OPINION About a year ago I wrote that the greatest source of uncertainty facing America’s rural economy was the outcome of the U.S. presidential election and the impact it would have on federal policy. COVID-19 had yet to emerge in China. The idea that a viral pandemic would wreak political, social and economic havoc around the globe wasn’t on anyone’s radar. It was a tail risk of the smallest order.
Fast forward to today and the outbreak of COVID-19 has arguably become the single-most consequential event in world history since the fall of the Berlin Wall in 1989. Policymakers, industries, companies and individuals struggle every day to adapt in the continuing pandemic environment. The recent development of new vaccines offers a substantial measure of hope but it remains difficult to foresee from today’s vantage point when exactly the virus will be vanquished or fade from the world.
If the experience of the past year has taught us anything, it’s that predicting the future is an uncertain business. But uncertainty is not an excuse. The end of 2020 has arrived, which means all business leaders should be looking forward into the coming year to formulate a view about challenges and opportunities that lie ahead. At CoBank one of the ways we do that is through the publication of a report from our Knowledge Exchange team that captures thought and perspective from our staff economists about key trends facing the rural economy. For 2021 of course our primary focus is the continuing impact of COVID-19 on the economy, policy and the various industries we finance. We hope our customers and other partners find the report useful as they devise strategies and courses of action for the year ahead, and position their businesses to survive and thrive in the future.
I would ask readers to consider and reflect on a handful of key themes that have helped me personally to understand and frame the events of the past year.
- Tail risks cannot be ignored. In the first two decades of the 21st century the United States has experienced three so-called “Black Swan” events that have upended the status quo and sent shock waves through the economy and our political system. The first was the September 2001 terrorist attacks on New York and Washington. The second was the financial crisis of 2008-2009. The third is COVID-19. We should all understand by now that such events, though highly unlikely in and of themselves, do occur with regularity through time. Businesses must find ways to incorporate the risk of such events into their financial and operating plans, and ensure they have the financial strength and flexibility to weather unforeseen storms.
- The United States must address its fiscal imbalances once COVID-19 is behind us. American policymakers deserve praise for acting swiftly and decisively to inject massive doses of fiscal and monetary stimulus into our economy following the onset of COVID-19. Doing so was the only correct answer in the short term. But those actions have also greatly exacerbated our nation’s public-debt problem. Federal debt as a percentage of Gross Domestic Product is now as great as it was at the end of World War II – and there’s no credible plan on the table to bring it under control. The executive and legislative branches of government must work together soon to find the correct combination of spending cuts and tax increases to put us on a sustainable long-term path.
- Broadband is essential. It’s sobering to imagine what the past year would have been like for the U.S. economy without a mature internet – and its ability to manage complex business, government and educational institutions remotely. Broadband access is vital for government, commerce, learning, entertainment and many other aspects of daily life. We must continue to make broadband ubiquitous and affordable, especially in rural communities where access is limited compared to urban areas.
- Our economy remains the strongest and most adaptable in the world. Despite the ravages of COVID-19, America’s economy has performed remarkably well throughout the crisis. Growth and employment have rebounded much more strongly than what was forecast in the early weeks of the pandemic. Asset values, bolstered by reduced interest rates from the Federal Reserve, have recovered and pushed past pre-pandemic levels. The U.S. financial system, despite taking heavy loss reserves, has remained strong. When one stands back to look at the total picture it’s a remarkable testament to the strength and adaptability of the private sector in this country, and of the resilience that Americans can still bring to bear in the face of adversity.
I’ll close with an expression of gratitude to our customers and all rural business leaders for what they have done during the past year to keep their companies and the rural economy running through the pandemic. It’s been a heroic effort and it’s a privilege for all of us at CoBank to serve you and stand by you as your financial partner.
Editor’s note: Agri-View is publishing portions of the CoBank end-of-year report, beginning with the Dec. 31 issue. Visit www.cobank.com to see the entire report.
Tom Halverson is the president and CEO of CoBank. Visit cobank.com for more information.