The Great Pause Was an Economic Revolution
foreignpolicy.com
foreignpolicy.com
Nor did the government tell companies how to shift their workforces to remote work, they just did it, and they did it pretty well, even though some of them had never tried it before. Some companies even introduced remote work in March, before the government ordered any lockdowns!
In doing these things, businesses have relied heavily on technology (also a product of the market) which enables far more people to productively work from home than would have been possible a few decades ago. Small, local businesses quickly pivoted to social media and online ordering to survive.
Given all of that, how can the author say, with a straight face, "None of this has anything to do with the spontaneous interplay of individual economic units that economists like to talk about." It seems like exactly that.
So while I agree that free market plays a role, I interpret the line to say that there is also a central decision of the government that organizes all this.
I think that's what the author means by "the spontaneous interplay of individual economic units" - that if a potential profit advantage exists, some rational actor will spring up to take advantage of it. The idea that this sort of thing happens reliably and consistently is behind theories like the efficient market hypothesis, for instance. There's little profit advantage in being the first company to shift to remote work or in proactively closing your coffee shop while there may still be a trickle of customers, but people did it. (For that matter, there's little profit advantage in being a videoconferencing service that has its average customer use the service occasionally suddenly use the service full-time for all its employees, and yet multiple such products of the market not only embraced it but built up their free offerings, too.)
If your claim is that the free market isn't constrained to being motivated by profit and can decide, even (or especially) if not ordered by government, to accomplish some other goal - I think you have no real disagreement with the author. What the author is claiming is novel is that people know that this is true, now.
There are many businesses still teetering on the edge who have not transitioned well. There are many businesses who laid many workers off.
Also there were major failures in how quickly PPE production could get ramped up, I wouldn't call that a supply chain/market success.
There was some corporate autonomy going on, but I wouldn't say we saw a miracle of the "free market" at work.
https://open.spotify.com/episode/5x8WrjXmV9RnluuHr1ZOcR?si=F... Notice that this was made April 3rd
The irony to most of this shutdown is that "essential" businesses are still open. What the Great Pause has exposed is the shallowness and fragility of mass production/consumerism. During the pandemic of 1919, 80-90% of household income was spent on food and essential needs.
Can you even imagine if we spent 80-90% of our income on essential needs? Well shit, we wouldn't hurt so much when non-essential business was put on pause, that's for sure.
most american households (as in >50%) do spend 80-90% (or more) on essential needs.
Also, it's a good book.
The picture for American families today is much better.
https://www.theatlantic.com/business/archive/2012/04/how-ame...
Come up with better data if you don't like mine.
https://www.jchs.harvard.edu/sites/default/files/Harvard_JCH...
https://www.usatoday.com/story/money/personalfinance/real-es...
The late 90s (just before this study ends) were also one of the last periods of meaningful wage growth.
So combined with, again, a lack of consideration about things like rising healthcare costs, it’s difficult to view this study as relevant or meaningful. And especially when the data ends before the now two largest downturns since the Great Depression.
~75% of 2003 household budgets went to food, housing, transportation, clothing and healthcare ("essentials"). among non-essentials, only ~5% to entertainment.
those are aggregate numbers, so you'd still expect more than 50% of american households to be spending 80-90% of their budgets on the essentials (said differently, the median household is most certainly above the 75% figure because of the highly disproportionate skew of the top 1%).
you could argue that we own too much house and too many cars on average, but i doubt that makes much difference to the big picture, because that's also disproportionately skewed to the top 20%. most american households are still spending most of their money on real essentials.
“Essentials” is flawed in your argument. Americans in 1919 actually had to struggle to survive.
It's funny to read that Hayek compared parts of the economy to organs. I often use analogy of money being blood in human body, to illustrate that from the perspective of each individual cell, blood is a resource, but from the perspective of the whole body, blood is just a transport medium of which it can create any amount required.
And accordingly, body can decide to vasoconstrict (shut down) certain organs in times of crisis. It is a collective decision, not a decision of an individual cell.
So of course, you can shut down parts of the economy. You can also put those people in parts that shut down on a kind of helicopter money support. All those things have always been possible, it's just people were conditioned to think they are not.
By the way, the "helicopter money" thing was proposed by Milton Friedman, a libertarian economist who was influenced by Hayek and who was highly critical of most forms of government intervention in the economy.
I would be interested to see an argument for this point, because I don't think it stands on its own.
> About 35 percent of food expenditures—more than $2.5 trillion globally—is up for grabs as consumers shift to dining at home and experimenting with new buying channels.
This could be the end of cruel factory farms and the resurgence of smaller, healthier and more humane farming.
Check out "SPIN farming": it stands for "Small-Parcel INtensive", a kind of turn-key farming business that is meant for small (down to 1/4 acre) urban farms. Combine that with "Syntropic farming" and you've got the makings of a economic revolution.
(Normally I would supply links but I've only just recently learned about them so I don't have anything in particular to recommend.)
It could also cement their lead, as there's less signalling to be had when eating at home - so fewer reasons to buy "high-status" food - and easier to compare prices and see what that status costs you. The true believers will continue, but will it be easier or harder for that belief to spread?
Yes, well, you're going to have to show me the math. We eat incredibly well, with decent nutrition (could be better, yes), 365 days a year. On a modest expenditure. Modern agriculture is sufficiently productive that world hunger is a distribution problem, not a production problem. I would like to see improvements in soil management and reductions in chemical usage, certainly, but new production practices you suggest need to pencil out.
If you are going to argue for market forces driving us to smaller farm operations, you need to show me the math. Show me how we get there. And make a net improvement in nutrition for everyone. Without inconveniencing the city dwellers that have forgotten that the phrase "seasonal produce" used to exist.
Go grow some food. Keep good records, and share the results with us.
- 1/4 acre in SV starts at $1 million
- farming is a job. My family's small garden (30'x30') was like a part-time job in itself.
- when there's an immigrant farm labor shortage and unemployed locals are recruited for farm work, they don't make it to lunch on the first day - it's back-breaking and often dangerous work
Thanks to the ag insider who did the 2-part post on ag economics earlier this week.
https://www.srf.ch/news/regional/basel-baselland/corona-ernt...
The newbies need not work as hard as harvest workers from the east. "We're twice as many as in a normal season. So everyone has only half the work."
====
Ganz so hart arbeiten, wie die Erntehelferinnen- und Erntehelfer aus dem Osten, müssen die Neulinge aber nicht. «Wir sind doppelte so viele, wie in einer normalen Saison. Also müssen auch alle nur halb so viel arbeiten»
If we have another Pause in the next few months, then it will be the body blow that completely cripples the economy, especially in the US. I can't see many small businesses surviving on a fraction of the income, especially when their margins are razor thin already.
At least in places where COVID has been largely suppressed now, the second time round shouldn’t be as economically shocking as the first; there’ll be way more focus on the test-and-trace approach that we just weren’t set up for in February. I would be somewhat worried about places where it was never really suppressed when it spikes again, though.
Making this permanent or even dragging it out would have severe economic consequences
The only reason extra taxes would be needed is to curb inflation.
I don’t like the rhetoric that we will need to pay it back in taxes though because I find it misleading. The real is inflation, not some debt to be paid.
Someone will have to pay.
Borrowing money to fund consumption now won't result in long-term inflation if we consume less in the future to account for the pulled-forward demand. I doubt that will happen.
In particular, it's a tax on all savings in cash and bonds (but not on investments in stocks), and it's a boon to all debt. For example, the total housing mortgage volume is huge - so if currency debasement causes any significant, rapid, unexpected inflation (expected inflation is priced in the interest rates) then it's a significant shift of wealth from the lenders (and, correspondingly, to all people and businesses holding money in banks) to the mortagage borrowers.
However, tax revenues can't cover our expenses so we are forced to issue debt and with printed money the debt is now going to cost more to service.
This is a pretty telling difference with how we perceive the world today. During the last decades most people living in the "first world" (however you define it today) lost ability to rationally think about small additional chances of dying. Even though the usual set of killers, from old age to cancer to traffic, are still around us and take a lot of lives every year (I believe CDC estimates 650000 US deaths from heart disease per year), they do not prevent us from living and enjoying our lives; we seem to mentally zero those deaths out. But a very small unusual danger can cause widespread panic.
As a non-coronavirus example, in 2002 a "DC sniper" killed 10 people in 3 weeks. When I was going to DC during that time for business folks from Chicago were calling me crazy, even though Chicago has way more people fatally shot during average 3 weeks. All my attempts to argue that additional risk is minuscule got nowhere.
We need to re-learn to make rational decisions about risks. Otherwise we will be constantly hiding under the table for any loud noise and destroy our economy, fun of life and long-term life satisfaction. My 2c.
Covid is a little similar in that it’s a new class of risk (different group dying than do from heart disease and all of the other known risks). It also doesn’t help that people on the Internet are calling others murders for being a potential transmission vector.
Anyway, you’ve missed my entire point. Even when you’re in the shitty parts of a city, you learn how to keep your head low and can reasonably avoid violence. Despite all of the murders in Chicago, people still live there, even in the South. The odds of getting murdered if you aren’t in the game just aren’t that high.
So, yes, certainly you can lay low and be safe, but this sense of safety comes at the price of prosperity.
I'm not arguing for or against your reasoning, but I know I would be more worried about infrequent random shootings than I would be about frequent targeted shootings, mostly because I believe I'm no one's target.
that's not to say completely ignore dangers and live obliviously, just put them in their proper place.
What price would you put on a 5% chance of death plus higher chance of permanent chronic health problems for each of your friends and relatives over age 70? (That may even be an underestimate of the Covid IFR for elderly people.)
Even for healthy young people, we are talking about a 1/1000 chance of death and rather higher chance of long-term organ damage. If this virus ends up infecting 60% of the population, as it will if people carry on their pre-pandemic lives, we’ll end up with something on the order of 2–4 million deaths in the USA, and the aggregate healthcare costs over the next few decades will be an outrageously large burden.
In my opinion the biggest problem the pandemic has highlighted is that many countries have a limited ability to collectively think rationally before getting into a crisis, and adequately prepare so we don’t get hammered so badly by entirely predictable risks of large-scale problems. As the saying goes, an ounce of prevention is worth a pound of cure.
> usual set of killers, from old age to cancer to traffic,
It would be great if we would also spend a significant amount of societal resources on reducing traffic deaths, firearm deaths, set agricultural policy to promote healthy diets and stave off cardiovascular disease, stop companies from dumping carcinogens into the environment, and so on.
As a society we could save a lot of money and lives with some systemic changes and investments.
On the economics front, USA just printed out $5 trillion of stimulus to fight the slowdown caused by lockdowns. I hear this is just a first step, stay tuned for more. I suspect the burden you mention would be smaller, but would love to hear an estimate.
On the spread: how do you plan to avoid it? Every state and every country has carriers. Assuming the proportion of those with no symptoms is high, as recent studies indicate, people will keep spreading it around. Are we going to force folks wear masks (which, by the way they take off completely if eating in a restaurant) for a year? Outlaw all in person schools and university classes? All contact sports? Honest question.
Look around the world. Many other countries rich and poor are doing a good job containing the virus, while the US is incompetently flailing. The scale of social/industrial changes necessary to stall a pandemic for long enough to get effective treatments and ideally a vaccine pales in comparison to the changes required to e.g. fight WWII.
The US is one of the richest and most industrially capable countries on earth, and yet it is barely acting at all, and many official actions (canceling research projects, defunding the WHO, restricting experts at the CDC, the president advising people to just drink bleach, public officials suggesting that the pandemic is a hoax, manipulation of aggregated statistics, ...) are actively harmful.
Success requires a large-scale coordinated national response including but not limited to: clear and consistent factual messaging to the public, free widely available tests with quick turnaround time, industrial coordination to produce and distribute necessary supplies (e.g. the state should be sending reusable face masks to every resident), quick ramp-up in necessary human labor like contact tracing and regular check-ins with people isolating at home, enforced quarantines and testing for travelers, temporary limits on travel to/from heavily affected areas, direct monetary transfers to people temporarily unable to work (possibly extending for months), state-supported pauses in expenses like rent and mortgage payments, ...
The countries which quickly and effectively control the pandemic are those which will ultimately see the least harmful medium-term economic consequences, while those which dither around will both cause massive suffering to their own citizens, and also crater their economies hardest.
> Are we going to force folks wear masks for a year? Outlaw all in person schools and university classes? All contact sports? Honest question.
I would say yes, yes, and yes. Wearing masks while visiting indoor public spaces like shops and public transit is not a significant burden. Packing audiences into sporting arenas during a pandemic is absurdly irresponsible.
>> Are we going to force folks wear masks for a year? Outlaw all in person schools and university classes? All contact sports? Honest question.
> I would say yes, yes, and yes.
I respect your opinion, but I would say "no, hell no, and hell no". Sooner rather than later your opinion and my opinion will have to be reconciled, perhaps not to a solution that makes everyone happy, but at least to a policy that is grudgingly acceptable to both camps.
You can make policy by force, which is what we have now, but such enforcement does not work long-term. You need wide buy-in, without which people quickly start breaking rules, en masse. Which is what we are already seeing in the US; just look at cars at open beaches with license plates from states that supposedly keep citizenry in quarantines.
If you are planning to take no precautions because to do so would be mildly personally inconvenient, I sincerely hope you stay far away from my neighborhood and anywhere I have friends/family living until the pandemic is past.
If your position is representative of your local area, my heart goes out to your neighbors and the first responders and medical workers who will be trying to save their lives at grave personal risk.
Getting rid of soft drink, fast food, alcohol, all sorts of things would save so very many years while overall I would think impact lives less than corona virus measures do. Particularly quality adjusted life years.
I do e.g. feel pretty strongly that people who drive cars while drunk or high are being incredibly selfish and antisocial (not to mention breaking the law).
I do feel that cigarette companies doing their best to trick people into using products that directly lead to their deaths are unethical.
Likewise it is unethical for people to dump toxic sludge into the local river.
And so on.
In normal times, public officials should try to err on the side of letting people do things that are personally risky but don’t kill third parties (say, skydiving, participating in contact sports, drinking cocktails, or having casual sex), while trying to accurately inform people of the risks involved. During a pandemic, however, public officials must be willing to take more extreme measures when the public is not compliant with basic precautions.
Luckily this pandemic doesn’t actually require so strict a lockdown as was done in China. Getting everyone to wear masks while in public and dramatically reducing people’s indoor gatherings seems to be enough to get the reproductive number below 1. It seems that grocery store visits, take-out/delivery meals, exercise outdoors, limited social gatherings outdoors with reasonable precautions, etc. can effectively balance people’s basic social needs with controlling the epidemic.
Any workers whose jobs are not possible under such precautions should be paid by the state until the crisis is less acute.
However there is a possibly implicit meaning that you consider the current efforts of preventing transmission of the virus to be overkill.
Possibly in other parts of the world a little more measure and give might have been the best response in hindsight, but knowing what we did know then, rather than now, I believe most places* (in the 'first' world) made the correct adjustments.
The USA is one of the places that had a fragmented, and insufficient overall, response. History will record how things were historically the worst in this country due to many factors.
Among those factors, anti-intellectualism as a driving force in politics, which contibuted to rigidly sticking to bureaucratic processes rather than scientific evidence and results oriented decision making. Another is an absolute failure to modernize and take a long-term investment stance across many government agencies and processes: often lead by a reluctance to be socially responsible.
I'm bringing this up because the reasoning is the same as yours (policy should be evidence-based) and yet the outcome of that reasoning is so different.
In terms of testing, death rate, positivity rate, death rate amongst confirmed vases, the us has done as well or better than many developed nations.
Could the us have done better? Absolutely. But we also are doing at least average... If not downright better. Can you cite per capita numbers in relation to other developed globalized countries?
But really all of this is a distraction. The point of the shutdowns we were told was to prevent cases from growing out of control so as not to overwhelm hospitals. No region of the United States, including New York had overwhelmed hospitals that required patients to be triaged out of the ICU. In other words, no one who needed an ICU bed in the US was denied one. That was the point of the lockdowns. It is still the point. That Texas and Florida's rate is rising is not an indication that they are mismanaging their states. Even with the rising cases they have hospital capacity. In fact, before cases were rising they were at a very low historical hospital capacity. While the numbers seem scary (one hospital in TX is at 97% utilization), they also have plans to add a lot more ICU beds. Thus, they have been successful in accomplishing the initially stated goal -- not to overwhelm hospitals.
Unless a vaccine is found -- and this is still a big if -- at some point every geography is going to have to come to terms with the fact that you have to either choose between never opening up to anything resembling freedom of movement or letting the disease take its course -- hopefully controllably. The US -- and most countries -- have currently chosen to let the disease take its course in a controlled manner. For the most part, that goal is being achieved, it would seem.
Either way... The point being to not overwhelm hospitals.. The question isn't whether they have 10x the amount of cases as ny now. Its whether they can handle the hospital numbers.
You’re spreading disinformation. If you need to do this to make yourself feel better, do it. But don’t become a spreader.
We haven't done nearly as well in most of the US. Granted, our overall death rate has been lower that many European countries, but I wonder how long that will last.
However, I don't understand why you think doing a lot to avoid COVID-19 is irrational. Around April it was the leading cause of death in the US, on a monthly basis. Currently it's below heart disease and cancer, but that's still a major risk. Furthermore, it's likely to go away next year, so it makes a lot of sense to temporarily change your lifestyle to avoid it.
I’m not thinking I’ll die if i catch it but if i do catch it, how many people will i pass it on to, and how many will they infect. How many deaths would be attributable to me catching it? It’s pretty heavy when you think about it.
I suppose someone has to be the 1 in 500 at my age. That would suck but like most people, i just assume it wouldn’t be me.
I am however a bit concerned at the folks who take a long time to recover https://www.reddit.com/r/COVID19positive/ they don’t get much focus in the stats but the idea of being absolutely spent for 3 months doesn’t appeal.
Another concern is the fact it seems impossible to avoid. The number of OCD types who almost take pleasure in turning their lives upside down to avoid the virus but then unexpectedly catch it is really disheartening.
I read one guys series of posts on reddit about all the precautions he was taking, only going shopping once a fortnight at a quiet time and enforcing a 30 min limit to get in and out. wearing not just a mask gloves but a face shield and in a few of his posts he detailed his routine for bringing his shopping into the house which involves stripping off all clothing straight into the washing machine while leaving the shopping outside for 1 day before cleaning it and putting it in cupboards. I felt for the guy when he posted his positive test confirmation.
That is fair point, but its consideration should not be limited to COVID. I definitely not claim you do this, but in the USA I see people sending sick (with colds and flu) kids to school all the time. I see people coming to work sick (even when there is really, really, no penalty for staying home) and spreading the good stuff on everyone in the office including this lady in her 70s and that guy who just had chemo which hosed his immunity.
We seem to ignore this "because that is what everyone does", but I personally know people who died from flu complications and there are real risks for others from this. We cannot ignore this, but give hell to folks who are not convinced that they must stay home to avoid infecting others with coronavirus; especially when they have no symptoms.
I never considered the death side of flu though.
The point of the article is that the pandemic has opened the world of possibilities for these humdrum "oh it's just how the world is" social harms. Many things have been written off as impossible to fix, as it's too expensive for society to afford. But COVID-19 has shown that society can afford to dedicate huge amounts of social resources toward saving lives; particularly, we have the capacity to set a much higher value for USD/QALY that we're willing to save. E.g. eliminating HIV/AIDS mortality in the US and even the world becomes almost trivial with that amount of resources, using known technologies. Deaths from accidents? Stress from debt or unemployment? A bit trickier, but we can imagine putting a significant dent in them.
I disagree. What do we have the technology for, if not to prevent dying? Why are we destroying the planet (I hope we can agree that having technological comfort requires quite a bit of material processing), if not for that?
To me, to use the technology (which has downsides) to just have more "easy" or extra enjoyable life seems more childish than to use the technology to prevent dying (or in general, improving the living conditions).
We can think of the tradeoff in terms of carbon emissions. Consider a coal miner. What would be better for him, to give him couple extra exotic vacations with airplane, or to close the mine and let him do something healthier, like installing solar panels?
I argue that the latter is a better life.
It's also interesting to note that many cities over the world experienced much cleaner air during the shutdown. I am not exactly sure what they have given up, but sounds like a pretty good deal to me.
Car accidents do not multiply beyond a very low saturation point (3 cars, 5 cars? Never heard of 500 cars in a crash). Heart disease or old age do not infect people nearby at all.
A virus can quickly spread if not contained. It literally grows by exponent until the majority of susceptible population is infected. At the height of the pandemic in the US (around early May) the weekly number of covid deaths was rather higher than the number of car death, if memory serves (I did check).
If anything, the quarantine was enacted too late in most places, which made it longer. And we are up for a second wave. At least, so say my friends who study the pandemic professionally.
And that's the real thing the centrists don't want the radicals to realize - that the center is where it is because of careful pruning and grafting, that in so many things from immigration and work visas to tax policy to trust funds to zoning to policing to military spending to labor law to (as the article mentions) how we deal with the homeless and the destitute, we're not taking a natural or default position in any meaningful sense, we're taking the current position, and working hard to keep things that way. The radicals aren't wrong simply because they are radicals and they demand change, so don't argue simply that their position is infeasible, or you may find that it's not as infeasible as you thought. Argue, if it's true, that their position is morally in the wrong. (And "Your proposals will certainly lead to economic collapse and suffering" is really an argument about feasibility.)
Another world is possible. For those who benefit from the current one, that's a scary thought. It's a thought that's driven countless restorationist or reactionary movements through history, from the Confederates to the Bourbons to Tokugawa to the well-funded fall of communism - but they fight so hard because they know that the other world can actually survive.
If you want to charge for content, that's fine, but this kind of bait-and-switch is just rude.
We can see that play out in practice, comparing how different nations dealt with the pandemic.
But I do agree with the premise, government shut downs happened because people by and large wanted them, not because the government wanted to impose some random restrictions.
The "self designed, self regulated free market economy" which the OP insinuated is a myth or a lie is actually the only reason the economy still functions. Businesses didn't shift to remote work and radically alter their supply chains in record time because some government central planner told them to.
Nothing hidden, but unquestionably central planning on the part of multiple governments.
The comment was also about engineering, not micromanaging. When a civil engineer designs a bridge to resist vibrations and avoid resonance, the civil engineer is not personally damping the bridge every time a car drives over. They've simply designed the bridge so it does what's wanted. There's no government central planner telling business what to do, but there are absolutely a number of government planners setting up the conditions under which businesses operate.