop by 25 to 30% in 2020 compared to 2019. However, luxury brands are already mobilizing efforts to respond to the situation. Chanel and Hermès announced that they would maintain salaries for all of their staff without resorting to state aid in France. Hermès will donate 20 Million Euros to the ‘Assistance Publique-Hôpitaux de Paris (Public Assistance of the Paris Hospitals) and has graciously provided hydro-alcoholic solutions and masks. LVMH launched the production and distribution of hydro-alcoholic gel for free and ensured the supply of masks from China. The Group will make the first payment of 5 Million Euros. Kering and Moncler also followed suit. The fashion industry will have to support its employees, suppliers and subcontractors in the upcoming months. It may also have to reduce the frantic pace of new collection launches, and of communications and public relations budgets. The cancellation of the next Paris and Milan fashion weeks are the first tangible signs of this.”
Isabelle Chaboud, Expert in Financial Analysis & in the Luxury Industry at Grenoble Ecole de Management