This week, another 5 million Americans filed for unemployment. Five million. Let’s put that number in context. At the beginning of this crisis, I predicted a rate of 3% unemployment growing per week. The US labour force is 165 million people. The total now filing for unemployment is 26 million and counting. That’s 16% of the labor force which is now unemployed.
Over just five weeks. Which is a rate of almost exactly three percent per week. That’s not to toot my own horn. It’s to point out a grim but inescapable conclusion.
At that rate, in another three weeks — two months in — a full quarter of the labor force will be unemployed. In another two months, half the labor force will be unemployed. We probably won’t get quite that far, if we’re lucky — but aren’t numbers that are rising towards 25% already devastating enough?
This isn’t just a surge in unemployment — it’s a historic tsunami. We have never seen numbers this fast and this catastrophic before. Ever. Not during recent financial crises, not during wars, not even during the Great Depression. We are living through a catastrophe that’s genuinely unprecedented and without parallel.
The reason that this catastrophe is multiplying and accelerating, ripping through the economy, is that the response to it was woefully inadequate. Seeing the effects of a pandemic — lockdown, quarantine, a whole society effectively staying at home — any good economy (and there aren’t many of those around) called for a stimulus at the same scale as the catastrophe: historic, massive, unprecedented. That only makes sense: if the crisis is without parallel in history, then the response must be too.
But what the American government, under Trump, produced, was something so feeble and inadequate as to beggar belief. I don’t say that for effect. The stimulus that was passed was the equivalent of supporting both businesses and households for just one week. And yet it’s already been a month. The stimulus was like trying to stop a tsunami with a brick, or a fire with a water pistol. It was never going to work, because it was simply too small to withstand a force much, much greater.
Added to that, the stimulus was byzantine and baroque. Who knew exactly how to get their hands on what little funds were available? And who knew if you met the conditions, anyways? The result is that right about now, stories are emerging of tiny, tiny fractions of what little stimulus there was reaching people’s hands. That’s like using a water pistol to fight a megafire — and making people sign about a thousand forms just to fill up the peashooters to begin with.
The result of both those factors — a stimulus that was too small, and too complicated — was that money didn’t reach people fast enough. And that, my friends, in an unprecedented economic crisis adds disaster to catastrophe.
What is setting in now is a contractionary spiral — the doom loop of depression, which Keynes, the great mind of the Great Depression, discovered more than a century ago. That loop goes like this. Some shock sets off a great wave of unemployment — sometimes a stock market crash, in this case a pandemic. The unemployed spend less, so businesses shutter. And soon enough, people have lost confidence in the economy — they change their habits for good, pessimistic, afraid, having lost faith in their institutions to protect and safeguard them. With a permanently lower level of spending — and earning — depression sets in.
We are now entering the Coronavirus Depression. The effects of today’s inaction are locking in a long-run path of ruin: they are going to shape the next decade or so. How so? By accelerating the American economy’s death — at the hands of inequality, monopoly, low-wage work, exploitative institutions, perpetual indebtedness, the political extremism and social distrust all that causes — a trajectory that’s already been travelled over the last few decades. Let me explain precisely why and how I think that is going to be the case.
Some economists say that jobs and incomes will magically bounce back. I tend to think they are the kind of economists who, like surgeons that only operate on mannequins, don’t understand how the real-world economy actually works.
The jobs that are being destroyed right about now — some large fraction of them — are not likely to come back. Why? Take the small business owner — who’s right about now shutting his doors, or is going to in the next few weeks. How likely is she to ever try opening up a small business again? Maybe like that simply won’t. They won’t be able to — trapped in years of liquidation and bankruptcy. Scarred by that experience, they will decide it’s just not worth it. Bang! A huge number of jobs simply goes up in smoke.
What about big business, megacapital? Well, it’s learning something it’s not about to froget: that it can get by on much, much lower labour costs. If you’re the CEO of a megacorporation, you’re discovering, right about now, just how much radically less employment you really need to keep things operating, going, moving. Maybe you never really needed all those cashiers, stockroom assistants, accountants, managers. Maybe you never even needed all those stores or showrooms or warehouses at all. Instead, you can use Amazon, Instacart, Google, or any other number of hyper-efficient services. Eye-opening, because your only goal is to maximize profits. Bang! Your level of hiring is reduced…permanently. Those jobs don’t come back…period.
The net effect therefore, will be that monopoly wins — a trend already vividly evident in American economic life, only now vastly accelerated: mega-business wins at the expense of small and medium sized business. You can already see that at work. Who’s actually done well from the pandemic? Amazon, Netflix, Facebook, Google. Here we all are, stuck at home, checking each others’ Instagram, watching Netflix, having our stuff delivered by some poor brave underpaid soul. Megacapital, technocapital, in other words, is having a field day. But technocapital has a few big problems, at least economically speaking
The first is that mega-techno-capital employs a relatively tiny, tiny number of people. GM used to employ millions. Google employs thousands. Ford used to keep whole cities thriving. Facebook has a tiny, weird, dystopian company town. You see the problem. An economy based on technocapital as its primary source of resource allocation is also one with a permanently low level of employment. So what do people do to make ends meet then?
Well, worse, technocapital then creates something like a caste economy. It divides the economy up into owners of techocapital — Bezos and Brin — who are worth billions; then their lieutenants and managers, who are worth millions; and then…everyone else. What does everyone else do? Well, they’re in the only segment of the economy that’s really been growing: “low-wage service jobs.” They become, in plainer English, glorified servants, driving cars, delivering groceries, walking dogs, cleaning homes.
Worse still, most of those people aren’t “employees”, even though they obviously “work for” a certain company. So as we all know, Uber drivers don’t enjoy basic protections, Google employs an army of people who aren’t “real” Googlers, Facebook’s worst and most dehumanizing work, like “content moderation” is done by contractors, and so forth. That trend — the replacement of the “job” with the gig” — is true across the economy. Working at an Amazon warehouse is a far cry from the kind of work the industrial economy offered in its heyday — Jeff Bezos doesn’t give you a pension, or pay for your kids’ college education. The byword of the economy that Americans megacorporations have created is exploitation to the bone, in the name of maximizing profit to the fattest degree.
So an economy that once used to have a vibrant middle and working class become a new caste of poor, scrounging for whichever gig pays a little more this week. But that kind of economy is sick. Dying. Why? Because a class of “low-income service” workers is effectively something very much like peasants or serfs. Did you know the average American now dies in debt? That means they never own, save, or earn anything across a lifetime. That’s serfdom by any other name: you work hard your whole life long, but you never own a thing — not a home, car, assets, savings to retire on. Just like medieval peasants, today’s Americans are not owners anymore — they are becoming renters, of everything from homes to healthcare to education, all had on debt, which they will never pay off.
What happens to a society of new poor? They can’t afford to fund basic social services. They grow too poor to afford to invest in healthcare, education, income, retirement for all. That’s where the average American is now. Ask them to invest in public healthcare, and they’ll look at you like you’re crazy. In a sense, they’re right — they can’t make ends meet on what they do earn, so what do they have left over to invest in anyone else with? Bang! A poor society becomes a truly poor society, in the sense that it never has the expansive public of a truly rich one. It declines further, into desperation and ruin.
Americans have normalized that situation — a life in which you’re perpetually indebted, in which the only way to have the basics of a good life, from education to healthcare to retirement, is to go into debt — but it’s not remotely normal. Everyday people should be able to afford such things, on average incomes. They should be that rich. Otherwise what is “rich” country, anyways? Otherwise what is an economy for? It’s just a vehicle to make the rich richer, but exploiting and impoverishing everyone else. But that is where America is — and has been.
America’s economy has been dying, for about two decades or so — which is how long the trends above — falling living standards, the evisceration of work, inequality, the implosion of the middle and working classes into the new poor, the growth of megamonopoly — have been rising. Coronavirus, though, is something like the executioner’s axe. It makes a return to any semblance of “normal” — which means something like Canada or Spain any other rich country, that enjoys high and rising living standards really — almost impossible. It is like a food pushing down the pedal of acceleration.
This economy dies — and a new one rises in its place. What does it look like? Like the stuff of dystopian fiction — think the Dark Ages meets Brave New World, by way of Charles Dickens. It’s made of three classes. A caste society of ultra rich; then their minions, the merely rich; and the new poor, which exists to serve the rich, doing whatever gig they can right at this moment — today selling on Amazon, tomorrow, driving an Uber, tonight, delivering groceries — just to make ends meet. Making ends meet just means paying off unpayable debt — the idea of owning much of anything outright is a distant fantasy. And the idea of a functioning society, with healthcare and education and retirement for all — that’s now become impossible.
What happens, in the end, to such a society? Usually — after a few decades of failure — it falls to authoritarian-fascism of some variant, soft or hard. The textbook example, of course, is Weimar Germany. But there are many others. Putinist Russia. Brexit Britain. Most of Eastern Europe. Islamic fascism. The masses cheer on the demonization of the hated other, as the source of all their problems — in Britain, Europeans, in India, Muslims, in Russia, gays and foreigners, and so forth. The true cause of the people’s economic woes, though, isn’t the powerless other — it’s simply a lack of money flowing to the average person, and piling up in the hands of elites, who use institutions as siphons to extract wealth in unimaginable amounts. America’s now joining that club of which membership is a dishonour: of genuinely failed states. The net effect of Coronavirus is going to be to accelerate the already ruinous authoritarian trajectory America is currently on — through even more poverty, inequality, and despair.
Coronavirus — or the lack of adequate response to it — is therefore going to radically accelerate seven already catastrophic existing trends. One, the stunning fall in living standards over the decade or two — whether longevity, happiness, meaning, incomes, savings, or trust. Two, as what was left of the old industrial jobs base is finally killed off, people becoming “low-wage service workers”, which those of us who speak plain English simply call…servants. Three, a caste society of those servants, those new poor, versus a tiny number of ultra rich — as, four, inequality spirals further. Five, the average person growing even more indebted, and becoming a true neoserf, never owning any major asset outright in their lifetime. Six, an economy monopolized by mega-scale institutions, which exploit and abuse their power, as small business is replaced by mega-biz. Seven, authoritarianism, as a result of all the despair that produces.
Let me translate that into plainer English. Those jobs aren’t coming back. The ones that do are going to be replaced with “low-income service work” — and even that will be subcontracted and outsourced so that people see a fraction of what income they might have once earned. Mega-business will learn it can get by on much, much less employment — while small business will shutter in a great paroxysm of death.
Inequality will spiral as a result. What was already emerging — a caste society of service workers, otherwise known more simply as servants, people doing menial work, forever seeking gigs, will accelerate. Such people, though, can’t fund a working social contract: they are too poor. They can only have a society to the level of say a Dickensian England — one with no real functioning systems or social contract. Perhaps, a cynic might even say, that has been the plan all along. Living standards, already falling, will continue falling. Ultimately, unless they’re reformed for the common good, such failing societies turn authoritarian — like America was already doing.
Bang! Economic implosion produces social ruin generates political ruin. That’s the path America’s on now. It’s not so different from yesterday, the path America was on. What the stunningly inadequate response to Coronavirus really does is three things. One, it locks that path in. Two, it accelerates the journey into the abyss. And three, it makes coming back nearly impossible.
The future is going up in flames every day, minute, second now — as the shockwave of this catastrophe accelerates, disaster added to it by incompetent leaders, failed ideologies, feeble politicians, and sociopathic demagogues. There’s a lesson in that. Maybe not for Americans, for whom I think it’s now too late. But for the world. It’s a simple one.