The Year of Magical Thinking

The economy, writ large, is just the totality of all the stuff we make and do. It is everyone’s livelihoods. The economy is not Wall Street. It is not stocks or bonds or bankers or debts. These financial instruments and measurements that we often speak of as proxies for the economy are all second-or-third-order derivatives of the millions of people making, doing, and exchanging things that make up the actual substance of the economy. To believe that money is the economy is to mistake the reflection for the thing itself. 

Think about what the coronavirus has done to the real economy. It has shuttered businesses, and caused the incomes of tens of millions of people to disappear, and has therefore caused all of those people to cut their spending and be unable to pay their bills, which then causes declines in other businesses and in other people’s incomes, and on and on. It is a crisis, but a crisis of necessity. We had to bring on this voluntary economic shutdown to prevent millions of deaths. The government — the only entity that exists to get the public through times like this — has the ability to replace the money that is not being spent due to our self-imposed shutdown, and to get the economy through to the other side of this, more or less in one piece. The government can give money to people to live, and it can see to it that businesses are not forced to declare bankruptcy by the thousands. And it can manage this crisis intelligently, for the good of everyone, so that we emerge with as little damage as possible. 

That simple and rational path is not the path that our government has taken. It has not taken that path because, unfortunately, our government has long been captured by the interests of the rich for reasons that have been well-explained many times before. Instead, our government has pursued a plan that has been extremely competent and generous when it comes to propping up financial institutions and the value of financial assets, but extremely parsimonious and incompetent when it comes to providing an adequate financial safety net to human beings and small businesses. (One technical reason for this is that the Federal Reserve, which can prop up the financial system, has done its job aggressively, while Congress, which is the body that must spend the money to save citizens, has not done its job well at all, primarily because Republicans do not care about saving citizens who are not Republican donors.) You will find no clearer evidence of this dynamic than the fact that the stock market just had its best month in more than 30 years, at the same time that unemployment rose higher than it has been since the Great Depression.

The point I want to make about all of this is very simple: It won’t work. It cannot work, for the same reason that mosquitoes can’t hope to live forever by sucking blood from a dead body. America has allowed a very small group of people to get very rich through rent-seeking — in essence, by collecting a skim off the value produced in the real economy. Now, in a reaction driven by panic and greed, the investor class imagines that it can wall itself off and protect its investment portfolio while millions upon millions of working people are left jobless and helpless. 

This is the magical thinking driving the current two-tiered response to a crisis that is afflicting the totality of humanity. What it ignores is the fact that, when you sweep away all of the technicalities, stocks and bonds are not valuable in and of themselves — they are just claims on a part of the wealth produced by working people. You can prop up the value of financial assets for a while, but in the long run, those assets are nothing without millions of people working and spending and living and making the economy go. Never is the truth of the phrase ​“You don’t make a billion dollars” more evident than when all of the billionaire industrialist’s workers are out sick, and all of his customers broke and unemployed. The rich and their political servants are about to find out the same thing that The Millionaire on Gilligan’s Island did: When times get really tough, that stock certificate is worth less than a single coconut. And you’re going to have to go pick that coconut yourself. 

The cutthroat, gangster version of capitalism that America prefers is simply not equipped to deal with the kind of crisis we are now experiencing. The instinct to save capital and forget everyone else was predictable — after all, this is the instinct that has been driving inequality higher for the past 40 years, a phenomenon that has been working fabulously for the very rich up until now. (The more ​“enlightened” version of capitalism, the sort that is feted at Davos, full of beneficent billionaire philosopher-kings making the world a better place for all, has never been spotted in the wild in the U.S.)

As we know from Charles Darwin’s studies, though, following instincts can often cause extinction. I do not think the grip of the investor class on America’s political system will disappear after this, but I do think that those who believe they will escape this crisis unscathed without being forced to share their wealth are in for a nasty surprise. Bloodsuckers die if their host dies. You cannot continue to rob the working class once you have allowed the working class to become unemployed. When everyone is hurting, the reasonable thing to do is to help everyone. But that would have required the rich to see themselves as part of ​“everyone.” And if they believed they were part of everyone, they never could have justified hoarding so much wealth in the first place. Instead, they will just keep building their own sand castle, too busy to see the tidal wave above beginning to crash.