Coronavirus — The Looming Economic Emergency

by Marcus Otono

We have established and supported our position on the crisis of capitalism engendered by COVID-19 in two previous, detailed articles on the subject. Our position was and is simple. The capitalist system in the United States is more concerned with the “health” of the owners’ profits than it is with the health of the workers that create that profit. We further asserted that the reopening of the economy at the time that it was being foisted on US workers in late April and May of 2020, over the objections of a majority of the workers and citizens, would lead to another spike in viral infections and deaths. Unfortunately, we proved to be prescient in both cases. A choice between profit for the owners and preventing death for the workers is no choice at all for the ruling class. Profit always wins.

Not that it took the psychic powers of Nostradamus to make these predictions. The cruel history of capitalism, especially the neo-liberal version of the Washington Consensus first advocated by Ronald Reagan in the early 1980s and sealed in place by Bill Clinton in the 1990s, showed in a bi-partisan manner that people don’t matter. The Divine Right of Unfettered Markets would not stand for the long lockdown that would be needed to really get the virus under control. And so, it has become that there is a Grand Reopening of business across the US. Most public health officials and the common sense of the American public knew the result of a spike in infections and deaths was in the cards while it was happening. Fully two-thirds of the population, as shown by reputable polls at the time, showed that Americans were afraid that the reopening was happening too soon and before the public health crisis had been brought under control. Events have shown that we were all correct in our fears.

Public Health Update

The focus of this article is not really on the health crisis of COVID-19. Although that is dire and getting worse, this piece will focus mostly on the impending disaster of the of the next six weeks on the economic well-being of the working class in the USA if nothing is done.

Of course, that doesn’t mean that we can ignore the public healthcare side of the crisis. After all, the healthcare crisis and the economic crisis are intertwined problems, each feeding the other. And the healthcare side of the equation is not looking good at all. The US is currently at over three million confirmed infections and over 140,000 deaths. To gain some perspective, the US has 4% of the world’s population, but has 25% of infections and deaths from COVID-19. It is also likely that both of these numbers are a fairly severe understating of the real scope of the problem because of the lack of widespread testing, both early in the pandemic and right up until today. Many states have become hotspots where the virus is spreading rapidly after re-opening because of this lack of testing, no doubt downplaying or even denying the severity of such. And although some local authorities, mostly city mayors and a few governors, have attempted to put the genie back in the bottle by reimposing some restrictions, none, at the time of this publication, have re-instituted the full scale lockdowns that did the most to curb the spread of the virus in March and April.

All of these problems in the public health sphere have been exacerbated by the lack of national, regional, and statewide leadership and planning, as shown by Trump and most of the state governors. Trump has been a cheerleader for reopening and downplaying the severity of the virus all along and most of his fellow Republican governors have followed his lead. The grunt work of fighting the infection rate has been borne by the big city mayors for the most part, many times actually hampered by state governors who have overruled them when it comes to instituting necessary measures for public safety. Like in Georgia where Governor Brian Kemp has even overruled city mandates on the wearing of masks. And even when and where the mayors have acted, they haven’t taken the same measures that were the most effective in slowing the virus spread in March and April. In short, the political decision to reopen the economy has not really been overturned, only slightly modified in some areas.

It’s no surprise that the countries in the world that have had the most success in fighting coronavirus infections are the ones that have been able to actually institute a national plan of action and then carry it out. In the areas where governmental planning is an ideological anathema (or considered “socialism”) like in the USA, India, Brazil, and the UK, COVID-19 is killing hundreds of people a day with no real end in sight. Needless to say, formulating an efficient and national response to a pandemic does not mean “socialism”. The common denominator seems to be that these countries took the virus threat seriously, rather than playing politics with it like we did in the United States. To put it bluntly, nobody in Taiwan made the wearing of facemasks into a huge political controversy and it shows in their results in fighting the pandemic.

The Economic Consequences

So that brings us to the economics of the situation. And always remember, when we talk about the economic consequences, we’re always talking about consequences for the working class. The wealthy are still “working” at home on their computers, protected from the dangers that a grocery store clerk might face from meeting the public every day. In addition to the lack of danger they might face, they’re also rich. Most of the ruling elite in our country and society could lose 90% or more of their wealth and still have enough to be set for life. You can see this dynamic at work in the stock market which, after an initial drop from a February high, has see-sawed within a couple thousand points of the 26,000 mark ever since. This shows that the benefits of the CARES Act for businesses and the Fed liquidity injections into the banking system will make sure that the rich are taken care of. The rest of us? Not so much. Most of our “benefits,” as meager as they were comparatively speaking, are set to expire by the end of July unless extended or replaced. The first blow will be losing the federal subsidy to state unemployment benefits slated to end July 31st or earlier.

The expiration of the $600 weekly subsidy that has been added to state unemployment payouts is going to hurt. To this point in time, this extra weekly benefit has masked some of the effects of an 11.1% official unemployment rate reported for June 2020, even though one estimate from the non-profit think tank The Century Foundation states that only 57% of those eligible have been able to access these benefits. This unemployment figure, along with even higher rates for April and May, translates to around 30 million people who are accessing these benefits every week. And while there has been an estimated 22 million jobs lost since the beginnings of this crisis, in spite of the cheerleading about job growth, only about a third of those jobs have been recovered. So, if the subsidy is allowed to expire without Congressional action, a desperate situation for the working class becomes catastrophic.

The joblessness situation is especially bad for many of the lowest paid strata of workers. They are the ones most affected by the closing of restaurants, bars, and the rest of the travel and hospitality industries, as well as retail stores. Many of those jobs will probably be gone forever as retail corporations close stores because of a lack of customers and a change in consumer dynamics that, even before the coronavirus, had led many customers into accessing home delivery of commodities rather than actually going out to purchase items. Since the pandemic began 28 corporations in the entertainment, leisure, and travel sector have declared bankruptcy, including such names as J.C. Penney, Neiman-Marcus, and Goody’s in retail. In food service there are also some big names filing for bankruptcy protection like Wendy’s, Pizza Hut, and Chuck E. Cheese. Gold’s Gym and 24 Hour Fitness in leisure and fitness, along with Hertz Rent-a-Car, Virgin Australia, and Latin American airlines like AeroMexico, and LatAm airlines in the travel sector have also filed for reorganization under Chapter 11. And this doesn’t even count other big names that are in trouble and on the verge of bankruptcy like Sears, Kmart and the AMC theater chain. And those are just the big names. A New York Times article accessing data compiled by Yelp estimated that 66,000 small businesses have gone under since March. Harvard University researchers have been even more pessimistic in their estimation, claiming that as many as 110,000 small businesses have closed their doors permanently between March and mid-May 2020.

Bars are closed again in various cities because of infection spikes correctly attributed to gatherings of unmasked and non-socially distanced consumers. Many of the petite bourgeois pub owners will be forced to close because of a lack of patrons and the corporate chains will close as many locations as necessary to pump up their bottom lines and stay in business. Restaurants are closed or open at half capacity to enforce social distancing regulations. Hotels are empty and airlines are cutting routes because no one wants to travel. None of this is the fault of a public that is rightly scared of going out and getting infected and dying from COVID-19, but it will negatively effect the livelihoods of a host of bartenders, servers, maids, hotel and retail clerks, musicians and entertainers, pilots, maintenance crews, and flight attendants. It overwhelmingly hits poor, black, and Latino people and these are the ones that will lose the most when the unemployment subsidies are cut back or cut out entirely.

In addition to the phasing out of this federal unemployment subsidy, many of the protections that were put into place on a federal and state level that were protecting renters and mortgage holders from eviction or foreclosure are beginning to be cut back and eliminated also, putting a homelessness crisis on the front burner just as COVID cases are skyrocketing. As in many other areas of the economy, housing insecurity was a major problem even before the pandemic hit and it’s only expected to get worse. Per CNN, there are an estimated 500,000 people who are homeless in America, but millions more are considered housing insecure in that they spend a large proportion of their income on rent or a mortgage. Fully 25% of renters spend over half their income on rent each month and that was figured in 2018, well before the coronavirus hit the US economy. The CARES act put a stop to most evictions for six months, but that de-facto moratorium will soon be ending, at least for those who haven’t been evicted already. This means millions are potentially facing homelessness by end of Summer.

For those left, a bad situation involving health and our very lives is about to get worse because of the economic repercussions. Much worse.

What Should Be Done? – A Broad Outline

Short of a widespread and global socialist revolution that changes the power dynamics of society, nothing that will be done will be enough to prevent many deaths and disabilities from COVID-19 in the coming months. Or for that matter prevent most of the economic shocks that are to come.

That said, this doesn’t mean that we can’t advocate for policies that will ameliorate the worst of the coming health and economic dislocations for the working class and poor. Not that we expect these policies will be adopted by the capitalist toadies in the legislative bodies. As we’ve stated in our previous articles, their minds are made up. Hundreds of thousands of deaths are just the price that we should all gladly pay to keep their profit flowing. But we should at least put plans of action out for discussion and, hopefully, action. Under the circumstances of a worldwide pandemic that’s killed over a half a million people, nothing should be off the table for discussion.

First, we need to acknowledge that the health and economic concerns are intertwined and feed off each other.

Second, we need to understand that what any individual “feels” or “thinks” about this crisis is of no importance where the science and human lives are concerned. The science of infection, treatment, and the spread of the virus must be the prime consideration. The experiences and studies done by specialists across the globe, and especially nations who have been hit by and bounced back from the virus, should inform how we move to save lives, and those who will reject evidence and who do not care for lives should be ignored.

Third, we must acknowledge that the anarchy of the “market” will not solve these interconnected problems. Only a plan, put together by healthcare professionals and scientists in conjuction with supporting sectors, can make any headway in conquering or at least halting the spread of the COVID-19 at this point.

And fourth, we must make sure that people are more important than profits when it comes to both the healthcare crisis and the economic crisis.

In order to halt the spread of coronavirus, we only need to look at our recent past to see the way forward. Even in the US, the hardest hit country in the world, there was a point in time where it looked like we were getting a handle on it. But just as soon as that point was reached, we reopened Pandora’s box and let the virus loose again. So the first step would be to reinstate the lockdown where the numbers show it’s needed, allowing trips out for essential errands only. For those essential errands, masks must be mandatory, enforced under penalty of fines and imprisonment and/or enforced isolation. Instead of enforcing laws against “living while black,” cops need to enforce laws that actually do protect the population from morons who think that their “right” to infect the rest of us is sacrosanct.

Economic Essentials for the Working Class

Economically essential workers, no matter what their current wages, must be paid as such; they are truly essential. Whether that means “hazard pay” for the length of the crisis or, preferably, a permanent raise in income is moot at this point. One way or another, get the money out to the people who will be risking their lives to make sure that society has enough to function through the lockdowns that will be needed to get the pandemic under control.

Healthcare needs to be free at the point of use for both victims of COVID-19 or for any other serious health issue. If this doesn’t happen, we will see an unprecedented rise in bankruptcies in a few months as hospital bills for treatment come due. To date, an estimated 5.4 million people have lost their health insurance because they’ve lost their jobs. The easiest way to fix this, given the current for-profit healthcare system, would be to extend Medicare and make it available to everyone. And for the duration of the crisis, all medical care should be provided at cost without consideration of profit. This includes the pharmaceutical industry and the drugs that are in use and being developed for treating COVID-19 and any other medical condition. Emergencies call for emergency measures and this current crisis is undoubtedly an emergency.

The rent and mortgage moratorium must be extended for the length of the crisis and extended to everyone, until a vaccine is developed and made widely available. This moratorium must also extend to utilities, including high speed internet services where available to ensure that people who are currently working from home can continue to do so, along with the students currently learning at home.

A lot of the ideas being floated for direct financial assistance to the people center around extending the $600 extra in unemployment compensation from the federal government in addition to any state monies qualified for, along with another one-time “stimulus” payment like the last one. These measures are included in the HEROES Act that the House of Representatives passed in June that is still awaiting action in the Senate. This legislation is likely not going to be passed in the Senate and/or signed by Trump. The House Democrats couldn’t even get their entire delegation to sign on to this as 14 House Democrats voted against the measure. So what’s likely to be enacted, if anything, is some weak version of extended unemployment subsidies ranging from $200 to $500 per week, and possibly there could be another one time payment.

But as we stated above, over four out of ten people who would qualify for unemployment aren’t drawing those benefits through no fault of their own. Of course, there were also problems with the stimulus payments, but there were many less problems with that payout than with an antiquated unemployment compensation system that was, and still is, overloaded and inefficient and subject to the whims of right-wing politicians whose idea of helping people boil down to “work or starve.” Or in this case, work and die soon or don’t work and starve later on the streets.

What we need to see is a bi-weekly or monthly payout of the equivalent amount of the unemployment compensation that is not getting to many of the people who need it. Instead of unemployment compensation, the American public needs to be given a stipend for monthly expenses in order for them to be able to stay home if they’re not essential workers. The amount of this stipend should be set by the working class itself and be based on prices in each area of the country. This would be a national plan, with regional input, and take some of the ideology out of financial assistance for US workers.

To pay for all of this without running the risk of an inflationary spiral, all benefits must be indexed to inflation with monthly cost of living raises when called for by the rate of inflation. And wealth over a certain level, to be decided by the working class, needs to be taxed heavily up to 100% for the duration of the crisis. Make no mistake, the money is there to do all of these things, it’s just the political will that’s lacking to make it happen.

Just like the health crisis and the coming economic crisis are interrelated, so is the crisis in racial injustice and ethnic and gender bias that we’re suffering through at the present time. It’s all systemic and it can all be traced back to capitalism. We can only fight the wealth and power of the capitalist state with the widest organization possible, all working in concert with each other to solve our common problems. And that means a fighting, anti-capitalist workers’ party needs to be our common goal.

Unlike what is being propagandized by the ruling class and their bootlickers, COVID-19 is not the cause of all of these problems, the pandemic was merely the spark that lit the fire to a house of cards already teetering and ready to collapse. But a collapse without a replacement is also a recipe for another kind of disaster. Socialism or barbarism is only the first choice offered to humanity. However, extinction is becoming a more and more realistic outcome as capitalism falls under the weight of its own contradictions. We need to take action now or we might not even live to regret it.