Where We Go from Here
A lawyer’s view on the our path forward from COVID-19.
As we continue the process of “reopening” the economy, how will business and the economy reshape themselves and what will the world, and Louisiana, look like? Both startups and established companies will face challenges and opportunities, requiring careful thinking to spot opportunities and manage risk, and raising a multitude of legal issues.
Expect to see the following:
Digital Transformation. We have been told for years to be ready for digital transformation — the shorthand term for the rising influence of artificial intelligence, big data, cloud computing and the internet of things (IOT). The pandemic forced us to deal with a sudden “mini” digital transformation — its defining features were adapting to remote working and learning to use Zoom. But how much will people go back to the old ways as the crisis passes? Facebook has announced permanent remote workers and “no-meeting Wednesdays.” Will those who tried working remotely like it so much that they continue, but maybe not every day? Or hate it so much that they cannot wait to get back to the office? Will businesses decide they don’t need so much office space? We have seen the large-scale postponement or cancellation of large events and the conversion of many to remote or “virtual” events. Will people continue to choose Zoom meetings over airplane flights? Probably all of these trends will continue to some extent, the question is, how much and how fast?
Trade, Manufacturing and Construction. We can expect to see a decline in international trade, as nations around the world explore the virtues of taking care of needs at home. This trend had already begun with the trade wars of the last few years. Events during the pandemic will likely accelerate the move toward national self-sufficiency and away from globalization and China’s influence will continue to be a target of controversy.
We can expect efforts to enact policies that encourage U.S. production of certain items and policies that make it harder to import some items. Tax incentives and other subsidies may be used to promote this. Tariffs are the other edge of the sword, making it harder to move goods from one nation to another. The November election results will affect which policy proposals have wings. And keep in mind that other nations will be doing this as well, so that competition will be subsidized in other nations and other nations’ tariffs will make it harder to export American goods.
If there is a resurgence of manufacturing, one might ask what kind of manufacturing growth to expect. One view is that we should protect local manufacturing of “essential” or “strategic items,” such as medical equipment and pharmaceuticals, items of military importance and energy. Another approach suggests that manufacturing will be most likely to increase where its economic disadvantages are less important, for example, where labor costs are a smaller factor in production costs, or where the lower cost of transportation by being closer to market is a greater advantage. Yet another thought is that cutting-edge technologies such as additive manufacturing (i.e., 3D printing) will be the core of a resurgence in manufacturing.
All of these changes in the economy may lead to construction projects and all that goes along with them — including project entity formation and governance, finance, complex land rights issues, construction procurement and management, environmental and related permitting issues, and, inevitably, dispute resolution.
Bankruptcy. And now for the bad news. We should expect to see an increase in bankruptcy and restructuring activity both from debtors and creditors. Already we have seen bankruptcy filings by high profile companies such as J. Crew, J.C. Penney, Neiman Marcus, Hertz, Whiting Petroleum and Diamond Offshore Drilling. We will doubtlessly see that trend on “Main Street” as well, despite PPP loan forgiveness. We can expect to see continued low energy prices for the foreseeable future and huge effects on the Louisiana economy. An already-existing push for energy self-sufficiency will continue.
Keep Paying Attention! As Yogi Berra said, “It’s tough to make predictions, especially about the future.” So, I am sure that I will read this later and wonder, “How could I have thought that?” As these issues play out, business leaders will need to stay up to date and develop strategy that works both in the short and long term. And dealing effectively with these changes will necessarily have legal implications as well as financial.
Loulan Pitre is partner in charge of Kelly Hart Pitre, with Louisiana offices in New Orleans and Baton Rouge. He is a 1986 graduate of Harvard Law School and a former member of the Louisiana House of Representatives. He may be reached at email@example.com.