Although there is no argument that the adoption of AI technologies will create new jobs, it does raise the issue of automation of current jobs and the potential negative impact upon society. In 2017, the Office for National Statistics analysed the jobs of 20 million people in England (ONS 2019) and concluded that 7.4% are at high risk of being automated. In addition, it highlighted that women, part-time workers and younger people in elementary occupations are most likely to be affected – many doing the jobs RPAs are primed for. A Universal Basic Income (UBI) has been put forward as one possible solution to the loss of jobs and the impact of automation upon the working population. It is claimed that a UBI would allow some security to workers, would contribute to limiting involuntary debt, and lower stress levels. However, the UBI does equate 'work' to 'money' in its simplest terms, negating the social aspects of work including personal value, relationships, a source of self-esteem, citizenship, and role in society (Meyer 2019). It may also increase inequality. UBI, whilst useful, could render the unemployed 'the left behind', creating a social underclass.

## 4 A Pandemic World of Work

The pandemic has made us re-think our work – and many jobs might be done with a mix of home and office work. For those employers looking to keep the traditional office space many will look for technology solutions to minimise spread of disease, such as:

Ahead of us further technological advances are likely to enable further changes to work. For example, the development of 5G is expected to have an enormous impact on businesses – especially so for a postpandemic economy as it will enable extraordinarily fast networking and connectivity. Workers wanting to maintain a home-based work lifestyle could use Virtual and Mixed Reality devices like Microsoft's HoloLens that would add imaging in video conferencing. 5G will enable faster and clearer connection, creating a far more personal experience. 5G, coupled with growth of AI will fuel development of the Internet of Things (IoT) which is expected stimulate the growth of Smart Cities, Smart Healthcare and Smart Work. Current planning on 5G + IoT adoption is intended to reach more deprived areas and reduce digital differences in access – with many health commentators believing it could even reduce health inequality and even manage pandemic outbreaks better.2 The transformative potential of 5G cannot be underestimated.

By 2025, IDC [2018] estimates that around 1.5 billion 5G connected devices will produce more than 175 zettabytes of data each year. A zettabyte is the equivalent of one trillion gigabytes. This rapid increase in data production through connected 5G devices is known as the massive Internet of Things (mIoT), which will accelerate the drive to digitalisation. Many of these 5G connected devices will use Edge Computing to deliver super-fast, low latency, AI powered data services directly on the device without needing to access the cloud. 5G is so much more than just faster 4G. Together with mIoT and 'AI on the Edge', 5G is the gateway to autonomous systems at scale and human-machine collaboration that will make pre-connected human beings look like dinosaurs. (Richard Foster-Fletcher, Digital Strategist, Boundless Podcast)3

However, critics of AI voice fears over privacy and cybersecurity with 5G and IoT having prompted governments to develop a stronger stance on AI governance. The European Union (EU) released guidelines for regulating AI in a white paper, applying to 'high-risk' technologies with high privacy concerns, such as healthcare, transport and surveillance. For example, the impact of certain AI is deemed "high risk" by the EU – such as AI tools used in recruitment, as it may affect workers' rights. They acknowledge that AI has a huge impact on society, and EU citizens must be protected in order to keep trust high. In doing so, the EU has pledged to create an 'ecosystem of trust', ensuring that tech firms comply with EU regulations and allowing citizens to adopt AI technologies with confidence. These governance plans are promised to be embedded into 5G planning – even to the extent of re-evaluating political and country affiliations of network providers.

2 AT&T Business Editorial Team. "5 Ways 5G Will Transform Healthcare". *AT&T*. https://www.business.att.com/learn/updates/how-5g-will-transform-the-healthcare-industry.html.

3 https://boundlesspodcast.co.uk/.

## 5 Skills Building – Adapting for Surviving and Thriving

It is only through understanding the realities of any climate, both internal and external, and adapting effectively, that most creatures survive. We are experiencing a new reality shaped by a major shift that is impacting jobs from both AI and the pandemic, and we need to push our minds further, understanding that we will need a mindset for constant 'adaptability' to build the relevant skills to thrive. Stimulus in skilling from the UK government comes from the UK Office for Artificial Intelligence (OfAI), which has three main aims: ensuring that AI has a positive impact on society, enabling adoption of AI across industries, and upskilling and investment. Key policies include increasing investment in R&D to 2.4% of GSP by 2027, investing £406 million in STEM education, and an additional £64 million for a National Retraining Scheme, enabling lifelong learning in digital and construction industries. In addition, the EU has developed an 'ecosystem of excellence' with small and medium-sized enterprises (SMEs) to boost innovation and the economy. This is an attempt to attract investment in European AI, and in turn stimulate the job market. The EU Commission is also developing a Skills Agenda with the goal to upskill everyone within Europe – with a specific effort on women to enter technology.

Josie Cluer, EY's lead partner on skills and learning, argues for a "skills-led recovery". She says "skills is a key driver of growth, productivity, and the government's levelling up agenda. So the Prime Minister's plan to 'build build build' has to be underpinned by investment in 'skills skills skills'. Organisations too, need to invest in the skills of their people, because the capabilities they need will be different to those pre-COVID. And last, individuals themselves, wherever they are in the labour market, will need to invest in their own skills, for employment and progression".4

Essentially at the core of any governmental role on re-skilling is encouraging both organisations and individuals to have a 'learning orientated' mindset. This supports the underlying theory and applications in the *dynamic* approach to both individual and organisational development. Two 'dynamic' approaches show key skills to survive – and thrive. The first is Dynamic Capabilities, which offers a methodology for organisations to gauge changes and adapt to volatile and complex challenges (Teece 2019) and the second is Career Dynamism (Pasha 2020), which offers a career delivery model that enables people to develop adaptive qualities for career uncertainty. The concept of dynamic capability suggests it is organisational

4 https://www.henley.ac.uk/articles/why-we-need-a-skills-led-recovery.

adaptive skills that enable "the firm's ability to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments" (Teece, Pisano, Shuen 1997). Dynamic Capabilities methodology suggest AI offers firms competitive advantage through creating *efficiencies* (such as RPAs, voice assistants, blockchains, and bots) and *innovations* through 5G and IoT. Career Dynamism showed those people best at managing chaos and uncertainty have demonstrable 'future of work' skills for work that is both uncertain and volatile in nature (Pasha 2020). Abilities such as 'career-resilience' enables people to be both adaptive and pro-active, by demonstrating capabilities such as *self-reliance* and *motivation to learn* as well a *positive self-concept* by truly valuing their personal abilities. Career Dynamism highlights critical qualities such as human skills of *creativity*, *openness* and an ability to *build positive relationships*. These are crucial skills, because robots will undertake routine, data-heavy, mundane and dangerous work, leaving the possibility of unknown new jobs which will unquestionably be focused on such human qualities.

## 6 What Might a 'New Normal' Mean for Us?

No man ever steps in the same river twice, for it's not the same river and he's not the same man. Heraclitus

We are in a 'new-normal', despite so many things looking similar. We have shared experiment of living and working through COVID-19. At the same time, major activist movements occurred during the pandemic, such as the Black Lives Matter movement, resulting in companies examining their diversity and inclusion culture – asking if they really do offer parity and equality. It is essential, therefore, that AI development is aligned to societal norms. Thus, software used in monitoring employee experience must ensure ethical diversity and inclusion practices, and be mindful of privacy needs of employees. For example, ensuring transparency in extracting building usage data and personal information from wearable tech, such as Fitbits and Apple watches. The role of 'Responsible AI' (Zhu 2019) will increasingly be a core activity that most tech producers are placing into their build strategy. Many firms are now using a multi-stakeholder approach to consider wider implications of AI, to ensure good governance, diversity and social impact. In building more ethical and responsible AI strategies, companies should build AI to align with the 'meaning and purpose' of corporate strategy – and both organisations and individuals will need to consider dynamic capabilities to achieve sustainable growth (Harreld, O'Reilly, Tushman 2007).

The pandemic has forced huge changes in the world of work, a world that was also starting to experience dramatic change from AI. If we can adapt well and evolve to the changes the pandemic has caused, and adopt AI effectively, firms are likely to see better levels of productivity and growth. And with it, they may see their employees being happier, better skilled and have more adaptability and resilience to withstand future challenges.

## **Bibliography**

#### **A New World Post COVID-19**

Lessons for Business, the Finance Industry and Policy Makers edited by Monica Billio and Simone Varotto

## COVID-19 and Its Impacts on Talent Mobility in China

#### Mikkel Rønnow Mouritzen

Roskilde University, Denmark; University of Chinese Academy of Sciences and Sino-Danish Center for Research & Education, Beijing, China

#### Shahamak Rezaei

Roskilde University, Denmark; Sino-Danish Center for Research & Education, Beijing, China

#### Yipeng Liu

Henley Business School, University of Reading, UK

**Abstract** COVID-19 has caused countries around the world to close their doors and put strict measures on the mobility of people across geographical boundaries. What will be the impact on highly skilled talent? We address this important question by exploring the experiences of European researchers in China during COVID-19. We do so by utilising the newest unique data gathered in a survey by EURAXESS, which reports that 47% of the European researchers in China left due to the outbreak. We complement this with archive data, interviews, and COVID-19 regulations to discuss and forecast future scenarios for talent mobility to and from China.

**Keywords** COVID-19. Talent mobility. International researchers. Brain circulation. Travel barriers.

**Summary** 1 Introduction. – 2 Talent Mobility: Why It Matters. – 3 Talent Mobility on the Rise in EU: China as a Partner or Competitor. – 4 Talent Mobility in China: Traditionally a Brain Drain, But Becoming Competitive. – 5 Data and Methods. – 6 COVID-19 Impact on Cross Border Mobility. – 7 European Talents in China. – 8 Conclusion.

**Innovation in Business, Economics & Finance 1** ISBN [ebook] 978-88-6969-442-4

### 1 Introduction

In a recent article, Liu, Lee, and Lee (2020) highlight how the COV-ID-19 pandemic is already having severe effects on both the global economy and global value chains. They emphasise that it is still too soon to draw definite conclusions concerning the consequences of the pandemic. However, they still point out an emerging trend, which shows that global supply chains are decoupling from China because of the pandemic. Moreover, they argue that this is happening in a time when there is a drastic reduction of air travel as well as severe travel restrictions (Liu, J.M. Lee, C. Lee 2020). In this chapter, we continue the discussion of migration and travel restrictions by exploring the effects of the pandemic on talent mobility amongst European researchers in China. Talent attraction policies have become increasingly important globally (OECD 2008). This has opened doors for academics around the world, only to come to a rapid halt because of COVID-19. The transformative issues arising in academia are highlighted in a recent series of articles published in Nature entitled "Science after the pandemic" (Witze 2020). The series explores some of the dramatic changes that have occurred in academia resulting from the COVID-19 outbreak. These issues include topics such as: what will happen to the nature of conferences, travel, and mobility? (Viglione 2020); what is occurring at now empty campuses? (Witze 2020); and how might publications change? (Callaway 2020). But they also deal with the effect on Chinese academia, which otherwise seems to have been on the rise since China became amongst the leading funders of researchers and the leading producer of academic articles (Cyranoski 2020). In this chapter, we will discuss what is happening to foreign researchers in China. We will mainly look indepth at European researcher's experiences and discuss the impact on European and Chinese scientific collaborations.

## 2 Talent Mobility: Why It Matters

Global flows of talent have become an increasingly important element of globalisation (Liu 2019). Whether in the public or private sector, the recruitment of individuals that can make a difference in organisations have become one of the key challenges of the decade (Lee, Rezaei 2019). In an article published before the COVID-19 crisis, Janger and Nowotny (2016) explore academic job choices and the international mobility of talented researchers. They find that in general job choices in academia are driven by factors such as collaboration partners, research funding, and academic freedom rather than personal factors. The literature on talent mobility suggests that the US is the first destination country for researchers and that it attracts the most substantial flows of international talent, making it able to reap the innovative rewards that come with global talent (Kerr et al. 2016; European Commission 2017; Kerr 2018). However, other countries have caught up and developed talent attraction schemes of their own (Shachar 2006; Shachar, Hirschl 2013, 2015). These schemes are particularly prominent in academia and often considered beneficial as the mobility of researchers aids in the creation and the diffusion of knowledge, which is of significant importance to knowledge economies (OECD 2008).

## 3 Talent Mobility on the Rise in EU: China as a Partner or Competitor

In an EU context, the introductions of both the Marie Skłodowska-Curie actions programme and Euraxess have aimed to encourage mobility amongst researchers. Here it is argued that:

[t]he main reason to foster geographic mobility lies in the fact that it is related to more intense knowledge flows through international collaboration and, as a consequence, increases scientific productivity which may, in turn, affect economic competitiveness. (European Commission 2017, 10)

These reasons for fostering mobility in order to compete in global research goes beyond the interest of the EU. Concerns revolving around the opportunities as well as risks related to being at the front of the research stage or falling behind are shared by countries such as Brazil, South Korea, India, and China – all countries that have recently been boosting the mobility opportunities for researchers (European Commission 2017).

## 4 Talent Mobility in China: Traditionally a Brain Drain, But Becoming Competitive

As the world's largest transition economy, talent in science and technology is critical to the development of a flourishing knowledge economy for China (Liu, Fang 2019). Since the opening of the Chinese economy and the increased mobility of students as well as researchers, China has suffered from a significant brain drain. The state, universities, and scientific organisations have therefore been part of implementing measures on both a country and local level which aim at attracting first Chinese returnees (Zweig, Kang, Wang 2020) and increasingly also foreign talents (Miao, Wang 2017). These efforts have coincided with the increased quality and the improved ratings of Chinese universities as well as the development of Sino-Foreign universities (Wang, Chen 2020). Even though these efforts have been successful to a certain extent, the individual talents and researchers seem to remain mobile whether they are Chinese or foreigners (Mouritzen, Rezaei, forthcoming).This reveals an element of vulnerability in the talent flows towards China, so although the country fairs increasingly well in the global competition for human capital, according to the MORE3 survey (European Commission 2017) and OECD publications, China remains a relatively unattractive place for foreign talent (OECD 2013) as seen in the figure below.

**Figure 1** The impact of internationally mobile scientists, inflows versus outflows, 1996-2011 (OECD 2013)

## 5 Data and Methods

While the data revealed significant barriers to Europeans in China that remain relevant, new issues have arisen with the pandemic. In particular, we examined in-depth the 2020 survey conducted by Euraxess that has highlighted the new reality facing European talents in China after COVID-19. The material deriving from Euraxess is included as the organisation has a unique coverage within the community of European researchers in China. We complement the survey data with qualitative interviews collected by one of the authors of this paper during fieldwork in China before the pandemic and through online interviews with respondents after the pandemic, although the data collected after the pandemic is based on a smaller sample as many respondents were unavailable for various reasons connected to the pandemic. Finally, we draw upon recently published news and regulations.

## 6 COVID-19 Impact on Cross Border Mobility

As noted, the outbreak of COVID-19 considerably changed the academic reality globally. In China, the inflow of foreign talent has been limited, while the outflow seems to have increased during the pandemic. The challenges emerging because of COVID-19 are already influencing research activities conducted in China, particularly activities done by the group of foreign academics operating there, having forced many researchers to leave the country at least on a temporary basis. Thus, Euraxess China reports that as of March 6, 2020:

When asked if they left China amid the virus outbreak, 47% of researchers replied positively; among these, 63% are not planning on returning to China or are uncertain when they will. (EU-RAXESS 2020)

The impact on foreign talents' cross-border mobility was affected by travel restrictions imposed by the Chinese government since March 28, 2020 (The Foreign and Commonwealth Office 2020b, 2020a),1 As stated below:

In view of the rapid spread of COVID-19 across the world, China has decided to temporarily suspend the entry into China by foreign nationals holding visas or residence permits still valid to the time of this announcement, effective from 0 a.m., March 28 2020. (Ministry of Foreign Affairs the People's Republic of China 2020)

1 As the virus spread across the globe, first moving to Europe only to be overtaken by the Americas, China was no longer the world's hotspot. Therefore, in a grander attempt to combat COVID-19, China implemented a string of restrictions on international travel. These included the suspension of the entry of most foreign nationals – even those who were holding valid visas that were issued before the announcement on March 26, 2020 (China Briefing 2020). Apart from all short-term visas such as transit visas and port visas lasting 72 to 144 hours, the visa restriction includes student visas, work permits, family visas, regular tourist visas, etc. Furthermore, they include such mobility options as the Asia Pacific Economic Cooperation (APEC) Business Travel Card (ABTC), which otherwise allowed individuals to move temporarily between fully participating economies for five years (China Briefing 2020). The few holders of the difficult to obtain green card (China Briefing 2019) are not subjected to restrictions (European Union Chamber of Commerce in China 2020b). It will only be visas issued after March 26, 2020 that will not be affected by the recently imposed restrictions (Ministry of Foreign Affairs the People's Republic of China 2020).

The restrictions only became additionally significant, as many researchers had already left China to avoid the virus following the COVID-19 outbreak. As foreign holders of most visa types were no longer eligible to enter China, the restrictions have deeply affected international talents operating in China (European Union Chamber of Commerce in China 2020a). As a result, the European Chamber President contacted the Chinese Minister of Foreign Affairs to address the matter and request the easing of the restrictions. According to the European Chamber:

The Ministry of Foreign Affairs' (MFAs') official response recognised and thanked the Chamber for its support in China's fight against COVID-19, and clarified that Chinese green card holders are not subject to the entry restrictions. It also stated that a fasttrack system will be established for foreign nationals who need to return for urgent/necessary purposes, such as trade, science and research or humanitarian reasons. (European Union Chamber of Commerce in China 2020b)

Foreign nationals returning to China for necessary "economic, trade, scientific or technological activities or out of emergency humanitarian needs" will however still need to apply for a visa in order to enter China at the Chinese embassies or consulates abroad and undergo a quarantine period, affecting the travellers for at least 14 days.2 Moreover, there have also been severe restrictions on international flights, initiated on March 12, 2020 (Business Traveller 2020; Reuters 2020), so that only 20 international flights could land each day.3 By the end of May, it was decided to maintain the restrictions with few exceptions (BBC 2020; Nikkei Asian Review 2020).

2 Travellers will be required to undergo strict testing and individuals will be subjected to a quarantine period of 14 days, although it is possible to enter into a fast-track option available to individuals from countries that have signed fast track agreements with China. However, this requires that the company ensures that the employer remains in a closed circuit or a sealed of environment for 14 days, where a designated driver transports the individual from their home residence to their workplace without this employee having any physical contact with other members of the staff or other parts of society (European Union Chamber of Commerce in China 2020a).

3 The Civil Aviation Administration of China (CAAC) further implemented changes that reduced air travel to and from China, taking affect from March 12, 2020. These changes included a reduction of international flights such that Chinese Airlines could only maintain one route to any country with no more than one flight per week. A similar rule affected foreign airlines that were only allowed to maintain a single route to China and only fly once per week. Moreover, the rules state that each flight must "ensure passenger load factor no higher than 75%" (CAAC 2020).

## 7 European Talents in China

The restrictions have particularly affected the foreign community of mobile expats in China, both those who left China at the onset of the pandemic and the ones who stayed behind. Nevertheless, they are only a part of the pandemic's transformational force that we will discuss later, relying on a survey developed and disseminated by Euraxess China where 46 European researchers based in China responded. The survey was an early response to the COVID-19 crisis, and some of the results were published on March 6, 2020 (EURAXESS 2020). Currently, we are working with Euraxess to develop and disseminate new material that will be available at a later stage. While the low numbers challenge the representativeness of the survey, the data is still a reliable indicator of changes affecting talent mobility. When asked "Is the novel coronavirus outbreak and the resulting prevention-and-control measures having any current impact on your work and research activities?", close to 75% of the respondents replied that it had a medium or high impact on their activities, as illustrated below.

This finding resonates with qualitative interviews conducted amongst researchers based in China. Amongst these respondents, of which many are now living in Europe as they have been blocked from re-entering China, a variety of answers emerged. Researchers who for various reasons decided to stay in China reported that they faced empty campuses and closed laboratories where only they could come and go. While this situation seems to be the new normal which has spread to most of the universities of the world (Witze 2020), the group of researchers stuck outside of China have been affected in slightly different ways with online meetings that at times have to include people based in both the EU and America as well as China. Moreover, most communication seems to have moved online – both the communication between individuals, such as a student and supervisors, but also institutional communication. When asked "Are you and/or your institution introducing or planning on introducing new online tools (such as online classes, webinars, online meetings, and group works) as an alternative to the normal activities?", close to 80% of the respondents reported that they either had implemented new online tools or were working on implementing new measures.

Like most institutions, Chinese universities have adapted to reality after COVID-19, and while it is still unknown what the exact effects of the pandemic will be on learning as well as migration, it is clear that university institutions across the globe are updating their teaching tools to address a new reality. In particular, the Sino Foreign Universities have reported challenges faced by their cohorts being scattered across the globe and their staff being unable to return to China **[tab. 1]**.

**Table 1** Challenges and solutions from four Sino Foreign university institutions

University Ningbo (University of Nottingham Ningbo China 2020b, 2020a), Duke Kunshan University (2020b, 2020a) and Sino-Danish Center (SDC 2020). Moreover, this is a brief collection of the most fundamental and reoccurring challenges related to travel barriers and entry issues. Research that would dive deeper into the actual institutions would reveal other issues and solutions, such as wearing masks on campus and connections between health initiatives in the university and the province.

> Just like the challenges faced by the transnational institutions, individual researchers collaborating between China and Europe report that their collaborations have suffered during the pandemic. When asked "In case you are involved in collaborations between China and Europe, have they been affected in some way by the current outbreak?", a third of the respondents answered that it have had an impact, but that the impact is difficult to assess at the early stage, while another third replied that it already either had a medium or highly negative impact on their collaborations.

**Mikkel Rønnow Mouritzen, Shahamak Rezaei, Yipeng Liu COVID-19 and Its Impacts on Talent Mobility in China**

**Figure 4** In case you are involved in collaborations between China and Europe, have they been affected in some way by the current outbreak? With 13% responding Yes, high negative impact, 28% responding Yes, medium impact, 33% responding Yes, but I cannot state what will be the impact, 4% responding No impact and 22% responding I'm not involved in any China-Europe collaboration

#### 8 Conclusion

COVID-19 has abruptly put an end to talent mobility and talent flows. Early data suggests that research, teaching, and mutual collaboration shared by China and Europe will be significantly disadvantaged because of the pandemic. The barriers emerging include both travel restrictions and a significant reduction in the infrastructure that facilitates mobility across borders. This might have even stronger effects in the future by hampering students, researchers, and technicians from either entering a country in the first place or from returning to their country of origin. Moreover, teaching is changing significantly, and particularly transnational institutions are forced to apply online tools that may limit the exposure to other cultures and thereby hinder shared experiences in the time to come. Finally, it seems likely that collaborations across borders will be increasingly difficult to carry out. However, what this difficulty will mean for talent mobility and foreign talents spread out across the globe has yet to reveal itself fully. Therefore, questions relating to COVID-19's impact on talent mobility should be raised and answered based on in-depth empirical research.

## **Bibligoraphy**

Lee, C.; Rezaei, S. (2019). "Talent Management Strategies in the Public Sector: a Review of Talent Management Schemes in Southeast Asia". Liu 2019, 364- 95. https://doi.org/10.4337/9781786437105.00027.

Liu, Y. (2019). *Research Handbook of International Talent Management*. *Research Handbook of International Talent Management*. Cheltenham (UK): Edward Elgar Publishing. https://doi.org/10.4337/9781786437105.

Miao, L.; Wang, H. (2017). *International Migration of China*, *International Migration of China: Status, Policy and Social Responses to the Globalization of Migration*. Springer. http://doi.org/10.1007/978-981-10-6074-8.

Ministry of Foreign Affairs the People's Republic of China (2020). "Ministry of Foreign Affairs of the People's Republic of China National Immigration Administration Announcement on the Temporary Suspension of Entry by Foreign Nationals Holding Valid Chinese Visas or Residence Permits". 26 March. https://www.fmprc.gov.cn/mfa\_eng/wjbxw/t1761867.shtml.

Mouritzen, M.R.; Rezaei, S. (forthcoming). "Circular Time Travel Through the Belt & Road Initiative: Is BRI a Mobility Facilitator or Blockage for Sea Turtles and Global Talent Flow?". *Asian Journal of Social Science*.

## **Part 10** AI and Big Data

**323**

**A New World Post COVID-19** Lessons for Business, the Finance Industry and Policy Makers edited by Monica Billio and Simone Varotto

## Artificial Intelligence and Data Analytics in Digital Business Transformation Before, During and Post COVID-19

#### Kecheng Liu

Informatics Research Centre, Henley Business School, University of Reading, UK

#### Hua Guo

Informatics Research Centre, Henley Business School, University of Reading, UK

**Abstract** Business activities have become highly dependent on the functions that digital technologies offer. The role and critical value of digital technologies such as artificial intelligence and data analytics are clearly witnessed during the COVID-19 pandemic. It is hard to just imagine what the world would become if there were no Internet and digital technologies during these times. The trend and potential value of artificial intelligence and data analytics to leverage and transform organisations are explored, with challenges identified and directions offered to make businesses ready to embrace future unknowns.

**Keywords** Artificial intelligence. Data analytics. Digital transformation. Technology impact. Technology in pandemic.

**Summary** 1 Artificial Intelligence and Big Data Before and During COVID-19 Pandemic. – 2 The Trend of AI & Big Data Development in Post-Pandemic. – 3 The Challenges in Using Data Effectively for Social and Economic Analyses.

**Innovation in Business, Economics & Finance 1** ISBN [ebook] 978-88-6969-442-4

**Peer review | Open access 325**  Published 2020-07-31 © 2020 Creative Commons Attribution 4.0 International Public License **DOI 10.30687/978-88-6969-442-4/025**

## 1 Artificial Intelligence and Big Data Before and During COVID-19 Pandemic

Data has become one of the most valuable assets to determine the success of businesses and public sector institutions globally. Artificial intelligence (AI) and data analytics are the key factors to unlock the value of data assets. Data has played a vital role in the battle against COVID-19. From predicting epidemic progression, detecting infections and diagnosis, accelerating clinical discovery, optimising resource allocation, and supporting public policymaking, in almost every aspect of the epidemic response, AI and big data have made a positive contribution to strategic decision-making and operational measures.

From the perspective of different beneficiaries, with the help of AI and big data applications, data-driven pandemic responses have taken many forms:

### 2 The Trend of AI & Big Data Development in Post-Pandemic

With regard to the accelerated adoption of AI and big data, we recognise three trends that are likely to influence the post-pandemic period.

The first trend is an accelerated digital transformation in various industries with the purpose to compete or even survive through digitisation of the production and delivery of products and services by deployment of technologies such as AI and data analytics. During the lockdown period, the digitisation in enterprise activities and virtual business grew fast, partly driven by the restrictions on the traditional way of conducting business. The increased mode of digital business processes may become the new normal for enterprises, public sectors and individuals. Therefore, traditional enterprises face an urgent necessity for digital transformation to servitise their offerings (Tien 2015) and use technical platforms to conduct business in digital business ecosystems (Liu, Guo, forthcoming). To a large extent, as commented by Atkins (2020), "COVID has been the catalyst for digital transformation at scale". However, enterprises should maintain a balance between their long-term strategic targets and the immediate company benefits that come from technological solutions, which may pose organisational challenges. In a recent survey (NewVantage Partners 2019) administered to 65 Fortune 1000 leading firms, about one third reckoned that they are not data-driven companies yet even though they have already adopted big data and AI and would still increase their investment in those areas. It follows that the journey of digital transformation for organisations is a long-term commitment that will require a radical shift of the mindset of the leadership and changes in business operations and culture across the firm (Liu, Li 2015).

The second trend is an increased exploitation of big data which bears broad implications for all sectors. Data harnessing involves a wide scope of activities starting from the ownership of data or digital sovereignty, to data collection, storage, management and utilisation. This raises a number of challenges. For instance, digital sovereignty is a highly debated issue that is still under the spotlight (Pinto 2019). When organisations grapple with increasingly larger data sets, they gradually improve their ability to change the landscape of business competition. Therefore, enhancing the ability of harnessing big data is critical to a company's long-term development.

The third trend is an easing of the bottleneck due to algorithm maturity. In a review conducted by Bullock et al. (2020), a broad range of AI-driven applications which are used against COVID-19 have been examined. The disappointing finding is that few of the current AI systems are mature enough to make a substantial operational impact in the fields of epidemiology, diagnosis and therapy. A conclusion derived from the study is that "AI systems are still at a preliminary stage, and it will take time before the results of such AI measures are visible" (Petropoulos 2020). The constrains mainly come from the lack of solid historical training data and the lack of quality data without noise and outliers (Naudé 2020).

These three trends are interrelated as progress in one area accelerates the advancement of others. The development of technological capabilities and the penetration of technologies to business practices and people's lives will bring profound changes in the years to come.

## 3 The Challenges in Using Data Effectively for Social and Economic Analyses

The need for and benefit from collaborative work in science and technology across disciplines and geographic boundaries have been recognised and even amplified during the COVID-19 pandemic. For example, since the National Oceanic and Atmospheric Administration (NOAA) has made their dataset open access, 68,000 other datasets have become publicly available (NOAA 2018). Those datasets have promoted innovations in weather applications and promoted scientific research in related fields. Other examples are the MIMIC open dataset, which was developed by the MIT Lab for Computational Physiology (Moody, Mark 1996) and the datasets of the Beth Israel Deaconess Medical Center (BIDMC) (Johnson et al. 2016). After more than 20 years of continuous maintenance and updating, BIDMC continues to make the datasets open to researchers as a comprehensive clinical and physiologic data source, which has led to significant contributions to research in the medical field.

Although great advantages are reaped in technological innovations from data openness, potential concerns relate to data misuse and the consequences of breaching data security. As new privacy and data protection laws are gradually put in place in many jurisdictions, the possible conflicts of interests between data openness and privacy become a significant factor in preventing the adoption of big data technology and AI. In order to solve privacy and security issues, researchers have attempted to train AI algorithms without using sensitive data. Federated learning (Konečný et al. 2016a, 2016b; McMahan et al. 2016) is one of the promising solutions which adopts decentralised collaborative machine learning and have been applied in retail, healthcare, and fintech (Yang et al. 2019). Due to differences in cultural backgrounds and strategies in the development and application of new technologies, different geographical regions have put different emphasis on data privacy. This represents a challenge for data re-use and sharing across industries and countries.

AI ethics is a topic that is much debated in academic and industry circles. Due consideration on AI ethics is needed during the process of system development. Dignum (2018) classifies AI ethics into three levels: ethics by design, ethics in design and ethics for design. These focus, respectively, on 1) AI's capabilities in ethical reasoning, 2) the methods of analysis and evaluation of AI's ethical implications, and 3) the code that should be adopted to ensure the ethical integrity of developers and users. AI ethics is not just a technical issue. Rather, it is a social concern with broad implications. The European Union published the first draft of ethics guidelines for trustworthy AI (HLEG) in December 2018 with the purpose of leading the discussion. Although there is still a long way to go before key regulations are in place, we believe that researchers in the relevant fields have a critical role to play for the safe and ethical deployment of AI in business, government sectors and society at large.

## **Bibliography**

**A New World Post COVID-19** Lessons for Business, the Finance Industry and Policy Makers edited by Monica Billio and Simone Varotto

## Reshaping the Future **Unlocking the Potential of Alternative Data for the Post-COVID-19 World**

Hung-Yi Chen

Zhejiang University International Business School, China

**Abstract** Alternative data has steadily become more mainstream in investment decision-making. These non-traditional datasets provide a channel to draw insights from information as diverse as satellite images, news, tweets, mobile and internet traffic and credit card purchases. While alternative data has become an industry buzzword, making meaningful use of it remains a challenge. The ongoing financial crisis caused by the COVID-19 pandemic poses unprecedented challenges. This chapter explores examples of how alternative data can be used to help economic recovery.

**Keywords** Alternative data. COVID-19. Data interface. Decision-making.

**Summary** 1 Introduction. – 2 Alternative Data Applications. – 3 Conclusion.

#### 1 Introduction

As many countries around the world continue to face unprecedented challenges from COVID-19, the longer-term economic impact of the crisis is uncertain. In the best-case scenario, the path out of the pandemic-induced recession may be 'V-shaped', that is, a quick rebound. But a protracted 'U-shape' or 'L-shape' recession or a 'W-shape' double-dip recession caused by another wave of infections may not be ruled out at present. How should governments respond to this situation? Could technology and alternative data sources be leveraged to correct the current economic contraction and pave the way for a fast recovery?

**Innovation in Business, Economics & Finance 1** ISBN [ebook] 978-88-6969-442-4

Alternative data comprises information as diverse as satellite images, news, tweets, mobile and internet traffic and credit card purchases. For example, Bloomberg, a data provider, offers a Tesla production tracker (Randall, Halford 2019) that monitors the vehicle identification numbers (VINS) registered by Tesla with safety regulators before production and VINS submitted to Bloomberg by Tesla car owners. This enables Bloomberg to provide real time forecasts of Tesla production rather than rely on infrequent (i.e. quarterly) company reports. Other examples are Nasdaq's acquisition of Quandl, one of the largest alternative data platforms,1 and Refinitiv's partnership with BattleFin to integrate alternative datasets with Eikon and its quantitative analytics platform.2

These non-traditional datasets also provide a channel to draw insights from the financial profile of a consumer or business. These data sources have the potential to overcome barriers to financial inclusion and enable more diversified risk assessment models for marginalised individuals or small and medium-sized enterprises (SMEs). Over the last few months, most SMEs have likely seen their liquidity buffers come under pressure because of the pandemic-induced economic slowdown (OECD 2020). It is therefore necessary to accelerate the digitisation of the financial industry in order to provide new frameworks for credit decisions, as small businesses and the self-employed are extremely vulnerable. While there is still substantial scepticism over how useful this new information will ultimately prove to be, this chapter seeks to review potential solutions and draw early lessons in order to effectively cope with, recover from or adapt to today's challenging situation. For example, in the current context, it is of interest to identify effective ways to exploit alternative datasets to inform prompt corrective actions in response to the global economic recession. This could include, for instance, impact analyses of markets and industry sectors such as healthcare, consumer goods, transportation and utilities.

## 2 Alternative Data Applications

The use of alternative data for trading purposes is not new. Investors have always been adept at using it to gain an informational edge in the market. Venetian traders would use telescopes to inspect the flags of incoming ships in order to derive clues as to the type of car-

1 "Nasdaq Acquires Quandl to Advance the Use of Alternative Data". Nasdaq, 4 December 2018. https://www.nasdaq.com/about/press-center/nasdaq-acquiresquandl-advance-use-alternative-data.

2 "Refinitiv Makes Strategic Investment in BattleFin and Partners to Incorporate Alternative Datasets within Investor Workflow". Refinitiv, 18 June 2019. https://refini.tv/3jeZDQ6.

go being carried and also what commodities they would buy or sell accordingly (Wigglesworth 2020).

The ongoing financial crisis caused by the COVID-19 pandemic is unconventional, which has led investors to seek alternative data with the purpose of seeing when the market rebound is likely to begin (Georgiadis, Lockett, Wigglesworth 2020). Analysts mine figures from traffic congestion to food-delivery apps. For example, the traffic index provided by Tom Tom employs data from 600 million drivers to gauge the level of congestion in 416 major cities worldwide. It showed that the traffic congestion level of Wuhan, China, during the lockdown, was obviously lower than the previous year.3 However, correlation can be misinterpreted as causation. For instance, the travel data provided by the Transportation Security Administration suggests that the number of Americans flying has been gradually increasing since its nadir in mid-April.4 Further, data from Apple shows that more drivers have been searching for directions in the US since April, which might suggest that the economy is starting to recover.5 Is this the evidence that the economic rebound is beginning? Or is there no relationship and the number is increasing purely because people feel more confident or just tired of the lockdown conditions? Without rigorous research, alternative data does not offer a clear picture of where the economy is heading or how quickly we might be able to go back to pre-crisis conditions.

Traditional monthly economic indicators such as GDP performance are released weeks or months after the events take place, and may be difficult to use for decision-makers to predict new economic trends and make timely decisions. As an economist aptly suggested, "Obviously, slow data is not helping us right now. We need to start looking at fast data: data arriving at a daily or weekly frequency" (Mc-Cracken 2020).

How we can access and utilise alternative data efficiently poses a serious challenge to its exploitation. According to Refinitiv, 80% of data is unstructured and must be processed into structured content (Gaumer 2020). How to use unstructured data? For example, unstructured text analysis via machine learning algorithm can be used to evaluate the credit risk and default potential of a company. To this end, relevant unstructured data sources include conference call transcripts, company filings and related news. However, finding, testing and using data costs considerable time, energy and money. It there-

3 "Coronavirus: Green Shoots?". *Financial Times*, 2 March 2020. https://ftalphaville.ft.com/2020/03/02/1583143211000/Coronavirus--green-shoots-/.

4 "TSA Checkpoint Travel Numbers for 2020 and 2019". Transportation Security Administration, 2020. https://www.tsa.gov/coronavirus/passenger-throughput.

5 "COVID-19 Mobility Trends". Apple, 2020. https://www.apple.com/covid19/mobility.

fore requires time and human resources that may not be affordable to every decision-maker.

Both BattleFin and Quandl, leading financial and alternative data providers, offer a solution for enabling their clients to easily obtain financial data in the form of an Application Programming Interface (API).6 This saves people a lot of time in obtaining, cleaning and processing the data. So, access to the data is not enough, but rather how data can be easily utilised to generate meaningful analysis. For example, the New York Federal Reserve's Weekly Economic Indicator7 is an example of how high-frequency data was compiled to provide a measure for current economic conditions. In particular, the key question is how to transform unstructured data into structured content, and also whether to encourage the use of APIs as key elements for data integration.

QR codes were used to track the health status of citizens and their movements during the pandemic in several countries. A QR code is an example of how we can build an interface for efficiently utilising alternative data in the digital world. In the last few months, China has rolled out health code systems across cities (Weinland 2020) with the purpose of identifying those who visited areas with high infection rates or who had been diagnosed with the virus, as well as to track whether individuals had completed a mandatory quarantine. Russia, France, Qatar, and many other countries also adopted similar measures to control the spread of the coronavirus.

## 3 Conclusion

The pandemic crisis spread extremely quickly across countries and much of its economic impact is likely yet to be seen. The ongoing financial crisis is, in many ways, atypical. In the face of the unprecedented nature of current challenges, this chapter presented some examples of how alternative data can be used to support decisionmaking. As the pandemic and its effects are likely to linger for some time, it is important that any informational advantage offered by new sources of data to improve our response to new infections and put our economies on a solid path to recovery is utilised to its fullest. Alternative data appear to offer promising solutions to today's world problems. Harnessing their power is the challenge of our current times and an opportunity to increase the resilience of our society.

6 "Financial Data API". Quandl, 2020. https://www.quandl.com/tools/api.

7 "Weekly Economic Index (WEI)". Federal Reserve Bank of New York, 2020. https:// www.newyorkfed.org/research/policy/weekly-economic-index.

### **References**

## **Part 11** Travel, Tourism and Entertainment

**339**

**A New World Post COVID-19** Lessons for Business, the Finance Industry and Policy Makers edited by Monica Billio and Simone Varotto

## Travel and Tourism **At the Frontline of COVID-19**

#### Adrian Palmer

Henley Business School, University of Reading, UK

**Abstract** The travel and tourism sector was hit more rapidly and deeply by COVID-19 than most other sectors. Recovery to pre-COVID-19 activity levels is likely to be prolonged, and questions are raised whether enforced change in consumer behaviour will have long-term effects. The travel and tourism sector has a history of reinventing itself, and previous predictions of decline following crises have often been short-lived. This chapter reviews historical precedents and theories of consumer behaviour to explore whether recovery will be different this time round, especially given the possible habit breaking effects of online substitutes, and political expediency of reducing causes of climate change.

**Keywords** Tourism. Travel. COVID-19. Festivals. Virtual tourism. Climate change.

**Summary** 1 COVID-19 - A Crisis for Travel and Tourism. – 2 Which Tourism Pioneers Will Lead the Return? – 3 Reality or Virtual Reality? – 4 Festivals Have Been a Growing Sector Within Tourism. – 5 Business Tourism. – 6 Green Dividends. – 7 Reinvention.

## 1 COVID-19 - A Crisis for Travel and Tourism

Tourism has suffered more than most sectors from the COVID-19 pandemic. The World Travel and Tourism Council (WTTC 2020) reported that in 2019, the last full year before the pandemic, the travel and tourism sector globally grew by 3.5%, outpacing overall economic growth of 2.5%. This pattern of tourism growth outpacing general economic growth had also occurred in the 9 preceding years. By 2020, WTTC estimated that the sector accounted for 10.3% of global GDP and 330 million jobs, or 1 in 10 jobs around the world.

**Innovation in Business, Economics & Finance 1** ISBN [ebook] 978-88-6969-442-4

The concept of a lockdown, brought on by COVID-19, caused instant harm to the sector, making its impact one of the most immediate and severe of any sector. Condé Nast reported that on 7 April 2020, the total number of U.S. air passengers recorded by the Transportation Security Administration (TSA) fell below 100,000 for the first time in the agency's history – a 95% drop compared to the passenger numbers on the same day one year earlier. Over half of the world's aircraft fleet was parked up, costing the world's airlines an estimated \$1.6 billion of lost revenue per day (Condé Nast Traveler 2020).

Inconvenient or annoying to those denied their holiday, lockdown was devastating to communities dependent on tourists' spending. Hotels worldwide closed and some tourist resorts resembled ghost towns, at a time when they should have been buzzing with tourists spending their money. Governments throughout the world intervened with measures to support the sector, especially to counter the social consequences of unemployment, and to preserve supply side flexibility for when the travel and tourism sector got back on its feet again.

But as we start thinking about the post-COVID-19 world, questions have been asked about what the recovery would look like for the tourism sector. A crisis invariably creates opportunities as well as challenges. New forms of virtual substitutes for tourism have appeared. Climate change protesters have celebrated the temporary banishing of aircraft from the skies and saw COVID-19 as a timely opportunity to fix the causes of global warming. Questions were being asked about the process of recovery in the sector. It was easy to impose a lockdown, but much more difficult to manage a return to normal. Indeed what would be the new normal? There has been a lot of crystal ball gazing, but if we draw on fundamental research about consumer behaviour, and reflect on historical precedents, we might get a better picture.

## 2 Which Tourism Pioneers Will Lead the Return?

Tourism will not one day suddenly be switched back on. Tourism will have to re-launch itself, and history tells us that most product launches see buyers segmented into groups of pioneers, early adopters, through to the laggards who will only adopt when everybody else has. Pioneers have always been a feature of tourism – for example the first to visit warfare zones after a ceasefire and the eager pioneers to be the first 'space tourists'. All eyes will be on the pioneers to kickstart the tourism revival. Way behind them will be a mass-market of people who only venture out if everybody else in their peer group is doing so. Many research studies have demonstrated the power of peer group reference in making purchase decisions. So it may take more than the lifting of travel restrictions to entice fearful people back, and will need the perception that other people like them are going on holiday. The most difficult thing to predict here is individual's perception of fear – of becoming infected, or of being stranded away from home in a new lockdown. There may be unintended consequences here which are difficult to predict. 'Social distancing' to keep people apart, the use of face masks and the ubiquity of sanitisation stations may be medically correct, but may reassure and create perception of fear in equal measure.

### 3 Reality or Virtual Reality?

Every big downturn in tourism leads to predictions that the sector will never be the same again. Dire predictions were made after 9/11, however most indices of tourism are now well above pre-9/11 levels (US Bureau of Transportation Statistics 2005). "But it is different this time round' is a common repost. This time, greater use of the Internet has been claimed to reduce the need for travel. During lockdown, consumers have been forced to break habits and learn to use new video communications, but will these bring about a long-term change in tourism habits?

The tourism literature has for a long time explored the reasons why people travel. Essentially there are push and pull factors at work. Pull factors relate to the inherent attractiveness of a destination – sunshine, scenery, access to friends and relatives, etc. Push factors represent a desire to escape the confines of current life constraints and to live – temporarily at least – an alternative life. A few days sightseeing in a historic city can be a welcome escape from the tedium of everyday life. But can online tourism provide such escape?

In fact, video portrayal of tourism can be both a substitute and a stimulus to seek the real thing. We have been here before. When colour television first appeared and people could enjoy the sights of an African safari from their armchair, the question was asked why would people need to go there? But seeing it on television evoked desire to see the real thing, and instead of being a substitute, television encouraged more people to go on a real safari. Many films and television soap operas have similarly evoked desire to go and see the film location, or a recreation of the film set. Simulated tourism using artificial intelligence may allow us to imagine that we are walking the streets of Paris or New York but, based on historical precedent, the virtual experience may lead us to seek the authentic real thing.

Customer experience and authenticity have become two big drivers of consumption. Customer experience is often defined in terms of the memorability of an event. Tourism on a video screen can only ever be two-dimensional – sound and sight, with none of the smell, taste or touch of actually being there. So online only has two dimensions for creating memories, compared to five in real life. Consumers seek out more authenticity as they get wealthier, whether it is authenticity in their music, choice of yoghurt, or tourism experiences. This is unlikely to change, so the quest for 'authentic' tourism experiences will continue. Of course, in an increasingly crowded world of tourism, and diverse media images, it can be debated how tourists construct their idea of authenticity.

Another emerging question, especially for millennials, is the distinction between reality and virtual realities. In a world where an individual's work and leisure life is largely spent online, real-world experiences can stand out as a point of difference. So in a world of streamed music, a music festival is a point of difference in life. One of the reasons for recent growth in book festivals may be a desire to bring e-books to life. For an Instagram generation, 'being there' offers an additional sense of identity and group leadership, reinforced by powerful images sent to followers. Again, we see the paradox of virtual realities feeding tourism demand for the real-life tourism related experiences.

## 4 Festivals Have Been a Growing Sector Within Tourism

Festivals are a growing generator of tourism business. They are essentially a coming together of people with a shared interest. We can learn a lot from sociology about the way in which being a member of a group reinforces an identity, distinguishing a 'tribe' of festivalgoers who are the 'in-crowd' from everybody else who is 'out-crowd'. Festivals often involve travel away from home to be with like-minded people, whether it is camping out and sharing music at a music festival, or sharing a love of books at the growing number of book festivals. The Association of Independent Festivals (AIF 2018) has estimated that audiences at AIF Member festivals spent more than £386 million in 2017, with £34.7 million of that being spent in the local area of the festival they attended. The average festivalgoer spent £483.14 while attending a festival, leading to local economic suffering where festivals were cancelled due to the COVID-19 pandemic.

Festivals have also put online delivery to the test – is an online format of a festival a substitute or a complement for the real thing? Festivals which had to cancel their summer 2020 events have developed imaginative ways of keeping in touch with their followers, including live streaming of book and music festivals and interactive presentations by science festivals. Festivals that have gone online have made either no charge or only a nominal charge – the main objective has been to retain the loyalty of followers and retain a diary slot for the following year. Organisers have realised that it would be very difficult to charge anything like the normal attendance fee for a virtual festival – there is so much free material available online and high charges for an event low in experiential quality may alienate loyal followers.

Online formats of festivals are probably here to stay. But without the experiential qualities of face-to-face, they will probably only ever be complementary. A challenge for organisers is that having a high quality, creative online presence may now have become a basic expectation of followers who – after the creative adaptations associated with COVID-19 – may not be happy with the previous status quo of a basic static website. This follows a pattern in many service sectors where online has not replaced face-to-face, but created duplicated and complementary routes to customers which must both be supported with investment. How should festivals build online into their business models? What will the business models of festivals look like in the 'new normal'?

## 5 Business Tourism

Business tourism is an increasingly important source of tourism revenue, and conference delegates often use resorts to fill off-peak capacity. With so many now using Zoom conferences, surely demand for business tourism will fall sharply post-COVID-19? This is certainly not a foregone conclusion, and the law of unintended consequences may again kick in here. In the early days of the Internet, many predicted that commuting would decline as people worked from home and didn't need to travel to the office. In fact, working from home wasn't a binary home or office choice, but most people typically work part of the time at the office and part at home. If you only need to go to the office twice a week, it doesn't matter too much if you live a lot further away, so commuting distances increased with the appearance of the long-distance commuter. Could something similar happen post-COVID-19? It is quite likely that more people will work from home. But this may spur a need to bring teams together face-to-face so that they can better identify as a team. And with office space cut back, meeting space may be hired in from hotels and conference centres. This is following a well-trodden path, with many conference facilities already filled with salespeople and other professionals who work from their homes scattered through the country, and who meet for regular team meetings at centrally located hotels and conference centres.

We even need to challenge the assumption that business tourism involves a cognitive, rational decision process, and will therefore be replaced by Zoom meetings. Business travel may be important to individuals' self-esteem and self-image, and may be a status symbol which business people will fight to preserve, regardless of the rational benefits of doing business through videoconferencing. The end of business tourism has been predicted before, but it remains to be seen whether this time round the combined effects of climate change, lingering virus dangers and greater familiarity with online conferencing will encourage firms to eschew the emotional appeal of the face-to-face meeting and instead opt for the cost saving and socially responsible videoconferencing option.

## 6 Green Dividends

The other great change in tourism 'this time round' is the spectre of climate change. Restricting international travel through COVID-19 may have been disastrous for some tourism communities, but has helped to delay climate change. Will this forced interruption to travel break habits and focus peoples' spending away from long-distance tourism to other leisure activities which are more benign to the planet? This prospect is in itself unlikely.

There has been a lot of research showing holidays being high on households' lists of spending priorities, for example the ABTA Holiday Habits report in 2019 suggested a growing commitment by UK consumers to spending money on holidays, despite a problematic economic outlook (ABTA 2019). There has been much reported hypocrisy of climate campaigners using planes to travel in what they admit would be a harmful way. This is symbolic of a cognitive dissonance between peoples' need to enjoy the benefits of tourism, yet at the same time feel inwardly calm and socially accepted in their support for measures to limit climate change. The tourism sector has been quite astute in tackling this cognitive dissonance. Flying with an airline which uses the most fuel-efficient aircraft and paying to plant trees to offset carbon emissions provides a clear conscience for those who feel guilty about travel.

The great expansion phases in long-distance leisure tourism have been associated with big reductions in the cost of travel – easyJet's early promise of a flight to the Mediterranean for less than the price of a pair of jeans opened new markets for tourism. In the immediate post-COVID-19 scenario, costs of flying are likely to be increased, caused by restricted supply from airlines who have closed down, and possibly lingering measures to reduce the spread of the virus. Cost – including measures to address climate change and virus limitation – is likely to drive or constrain long-distance tourism. And governments may have been emboldened by COVID-19 to further help reduce climate change. Simply not bailing out the airline sector may restrict supply and raise prices, without much cost or effort by governments. Governments may also see the break in consumers' habits as an opportunity for driving through environmental changes which increase the costs of tourism. Demand for long-distance tourism is more likely to be influenced by its cost than a general sentiment towards climate change.

## 7 Reinvention

Tourism has had a habit of reinventing itself over many decades. COVID-19 will not destroy it, and if we look at historical precedent, it is unlikely to dampen long-term demand. Fear and cost may in the short-term restrict the resumption of long-distance tourism, and a reinvigorated 'staycation' may lead the way. Climate change may pose a short- to medium-term challenge to the sector, possibly buoyed by experience with the COVID-19 closedown of the sector. But in the longer term, tourism has shown its capacity to adapt. Fear of travel may be a short-term constraint, but in the longer-term, falling costs of new climate friendly travel technologies may help to reinvent the sector again. And in an online world in which consumers seek greater authenticity, constant images of faraway places are likely to further stimulate demand for travel, rather then replace it.

## **Bibliography**

**A New World Post COVID-19** Lessons for Business, the Finance Industry and Policy Makers edited by Monica Billio and Simone Varotto

## European Football After COVID-19

J. James Reade University of Reading, UK

## Carl Singleton

University of Reading, UK

**Abstract** The European football industry has suffered an unprecedented shock from COVID-19. In this chapter, we reflect on how the sport's administrators responded to the initial outbreaks and what lessons can be learned. We also look ahead to what football in the post-COVID-19 era could look like. We conclude that this largely depends on the decisions now facing the sport's administrators and the powerful owners of the biggest football clubs: will they prioritise football as the inclusive and diverse game, at the heart of local communities? Or will their intrinsic financial interests dominate?

**Keywords** Soccer. Sports Economics. Sports Finance. Coronavirus. Sports Management.

**Summary** 1 Introduction. – 2 Finishing the 2019-20 Season. – 3 How Could Football be Different in the Post-COVID-19 Era? – 4 Concluding Remarks.

## 1 Introduction

A deadly airborne virus means social distancing and threatens the entire business model of European professional football – sport normally involves large gatherings of people, where an airborne virus can spread.1 Following the outbreak of COVID-19, by April 2020 practically all major professional sports had ground to a halt worldwide. Football leagues were suspended, ei-

**Innovation in Business, Economics & Finance 1** ISBN [ebook] 978-88-6969-442-4

1 See Stoecker, Sanders, Barreca 2016 and Cardazzi et al. 2020 for evidence from North America that sports events can increase the mortality from influenza in local areas. See Parnell et al. 2020 for a discussion of the implications of COVID-19 for mass gatherings and major sports events, such as the previously planned 2020 UEFA European Championship.

ther by themselves or by governments, from the elite level, normally played in front of tens of thousands of fans, to the bottom levels, or 'grassroots', played on local parks and recreation grounds.

Football has become an economically important business. In 2018- 19, the twenty highest earning football clubs in the world, all in Europe and eight of them in England, generated a combined income of €9.3 billion (see Deloitte 2020). The growth in European football over the past three decades has been remarkable. The most prosperous league over that period, the English Premier League (EPL), had broadcast rights for 2019-22 valued at £9.2 billion, with around 46% of that from overseas (see Svenson 2019). Figure 1 shows how the value of the domestic TV rights for the English Premier League increased from £61 million per season in 1992 to £1.7 billion by 2016 **[fig. 1]**.

In this chapter, we discuss how this growth industry has been affected by the COVID-19 global pandemic. First, we summarise how European football responded to the initial shock and disruption caused by the outbreak, mainly focusing on what happened in England. Second, we contemplate how football and its business could be different in the post COVID-19 era. Finally, we offer some concluding remarks, suggesting that the immediate future of European football very much depends on the vision and priorities of its principal decision makers.

#### 2 Finishing the 2019-20 Season

As COVID-19 spread globally, sports events that could be postponed were postponed, e.g. the Summer Olympic Games and the UEFA European Football Championship. Annual events that couldn't be postponed were cancelled, e.g. the The Championships, Wimbledon, the Boston Marathon and the Formula One Australian Grand Prix.

The wrangling that took place in the suspended European football leagues during the spring of 2020, concerning their resumption or otherwise, has made clear that the two most fundamental influences are government and money.2 In France and the Netherlands (both countries with a rich footballing heritage), the football seasons were cut short due to the intervention of the respective governments. The bans on sports in these countries reached far enough into the summer that a resumption would be impractical, without affecting the start of the next season.

2 Safety played a role too, primarily affecting the timing of resumptions though, rather than the decision between cancelling and continuing. In the immediate weeks around the peak levels of infection, leagues determined that they could not justify using scarce national COVID-19 testing resources to ensure the virus was not spreading among the players and other people involved in putting on football matches, even if they were resolved to return.

**Figure 1** Nominal value of domestic broadcast rights for the English Premier League 1992-92 to 2021-22; author calculations using SportsBusiness Media Rights Tracker, accessed May 2020

Other seasons were cut short, such as in the English lower leagues, arguably because the decision makers were able to impose particular outcomes (usually applying points per game before the season was suspended), to determine the champions, promotion and relegation, without fear of significant adverse financial repercussions from legal action.3 Between 2012 and 2015, a club relegated from the EPL, in the best case, suffered a £20 million loss in revenue, and, in the worst case, £50 million.4 Conversely, the minimum revenue gain to a club from promotion to the EPL in this period was £33 million, and the maximum gain was £76 million. Because of these large sums in English football that depend on the outcome of a season, the EPL and the EFL Championship, the second tier, could not be decided in 2019- 20 by some arbitrary measure, or even a forecast of likely outcomes.

The financial model of football in Europe, but especially in England, has changed dramatically in the last thirty years, following the formation of the EPL as a breakaway from the English Football League. In 1990, average revenues within the English Fourth Divi-

3 Although not all leagues have avoided this issue. Heart of Midlothian F.C. have begun legal action against the Scottish Professional Football League after they were relegated from the top division when it was cut short (https://www.theguardian.com/football/2020/jun/15/hearts-legal-action-spfl-relegation-scottish-premiership).

4 These and the following financial values are author calculations using the annual reports filed by football clubs at Companies House, the UK's registrar of companies (https://www.gov.uk/government/organisations/companies-house).

sion (now League 2) were 12% of those generated by clubs in the First Division (now EPL). But in 2015 the equivalent figure was 2%.

Football has operated on a professional basis for almost a century and a half, and yet at no point in that time has a set of circumstances arisen such as those imposed by COVID-19, where it was financially unviable, and in some cases legally impossible, to complete seasons. One lesson from the crisis is that a set of revised rules and regulations regarding the cutting short of seasons is required. Sports leagues will need procedures in place that determine the exact method by which a season will be cut short, if a particular threshold of matches has been played, or will instead be abandoned, if too few have been played.5 If it is known in advance that points per game, weighted or otherwise by other factors (e.g. goals scored, home or away form, uncertainty), will be used to decide the season outcomes, then leagues can be cut short without fear of legal repercussions.

The increased concentration of money at the top of the game has had significant impacts further down the leagues too, since little of the revenues coming into the game make their way down to the grassroots level. Liberalisation of football's labour market has resulted in a larger proportion of immigrant labour at the top of the game over the years, rather than local players making their way up the leagues (see for example the Taylor 2007). Opportunities for local young men and women to succeed in the game are reduced. In England, the Football Association has responsibility for the grassroots, and, along with many small town and village clubs, it has lost out on significant sources of revenues in the summer of 2020 because of COVID-19. Festivals on football pitches and music concerts at stadiums are not only part and parcel of the British summer but also the financial viability of football outside the elite levels.6 These patterns are not unique to English football. Without substantial support from governments or a fairer redistribution of wealth in the football pyramid, it seems unlikely that the rich ecology of association football, down to its grassroots, with all its attendant mental and physical health benefits, will look the same post COVID-19.

#### 3 How Could Football be Different in the Post-COVID-19 Era?

The future of European football in the post-COVID-19 era largely depends on how soon it will be safe for the fans to return to stadiums, and whether they will come back. To the best of our knowledge, there

5 This happened with the 1939-40 season in England, abandoned after only 3 matches.

6 In June 2020, England's Football Association announced 124 job losses and expected losses of £300 million (see https://www.bbc.co.uk/sport/football/53222021).

is not yet any conclusive evidence regarding how easily the virus is transmitted at a large outdoor public gathering such as in a sports stadium.7 But regardless, common sense in the ongoing public health emergency dictates that fans should not be returning soon.

A vast literature has looked at the effects of crowds on football match outcomes (e.g. Garicano, Palacios-Huerta, Prendergast 2005; Buraimo, Forrest, Simmons 2010). Along with the familiarity of playing at home and the fatigue from travelling away, the impact of the home crowd has been suggested as a factor in accounting for the substantial home advantage in professional team sports (Schwartz, Barksy 1977), i.e. teams tend to win more often when playing in their own stadiums. Two studies of the rare instances when professional European football was played behind closed doors, before COVID-19, have found evidence that home advantage was disproportionately eroded in these matches (Pettersson-Lidbom, Priks 2010; Reade, Schreyer, Singleton 2020). Figure 2 describes the differences between matches with fans and without in the latter of these studies, showing that on average the normal home advantage was approximately wiped out, accounted for by fewer goals scored by home teams **[fig. 2]**. Referees also punished players on the away teams significantly less without the pressure from the crowd. However, these results were generally based on one-off games behind closed doors. It is not clear whether they were driven by the familiarity factor rather than reduced referee bias. Further, rules have been changed for the football which has returned since COVID-19, such as an increased number of substitutions, which could also plausibly affect match outcomes.

Nonetheless, it has been widely noted that home advantage has not only disappeared but even reversed in the first major European league to complete its domestic season.8 In the German Bundesliga *geisterspiele* (ghost games), from the post-COVID-19 resumption up to the end of the 2019-20 season, home teams won just 32% of the matches played (26 of 82, compared with 43% in the same season before March). Away teams, however, won 45% (37 of 82) of the post-shutdown matches, compared with 35% in the season beforehand. Figure 3 summarises the trends of home advantage in professional football since 1890, as well as what has happened generally since the European virus-induced social lockdowns **[fig. 3]**. When football returned behind closed doors in May, home advantage looked to have disappeared, but this has partly

7 There is some preliminary evidence from North American Sports that the different severity in local areas of the initial US outbreak was related to sports events. Ahammer, Halla and Lackner (2020) found that NBA (basketball) and NHL (ice hockey) games in early March 2020 significantly increased the rate of COVID-19 confirmed cases and deaths by the end of April 2020 in the areas surrounding the venues.

8 See for example *ESPN*, 9th June 2020 (https://www.espn.co.uk/football/germanbundesliga/story/4107639/).

**Figure 2** Differences in sample means of football match outcomes: closed doors vs with fans, 2002-03/2019-20. Uses all matches in the UEFA Champions League, Europa League, Italian Serie A, Serie B, Serie C, Coppa Italia and French Ligue 1 since the beginning of the 2002-03 season. SOT is Shots on Target. See details in Reade, Schreyer, Singleton 2020

recovered throughout June, perhaps as teams have become more familiar with the lack of fans in their stadiums.

Why does home advantage matter in football? Home advantage ensures that a weak team in its own stadium has a good chance of beating a strong visiting team (Forrest et al. 2005). If the reduction in home advantage without fans is greater for weaker teams, then stronger teams will win more often, and the competitive balance of leagues will be reduced. Studies have found that the demand for football on television is increased by the uncertainty of the match outcome (e.g. Buraimo, Simmons 2009; Cox 2018; Schreyer, Schmidt, Torgler 2018a, 2018b). This suggests that TV audience demand for European football could be affected if matches remain behind closed doors. Reduced home advantage should increase the attractiveness of matches featuring a strong home team and a weak away team, and vice versa when those relative strengths are reversed. In addition, there could be a second effect on demand, as changes in home advantage that are not equally distributed over team strengths would tend to affect the competitiveness of overall league championships and the interest of fans.

It is also not clear that matchday revenues will recover quickly when fans can return to stadiums. One argument is that there will be a pent-up demand effect, that could offset or override the negative demand effects from any ongoing risk of COVID-19 infection. Two of the most sustained attendance increases in the history of English

#### **J. James Reade, Carl Singleton European Football After COVID-19**

**Figure 3** Professional football result outcomes since 1890 (left panel), and between January 2016 to June 2020 (right panel). H refers to home wins, D refers to draws and A refers to away wins. Uses all matches in the top leagues of 108 countries or regions since 1890, 82 countries since January 2016, and 29 in May and June 2020. Author calculations using https://www.worldfootball.net/

football came after the suspensions brought about by each World War (e.g. Dobson, Goddard 1995). But this is a tentative parallel at best. Reade and Singleton (2020) found that in the initial stages of the European COVID-19 outbreak there were already substantial negative demand responses, suggestively because of the implied risk of infection, even when the significance of the disease and its implications were being widely played down.

The elite European football clubs are likely to survive the outbreak financially, given their continued access to substantial funds besides match-day gate receipts. But professional football below that level still relies on ticket revenues. By studying the 2018-19 accounts of professional football clubs in England and Wales, Szymanski (2020) found that the majority of these businesses were already on the verge of insolvency before the loss of revenues and write-down of assets, i.e. player valuations, due to COVID-19.9 If the present structures of professional football are to survive, then some consolidation will be needed. Szymanski (2020) notes that much of football club debt is owed to other clubs, in the form of delayed player transfer payments. Therefore, if any club goes bankrupt it has knock-on effects for others, both domestic and foreign, potentially leading to financial contagion. He suggests that the consolidation of the national football business model should involve assigning the valuable future broadcast rights from the top league to a collective fund, from which those unable to collect unpaid debts can make claims, including for delayed transfer fees and player wages. In other words, the only way to save

9 This research was presented at the Reading Online Sport Economics Seminars (ROSES) on 17 April 2020. See here for a public recording: https://www.youtube.com/ watch?time\_continue=4006&v=viPqe93rW2c&feature=emb\_logo.

the existing professional football pyramids today is to leverage the future value of football after COVID-19.

## 4 Concluding Remarks

The financial pressures facing most firms in the European football industry will be acute unless drastic collective actions are taken. The benefactor club owners have deep but not bottomless pockets, nor endless patience. Major football clubs and national associations will need to prioritise their resources. The women's game has been an area of substantial growth in participation and interest in recent years.10 Given the potential for further growth in this area and others, football's decision makers could find opportunities within any consolidation. By diverting some of the resources held by the powerful elite leagues, which currently feather superstar players' nests and tickle billionaire owners' egos, such as in the EPL, they could make longer-term investments in the health of the European football industry. The football labour market is also overdue for reform. In the 2019-20 season, EPL clubs paid £263 million in fees to the agents representing players.11 The influence of these agents should be curtailed, as it represents next to nothing in added value to the sport, but sees large sums of money exiting it, which could be used to prop up the rest of the pyramid and invest in the women's game. Given the public good that football can deliver, in terms of public health and social cohesion, there may be a case for state intervention, not only to support the industry financially but also to force a re-evaluation of whom the beautiful game ultimately serves.

10 For example, in England, 11.7 million watched England's defeat to USA at the 2019 FIFA Women's World Cup, compared with a peak of 2.4 million four years before in the previous World cup (see https://www.theguardian.com/football/blog/2020/jan/02/ womens-football-decade-of-progress-2020).

11 See for example *BBC Sport*, 24 June 2020; https://www.bbc.co.uk/sport/football/53170215.

## **Bibliography**

Szymanski, S. (2020). "Covid-19 and Football Club Insolvency". mimeo.

## **Part 12**

Politics: Protectionism and Populism

**359**

**A New World Post COVID-19** Lessons for Business, the Finance Industry and Policy Makers edited by Monica Billio and Simone Varotto

## Why Collaboration Needs to Win Over Protectionism

Benjamin Laker

Henley Business School, University of Reading, UK

**Abstract** The COVID-19 virus is severely affecting international trade, creating a negative fiscal outlook. Consequently, the global economy is receiving its sharpest reversal since the Great Depression. As such, we are seeing several countries invoke restrictions or taking action to secure medical supplies. A by-product of this is protectionism. One should worry most about developing countries without any domestic suppliers, who also need critical medical supplies, and who will be locked out, and not access essential equipment, medicines, and basic foodstuffs because of export restrictions set by developed nations. Therefore, collaboration is needed more than ever to ensure economic and societal prosperity throughout the world, rather than within a small number of isolated, prosperous regions.

**Keywords** Informal economy. Protectionism. Trade. Xenophobia. Collaboration.

In response to the coronavirus crisis, there are many examples of co-operation and collaboration, from communities coming together to Clap for Carers in the UK to Federal Reserve loans to other central banks. But in emotive, uncertain times, the instinct to wind up the drawbridge and look after your own is strong and playing out across societies, nations, and communities. The pandemic is politicising travel and migration and driving self-reliance and protectionism. Some view this as a much-needed retraction from the upper limits of globalisation, shortening supply chains, and reducing exposure to risk in an unstable world. Others fear a dampening down of trade will leave economies vulnerable and heighten instability, leading to more risk aversion and inward focus.

A particular issue concerning the informal economy is intangibility: things which are not measured are not known to legislators, meaning, unfortu-

**Innovation in Business, Economics & Finance 1** ISBN [ebook] 978-88-6969-442-4

nately, that over two billion workers from the informal sector, are threatened. Narula (2020) suggests that those affected account for 70% of employment in the Middle East and North Africa, and 80% in both South Asia and sub-Saharan Africa (ILO 2020). Somewhat concerningly, these people will, according to Narula (2020) not receive government aid in relation to the COVID-19 pandemic. For example, within the nation of India, 63 million micro-enterprises represent 99% of all enterprises and comprise 107 million people – who are not known to legislators because they are unregistered. As a result, they are not accounted for on government data – though the number may be closer to 300 million (Jayaram et al 2020).

The COVID-19 pandemic has sparked a radical reordering of business ecosystems, suggest several business historians, such as Rita Trehan, CEO of global transformation consultancy Dare Worldwide (Laker et al. 2020). She considers the need for a collaborative approach to be crucial to success when new networks are built as lockdown eases. But these networks should look to contain within them, informal workers because businesses, both foreign and domestic, are responding to the slowdown by reducing employment, hence there will be a sharp upwards increase in those below the poverty line.

Narula (2020) suggests that informal workers typically live from hand to mouth. This means that, without paid work, a person cannot purchase essential supplies such as food – let alone apparent desirables such as medication. One recent example of this transactionary relationship occurred within India, where earlier this year, millions of informal workers walked home from big cities to return to ancestral villages. Even if the pandemic subsides concludes Narula (2020), it is naive to believe activities can ever return to their pre-pandemic state. Economically weak countries will already have suffered from declining revenues from almost all sources, also as the pandemic raises emergency spending to mitigate the immediate challenges. Countries dependent on primary sector exports are notoriously volatile, especially in the extractive sector. Other primary good exports will likely be affected not by price volatility, but due to logistical challenges and restrictions, while imports are likely to cost more. The reduction of fiscal performance may lead to an increase in borrowing and, most certainly, a requirement for aid. There will be a number of nations that rely heavily upon remittances for their foreign exchange (Narula 2020). As a result, these nations will quite likely suffer a shock: Arabic counties will consider returning their migrant workers, who are primarily engaged informally and in receipt of limited, sometimes nonexistent labour rights, both at home and abroad, to their home countries (Narula 2020).

That being said, there is an immediate short-term opportunity from the COVID-19 pandemic. With items from ventilators to masks in seriously short supply and prices soaring, those trying to source goods complained of a bidding war with other buyers, involving a web of brokers and suppliers. Shipments destined for multiple countries were diverted elsewhere – often to the US ILO (2020). German officials accused the US of 'confiscating' a consignment of respirators en route from China to the Berlin city police during a stopover in Bangkok ILO (2020).

There is somewhat of a critical opportunity for developing nations to enable and even support informal workers to help contribute to the gap of supply. This could occur through subsidies provided to local suppliers to help maintain import prices. One striking example that has already implemented such a concept is apparent within the global shortage of personal protective equipment for hospitals (Narula 2020). Medical institutions are struggling to acquire specialist items because prices the world over have increased. As a result, many small enterprises are beginning to manufacture and sell items locally, and in some cases, the central government holds the responsibility for sterilising and deep cleaning the final product (Narula 2020).

It is not just the US that has veered into protectionism. According to the Global Trade Alert team at Switzerland's University of St Gallen, 75 countries have introduced some export curbs on medical supplies, equipment, or medicines this year (ESCAP 2020). They include most EU countries, India, China, Brazil, and Russia. But the team also found that 79 countries have liberalised trade in medical supplies this year. Clearly, governments and public authorities have a duty to show responsibility and restraint when it comes to facilitating the flow of supplies, treatments, and testing equipment needed to tackle the coronavirus beyond their borders.

So how will global co-operation play out as lockdown eases? The danger is that the movement of people, goods, and capital curtailed during lockdown is all in danger of being politicised by agendas that existed long before the crisis hit. Regarding the movement of people, the Trump administration used the pretext of the 'Chinese virus' to curtail immigration further, arguing that jobs should go to Americans instead. He will likely be able to maintain anti-immigration policies long after the virulent phase of the epidemic because public concerns will make it easier for him to retain them.

In an atmosphere of mistrust and suspicion, there has been an increase in displays of xenophobia against Chinese and East Asian persons in many countries across the world, fuelled by provocative newspaper headlines like 'Yellow Alert' (France) and 'China Kids Stay at Home' (Australia). Indian health authorities have campaigned to spread awareness that not all people who are from China have COV-ID-19. Pointing the finger and blaming other ethnic groups for the disease is one response. But public opinion on immigration is often more nuanced than politicians give people credit for. In Europe, the crisis has highlighted the reliance societies have on informal workers in food production and the care system, with many risking their lives during the crisis.

International tourism is set to plunge by 80% this year, but some regions will recover more quickly than others. Less developed countries will be hit particularly hard, but experts say this is an opportunity to rebuild the industry to be more sustainable. Countries with pre-existing links and similar health protocols are coming together to create 'travel bubbles' as lockdown eases. Australia-New Zealand, Taiwan-Singapore and Greece-Cyprus-Israel are looking to collaborate and set up safe tourist zones to allow movement between countries.

In terms of the flow of capital, the crisis will accelerate an alreadyexisting trend of financial de-globalisation. State ownership of private companies is on the increase, with the nationalization of Italy's airline, Alitalia, the UK government taking control of rail companies, and Spain nationalizing all of its hospitals and healthcare providers to combat the spread of the virus. Nations looking inward are seeking to shorten their supply chains and decrease reliance on overseas manufacturing. The global trade system that has dominated the world for decades is under threat from protectionist thinking, with WTO predicting that world trade could reduce by up to a third (Joyce, Xu 2020). Economists argue that the way to make supply chains more resilient is not to domesticate them but to diversify them ESCAP (2020).

More than ever, there is a need for firms to cultivate adaptive – rather than hierarchical – structures that support rapid change, refocusing, and reallocation of resources. Those organisations that can leverage their network and work together will come out ahead as lockdown eases. There is a need to integrate data from a wide range of sources to innovate and connect. Those companies that are in touch with their core purpose beyond making money will have better clarity on the way forward.

The coronavirus crisis has shown that the global economy's governance is made up of international institutions and informal collaborations that are shaped by individual nations' willingness to cooperate. For the sake of the world's economic and physical health, collaboration needs to win over protectionism.

## **Bibliography**

**A New World Post COVID-19** Lessons for Business, the Finance Industry and Policy Makers edited by Monica Billio and Simone Varotto

## The Political Implications of COVID-19 **What Now for Populism?**

Daphne Halikiopoulou

University of Reading, UK

**Abstract** This chapter briefly examines the political implications of COVID-19, focusing on the potential constraints and opportunities it poses for populism. Some initial comparative observations suggest the following patterns. First, populists in opposition are likely to be weakened electorally in the short-run, as voters support non-populists on the basis of valence voting. Second, this may not apply to populists in power, who may use emergency measures for democratic backsliding. Third, in the long-run, a potential economic crisis as a result of the pandemic may benefit populist parties, especially those in opposition as discontent voters may punish those in government for the poor managing of the health/economy trade-off. In sum, what will determine the direction of future political developments is the extent to which governments can balance the trade-offs involved in the COVID-19 crisis, including effective health management versus economic growth and individual freedoms versus collective security.

**Keywords** COVID-19. Populism. Far right parties.

**Summary** 1 Introduction. – 2 COVID-19 Trade-offs. – 3 What Now for Populism? – 4 Conclusion.

## 1 Introduction

The exponential spread of COVID-19 in early 2020 placed governments around the world under severe strain. Despite the global reach of the virus, nationstates responded primarily as individual actors, seeking to contain the virus and ensure the resilience of their national health systems. Part of this response was the closure of borders and the grounding of airlines confirm-

**Innovation in Business, Economics & Finance 1** ISBN [ebook] 978-88-6969-442-4

ing that, although a global phenomenon, COVID-19 required first and foremost a national response. Besides the health dimension, this is also interesting from a political perspective as COVID-19 emerged at a time when the retreat of the nation-state and the restoration of sovereignty were relevant political trends: for example Brexit and the rise of right-wing populist parties that pledge to restrict immigration and challenge EU expansion. How may we assess the political implications of this global crisis, especially given that it comes at a time when populists, who thrive on the tensions between international initiatives and the 'national preference', are either in charge, or the main opposition party, in many countries?

This chapter briefly examines the political implications of COVID-19, focusing on the potential constraints and opportunities it poses for populism. This is a new and fluid situation that is fast evolving. While data is novel and relatively untested, we may still draw some (cautious) preliminary conclusions by comparing cases in an attempt to identify broad patterns and exceptions. What follows is a brief sketch of patterns from which we may identify certain policy implications and lessons learned. The chapter first outlines a series of trade-offs with regard to the COVID-19 situation. It then proceeds to examine the political implications of these trade-offs, before briefly discussing the challenges and opportunities they represent for populist actors. Distinguishing between populists in opposition and populists in power, it concludes with lessons learned and avenues for future research.

## 2 COVID-19 Trade-offs

According to the 2019 Global Health Security (GHS) Index, fewer than 5% of countries included in the index scored highly, suggesting that the majority of countries were poorly prepared to respond to, and mitigate the effect of, a pandemic. The emergence of COV-ID-19 confirmed this overall lack of preparedness, but also revealed a paradox: on the one hand, some of the world's most stable democracies that scored highly in the GHS, such as the UK and the US, performed particularly poorly. On the other hand, developing authoritarian countries, such as Vietnam, and smaller democracies fatigued by economic and political upheaval in recent years, such as Greece, outperformed advanced Western democracies in the handling of the pandemic.

In order to explain this variation, preliminary research on this topic has examined short-term indicators such as the speed with which distancing measures were introduced, quarantine effectiveness and willingness to comply (see e.g. Brouard, Vasilopoulos, Becher 2020; Hale et al. 2020; Fenner 2020). This research suggests that along with long-term infrastructural capacity, short-term political decisions have played a very important role in the containment and mitigation of COVID-19. Responding early is key to responding effectively, so for example tracking, testing and containing infection clusters is of paramount importance. Countries that introduced lockdown measures early tended to have better results, again Greece being a prime example, though some preliminary work has noted inconsistencies with this broad pattern (see Born et al 2020 on Sweden).

This reality highlighted that addressing the pandemic is all about trade-offs and presented both governments and citizens with some important dilemmas: does effective health management occur at the expense of economic growth? Should we introduce – and adhere – to strict lockdown measures at the expense of our personal liberties? Should we trade-off these individual liberties for our collective security? These trade-offs, in turn, have important political implications given the delicate political climate – rise of populism, euroscepticism, Brexit – at the time of the emergence of COVID-19.

## 3 What Now for Populism?

Far right populist parties, which utilise a rhetoric that combines nationalism and the 'Popular Will', have significantly increased their electoral performance since the 2010s. Examples abound: the French Front National (FN) (now Rassemblement National), the Dutch Freedom Party (PVV), the Austrian Party for Freedom (FPÖ ), the Norwegian Progress Party (FrP) and the German Alternative for Germany (AfD) have all mobilised voters on their populist-nationalist platforms. Their electoral success has been the focus of a substantial body of literature in the fields of party politics and voting behaviour (see Mudde, Rovira Kaltwasser 2018; Stockemer, Lentz, Mayer 2018). Different explanations place varying emphasis on factors including immigration and cultural insecurity (Inglehart, Norris 2016), economic deprivation, both actual and relative (Colantone 2018; Fetzer 2019; Adler, Ansell 2019; Engler, Weisstanner 2020; Halikiopoulou, Vlandas 2020), societal decline and status anxiety (Gest 2016; Gidron, Hall 2019) as well as institutional mistrust and poor evaluations of governance quality (Hooghe, Marien, Pauwels 2011; Agerberg 2017). While scholars disagree about the source of the grievance that prompts voters to opt for far right populism, at the core of the debate is the impact of globalisation (Kriesi et al 2006) that divides societies between winners and losers, thus incentivizing the discontent to vote for parties that place blame on the establishment.

Populism posits that only decisions made from below are legitimate – and indeed morally superior (Riker 1982), because only these decisions reflect the will of the people (Mudde 2004). As such, populists tend to be sceptical of intermediary institutions, elites and experts, who they try to discredit. They thrive on an emotive but often empty rhetoric, aimed at voters motivated by the need to protest their social, economic and/or cultural discontent. Far right populism merges this narrative with nationalism. These parties pledge to speak on behalf of the 'pure people', restore national sovereignty, 'take back control' from supranational institutions and promote the 'national preference' through strict immigration and citizenship policies (Halikiopoulou, Vlandas 2019). This suggests competing expectations regarding the electoral fortunes of far right populist parties in light of the COVID-19 pandemic. On the one hand, the limits placed on globalisation by the pandemic could reduce the attractions of populists. In addition, the need to manage the pandemic requires effective government, expertise and efficient democratic institutions providing the organisational and infrastructural support that determines state effectiveness. In this respect, COVID-19 could pose a significant challenge to populists by exposing their lack of competence, and placing them under scrutiny. In accordance to the valence model of voting (Evans, Chzhen 2016), which suggests that party performance evaluations affect voter choices, voters may increasingly prioritise competence over emotive narratives. Populist parties in opposition may become weakened electorally as non-populists in power have tended to consolidate their support during the pandemic (Bayerlin, Gyongyosi 2020).

On the other hand, potential 'austerity' strategies resulting from the health crisis could exacerbate those voters' insecurities that prompt them to support far right populist parties. In addition, populists in power could benefit from the crisis by blaming immigrants and refugees for the spread of the pandemic, using them as an opportunity for power abuse and an excuse to attack freedom of movement. Indeed far right populism is compatible with some of the COVID-19 blame-patterns: closure of borders, exclusion of immigrants and an emphasis on restricting health services for natives. In a number of cases this has helped populists – or rather right-wing nationalist authoritarians – in power to use the COVID-19 crisis to extend their powers in the political system. Autocratic-minded leaders, for example Orban in Hugary, Modi in India and Bolsonaro in Brazil, have rallied around the flag to increase support at a time of heightened insecurity. One important lesson from the past is that, in similar crisis situations, authoritarian and/or nationalist leaders have taken advantage of emergencies to consolidate power (Levitsky, Ziblatt 2018). This suggests that there is a substantial danger of further democratic backsliding by suspending democratic institutions through emergency laws, for example suspending parliament and ruling by decree.

This raises questions about the utility of the term populism to describe the challenges to democratic politics both prior to, and after the emergence of COVID-19. One of the most concerning political developments regarding actors described as 'populist' is not actually their populism – referred to above as an ideology that draws on a distinction between the good people and the bad elites (Mudde 2004) – but rather their nationalist, authoritarian and/or a far right agenda. The coronavirus pandemic has highlighted the extent to which the term 'populism' itself is inflated, overused and too broad to be analytically useful. Conflating the terms nationalism, rightwing extremism or authoritarianism, i.e. grouping any party that has these attributes in the populist category *because* of these attributes, means that populism is superfluous and what really matters is the other attribute: nationalist, far right, or authoritarian for example (Halikiopoulou, Vlandas 2019). Orban was able to impose undemocratic measures in Hungary not because he is a populist but because he is authoritarian. Marine Le Pen and Matteo Salvini blame immigrants for the pandemic not because they are populists, but because they are nationalists.

The long-term political consequences of this are significant. In cases where democratic institutions are weak there is a serious risk of further democratic backsliding. The long-term economic costs of the pandemic can only serve to exacerbate this. As a large body of literature suggests, wealth inequalities, decline of social status, and limited access to compensation can serve to drive voters closer to extremism (Adler, Ansell 2019; Gidron, Hall 2019; Halikiopoulou, Vlandas 2016).

## 4 Conclusion

In sum, what will determine the direction of future political developments is the extent to which governments can balance the trade-offs involved and exit this crisis having simultaneously protected society's most vulnerable and retained its democratic institutions and values.

Future research can delve into these dynamics in greater detail. Comparative research across cases and across time can identify further patterns with regard to which populist actors are more likely to be weakened and why. In the short term, health policies and stringency measures will affect a government's popularity. But longer term factors, such as state capacity and the strength and impartiality of a country's democratic institutions, will determine the extent to which democracy can withstand the COVID-19 shock. While the current pandemic may be unique in its specificities, it is not unprecedented in terms of what it represents: an emergency situation that exposes systemic weaknesses and threatens the stability of democratic societies. Lessons learned from parallel historical precedents may offer us the benefit of hindsight.

### **Bibliography**

Pandemics are disruptive events that have profound consequences for society and the economy. This volume aims to present an analysis of the economic impact of COVID-19 and its likely consequences for our future. This is achieved by drawing from the expertise of authors who specialise in a wide range of fields including fiscal and monetary policy, banking, financial markets, pensions and insurance, artificial intelligence and big data, climate change, labour market, travel, tourism and politics, among others. We asked contributing authors to write their chapters for a non-technical audience so that their message could reach beyond academia and professional economists to policy makers and the wider society. The material in this volume draws from the latest research and provides a wealth of ideas for further investigations and opportunities for reflection. This also makes it an ideal learning tool for economics and finance students wishing to gain a deeper understanding of how COVID-19 could influence their disciplines.

Università Ca'Foscari Venezia