Ever hear those annoying ethics hypotheticals where you have to choose between two awful situations to figure out what your ethical theory is? That’s sort of what the economic situation is with this pandemic.
A Berkeley economist Pierre-Olivier Gourinchas put together an argument riffing on the virus-oriented “flatten the curve” graph. In terms of economic impact he finds an inverse relationship between what’s good for the economy and what’s good for public health.
If you increase the shutdown and extend it over time, you can spread out the infections and put less pressure on health infrastructure. The more people stay home for longer, the better you can deal with the virus (flatten the curve).
But if you increase the shutdown and extend it, you also deepen the inevitable economic crisis that occurs when you shut an economy down. The more people stay home for longer the bigger the production crisis.
Kind of a double bind: address the health crisis, extend the economic crisis. What do you do? Gourinchas says three things:
From this perspective, the priority should be:
(a) to ensure that workers can remain employed -and collect their paycheck- even if quarantined or forced to stay home to look after dependents. Temporary layoff assistance is a key component. Without it, it is even unclear whether public health advisories can be followed. Households need to be able to make basic payments (rent, utilities, mortgages, insurance).
(b) to ensure that firms can weather the storm without going into bankruptcy, with easier borrowing terms, possibly temporarily waving tax or payroll payments, suspending loan payments, or providing direct financial assistance where needed;
(c) to support the financial system as non-performing loans will mount, so as to ensure the crisis does not morph into a financial crisis.
These proposals broach the question: what should socialists propose for the mode of production in this crisis? What does a socialist take on monetary and fiscal policy look like?
Progressive economists Saez and Zucman propose a social insurance program where the government is the payer of last resort for stuff. The St. Louis Fed put out a proposal for unemployment insurance and transforming the COBRA program so it can provide healthcare for more people. The progressive Roosevelt Institute has similar proposals but says we should keep states and municipalities in mind.
Socialist political economist Doug Henwood has a bunch of “ambitious” points: create a Reconstruction Finance Corporation to fund a GND, nationalize oil and gas, don’t just focus on finance, infrastructure investment, autoworker programs for clean car production.
$2K immediately for every person in America; – Eligibility includes children, undocumented; ppl in US territories – Distributed through prepaid cards (mailed/available at bank or postal office) – Funded by Treasury minting 2 coins worth $1T each.
A trillion dollar coin!
I think we could take the fight directly to capitalists more, rather than only rely on state measures. Socialists could call for every CEO to follow Marriott and Love’s Gas Stations CEOs and reduce CEO pay to zero and provide raises, bonuses, and healthcare to all workers. We could also organize to force companies to follow what AT&T did last week, and not take bailout money to buy their own stocks. Finally, given the way liquidity and the bond market is going, we may want to think about expropriation.