Economy

Misdiagnosis can be fatal in a pandemic. Treating the economic effects of the global COVID-19 epidemic as a conventional recession means prescribing the wrong medicine and harming the patient. This is a supply-side recession, not a demand-side recession. The shortfall includes intensive care beds, ventilators, protective gear for healthcare workers, and other medical supplies. Thanks to these shortages, as well as insufficient trained medical personnel, hospitals may soon be overwhelmed everywhere by the demands for treatment of coronavirus victims. To slow the spread of the virus while augmenting existing medical supplies and personnel, governments are promoting social distancing and sheltering in place, both euphemisms for quarantine.

The first victim of war, they say, is truth. The first victim of coronavirus, by contrast, is fiscal discipline. Yesterday, President Trump started negotiating with the Senate over a proposal to suspend payroll taxes, possibly until the end of the year. Wall Street certainly liked it: markets shot up by five percent. Whether future Americans will enjoy paying the bill is another matter. The government’s proposal is not just targeted help for a few industries like travel and tourism, which stand to lose out heavily as people stay at home. It is not a modest tax cut to encourage Americans to go out and spend a little more. Even to call it a 'stimulus package' — as these things are pat to be called — seems pathetically inadequate.

What delicious reading it makes going back over Paul Krugman’s missive in the New York Times on the morning after Donald Trump was elected in 2016. ‘Global recession with no end in sight...when are markets going to recover? A first pass answer is never...’ Those words should be carved into a façade somewhere in Wall Street and held up for ever after as an example of hubris of economic forecasters. In liberal circles nowadays there is always misery. The end of the world is always around the corner, where from economic calamity in the global capitalist system, climate change, rise of fascism, AI taking our jobs and creating mass unemployment, or whatever. But let’s get back to the real world for a moment.