Safe from the pitchforks?

OK, I’m done with all these trite catchphrases about all of us being in this mess together.

We’re not. We never have been. And we won’t all be in this together moving forward.

Earlier this month, I argued that, while there may be a utopian moment in the common refrain, the obscene inequalities that are produced by the prevailing economic and social institutions in the United States empty that phrase of any real meaning. I referred, in particular, to the fundamental difference between the conditions of workers who have been forced into unemployment or are commuting to and working in dangerous jobs and those of billionaires who have gotten wealthier and corporations that have been bailed out during the pandemic crisis. The disparity could not be starker.

Yes, I was pretty angry, as I’m sure millions of other Americans were.

And then I read the New York Times article about the people who left New York City as the coronavirus pandemic hit, and those who didn’t. That was it!

Sure, we’d all heard or read stories about the wealthy taking to their yachts and private jets, procuring their own ventilators, availing themselves of concierge testing, and much, much more.

But then the Times revealed that, between 1 March and 1 May, the wealthy managed to empty out of New York City en masse—leaving everyone else behind.

In the city’s very wealthiest blocks, in neighborhoods like the Upper East Side, the West Village, SoHo and Brooklyn Heights, residential population decreased by 40 percent or more, while the rest of the city saw comparably modest changes.

The neighborhoods driving the exodus from the city do not in any way, shape, or form resemble New York City as a whole. The people who left are mostly white in a city that’s mostly not. They are more than twice as likely to have a college degree. These places they left have higher rents and lower poverty rates. And the incomes of residents there are considerably higher: more than half of these neighborhoods’ residents have household incomes of more than $100 thousand, nearly one in three taking in more than $200 thousand, compared to $60 thousand in the other areas, with more one-third earning less than $35 thousand.

I’ve already shown how New York City represented a tale of two cities by comparing the map of where frontline workers live within New York with the map of the confirmed cases of coronavirus in the city. The two were virtually identical.

Now compare the map at the top of the post with the latest map of positive tests for COVID-19. Once again, the maps are almost identical: areas that have the highest rates are also the ones where residents could not escape and go elsewhere. Take, for example, Baychester. It’s a neighborhood geographically located in the northeast part of the Bronx, adjacent to Coop City. More than 95 percent of its residents have remained in place and there are 38 cases of confirmed cases of coronavirus per 1000 population, one of the highest rates in the city. And Gramercy Park, in Manhattan? There are only 8.2 cases per thousand and more than 40 percent have managed to leave the area.

Even if they’d stayed in their upscale neighborhoods—in their expansive apartments and penthouses, with or without their maids, cooks, and nannies—they would have been safer than most other residents of the city. But they didn’t bother. Instead, they abandoned their fellow New Yorkers and headed out of town.

There’s nothing about the pandemic crisis that has treated people equally. On the contrary! The infection rates as well as the consequences of the economic response merely reflect the already obscene levels of inequality that preceded the arrival and spread of the pandemic in the United States.

And, if anything, all signs point to a worsening of those inequalities over the course of the pandemic crisis.

I know, that’s hard to imagine. But if this unequal emptying out—of New York City literally, and of the country metaphorically—doesn’t make people mad as hell, I don’t know what will.

Cartoon of the day

Special mention

 

Generation screwed—and screwed again

You know your generation’s screwed when even Monopoly is mocking you.

Back in 2016, I argued that Millennials were in fact generation screwed.

For example, in 2010 (when some of them were 20 to 24 years of age), their unemployment rate was 17.2 percent, much higher than the already high national average of 9.9 percent.*

Partly because of the difficulty they had finding jobs, but also because they have been saddled with high student and healthcare debt, the typical Millennial family lost ground between 2010 and 2016, falling further behind the typical wealth lifecycle than any other birth cohort. According to the Federal Reserve Bank of St. Louis (pdf), a typical 32-year-old family respondent in 2016 (born in 1984) was 34 percent ($12,000) below the 32-year-old benchmark established by earlier generations.

No wonder Hasbro decided to lampoon their inability to purchase real estate.

Still, the authors of the report thought there were grounds for optimism, since “These families have many more years to earn, save and accumulate wealth.”

Except now, according to Vox (first in early April and now in May), Millennials have been screwed again.

As someone on the tail end of the millennial generation, I was lucky enough to still be in school when the 2008 recession hit. Yet financial anxiety has been an omnipresent part of how I see the world. It feels as though the one-time hallmarks of adulthood — buying a house, having kids, stability, even thinking about these things — are no longer milestones, but irresponsible dreams. Meanwhile, millennials older than me, many of whom are in their 30s and began their job searches in the thick of the 2008 recession, are even more financially fragile.

In fact, Millennials have every reason to be concerned, about their present and their future. They (and the next younger cohort) appear to have been most affected by furloughs, layoffs, and pay cuts in the midst of the current economic crisis. Moreover, we know that those making less money and those working in certain sectors (such as hospitality, restaurant services, and retail trade) have been more likely to be laid off than other, often older workers. And yet still Millennials have to continue to pay off their student loans and healthcare debts and make their rent payments.

The last time I analyzed the situation of Millennials, I discovered they were more inclined to identify as members of the working-class (and not, for example, as middle-class) and more critical of capitalism than previous generations.

I wonder now, when they’re being screwed a second time in their short lives, how they will identify and what economic and social arrangements they will end up criticizing.

Millennials still have plenty of time, if not to accumulate wealth, at least to change the world.

 

*For the sake of comparison, the difference between the two unemployment rates in 2007 was only 2.8 points.

Are we all in this together?

It must be confessed that though the plague was chiefly among the poor, yet were the poor the most venturous and fearless of it, and went about their employment with a sort of brutal courage; I must call it so, for it was founded neither on religion nor prudence; scarce did they use any caution, but ran into any business which they could get employment in, though it was the most hazardous. Such was that of tending the sick, watching houses shut up, carrying infected persons to the pest-house, and, which was still worse, carrying the dead away to their graves.

— Daniel Defoe, A Journal of the Plague Year

I’m almost sick of hearing the refrain, “We’re all in this together.”

I say almost, because I do think there’s a utopian moment in that phrase in the midst of the current pandemic. It speaks of solidarity, of being in common, of paying attention to and honoring healthcare workers and others who are currently laboring in “essential” activities while the rest of us are instructed to stay at home. In that sense, it betokens—or at least aspires to—a thinking about and caring for others.

Otherwise, and this is why I’m getting tired of it, the expression serves to deflect our attention from and to paper over the obscene inequalities that afflict American society. I’m referring not only to the pre-existing unequal condition in the United States—the sharp fissures and enormous chasms that have been highlighted by the pandemic—but also to the ways the gap between the haves and have-nots has played an important role in actually causing the spread of the dreaded disease, as well as to the possibility those inequalities will only get worse as a result of the pandemic and the way the response to it has been devised and implemented in the United States.

It has now become almost commonplace, at least within the liberal mainstream media, to note that the unfolding of the novel coronavirus pandemic and the ensuing economic crisis have focused a spotlight on the grotesque inequalities that preceded their onset. With every day that has gone by, it has become clearer that the spread of the virus has been profoundly lopsided and uneven—from access to testing and decent, affordable healthcare and who’s been able to shelter in place to the presence of underlying “comorbidities,” all of which have made the virus both more prevalent and more lethal among working-class Americans, including African Americans, who have been left behind.

The pandemic has also brought with it an economic crisis—and that too has reflected existing inequalities. On one hand, tens of millions of low-wage workers have been especially vulnerable to layoffs, with restaurant and retail workers especially at risk, increasingly obliged to acquire sustenance for themselves and their families in the country’s understocked food pantries. On the other hand, millions of other workers—who drive buses, care for hospital patients and the elderly, pack and transport commodities, take their places on the assembly-line in slaughterhouses—have been forced to have the freedom to continue to commute to and labor at their jobs in perilous conditions, increasing the risk of contagion to themselves, their families, and the communities in which they live.

Meanwhile, the former or current employers of those same workers have been lining up to receive loans from private banks and through the various government bailouts, with few of any restrictions (e.g., on stock buybacks and dividends payments to shareholders) and high-profile chief executives of corporations have announced voluntary salary cuts, which turn out to be nothing more than publicity stunts.

Not only do the consequences of the pandemic appear to reflect existing inequalities. It also seems to be the case that those same inequalities are acting as multipliers on the coronavirus’s spread and deadliness. It is no coincidence that the United States, with the most unequal distribution of income and wealth among rich countries, also has the highest number of confirmed cases of and deaths from the coronavirus. One reason is that, as inequality has increased, health disparities themselves have widened—and lower-income Americans are much likelier than those at the top to have one or more chronic health conditions, thus exposing them to more risk from the coronavirus. Moreover, those same people are the ones who have been continuing to work in their “essential” in-person jobs, which require more contact both with other workers and customers. In other words, workers, who have more health problems and less health care, are at greater risk of transmission.

The pandemic under extreme inequality thus involves a devastating feedback loop, for workers and society as a whole. The people who can least afford it, given their health and working conditions, are forced into the position of being more exposed to contagion and becoming agents of transmitting the disease to others—in their workplaces and households and in the wider community.

And there’s another feedback loop, or cycle of injustice—from existing inequalities through the uneven effects of the pandemic to even more inequality in the future. As Charlie Cooper has argued,

With social distancing here to stay for the foreseeable future, it’s becoming increasingly clear that the next stage of the pandemic is going to change many lives for the worse.

Specifically, it’s going to exacerbate existing inequalities, as the privileged buffer themselves against its pernicious effects while the world’s most vulnerable struggle not to fall through the rapidly widening economic fissures.

For one thing, even after recovery from the immediate affliction, the coronavirus infection may cause lasting damage throughout the body, thereby worsening both the health and economic activity of some (still unknown) portion of an entire generation.

On top of that, the effects of the economic crisis, with tens of millions of workers furloughed or laid off while banks and corporations are bailed out and the stock market is on the rebound, may be even worse than those of the Second Great Depression. Let’s remember that, aside from a brief hiatus (in 2009), the trend of growing inequality that preceded the crash of 2007-08 was quickly restored during and after the so-called recovery.

For example, in 2007, the top 1 percent of Americans captured 19.9 percent of pretax national income (the blue line in the chart on the left), while the bottom 50 percent had only 13.7 percent (the red line). By 2014 (the last year for which data are available), the percentages were 20.2 and 12.6, respectively. The story of wealth inequality is even more dramatic: while the share of wealth owned by the top 1 percent (the red line in the chart on the right) grew from 34.1 percent in 2007 to 36.6 percent in 2016, the tiny share owned by the bottom 50 percent (the blue line) barely changed, rising from 0.3 percent to 0.4 percent.

Since we’re only at the beginning of the current crisis, we still don’t know what the final results will be. Even a quick, V-shaped economic recovery (about which I have my doubts) would still be accompanied, according to current modeling, with millions of cases of coronavirus and 100 thousand or more deaths, spread unevenly within the U.S. population (especially now that the Trump administration is set to dismantle its coronavirus task force). While the effects of a longer and more severe downturn—a third economic depression, perhaps—will likely be characterized, especially since there have been no major policy changes compared a decade ago, by the same kind of unequalizing dynamic.

All signs, then, point to the fact that existing inequalities will give rise, on their own and through the consequences of the pandemic, to even more obscene levels of inequality in the future—unless, of course, there is a profound change in the way the American economy and healthcare system are currently organized.

Undoing those inequalities is the only way of ensuring that, in reality, “we’re all in this together.”

Cartoon of the day

Special mention

 

Cartoon of the day

Special mention

 

Poll of the day

While we keep hearing the catchphrase “We’re all in this together,” most of us know we’re not.

Not in terms of the novel coronavirus pandemic. And even less in terms of the economic crisis caused by the response to the pandemic.

Just consider the lines that have formed. The lines of workers who are being subject to dangerous conditions while they commute to and labor in “essential” services and production; the lines of other workers who have been furloughed or laid off, who are waiting for their claims to be processed; the lines of the poor and needy waiting outside food pantries—their lives and livelihoods were precarious even before the pandemic. And now they’re even worse.

As it turns out, to judge from a survey conducted by Harris Poll and Lehigh University (pdf) in early April, the vast majority of Americans are well aware that something needs to be done to address the obscene levels of inequality in the United States. In response to the question “how important is it that the U.S. government commit to reducing economic inequality (i.e., the unequal distribution of income and opportunity between different groups) in this country within the next year?” 78 percent consider it to be somewhat or very important, while only 22 percent think it’s not very or not at all important. And those numbers are pretty consistent across different groups: gender, age, region, income, education, and so forth.

What that means is that the terms of the current debate—stay at home or reopen the economy, bail out corporations or states, and so on—miss the point entirely. What the vast majority of Americans want is for their government to commit itself to reducing the grotesque levels of economic inequality that preceded the pandemic, which have been highlighted by and only gotten more obscene during the current economic crisis.

Chart of the day

A new report from the Institute for Policy Studies, “Billionaire Bonanza 2020: Wealth Windfalls, Tumbling Taxes, and Pandemic Profiteers,” reveals that the wealth of U.S. billionaires is indeed staying at home.

Since 10 April 2020, there’s been both an increase in the number of billionaires (to 629) and a surge in billionaire net worth. Billionaire wealth increased $282 billion, or 9.5 percent, in just 23 days, bringing the combined net worth of the billionaire class to $3.229 trillion.

That’s on top of a dramatic increase in both the numbers and total wealth of U.S. billionaires for the past three decades. In 1990, 66 U.S. billionaires held a total wealth of $118.8 billion, or $239.56 billion in 2020 dollars. The United States, by the beginning of this year, hosted 614 billionaires with a total wealth of $2.947 trillion.

And the rest of us? While U.S. billionaire wealth soared by 1,130 percent since 1990, median household wealth increased by only 5.37 percent.

As the authors of the report argue,

If expanding billionaire wealth “lifted all boats” and created, in effect, a society that worked well for everyone, we could perhaps afford to worry less about billionaire fortunes. But the number of households with zero or negative wealth. . .is increasing. Our society is most definitely not working for all of us. A high percentage of U.S. households are living on the edge, paycheck to paycheck. The current pandemic is exposing our central economic and social reality: Extreme wealth inequality has become America’s “pre-existing condition.”

The comorbidity of dramatically increasing wealth inequality and economic precarity for a larger and larger number of American workers has made it difficult, if not impossible, to mitigate the economic and social effects of the response to the novel coronavirus pandemic in the United States.

Crisis and recovery—pandemic edition

In retrospect, I can now recognize that we were both right and wrong, as is always the case when one tries to look into the future.

— Henning Mankell

Regular readers of this blog know two things about me: I don’t make predictions. And I use these posts not to pronounce firm conclusions or solutions, but to try to work through the issues and clarify my thinking.

So, think of this as an exercise in trying to make sense of the ongoing debate concerning the shape of the recession and the speed of the recovery from the severe economic crisis induced by the response—by U.S. corporations, banks, workers, various levels of the government, and others—to the novel coronavirus pandemic. Nothing more.

Moreover, I don’t have or offer a single theory of capitalists crises, no set of “laws of motion” that inexorably (in either the first or last instance) work themselves out to produce every recession, depression, or other economic meltdown within capitalism. For me, every crisis is a singular event, which requires a conjunctural analysis—and this one is no different.

That said, I think we can all agree that the current crisis is severe—in terms of a variety of indicators, from the projected decline in Gross Domestic Product to the current and projected additional rise in unemployment. It’s probably the most dramatic since the first Great Depression of the 1930s, and therefore worse than any of the eight other economic downturns (including what I have called the Second Great Depression) since 1960.*

The big question is, how long will it last—that is, will American capitalism rebound and how quickly will that occur?

That’s the question that seems to be on everyone’s minds these days, from Donald Trump and the right-wing anti-shutdown protestors through businesses and banks both large and small to the millions of workers whose lives have been decimated either by being laid off or being forced to have the freedom to continue to work under conditions that imperil their health and lives.

And the stakes couldn’t be higher. In Trump’s case, for example, a quick recovery increases his chances of reelection in November—although that might not work out exactly as he hopes if reopening the economy prematurely means thousands more American deaths. A longer downturn, on the other hand, calls into question capitalism’s resilience, highlights even more the grotesque levels of inequality that characterize the United States, and serves to legitimize more generous government-sponsored social programs (including, e.g., a universal or unconditional basic income) to mitigate the effects of the crisis on workers, their families, and their communities.

So, what will the COVID-19 recession look like: will it be V-shaped, U-shaped, or W-shaped (to use the alphabet soup most recently discussed by David Rodeck)?

One possibility is for a relatively quick, V-shaped downturn and recovery such as occurred in the early 1990s (starting with a recession that lasted for 8 months, from July 1990 to March 1991, followed by a relatively speedy recovery).

It’s a rosy forecast that has been offered by such theoretical and politically different economists as Gregory Mankiw (putting on his optimist cap) and Dean Baker, as well as a couple of my friends (in private communications). The basic idea is that the crisis was caused not by capitalism’s “inner workings” (such as the bursting of a speculative bubble or a decline in the profit rate), but by the pandemic and the government-mandated shutdown of businesses. So, the logic goes, as soon as the shutdowns are lifted, businesses will reopen, workers who were furloughed or laid off will head back to their employers, and spending (both consumption and investment) will rebound.

In other words, capitalists will be able to bury the bodies (both literally and figuratively) and get back to business as usual—although it’s quite possible, even then, that U.S. capitalism itself will look quite different (with increased concentration, especially in the retail sector, and even more inequality).

A second, less-optimistic picture is a U-shaped cycle, with a prolonged downturn and extended trough, and thus a delayed recovery—something like the United States experienced during the Second Great Depression (the so-called Great Recession itself lasted 18 months from peak to trough). Here, we’re talking about a much longer decline in economic growth (comprising 5 quarters of negative real GDP growth, from early 2008 to mid-2009) with soaring unemployment (reaching a peak of 10 percent), and, of course, an almost complete meltdown of the financial sector.

We don’t yet know how severe economic growth is or will be (although the authors of a recent National Bureau of Economic Research working paper forecast a year-on-year contraction in U.S. real GDP of nearly 11 percent as of the fourth quarter of 2020, while the 90-percent confidence interval extends to a nearly 20-percent contraction) but unemployment is already at an alarming level (18 percent, by my estimate) and will no doubt increase in the coming months.** Moreover, it’s quite possible that many of the workers who have been furloughed or laid off will not soon be reintegrated into their previous jobs or find, at least in the medium term, new jobs. That’s because many businesses will not reopen or will be acquired, as happens during every capitalist crisis, and the remaining businesses will resume with smaller workforces (e.g., because of automation and speed-ups). And, of course, certain sectors (such as transportation and any activity that involves large gatherings, such as professional and collegiate sports) will likely reopen very slowly.

In addition, a recent study suggests that forecasters (both researchers and government agencies) tend to be too optimistic about when recession recoveries will begin, which means the return to a normal economy could be slower and bumpier than many economists are currently predicting.

Finally, we still don’t know the likely trajectory of the pandemic, both within and across countries. Especially as tentative steps are being taken to reopen the U.S. economy, it’s quite possible, without widespread testing and an effective vaccine, that we’ll see a second or third wave of COVID-19, which will require new shutdowns.***

That leaves us, then, with a third possibility: a W-shaped recession and recovery, such as took place in the early 1980s, with an initial downturn (from January to July 1980) followed in short order by a second, more severe one (from July 1981 to November 1982).

Such a double-dip recession, with a short recovery inbetween, might occur if the economy is reopened and pent-up demand (for everything, from cars to the commodities in brick-and-mortar stores and restaurants) leads to a surge in consumption, but the initial recovery is disrupted by households attempting to rebalance their finances (e.g., to pay for healthcare and to make up for foregone paychecks) and businesses that, after selling off their inventories, curtail both new purchases and longer-term investment projects in the face of considerable uncertainty. That would mean a new round of furloughs and layoffs, even without new waves of the pandemic.

Of course, if the novel coronavirus does get out of control again (e.g., as recently happened in Singapore), either because of its spread from one region to another the United States or because of outbreaks abroad (which in coming months may be experiencing only the initial stages of the pandemic), then the likelihood of a W-shaped cycle would increase.

As I wrote at the top, I don’t make predictions, and I have no idea which of these three possibilities is most likely. What I do know is that the existing way of organizing economic and social life in the United States, which was already inflicting its pains and punishments on most of the American people while favoring a tiny group at the top, has proven to be even more poorly equipped to handle a pandemic. The public healthcare system, notwithstanding the heroic work of its workers, has clearly come up short. And the way the system has stranded workers and the owners of small businesses, who have barely benefited from the bailouts that have mostly favored large banks and corporations, has made a terrible situation even worse.

Regardless of the depth of the recession and the speed of the recovery, the real debate in the months ahead will center on one question: what fundamental changes need to be made so that, in moving forward, the grotesquely unequal imposition and shifting of burdens favored by American economic and political elites can finally be eliminated?

 

*The designation of a recession is the province of a committee at the National Bureau of Economic Research. Contrary to popular belief, which equates a recession with two consecutive quarters of negative GDP growth, an NBER recession is a monthly concept that takes into account a number of monthly indicators—such as employment, personal income, and industrial production—as well as quarterly GDP growth. And just to be clear, the NBER does not have or utilize a separate category or metric for capitalism’s depressions.

**According to a newly released poll from the Pew Research Center, 43 percent of American adults say their households have suffered a job loss or a cut in pay since the start of the coronavirus crisis, marking a 10-point increase from a month ago. Among lower-income adults (with annual incomes less than roughly $37,500), an even higher share (52 percent) say they or someone in their household has experienced this type of job upheaval.

***The CDC is now warning that a second wave of the novel coronavirus later this year may be far more dire because it is likely to coincide with the start of flu season.

Chart of the day

According to a newly released poll from the Pew Research Center, 43 percent of American adults say their household has suffered a job loss or a cut in pay since the start of the coronavirus crisis, marking a 10-point increase from a month ago.

Among lower-income adults (with annual incomes less than roughly $37,500), an even higher share (52 percent) say they or someone in their household has experienced this type of job upheaval.

Latinx Americans are particularly hard hit, with 61 percent of them saying their households have suffered financial losses because of the crisis, in comparison to 44 percent of black adults and 38 percent of whites.

In addition to being the hardest hit by the economic fallout from COVID-19, lower-income adults are less prepared to withstand a financial shock than those with higher incomes. Only about one-in-four (23 percent) say they have “rainy day” funds set aside that would cover their expenses for three months in case of an emergency—such as job loss, sickness, or an economic downturn—compared with 48 percent of middle-income and 75 percent of upper-income adults.