As I write this we are into the second week of social distancing, in reaction to the pandemic, as is almost everyone I know. We are all worried about family, friends, and community. Where I live, in upstate New York, my local hospital is bracing to accommodate an expected wave of infected patients, and our local businesses are pulling back, when they are not closing. Nothing this disruptive has happened, at least since World War II.
There’s little doubt that the federal response to the pandemic has been too little too late. What seems clear is that we’re at a historical turning point. The psychological trauma of the pandemic is hard to measure, but undeniable. Losses of all sorts among friends, family, and community are only going to escalate.
This is still the easy part. No matter how disruptive and disturbing all this will be, the medical crisis will eventually pass, leaving the survivors with an economic collapse in its wake. The national and global systems of finance, trade, and distribution have ground to a halt. An economy that ran on massive amounts of debt is suddenly insolvent. It’s hard to imagine going back to business as usual.
The old financial system was operated in a top-down way by the Federal Reserve and the banks. It specialized in giving out low-interest loans to corporations and large institutions. A lot of that money–especially since the 2008 crash–went to stock buy-backs, inflated executive salaries, bonuses, speculative hedge funds, bailouts, and real estate investments.
Ordinary people saw little if any of this money. Interest rates stayed high (look at your mortage or credit card rates). Wall Street may have been drowning in money, but not Main Street, which experienced a drought. No ordinary person could hope to start a business, or buy a house or send their kids to college, without incurring an onerous debt burden. The vast inequality of wealth which was evident before the pandemic was already a political issue. Now it can no longer be avoided.
This crisis is an opportunity for much-needed reform. Andrew Yang rose to fame in the presidential election process by calling for a guatanteed minimum income of $1000/month. Now the politicians, including Trump, are calling not only for corporate bailouts but for a similar direct payment to individuals. Yang’s proposal, however, was for a permanent income payment, not a one-time political gimmick to buy people off.
Yang’s point was that automation, robotics, and other efficiencies were steadily eroding the value of labor. Technology, he argued, dictates that there simply will not be enough productive work to provide jobs to support the population at large. Most of us, like it or not, are increasingly economically redundant. This is not because the corporate economy has failed, but because it has succeeded so dramatically in providing more and more goods and services with less and less labor.
The pandemic has exacerbated this situation. The need to put money directly into the hands of people is no longer a matter of only reducing inequality, but of survival. A living wage–presumably adequate to afford basic food and shelter–would bolster demand for goods and services. A fund of direct grants to small businesses is equally necessary for community survival. These steps would revive and sustain the economy like nothing else that could be done. Unlike the inflationary speculative money of Wall Street, the money for Main Street would be well spent on sound basic productive activity benefiting the public at large.
Is giving away money a heretical idea? It certainly has been. Keep in mind, however, that the old financial system did exactly that, though it was mostly hidden behind the mysteries of money creation very few understood. Access to money in the form of the credit went mostly to people already rich in assets and resources. They had the collateral to back up their debts, and the advantage of investing in a growing economy. The rich got richer, and everyone else ended up working for them.
That system had a long run, but it was breaking down long before the pandemic. As long as a large labor force was needed to run the economy, most people could benefit, even prosper. In the early post-war years–the fifties, sixties, and seventies–there were plenty of well-paying jobs to go around, which made possible the suburban American dream. That hasn’t been the case in recent decades.
The new world which beckons is one in which economic security for all is within reach. But to get there will require vision and courage. It will require, above all, a reorientation of values. The selfish libertarian individualism which justified inequalities of wealth may be impossible to maintain in a world in which a few billionaires have all the money and resources, and the general population is left behind. We’ll find out how that works out.