There have been some fascinating pieces of high-end journalism circulating from folks I’ve not been able to read or listen to for some time: probably because of the loud din of garrulous trivia our own politics has itself hooked on for the last few years.
If the local political jibber-jabber has begun to take a backseat, as we try figure the best way to tackle the disease and its repercussions, perhaps then we’ve also got a little time and a little space to actually do some fresh thinking about the kind of future we want.
I suspect what comes after the Covid19 crisis will be as challenging as facing down the disease itself. But, for now, the shock itself is causing a change of gears in a range of folks with different views on the effects of shuttering the global economy.
Adam Toose in Foreign Policy, writes:
The economic fallout defies calculation. Many countries face a far deeper and more savage economic shock than they have ever previously experienced. In sectors like retail, already under fierce pressure from online competition, the temporary lockdown may prove to be terminal.
Many stores will not reopen, their jobs permanently lost. Millions of workers, small-business owners, and their families are facing catastrophe. The longer we sustain the lockdown, the deeper the economic scars, and the slower the recovery.
For a thoughtful perspective from the Australian right, former Australian Deputy Prime Minister, John Anderson says this is a time for a radical rethink on a personal basis on what we think we are doing with the economy…
…perhaps we’ve had some shocking insights into what really serious phenomena collapses due to people’s lifestyles their job opportunities and all of those sorts of things I mean you’ve had the coronavirus is one example. We can now, if we’re honest, see that the one-party state is hardly something we want to live under.
Just perhaps, to the obsession with climate change, I’m not saying it’s not important but I am saying that the one-track mind that had everybody so focused on it, that they missed this train coming at us, will sober us up a little bit and make us determined to rethink our own freedoms, rethink our own prosperity and the desirability of being able to afford things and think of our own children.
It seems to me though that until we are willing to to to pull together and focus on our common interests and stop dividing over everything that divides us in the West. In our cultures that’s almost impossible but I hope to find the sort of leaders, you know, good strong people who can with high intelligence and with deep knowledge and with deep courage to take us forward.
[But] we have to be worthy of them if I can put it that way. In other words, we’re being held back economically by what we’ve allowed ourselves to become socially. [Emphasis added]
That’s a perceptive thought coming from a former senior politician.
He is right about the dangers of continuing to polarise through a global shock like this, not least because it is unlikely to be the last one we are going to have wash up on our global shores. Not so much a black swan as a grey rhino says Ferguson earlier.
Ferguson also raises a question over a public administration that apparently was well aware of all the dangers of a pandemic and on paper had a plan to manage it. He throws his arms up in frustration with the issue of big government.
Big as in the federal US? States, like New York and Masschuchets, are locking down to get their citizens the biosafety and/or resources they need to them. Papers written at the federal level beforehand were either ignored or never resourced by the Treasury.
Or small, as in the Federal Republic of Germany, who’s constituent states are generally politically and culturally coherent enough and have the capacity to plan and prepare on a much smaller and more tightly knit community by community basis.
But looking at what’s gone wrong in the US, Mark Blyth from a more leftist point of view hits several nails on the head here (and which I quote at length in the rough transcript below the video):
Economically we don’t know where we are, but if you look at the way that different countries are put together the United States is kind of like a Mustang: no airbags, big engine, straight down the road. Fabulous.
If you crash in it you die. Western Europe is like a Volvo; it’s a lot safer, clunkier and it’s not as much fun, but you probably want to be in one when there’s a car crash.
Huge amounts of [US] businesses have not just a liquidity problem but solvency problem and that goes through them again to the growth model and the very structure of American companies.
But here’s the question: why did we have to bailout Cruise Lines and why do you have to bail out Airlines? The short answer is: because American business runs with no cash.
There’s a lot of stuff in the press just now about share buybacks.
If you look at companies buying back shares and then look other people and other things buying shares then about 90% of all the action in the stock market over the past ten years has been companies buying back their own shares
In other words, it’s a giant Ponzi scheme. They get in revenue, they take out what they essentially have to do for investment. Any free cash flow is then used to buy back the stock. That increases the earnings per share.
That’s the key metric, which boosts the price and then they award themselves huge bonuses. Then the whole company has no cash buffer, so when anything like this comes along, you know the old business adage of always have 90 days in cash and 90 days in the bank, forget that.
We’ve been running the whole economy on razor-thin margins and the assumption you can always have access to credit.
The airline figure is astonishing. I think it is 94% or 96% of their free cash flow (which means all of your profits minus what you put into things like buying planes and new uniforms and occasional pay increases). It’s $48 billion.
All of that went into buybacks and guess what they got as a bailout? $50 billion. It really is crony capitalism on an astonishing and epic scale. [Emphasis added]
This in part goes to Anderson’s earlier observation of what we have become socially (heavily dependent on fragile just-in-time supply, endless credit, and driven on by instant opinions matrices like Twitter) knocking into our economies and wellbeing.
This applies to some extent everywhere. But in particular, it explains why the US economy (as well as public health) has been so quickly compromised by the shutdown. Like the Mustang, it is maximised for speed, not safety.
Coming back to earth somewhat, I don’t know which local businesses will survive this, but it will come down to solvency since liquidity can be gained by negotiating flexibility from landlords and further up from banks.
But you can probably tell which ones at least hope they will be coming back from their state of economic health going into the crisis. People get tetchy mixing economics with public health when so many lives are at stake.
But if we are to get a decent reset after this is over we have to talk about it now, not later when the default mechanisms (and old habits) may kick in again.
Photo by stevepb is licensed under CC BY-NC-SA
Mick is founding editor of Slugger. He has written papers on the impacts of the Internet on politics and the wider media and is a regular guest and speaking events across Ireland, the UK and Europe. Twitter: @MickFealty
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