April 29, 2020
Who is selfish enough to ask “what’s in it for me?” Perhaps it might be a good time to reflect on the voices that are calling for an economic shut down and those that are calling for it to be opened up.
The news is now covered with images of people holding rallies to reopen the economy. There are parades of cars with folks from middle America demanding that economies be open. There are middle aged men dressed up in combat gear carrying assault weapons demanding that the economy be reopened. Trump has bemoaned the fall in the economy, and as markets hit bottom declared the ‘cure can’t be worse than the problem itself‘.
Now business leaders like Elon Musk, CEO of Tesla are speaking out too. This morning he put out a tweet saying “Free America Now”, which sounds awfully similar to Trump’s ‘LIBERATE’ tweets from two weeks ago.
It may not be obvious to the casual observer, but those who are in a rush to re-open the economy seem to be intimately tied to that happening. Those who are more cautious seem to have a bigger focus on the human aspects of such a move. These comments are anecdotal to be sure.
That said, PBS released a poll today suggesting that well over 65% of people don’t want to re-open the economy too quickly. Here are the (partial) results:
- Have students return to schools – 85% bad idea
- Have people return to work? – 65% bad idea
- Allow large groups to attend sporting events – 91% bad idea
- Open restaurants for people to eat in them – 80% bad idea
You might be interested in guessing at the motives of these people, but it is hard to do. Here are some key points:
- Trump has touted his expertise at running the economy, and specifically uses the example of a rising stock market as central to his success. There is an election in November that he wants to win. At this point in his term, he has added at least $4 trillion to the US debt so far, and another $2 trillion is likely before year end. That $4 trillion, at the end of last year had resulted in just $3 trillion of additional GDP. (2016 18.7 trillion vs. 21.43 trillion at end of 2019). It is clear that he really, really, really wants the economy to be strong and he is willing to use taxpayer money to make it happen. (This is a key characteristic of a Ponzi scheme too!)
- Tesla has had an amazing run as a company, and many would argue that the financial metrics for the company are obscenely out of sync with reality. Along those lines, the company nearly went bankrupt 2 years ago and as CEO, Musk pulled the company back from the brink, he negotiated an amazing compensation package worth $600MM. If the stock price stays high. By comparison with every other car company in the world, Tesla is very, very expensive. To get paid, Musk has to produce cars.
- More generally however, it is worth noting that about 70% of Americans have less than $1,000 saved. Only about 30% of Americans are participating in the recovery in stock prices, although, of course, substantially more need a paycheck to pay rent and buy food.
It seems a bit odd that the largest cohort of Americans (perhaps those who aren’t participating in the economic benefits of the US economy) are not interested in getting back to work too soon. They seem more interested in health and safety. Unfortunately, once the economy reopens, some may be forced off of benefits if they refuse to return to work. At that point the decision will become a decision about survival.
Perhaps the US government needs a health and safety committee that puts health and safety ahead of increasing wealth for the wealthy.
Here are charts of the growth in cases for Russia and Brazil. Two countries that downplayed the virus and didn’t shut down their economies.
And the US, which initially downplayed the virus, and followed up with haphazard policies.
It is worthwhile to compare this with countries with excellent testing, restrictive shut downs and other very restrictive policies.
Ultimately one has to wonder, “What is in it for me?”. This pandemic is likely to lead to a serious re-evaluation of the ‘value of life’, so it may be time for you to consider where you stand.
Is the economic benefit greater than the health risk, not just for you, but for everyone you come into contact with? What are your responsibilities to your community and family? The human impact may last far longer than the financial impact, and the pain may be even greater.