Saturday, April 11, 2020

No precedent exists to guide us after the Great Economic Lockdown and Coronavirus Crisis

On January 1, 2020, a formal international economic structure and an informal global economic structure existed. Both were unlike anything that existed in the 19th Century when the economic theories of Adam Smith, Karl Marx, and friends became popular. We have significantly interrupted the normal functioning of those structures because of a pandemic threatening the lives of many, many people.

Ignorance still pervades what has become the Coronavirus Crisis though you would not know that from the news relating to the Trump Administration exploring ending shutdown orders.

Covid-19 infections began in China in November 2019 or earlier and as noted in an article in the LA Times may have arrived in the U.S. in December.

In the past, several members of the coronavirus family called "human coronavirus" have infected us annually causing mild respiratory ailments we regard as the common cold. These "colds" are not distinguished clinically from other annual colds. Those infections provide no lasting immunity. The same type of human coronavirus may return after several years, but a different one may cause an infection in intervening years. Incidents peak in the winter, taking the form of local epidemics lasting a few weeks or months. We also don't shut our economy down during these "common cold" epidemics. From this we know that strains of coronavirus behave differently from influenza virus strains.

We don't know if the Coronavirus Crisis will be seasonal like other coronavirus strains. We don't know if the Covid-19 coronavirus will provide any lasting immunity like influenza virus strains. And unlike in cold and flue epidemics, we have instituted worldwide the Great Economic Lockdown of 2020 to limit deaths and major disabilities from the Covid-19 pandemic.

No precedent exists to guide us through to January 2021. Still key elected officials are under tremendous pressure from constituents only slightly more ignorant than they are who are pushing to end the Great Economic Lockdown of 2020. Or perhaps they all are crassly merciless believing that humans are just nameless machines feeding labor into the all-important economy. If you think they are not that ignorant or crass, consider this.

In fact a pandemich such as the Coronavirus Crisis was predicted as we can see below in Bill Gates' TED2015 talk explaining what our pandemic would be like. (with transcript).

It is fair to say that almost all the populist voters who supported the Trump movement were and are unaware of what Gates explained. And it is likely that those few who were aware dismissed it as a lie from the political left.

Because of the populist rhetoric reawakening 19th Century attitudes on race, culture, economics, and relative wealth, issues of public health and safety in the reality of the One Earth 21st Century did not come up in election campaign discussions. In the past decade within the western economies deliberate populist political choices were made to accelerate the reversal the 30-year economic globalization pattern that preceded the 2008-09 Great Recession.

The  Coronavirus Crisis and subsequent Great Economic Lockdown of 2020 is an unexpected outcome of those choices.

In the Post-WWII half-century leading up to the Great Recession the global economy expanded, with trade and cross-border financial flows growing and nations working together, albeit haltingly, resisting at times.

Since the Great Recession and prior to the Covid-19 pandemic cross-border financial flows were down more than 60 per cent by value indicative of the success of the populist choice and indicative of opposition to nations working together.

In the past decade overt government intervention and state-against-state economic clashes became the norm. Most obvious are Trump's trade wars which, along with Climate Change denial, blinded the American political debate to any broader "One Earth" reality. And Trump's most antagonistic trade war was with China.

That truth is that the health of the public in Wuhan, China, in December 2019 should have been the primary concern of the U.S. government resulting in a major effort to address the pandemic potential by mid-January 2020. But that was impossible in the political climate controlling American democracy within which money is the only issue, who has it and who can get it.

Government mobilization of the public and corporations to mitigate the Coronavirus Crisis has been compared to the mobilization of civilians and the economy at the beginning of WWII. Yet few, if any, have noted the parallels of American pro-isolationist policies of the Roaring 20's that led to the Great Depression and WWII. And in truth there has been no U.S. government effort to mobilize the public and corporations approaching the scale of WWII mobilization.

The Great Economic Lockdown of 2020 ordered by states and local governments in response to the Coronavirus Crisis has no parallels in history. In the 21st Century humanity exists in a rapidly moving "One Earth" reality created by the colonialism of the 19th Century, the wars and medical advances (including birth control) of the 20th Century, and the technology of the 21st Century. Consider:
  1. Since the end of WWI we have been in an extended period of struggle over globalization between the forces of nationalism against the idealism embedded in a One Earth movement that resulted in the 20th Century nations creating international organizations such as
    • the League of Nations and the United Nations,
    • the International Monetary Fund (IMF),
    • the World Health Organization (WHO),
    • the World Trade Organization (WTO),
    • the ASEAN Free Trade Area (AFTA),
    • the North American Free Trade Agreement (NAFTA) and its probable successor the U.S.-Mexico-Canada Agreement (USMCA), and
    • the Paris Agreement,
    all of which facilitate a world economy dependent upon trade and cross-border financial flows, but which have been opposed since The Great Recession of 2008-09.
  2. In the 21st Century a globalized, connected public has come into being outside those organizations as a result of popular, easily accessible technology which is associated with pervasive data production, collection.  analysis, and cross-border sharing; that public is made up of "informed" labor which is also the consumer swimming in a deluge of "infotaiment" in an economy where consumer spending is the major element (for instance 71% of the U.S. Gross Domestic Product).
  3. In the 21st Century the world is supporting an aging population; in 1960 persons age 65 and older made up only 5 percent of the world's population while today they make up nearly double that percentage with Europe and North America at 16%. and in 1960 persons under the age of 14 made up 37%,while today they make up 26% which is an 11% drop.
  4. In the Great Economic Lockdown of 2020 well over 20% of labor (including thousands of small business owners) across every developed country has ceased working which means that a comparable percentage of consumers have had their normal income stop as they are the same people; at some point the more fortunate in many nations may receive government funded replacement income created through unprecedented national debt increases which no one has discussed in the context of repayment.
  5. In January before the Coronavirus Crisis was acknowledged in the United States, The Wall Street Journal, MarketWatch, and other new media noted with seeming concern that the Congressional Budget Office projected that by 2030 federal government debt would rise to $31.4 trillion, 98% of the Gross Domestic Product; but on top of an expected $1 trillion current fiscal year deficit, the Great Economic Lockdown of 2020
    • has caused unemployment to surged dramatically, reducing government income flows from payroll taxes;
    • forced Congress to approved three rescue packages, the most recent of which came with a $2 trillion price tag with more packages being discussed;
    • stimulated the Federal Reserve, after injecting $1.5 trillion into short-term money markets and cutting interest rates to about 0 percent, to implementing plans to boost the economy by buying up mortgage-backed securities and government bonds and creating further plans offering up to $2.3 trillion in economic aid to businesses and state and local governments, including extending $600 billion in loans through its Main Street Lending Program to small and medium-sized businesses, offering $500 billion to state and local governments to avoid budget shortfalls and maintain spending on critical relief programs, and collectively offering up to $850 billion to households, employers, and companies through its corporate credit facilities and Term Asset-Backed Securities Loan Facility, much of which is considered potentially unrecoverable unlike the Troubled Asset Relief Program (TARP) of the Great Recession era;
    all of which is expected to push the U.S. national debt, which was was around $22 trillion last year to, beyond $25 billion this year to be considered in the context of even greater debt expansion by other nations around the world.
Again no precedent exists to guide us through to January 2021. In addition to what we don't know about the Covid-19 coronavirus, we do not know how the interplay of the five factors listed above will influence government action attempting a return to economic "normal" and what reactions from labor/consumers will result.

After this pandemic the data will be crunched and costs of preparing for future pandemics, including the costs of creating structures to limit the impacts of those pandemics, will be considered for inclusion into a recovering economy.

The problem is many nation-states are controlled by glib semi-competent politicians served by the "infotaiment" media. And too many are committed to broad free-market policies constraining the possible consideration of government options to intervene in the economy even in a stressful pandemic situation.

Perhaps it is just a well we Americans have an experienced reality TV host as our President as a lack of precedent to guide him through to January 20th, 2021, will not be of concern - his writers can just make things up to suit him. What happens after that is another story....

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