Difficult Prospects

Without a vaccine for the CCP virus, or the imminent prospect of one, to many people, including yours truly, it increasingly seems that the present lockdowns are economically unsustainable and only slowing the inevitable progress of the pandemic. The virus is so easily transmissible, even by the asymptomatic, and already so widespread, that eradicating it without a vaccine (or herd immunity, which I’m guessing will take longer) is a pipe dream. Trying to do so via the blunt force instrument of government-enforced lockdowns will only continue to exacerbate the human misery represented by the latest unemployment figure – 36 million and counting.

These (https://www.thedailyfodder.com/2020/05/why-swedens-covid-19-strategy-is.html; https://pjmedia.com/news-and-politics/stacey-lennox/2020/05/14/dr-bhattacharya-stanford-antibody-studies-indicate-no-safe-option-n390630) articles spell out the compelling case for why, having now “flattened the curve”, the best we can do – again, absent a vaccine – is focus on protecting the particularly vulnerable while letting everybody else go back to work or school.

Even without the lockdowns, we will have to wait for a vaccine or herd immunity before life goes back to anything remotely resembling the old normal. For many people, it never will.

***

In two recent posts, I argued that the virus is highlighting, and possibly deepening, a pre-existing class divide between those who have jobs that require their physical presence and those who can work remotely. This distinction also describes, more often than not, an economic divide between those who have money and academic credentials, on one side, and those who don’t, on the other.  The current job losses and economic distress – as well as the direct effects of the illness – are falling disproportionately on the less-well-off people whose work, often in service industries, requires their presence in relatively densely populated environments, rather than on the generally better-off office/computer workers.

Most people I know find the lockdowns to be a depressing inconvenience, but also, in many cases, a chance for more reflective time with loved ones.  This crowd is in no hurry for the lockdowns to end, which prospective change they associate with greater risk to the well-beings of themselves and those they love. Ok, so the stock market is down, but true financial distress is not on the table for most people in this group; food is, produced and delivered, often at more risk, by “essential workers” who are on the other side of the divide.

For vast numbers of people who work in the hotel, restaurant, retail, travel, personal care or live entertainment fields, though, the world looks unremittingly bleak. Indeed, for them the outlook is unremittingly bleak, because even if all the lockdowns were relaxed tomorrow, most of those jobs will not be coming back until sometime after there’s a vaccine or reliable herd immunity.  

There will be less business travel and vastly less discretionary money spent on restaurants, hotels and flights to wherever.  Take me out to the ballgame? I don’t think so. Where shopping can be done online, it will be. Spacing requirements – whether or not enforceable at law – will so dramatically change the entertainment/hospitality experience (and price!) that demand will be dramatically lower, rendering most such businesses inoperable. Trickle-down economics will freeze.

What does all this mean? Thirty six million jobs have already been lost; many of those jobs will not be coming back any time soon. Patterns will change; new businesses will arise. But the transitions will be very, very painful and some won’t make it.

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Other shifts in demand will also cause profound displacements.

New York City’s horrifying experience with the pandemic will leave lasting scars. The City was already losing many of its wealthy inhabitants to punitive local taxes and rising crime; that trend will only accelerate as many who can move to less crowded environments – the ‘burbs or maybe a smaller city – do. New York may see a return to 1970s-era lows in terms of both municipal finances (as taxpayers flee) and the perceived quality of life it offers. The City That Never Sleeps, will. (I might add that having spent almost all my working life in New York, living nearby and with children and grandchildren living in town, this prospect brings me only sorrow).

Many, many colleges, too, will be big losers from the pandemic. The virus will later be seen as having dramatically accelerated the breakdown of the once-upon-a-time social consensus that everybody should go to college – often in a four-year, residential context. This consensus was already facing huge challenges because of ballooning college costs (and, in many cases, questions about the quality of the educations actually provided). Fears about the virus will devastate attendance and college revenues for at least this coming year, while the shifts to online learning this year and next will convince many that the existing model can change. In the long run, such changes may well result in a much more efficient higher education industry; in the near term, they will cause great pain to many educators and confusion to students.   

A few of the relatively near-term economic effects of the pandemic will be good for Americans. Given our much-reduced faith in the trustworthiness of the Chinese government, some manufacturing of goods used here – probably beginning with prescription drugs and high tech products with military applications – will be coming back to the States. Here again, a shift that was already underway – in this case the decoupling of the American and Chinese economies – will have been accelerated by the virus.

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My conviction that our recovery from the pandemic will be long and painful, as tens of millions of now-unemployed workers try to find new paths for themselves, doesn’t mean that I think that the lockdowns were a terrible mistake. The lockdowns may or may not have been overdone, but we’ll never know with any certainty how much worse the death toll would have been if they hadn’t been imposed. People will argue about that for years without ever really settling the issue.  

If it’s true that the cat is well and truly out of the bag, if you will, i.e., that the spread of the virus can’t be stopped except by a vaccine or herd immunity, neither of which has any likelihood of taking effect for at least six months and maybe much longer, then the economically devastating effects now being attributed narrowly to the lockdowns would largely have taken place anyway. In most of the industries in which demand is evaporating, it’s evaporating because of people’s fear of getting sick from contact with asymptomatic others, not because of what the government says we can or can’t do.

The immediate economic devastation from shifting consumer behaviors resulting from virus fears would have been less had there been no lockdowns, but those demand patterns were going to change with or without the lockdowns, and presumably more people would have died had an un-flattened curve overburdened our medical system.

Do I think the lockdowns should end? Yes.

Do I think we face a long period that will be very painful for many people as our economy adjusts to new social/consumer behaviors? Also yes.

Do I think we should spend a lot of time second-guessing every decision made by our political leaders, left or right, and/or their medical advisors, during this process? No. All those people had to make decisions with very limited information and enormous, unquantifiable risks on both sides of the equation. I would give them all a pass – until now. Now we have to start moving forward again, and they all know it.

Well, those who don’t know it, I’ll be inclined to judge harshly.

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America will eventually come out of this crisis stronger than ever before. The magic of free markets is that they can, and do, adjust to changes organically; and in many cases, the changes that I expect to flow from this disaster (e.g., more telecommuting, a more efficient education marketplace and onshoring the production of many essential goods) will be beneficial.

When a vaccine or herd immunity works, the vibrancy of our social lives, and new jobs associated with it, will return. That’ll happen when it happens; ever the optimist, I’m still (like President Trump) hoping it’s late this year.

(Seriously, what did you expect Trump to say? If a president doesn’t convey optimism even in dire circumstances, he’s sunk politically; “The only thing we have to fear is fear itself” – FDR.)  

In the near term, though, we should be braced for the fact that tens of millions of Americans will be suffering for quite a while, and that our government will continue to borrow and spend trillions to alleviate their pain.

We’ll be paying those bills for a very long time.

M.H. Johnston

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