European states are facing economic interventions unprecedented since the Second World War, says Danuše Nerudová, currently a member of a special economic advisory team to the government’s COVID-19 task force. The economist believes this is a major opportunity to speed up much needed reforms. When we spoke, she explained how the Czech Republic could harness such change to move away from its image as a “fitting shop” economy focused on assembling products such as cars.
“The Czech Republic is a sort of ‘fitting shop’ of Europe, but this crisis creates a space to concentrate on the production of added value goods.
“I also think that it is a space to redefine investment strategies. The Czech Republic can invest into smart technologies and the digitisation of public administration. This is something that can bring us out of this ‘fitting shop’ role to a different place.”
There has been talk of digitisation [in the Czech government] for a long time, in fact there was a major conference on this topic last year. How much is the government ready to take these major steps now?
“I think they are in the process, because for more than two or three weeks now, 80 to 90 percent of their work has been moved to the online sphere.
“I really hope that they stay online and think strategically about how to invest into different instruments which could help further digitise public administration.
“We are already half-digitised right now precisely by the fact that government officials are forced to communicate together online. Even the ministries and various institutions are communicating through online instruments.”
So in other words you are saying that this level of online communication that we are witnessing right now could be harnessed to speed up digitisation.
“Yes and I would stress that we should not take a step back, because we are already halfway there. We need to go ahead with digitisation and take this crisis as an opportunity to finalise this process.”
How much will the travel industry be hit and to what degree will people be forced to travel after discovering the potential of having discussions online?
“Firstly, I think we are going to face a huge hit to the travel industry. One part of this is business trips, because as has come clear during this crisis, almost everything can be solved online. I myself have attended two digital conferences during this period, which would normally not have been online. I think it will be more efficient for companies to have online business trips.
“Then there is recreational travel during vacations. This is also going to be reduced for at least one year, with people being afraid to travel.
“Despite world leaders not being able to agree on the precise reduction of carbon emissions, one of the positive externalities of this crisis is that we have been able to reduce our carbon footprint precisely due to the fact that a part of these activities went online.
“This has also been caused by the shutdown of certain sectors of the economy, but at least this carbon emission reduction is one positive from this crisis.”
In an interview last week you said we could see major changes in the global supply chain. Could you explain this point?
“I think that we are going to face changes in global supply chain management, especially a re-evaluation of ‘just in time’ [a method of supply which cuts costs by reducing the amount of goods and materials a firm holds in stock].
“This crisis shows that acting according to ‘just in time’ sometimes brings about the problem that companies suddenly run out of components necessary to continue production, if there is a pandemic somewhere in the world.
“Therefore, I think that management teams of global companies will reconsider this method. We are going to see new strategies that do not just take economic profit into consideration.
“This is because sometimes it is better to be slightly more inefficient, but at the same time be able to produce even when there is a pandemic in China and India.”
How much is this something that the Czech Republic can have an impact on? What do you think European states need to do to change the nature of supply chains and the supply of materials, for example those in the medical sector?
“I think that this decision about strategic materials and products has to come up on the level of the European Union. It is necessary that the union acts, opens up this question and redefines its list of strategic materials and products.
“It needs to do this in order to be prepared for future crises, because this is not the last pandemic we are going to face.
“Currently we are witnessing a huge failure of the EU, because it was not able to help its members handle the crisis and I think it needs to act, because otherwise we could face disintegration with states believing they can do better by themselves.”