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Interview: Prof. Dr. Henning Vöpel about the effects of the Corona crisis

How hard will the Corona crisis affect Hamburg? And what opportunities will it create for universities and digitisation? We asked our HSBA professor and director of the Hamburg Institute of International Economics (HWWI), Prof. Dr. Henning Vöpel, this question.

How badly will the Corona crisis affect Hamburg / the Hamburg economy? 

This depends very much on the duration of shutdown and lockdown. At the moment the damage would be limited. Most companies can maybe hold out for two or three months, but beyond that it will be very difficult. Then no more guarantees and loans will help. It can be assumed that the supply shock will increasingly be followed by a demand shock, and that sales markets and supply and production chains worldwide will probably remain disrupted well into the second half of the year. There will therefore be no V-shaped economic cycle, i.e. a short recession with a rapid recovery, but rather a long U, possibly even an L, i.e. a structural slowdown in growth. Hamburg itself is likely to be disproportionately affected compared with Germany as a whole, because the service sector and foreign trade are of great importance here. As things stand at present, the crisis will presumably cost Hamburg around ten billion euros, with an additional two to three billion euros being added every week.     

Can the new general ruling change/improve this?

Yes, the relaxation will allow the economy to gradually pick up. However, this is only possible to the extent that it does not lead to a loss of control over the pandemic. Against this background it is important to know more about how and where the pandemic is spreading faster and where slower, and of course to adopt accompanying measures such as the wearing of masks. Orientation towards the reproduction rate R<1 is therefore only of limited use, as it is an average value. We need to know where R is still significantly greater than one and where significantly less, i.e. where the ice on which we are moving is still very thin and where it is already a little thicker. That's what every exit scenario depends on at the end. But for that you would have to test more.      

What else should politicians do to revive the economy?

The capital stock will be essentially unchanged after the crisis, so in principle we could very quickly produce at the same level as before. But of course the situation of the companies is different now; many are on the verge of survival. To this extent, there is no need for a reconstruction programme after the crisis, but a kind of revival. Moreover, the crisis is an opportunity to rethink how we want to organize society and the economy in the future. There will certainly be adjustments in consumer behaviour, in global value chains and in risk attitudes as a reaction to the crisis. As we say in economics, this will lead to real reallocation decisions that will also change the structure of our economy. Against the background of digitisation and climate change, the post-crisis phase is an opportunity for modernisation. Therefore, the focus should not be on the short-term preservation of structures, but on innovation and structural change.       

What effects will the crisis have on the universities?

Twofold effects. In the short term, the crisis may hit some universities hard, while the state universities are in a comparatively comfortable situation. However, private institutions are increasingly important in the higher education landscape. That is why it would be important to put the private ones under a protective umbrella as well. Moreover, education, science and research are becoming increasingly important for business and society, because the corona crisis shows just how vulnerable we are and how much knowledge shapes our understanding, actions and design. Universities will therefore play a very important role in shaping the future, and private universities in particular have an important function in transferring knowledge to the economy.  

Will we achieve long-term changes here that will better prepare students for the working world of tomorrow?

Yes, I certainly hope so. The Corona shock has the potential to change the collective consciousness, in the best case positively influence the attitude towards change, because we all suddenly have to face the thought of having to let go of the status quo, to develop new solutions, to be agile and creative. We have known for quite some time, especially in the HSBA, that these skills will be very important in the working world in the future, because innovation cycles are getting shorter and companies basically have to change permanently: Agility replaces process, collaboration replaces hierarchy.  

From this point of view, are there also opportunities offered by the crisis? Will it take us a significant step forward in terms of digitization or will we tend to return to analog processes after the crisis?   

The crisis is acting as a catalyst for the structural change that is already imminent but has been postponed in many places. After the crisis, those who had already initiated the structural change will suddenly be in a much better position, especially with regard to digitalisation. The experience of many companies during the crisis is that digitization does not hurt, but can help in concrete ways, for example in work processes or in sales. This experience is very important. But it will be important that we do not collectively fall back into old patterns of behavior. I have personally resolved to insist much more often on remote work processes in the future. This will not make the analogue process less important, but on the contrary, the time gained will make it more valuable and productive.      

 

Henning Voelpel, HSBA