
The Normal Economy Is Never Coming Back - erentz
https://foreignpolicy.com/2020/04/09/unemployment-coronavirus-pandemic-normal-economy-is-never-coming-back/
======
Barrin92
Good grief that's a dramatic article. The economic decline may be stark but
that's what happens when you effectively freeze economic activity. I'm not
really sure why exactly things are never supposed to be the same given that
people still have their training, factories are still around and those can be
reopened once sufficient safety is guaranteed.

There's disruption in supply chains and business formation and whatnot, but I
think it would be better to think about the economy in terms of actual
resources and human capital rather than stock market figures, the former isn't
vanishing into thin air.

There's this tendency to dramatically overrate the impact of contemporary
events. People said the same thing after 9/11 when it came to other aspects of
life, and apart from increased airport security and a few costly wars there
indeed was nothing new under the sun.

The CDC estimated that the swine flu in 2009 may have killed up to half a
million people globally. We'll see what the death toll of this is at the end
but this isn't humanity's first pandemic and it isn't its worst, not by a
significant margin.

~~~
eirini1
I think its funny that you mention 9/11 as an example there because most
people I know would agree that the whole world completely changed after 9/11
(and I'm not even American myself). Both on a cultural and social level, there
is no event before the COVID-19 outbreak that changed the world more.

You are correct - in a world where production was organized on a rational
level, to serve certain needs or desires, the coronavirus outbreak would not
have been as big of an issue. However we live in a world where profit and
markets regulate production, and these are far from rational. Hence, unless
massive changes come to how production is organized, the article has a very
good point and you are the one who is looking at matters much too sober I
think.

~~~
Barrin92
>Both on a cultural and social level, there is no event before the COVID-19
outbreak that changed the world more.

Let's be serious here for a second. We had the collapse of the Soviet Union,
the creation of the internet, the emancipation of women, the civil rights era,
The Great Leap Foward etc. Everyone can name two dozen things _over the last
few decades_ that changed the world more than this.

Currently everyone is behaving like their college aged selves, sitting in
their apartment playing Animal Crossing and ordering pizza for a few months.
Humanity has endured greater change. I think some people need to turn the news
off for a hot second and evaluate if they've gotten a little too soft over the
years. Ask people in Africa if the world has changed, a continent with 25% of
the world's disease burden and 1% of healthcare spending, this is just
background noise over there

------
vearwhershuh
EDIT: Big Oops. This is Foreign Policy, Not Foreign Affairs (the CFR
publication). :/ That explains why they would mention a debt jubilee.

Foreign Policy is the main outlet for the Council on Foreign Relations (CFR),
which is one of the main organizations of the establishment. It is useful to
read to see what the establishment is thinking, although of course one should
not expect too much honesty.

This article is academically hysterical in tone and doesn't say very much,
other than things are unprecedented and central banks are trying things on a
scale never tried before. Of course the problems with globalization (which the
CFR championed) will never be discussed.

It does mention a Debt Jubilee, which is the best option we have right now,
but doesn't drill down on it. It says something about how dire the situation
is that they will even mention it without completely dismissing the idea.

For those of you interested at home, Steve Keen is the economist who has done
the most work on what a fair modern debt jubilee would look like:

[http://www.debtdeflation.com/blogs/manifesto/](http://www.debtdeflation.com/blogs/manifesto/)

 _It makes sense to call instead for a more active, more visionary government
to lead the way out of the crisis. But the question, of course, is what form
that will take and which political forces will control it._

The CFR has consistently advocated for global government, and you can expect
this to be their solution to this crisis.

~~~
8note
I thought Foreign Affairs was the main output from CFR. Do they run both?

~~~
vearwhershuh
Gah, I got it wrong. I'll update parent.

------
simonh
I think an important thing to bear in mind is that we don’t have a choice.
There seems to be a misconception that if we don’t bother with a lockdown and
just carry on as normal, just with a bit of social distancing, that we can
accept higher deaths but save the economy. We can’t. A study of the economic
effects of the Spanish Flu shows that cities which locked down hardest and
earliest actually suffered less long term economic impact than cities that
didn’t[0].

There’s no such thing as an option to “choose the economy”, the Spanish Flu
shows us this. Aside from the millions of deaths this could lead to, and
completely crushing the health care system, there would also be many tens of
millions of people sick and unable to work, plus many tens of millions of
people stuck caring for them. A lot of people would choose to stay at home
anyway, especially as the carnage reached its peak. There’s just no way for
the economy not to take an existentially threatening impact.

This article is shocking, and I believe it’s right, but we need to buckle down
and make some really hard choices about how to tackle this thing. However long
term I am an optimist. The work force should largely survive and our capital
investments still exist. We’ve got used to historically very low inflation,
but a dose of inflation over the next 5 to 10 years could actually give use
the the flexibility to spread out and absorb the costs across the economy and
society. As a fiscal conservative I can’t believe I’m saying this, but there
it is.

[0] [https://www.weforum.org/agenda/2020/04/pandemic-economy-
less...](https://www.weforum.org/agenda/2020/04/pandemic-economy-
lessons-1918-flu/)

~~~
standardUser
Today, Denmark, Austria and Czechia are all beginning to ease their lockdowns
and allow parts of their economies to re-open. Their approach requires a
spectrum of modern technologies and capabilities that were simply not
available 100 years ago. The Spanish Flu may not be the most useful analogy
for us to keep turning to. The last hundred years were a doozy.

~~~
drsim
What modern technologies and capabilities here vs. other places? Living in
Denmark I see the 'success' as being fairly early with simple social
distancing and closing borders.

~~~
simonh
Absolutely. The earlier measures are put in place and the better they are
observed, the less severe they need to be. However for a small country like
Denmark luck definitely plays a part. Looking at the USA there’s no obvious
reason why New York has been so severely affected compared to say Los Angeles
or Chicago, it just depends how early the virus started getting traction. It
seems a small number of very socially mobile people can give the virus a
massive kick-start. There doesn’t seem to be any particular reason why what
happened in Lombardy couldn’t have happened in Denmark.

~~~
drsim
It is curious. I feel that Danes have a strong sense of social, collective
responsibility. High education levels, generous social security net. In a
pandemic my observation is that these things can play a strong role in
stopping the spread (or an authoritarian stance).

------
scottLobster
So to sum up the article:

1\. The shutdown has put a lot of people out of work and closed many
businesses permanently. 73% of Americans have experienced at least some loss
in income as a result.

2\. Most government aid is too little too late to prevent 1.

3\. World economies were stagnating before the corona virus started, even in
the developing world. Now consumers are going to get even more fiscally
conservative, possibly exacerbating the stagnation.

4\. Unprecedented levels of national debt kicks a much larger can down the
road, and we have no idea what that means.

5\. A long, halting recovery is more likely than a sharp V-shaped recovery.

Yes all of that is a problem. Will it result in systemic changes to how we do
things? To a point. Is it going to have killed the global economy 10 years
from now? I doubt it. The only lasting difference might be a cultural surge in
individual savings and drop in discretionary spending, but perhaps a more
secure, slower growing economy is a good thing. It certainly wouldn't be the
end of the world.

------
omgwtfbyobbq
_This collapse is not the result of a financial crisis. It is not even the
direct result of the pandemic. The collapse is the result of a deliberate
policy choice, which is itself a radical novelty._

I feel like the author needs to acknowledge that not making a choice is still
making a choice. Yes, the current situation is the result of a deliberate
policy choice.

The alternative, BAU because a government chooses not to shelter in place,
could also result in a similar economic situation, plus healthcare being
overwhelmed and an order of magnitude (base 10) or more increase in death
rate.

I wouldn't be surprised if the overall economic harm from choosing to do
nothing is greater than the overall economic harm from choosing to shelter in
place. The worst part is, the governments that choose to do nothing can
actually make the economic situation worse for everyone else because they
aren't doing anything to slow the spread of the virus.

------
aazaa
The gist of the article is that there are few historical parallels. That seems
fair.

> ... In a crisis, it is easy to agree to spend money. But that fight is
> coming. We are engaged in the largest-ever surge in public debt in
> peacetime. Right now we are parking that debt on the balance sheet of
> central banks. Those central banks can also hold the interest rate low,
> which means that the debt service will not be exorbitant. But that defers
> the question of what to do with them. To the conventional mind debt must be
> eventually repaid through surpluses generated through tax increases or
> spending cuts.

The most likely outcome is that the debt from the many fiscal stimulus
packages to come (infrastructure, direct payments to taxpayers, tax holidays)
will just stay parked on the Fed's balance sheet.

The US can afford to do this, but only if the Fed commits to pegging the yield
curve through unlimited treasury purchases. The dollar will head much lower,
making US goods more competitive abroad. Nominally, the economy should start
looking better pretty quickly.

So in the short term, it seems plausible that the economy can return to normal
outward appearances pretty quickly.

In the long term, however, the Fed will be left with a balance sheet
approaching or even exceeding GDP. Where that ends up going is anybody's
guess. But historical precedents don't paint a pretty picture.

The joker in the deck is how long the virus crisis lasts. Nobody knows the
answer, so the degree of departure from normal will be a riddle for some time.

------
donclark
I hope and pray that this is the case. This may be the best time for us to
make a change in the way the world works. Our lives have been disrupted, and
we need to strive to make lasting changes for the greater good.

------
fulafel
Corona is small potatoes compared to climate change related changes.

------
avgDev
I just talked to my boss, how radical are the steps the US government is
taking. We have a republican President and senate majority that just agreed to
the biggest stimulus ever and while Trump is giving mixed signals (seems like
he is trying to appeal to investors) there is no end in sight. My boss is a
republican and it also scares him, he agrees that we need to help the people
but the government has access to many great minds and they know more than us.

My wife is a marketing director at large mall, and honestly I am trying to get
her to switch either to digital marketing, or programming. Retail is going to
suffer for a long time, and it has been suffering for years. When we start
going back to normal, I expect retail traffic to be down or government may
enforce rules limiting number of customers. People will have less money, less
confidence and retail will be the last place where people spend money.

Plus, our world is very complex, air traffic is down, fuel usage is down,
plane orders are down, manufacturing is down, freight deliveries are down then
cuts are going to be made to non-essential departments across different
sectors. I am a dev in manufacturing, and so far I think I'm safe. However, I
have a friend in IT, they service large retailers.....he thought he was safe,
his company just announced a hiring freeze as some clients are looking to get
out of contracts as they are 100% not operating.

My comp sells products directly to larger manufacturers our orders March were
down 25%, and April could be as much as 30-40%.

------
jshaqaw
Maybe. The author of this article wrote a book on how a decade of financial
crises changed the world. Everyone who writes a book seems to try to shoehorn
the current crisis into a blurb pitch for their last book.

------
PeterStuer
OTOH Prepare for the Ultimate gaslighting

"Pretty soon, as the country begins to figure out how we “open back up” and
move forward, very powerful forces will try to convince us all to get back to
normal. (That never happened. What are you talking about?) Billions of dollars
will be spent on advertising, messaging, and television and media content to
make you feel comfortable again. It will come in the traditional forms — a
billboard here, a hundred commercials there — and in new-media forms: a
2020–2021 generation of memes to remind you that what you want again is
normalcy."

[https://forge.medium.com/prepare-for-the-ultimate-
gaslightin...](https://forge.medium.com/prepare-for-the-ultimate-
gaslighting-6a8ce3f0a0e0)

~~~
partiallypro
I think a lot of people insulated from the current fallout have this view, but
a lot of people...the majority of people, do want to "get back to normal." We
are also operating a short time frame. Right now what is going on feels fine,
for the insulated, but that will deteriorate as this drags on and the longing
for "how it was" will intensify. I actually don't think a lot of these think
pieces will end up being correct, and we will largely be back to "normal" with
some cultural adjustments.

~~~
PeterStuer
The problem with 'normal' is it was a planet destroying sickening consumption
madness with a majority on psych meds or other substances to numb the pain.

Surely this pandemic is far from ideal, but can't we stop and think about a
few things we perhaps need not return to?

~~~
new2628
This is an important point, a pity it is downvoted without any argument.

Off the top of my head: Formula 1, Eurovision, auto shows, most spectator
sports. I wish they all took a slightly longer hiatus.

------
seph-reed
> The longer we sustain the lockdown, the deeper the scarring to the economy
> and the slower the recovery. In China, regular economic activity is inching
> back.

I found this quote note-worthy.

------
yters
Is there any damage to priming the population to give up significant liberties
if a crisis can be portrayed as serious enough?

------
LoSboccacc
fault is not the coronavirus, is the massive delocalization.

and the solutions are known, but the political landscape is too fragmented for
the required corrective actions

------
mlthoughts2018
I haven’t seen much analysis of the possibility that most of the rapid job
losses are in areas of the economy that just don’t matter much for aggregated
productivity or economic health. Essentially, we really had ~10% “unproductive
employment” or “discretionary employment” all along, and the virus just
highlighted what was already there.

Taking that group of previously employed people out of the labor market just
doesn’t have a big side-effect. The spending they otherwise would have engaged
in had they kept getting paychecks would is just not a significant amount of
spending except in a few cases here or there, it’s not systemic, just a
downward adjustment. Lots and lots of small shops, restaurants, pet groomers,
or freelancers might not get jobs back, and things become a bit inconvenient
for everyone else but life moves on, the general backbone of the economy is
pretty much unchanged. Just about the same volume of food & staples, energy,
rent, repairs, education, and entertainment will be purchased as before, set
back by ~6 months of lost revenue.

Obviously for the actual people laid off, it’s a disaster and they personally
deserve economic help to sustain to find new work and have medical care
throughout.

But the experience of this group of people isn’t the experience of the overall
economy.

I have no idea if this is even remotely correct or what, but just feel like
nobody is playing devil’s advocate and analyzing the economy this way just to
investigate.

What if it’s just true that there’s a pretty large layer of the workforce and
employers that could disappear overnight and the economic response from
everyone else is just that it’s sad but fine? We’d love the luxury of lots of
coffee shops, start-ups, self-employed fringe service gigs, but at a moment’s
notice you can take all that away and it’s fine. Those weren’t ever really
real jobs, just floating “good times” jobs already not factored in much to
stock market speculation or core economic growth and productivity.

~~~
soared
The basis for your argument is incorrect though (regardless of opinions after
it). Its not only small shops, restaurants, etc who are losing jobs. High
skill workers, highly paid tech employees, etc are losing jobs as well. You
can't really make a claim as to when or if those jobs will return, as it could
be years. Even if revenue is the same but 6 months set back, that could easily
mean a 24 month delay in hiring while the company repays debts and recovers.

~~~
mlthoughts2018
I haven’t seen any data or reporting that backs up your comment. I’ve read
about large layoffs in retail, entertainment, hospitality, gig workers, and
startups with poor financials. I haven’t heard of significant layoffs at
established white collar firms with stable business models. I do expect some
impact there, especially in adtech, but I’m not seeing anything like what you
are claiming.

