The rapid unraveling of the world economy from the once humble but now novel and frightening coronavirus from Wuhan, China fascinates me. A pandemic that hits at the intersection of economics, politics and health care. My three favorite topics all at once. One cannot be an expert in all of them equally, but it does not take much of an observer to see how clearly all three systems are failing all at once.
Coronavirus pandemic exposes our flawed system
Not only have these three systems stumbled at once, but the reigning underlying ideological assumptions have fallen apart as well. What we have been trained to believe about what was possible is clearly not true; this opens windows of fresh air despite the recent closure of electoral doors in our faces. Let us look out these windows in turn.
The employer-sponsored health insurance system the United States developed after World War II was mostly an accident. Unionization in heavy industry leads to companies providing a sort of corporate welfare state for workers lucky enough to work for large companies. This included pensions, health care, paid vacations, and even golf courses for workers. Great for the little guy working for the big company but not so great for the little guy working in farms, small businesses, retail, or restaurants among others. Those excluded began to become more and more numerous after World War II so patches were made to cover them (Medicare for the elderly, Medicaid for the poor, CHIP for children, VA for veterans) but no national, universal system ever became law. More than 65% of Americans have private health insurance compared to 34% on public insurance.
Despite the erosion of employee benefits since the 1970s, the vast majority of Americans on private health insurance get their insurance from their boss. The Federal Reserve of St. Louis forecasts an unemployment rate of 32% due to the coronavirus while JP Morgan predicts 20%. If one-third to one-half of the private health insurance market evaporates from layoffs, what happens to private health insurance? Can it be the cornerstone of health care finance in the United States? The self-employed also will not be able to buy private health insurance for their families with the downturn in business. Is anyone actually thinking about the huge hole about to be punched into the postwar health care system?
Public health insurance (seen in Australia, Canada, South Korea and Taiwan) does not have this problem as health spending and coverage is not tied to the profitability of your employer. A government can run a deficit and print money, but we cannot expect the MGM Grand Hotel to run deficits to pay for union health insurance when 150,000 hotel rooms are empty in Las Vegas. A single-payer, national health insurance program will cover you for richer or poorer, in recession or expansion.
Medicare for All becomes not just a slogan or a political platform but a program for survival of the entire American health sector. Myths about single payer become even more ridiculous when we look at East Asia instead of Europe for health system comparisons. Taiwan has very low administrative costs and low cost growth while a very robust private sector competes vigorously for patients. Usage of health services is high with no waiting times or national caps on volume. Patients choose doctors and hospitals, and the national health insurance covers them all. And no one would even joke that Taiwan is socialist since it was founded by Chinese escaping the Chinese Communist Revolution of 1949.
South Korea also faces a nuclear-armed Communist neighbor yet somehow also manages to have a national health insurance system that went single payer in 2004. Despite being an oligarchy of approximately 100 family-owned business conglomerates called chaebol, South Korea has universal health care. Sure, Wal-Mart has more than $500 billion in sales and millions of employees. But did you know that 20% of the GDP of South Korea is one company? Samsung. Korean conglomerates loom so large it would make Warren Buffet blush. Plutocracy does not limit a nation’s ability to have guaranteed health insurance.
People remark that things will never be the same again after coronavirus. Have we fathomed how far this rabbit hole will go? Small businesses will close, restaurants lock up, hotels shutter, and many of them may never, ever come back. There will be major companies that may never recover like Macy’s, Sears, cruise lines, or airlines. Tourism hot spots like Las Vegas may fall apart if the cachet of being in crowds like in the pre-coronavirus days does not survive.
But let us think about the big boys who will be fine and always were going to be fine. We should all be frightened that major employers will use this as an excuse to NOT hire back workers when the crisis ends. Blue collar workers in warehouses and logistics have shown their worth, but I foresee this era of telecommuting and working from home will just become a stay at home unemployment. Work from home will become stay at home and don’t work for millions.
The void will even hit recession-proof health care. Elective procedures produce profits that keep the average hospital afloat; governors have cancelled them in the emergency. Hospital budgets collapse and layoffs begin. People assume largest employer in Houston, Pittsburgh, and New York would be an oil company, steel mill or a bank. Surprisingly, they are all hospitals. Government, health care, and education spending should be stable or ramp up in a recession to provide counter-cyclical spending to boost the economy. Instead, school closures and loss of health insurance from unemployment are PRO-cyclical and make the downturn worse as health and education spending fall. What to do?
Conventional economics has been (secretly) thrown out the window for 12 years; this time, the public might actually notice. As they deposit their $1200 stimulus checks from Congress, voters might consider how much money their employers cashed in the $2 trillion bailout. The more dire the situation the more unusual and more heterodox policies come to the fore.
Government responses to recessions involve fiscal policy (money appropriated by Congress from taxes or borrowing) and monetary policy (actions by the Federal Reserve affecting the supply of money). The $2 trillion bailout this month and the $787 billion stimulus bill in 2009 are fiscal policies. This gets all the attention and causes Tea Party protests or congressional hearings and presidential debates. But that misses the more mysterious monetary machine.
Behind the scenes, the Federal Reserve pumped far more money this year and in Great Recession using monetary policy. Traditionally, this occurred by raising and lowering interest rates by decreasing or increasing the supply of money to the economy by purchasing safe U.S. Treasury bonds from banks. Lowering interest rates stimulates the economy and raising interest cools the economy. When interest rates could not be lowered further during the Great Recession, a complicated idea called quantitative easing began. Central banks began to purchase assets directly to stimulate the economy just to give cash to corporations. NPR in 2011 explained lucidly how even Hilton Hotels in Hawaii and bankrupt malls in Oklahoma were purchased as collateral from non-bank corporations to expand the money supply. Who knows what unconventional cash injections they will pursue this recession?
For a very good reason, the British Labour party proposed the People’s quantitative easing years ago in addition to other heterodox economic ideas. If non-bank companies can get cash for shaky assets, why not use the monetary system to assist the general public? It would stimulate the economy more directly than corporate bailouts. Not long after, many economists and central bankers rebranded the idea as helicopter money. Just have the Federal Reserve add dollars directly into everyone’s bank account! It would raise demand directly and equally instead of hoping middlemen do the right thing.
If money is something invented by humans, can we just invent more for us instead of Goldman Sachs? The myth that people should serve the economy instead of having the economy serve the people is falling apart.
Never has something as small as an RNA virus so quickly and completely proven in a matter of weeks the value and truth of what the left has said for decades. Yet politically we have never felt more dejected than ever with the collapse of the Bernie Sanders (I-VT) campaign and the anointing of arch-neoliberal, mass incarcerator, criminal justice deformer, warmonger, and senator from MBNA, “Credit Card” Joseph Biden (D-DE) as presidential nominee. The health and economic system have collapsed but the political establishment still stands. A leadership class that at best up for tweaking the faintest of margins of the medical-industrial complex (or any industrial complex for that matter) seems neither shocked nor awed by the enormity of the challenges and opportunities that lay ahead.
To take advantage of the moment, politicians have to have some animating beliefs. On the left, reducing investment in prisons and wars and increasing investment in health, education, housing, and the environment is not a slogan but an actual agenda to reduce social injustice. Reducing wealth and income inequality does not just make us feel good inside but actually improves outcomes in life expectancy, mental health, education, employment and crime.
The failure of the Bernie Sanders campaign is as unexpected as the conversion of the Republicans to handing out cash and giving out free coronavirus treatment under Medicare. Newcomer Sen. Josh Hawley (R-MO) has proposed a Denmark-style salary guarantee at 80% of wages during the pandemic. Sen. Marco Rubio (R-FL) focuses on the paycheck protection program running out of cash. If younger Republicans move towards economic populism after decades of Baby Boomer economic libertarianism, the future of the right may be more interesting than popularly assumed. More concerningly, a Hungarian journalist confided in me that Viktor Orban’s right-wing populist nationalism combines anti-immigrant policies with lots of economic subsidies and social spending. A budding, new nativist Right with liberal spending habits in the United States should worry us all.
Coronavirus shatters myths
Rules are meant to be broken, myths are meant to be shattered, and conventions are noted in the breach. The conventional wisdom on health, economic, and political policies have all evaporated. We should take note and then raise hell.