Because the differences between the 20th Century and 21st Century economies are significant, though not commonly identified, they will become significant elements in the post-pandemic Extended Economic Distortion.
Like most centuries, what is significantly different from the last century is confusing because the source of changes seem to escape clarity. For instance, as late as April 2009 international finance guru Randy Charles Epping's book The 21st Century Economy--A Beginner's Guide
was released to acclaim and was regarded Bookauthority.or as among the "40 Best New Economy Books".
In that book according to one description: "Epping defines key ideas and commonly used words and phrases like carbon footprint, WTO, economy of scale, NAFTA, and outsourcing [and] illustrates how central banks help navigate global crises and drive the global economy, discusses the benefits of Green Economics, shows how trade wars can be avoided...."
Uh, shows how trade wars can be avoided?
One thing 2016 and 1916 have in common is that the economics of the previous century was about to come to an end. In 1916 we had WWI followed by The Great Depression and WWII. In 2016 when Donald Trump took control of the Republican Party and won the U.S. Presidency, he began a nationalist trade war with the rest of the world completely disrupting the norms of the global economy, a trade war that appears to be expanding into hostilities when it comes to China.
Then came 2020's pandemic shutting down travel and commerce for many months - we don't know how many, because it's still going on and does not appear to be on a course towards full recovery. Except for China which, as explained in The New York Times
This was supposed to be the year that China’s export machine began to stall. President Trump had imposed broad tariffs on Chinese goods. Countries like Japan and France pushed companies to shift production from China. The pandemic had crippled China’s factories by the end of January.
Instead, China Inc. has come roaring back.
After reopening in late February and early March, China’s factories began an export blitz that is still gaining steam. Exports soared in July to their second-highest level ever, nearly matching the record-setting Christmas rush last December. The country has grabbed a much larger share of global markets this summer from other manufacturing nations, entrenching a dominance in trade that could last long after the world begins to recover from the pandemic.
China is showing its export machine cannot be stopped — not by the coronavirus and not by the Trump administration. Its resilience lies not only in the country’s low-cost, skilled labor and efficient infrastructure but also in a state-controlled banking system that has been offering small and large businesses extra loans to cope with the pandemic.
The pandemic has also found China better placed than other exporting nations. It is making what the world’s hospitals and housebound families need right now: personal protection gear, home improvement products and lots of consumer electronics.
The irony of this is important to California. As explained here in the lengthy November 24, 2016 post #Calexit. Perhaps 170 years of invidious doubtful scorn is enough
California's early European influence was Spanish trade with Asia:
Effectively the Pacific Coast (and more) of the Americas was left to the Spaniards, good Roman Catholics all, to colonize and they did so from Northern California to Cape Horn.
The first European contact in California was a Spanish sailing expedition, led by Portuguese (?) captain Juan Rodríguez Cabrillo, in 1542, which traveled up the Pacific Coast as far north as the Russian River. Subsequent Spanish expeditions, followed....
In 1565 the Spanish developed a trading route where they took gold and silver from the Americas and traded it for goods and spices from China and other Asian areas. The Spanish set up their main base in the Philippines. The trade with Mexico involved using an annual passage of Manila galleons, which would traverse somewhere near Cape Mendocino, then could turn south down the California coast towards their home port in Mexico.
When the value of California for trade routes became obvious to several other European interests, particularly the Russians whose fur traders were traveling from Alaska down the coast, the Spanish sent the Portola Expedition both over land and sailing up the coast in 1769.
The Portola Expedition's original assignment was to travel to the "port of Monterey" described by the Vizcaino expedition and establish a settlement there. After that, the explorers were to continue north to locate Cermeño's "Bay of San Francisco" (the northern end of which is now called Drake's Bay), chase away any Russians encountered, plant the Spanish flag and determine whether the bay would make a good port.
After the Portolà expedition of 1769-70, Spanish Catholic missionaries began setting up 21 California Missions on or near the coast of Alta (Upper) California, beginning in San Diego. During the same period, Spanish military forces built several forts (presidios) and three small towns (pueblos). Two of the pueblos grew into the cities of Los Angeles and San Jose. And so California became a part of Viceroyalty of New Spain.
Except in the midst of WWII, trade with Asia has been critical for California's economy since the 17th Century. In the past four decades, trade with Asia has been integral to the U.S. economy as a whole. In 2018 Asian trade for the U.S. totaled $1.6+ trillion. In the first six months of 2020 it was $115 billion less.
A new 21st Century economy integral element is the so-called "Gig Economy." For many it is hard to understand the significance of the Gig Economy. Apparently the federal government has no lack of understanding.
There was no hesitation on the part of the federal government as reflected in the red in the chart to the right. Those red bars are the people on Unemployment Insurance (UI) under federal programs established by the CARES Act and some other programs
Under the CARES Act states are permitted to provide Pandemic Unemployment Assistance (PUA) to individuals who are self-employed, seeking part-time employment, or who otherwise would not qualify for regular unemployment compensation.
The important thing to recognize is that news stories such as in today's New York Times
begin with "just over one million Americans filed new claims for state jobless benefits last week" before noting further down on the page "another 608,000 people filed for benefits under the federal Pandemic Unemployment Assistance program."
The truth is last week 1.43 million new unemployment claims were filed, and 42.5% were under the PUA many of whom, if not most, fall under the vague definition of gig workers who were working in the Gig Economy. And it is this subject that also relates to California's history.
If you know about the film industry you know that today actors, writers, and almost all other production folks are effectively gig workers, meaning they don't have jobs until they are hired for specific productions then laid off. Many work enough to get UI for a period, but then must do jobs like wait tables. It wasn't always this way as a 1984 New York Times article
In 1938, Metro-Goldwyn-Mayer had 120 actors and actresses under contract, including Clark Gable, Greta Garbo, Robert Benchley, Dame May Whitty, Judy Garland, and Freddie Bartholomew. Nearly a hundred writers and directors were under contract to M-G-M that year, too. And 1938 was hardly a peak year during the golden era of the Hollywood studio system.
Although the movie industry has often yearned publicly for the old days - Francis Coppola, for example, bought a nine-acre studio in the heart of Hollywood a few years ago in order to re-create the old system, and every decade Universal has announced a ''new talent'' contract program - the studio system, with its old authoritarianism, has stubbornly remained as dead as the dodo bird and passenger pigeon that it followed into oblivion. Mr. Coppola's Zoetrope, which put four promising actors under long-term contract, is bankrupt; and somehow the new talent programs, which tried to do the same thing with beginning actors, never worked.
In the film industry there is some evolved benefits programs through unions for some of the quarter of a million California film industry UI applicants. But that isn't true for the bulk of the Gig Economy that began in the past two decades. Investopedia
lays the subject out straightforwardly:
In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees. A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career.
offers considerably more discussion but gives this piece of critical information:
In the 2000s, the digitalization of the economy and industry was carried out rapidly due to the development of information and communication technologies such as the Internet and the popularization of smartphones. As a result, on-demand platform based on digital technology has created jobs and employment forms that are differentiated from existing offline transactions based on accessibility, convenience and price competitiveness, the so-called Gig economy has become a focus.
Within the overall economy, the Gig Economy has complicated things because as noted in Wikipedia "36% of U.S. workers join in the gig economy through either their primary or secondary jobs." And they are likely the bulk of the 42.5% of new filings for unemployment.
Complicating the matter further, California is in the middle of a policy battle over whether gig workers are should be employees, not independent contractors. It's complicated and the outcome could impact the future of the national economy.
Foreign trade and the Gig Economy are two integral elements of the 21st Century American economy facing significant change. A third is the role of immigrant workers.
We are generally familiar with the nearly-century-old policy debate - perhaps battle - over immigrants, both legal and illegal, who work in agriculture. The Trump Administration has instituted policies that reduce the number of available workers, implying that the goal is zero. That would have a significant impact on the cost of food.
Then there is the complicated issue of the H-1B visa, on which U.S. technology companies have become dependent for workers. The issue is complicated because some companies use those visas to tie workers to a job and pay less than the market wage. But the United States and China are in a growing competition for technological leadership in areas such as artificial intelligence, biotechnology, quantum computing, and other sectors vital to future economic and military prowess. The Trump Administration's has acted to restrict both student and H-1B visas.
In the pandemic with its travel restrictions many actual and potential technology workers have gone home and others have not been able to come to the United States. In effect the pandemic has implemented Trump policies. This is going to disrupt American technology leadership already being effectively challenged by China. It is not clear that this will change in the next few years.
The post-pandemic Extended Economic Distortion is going to result from, among other factors, reduced world trade, reevaluation and potential reorganization of the Gig Economy, and a loss of immigrant worker efficiency and expertise.
A reason for the surprising ease that the early $500 billion in direct intervention for American families passed both houses of Congress. Without it, 17 million people would have dropped below the poverty line. That's why Trump bypassed a stalled Congress with the $300 per week second round add-on to UI.
Getting restaurant and personal care workers back to work is a goal to avoid some potential deep poverty. But post-pandemic economic issues go well beyond the service industry and well beyond the time when a vaccine will push Covid-19 onto the same shelf in people's minds as "the flu."
No historical period exists that is identical to this time. But the sharp deflationary recession across Europe and in the United States known as the Depression of 1920–1921 was stimulated by the return to the civilian economy of troops after the end of World War I.
But it created an economic distortion further twisted by the Spanish Flu and the rise of labor unions. Each country responded differently. Italy's response to the social unrest offers a cautionary lesson for dealing with an Extended Economic Distortion in 2020. We will explore the Mussolini-effect here in the future.