With increased demand for their services, the likes of Netflix, Facebook, Google and Amazon will surface from this crisis bolstered and emboldened
Drastic downward moves on stockmarkets; a sense of fear and panic in the streets; governments overwhelmed by an uncontrollable disaster as it spreads its tentacles around the world.
It’s no surprise the current crisis has sparked comparisons with the Wall Street Crash of 1929 – and ominous warnings the world may be on the verge of another Great Depression.
French finance minister Bruno Le Maire said this week the coronavirus pandemic is “comparable only to the great recession of 1929”.
But how fair is that comparison and is it useful to draw such parallels?
In truth, the current crisis sparked by a disease bears only a passing resemblance to what unfolded back then.
Both crises were genuinely global and precipitated a financial panic.
In 1929, it was the failure of policymakers to act swiftly – especially in the US – that allowed a market crash to curdle into something far worse and more damaging as it engulfed the real economy.
After the US economy toppled recession in 1929, the Federal Reserve misguidedly continued to tighten monetary policy for several years while the government largely stood by and watched, taking only limited and meagre action.
President Herbert Hoover summed up official attitudes when he declared in 1931 that "privation and suffering" were a "symbol of the triumph of the American soul".
By 1933, when a new administration under Franklin D Roosevelt announced its New Deal policy to get millions of people back to work, unemployment had soared from 3pc to 25pc of the US workforce. US GDP had halved from $103 billion to $55 billion while global trade contracted 66pc in US dollar terms between 1929 and 1934.
It’s not impossible that something similar could happen now, but there are grounds for cautious optimism things may not turn out to be quite so bleak – even if the IMF's revised global GDP forecast is rather too sanguine.
Hope in transience
For one thing, however serious and potentially deadly the current pandemic may be, it is likely to be a temporary phenomenon that will eventually lift.
In the interim, there will undoubtedly be serious and lasting economic damage, a surge in unemployment and the accumulation of huge debts. But unlike in 1929, policymakers around the world have been swift to respond with stringent measures designed to minimise the impact on jobs and corporate failures.
Assuming the pandemic is of limited duration, there is reason to believe the economy may ultimately rebound.
There is one area where comparisons with the Great Depression hold up well, however.
One group of companies which performed remarkably well during that era despite the slump were the technology companies of the age – manufacturers of radios, telephone companies and the movie business, which experienced a golden age during the 1930s.
Sales of radios and cinema tickets soared as people sought an escape from the drudgery of daily life. Many of the unemployed or underemployed had plenty of time on their hands to seek diversions with up to 80 million Americans going to the cinema each week during the Depression.
In much the same way, it is the technology giants of Silicon Valley – Netflix, Google, Facebook, Amazon etc – who stand to emerge as winners from the current crisis.
It’s not just because of demand for entertainment and staying connected to friends and family during an extended period of quarantine.
More than ever, the rest of the economy depends on their services to continue functioning as millions of people work from home.
For the same reason, providers of basic infrastructure broadband networks and cloud service providers – including Microsoft and AWS – also stand to benefit.
Across the board, suppliers of public utilities like electricity and telecoms should hold up relatively well due to a combination of inelastic demand for these services and cost deflation.
Most of the big tech companies are also cash-rich, allowing them to thrive during an extended downturn and potentially pick up weaker competitors along the way, cementing their growing dominance over tracts of the economy.
Another potential advantage for these technology companies – albeit a temporary one – is the fact that the fight against coronavirus has diminished scrutiny of their activities and the threat they may pose to competition.
The push to regulate and muzzle the forces of big tech is likely to take a back seat – at least for a while as the world shifts its focus to tackle a deadly pandemic.
However, when the dust settles and the current crisis ends, one of the consequences is likely to be a further entrenchment of the tech industry’s power and influence.