Are We Shutting Ourselves??
Are We Shutting Ourselves?? The last ten days have had the virtue of inserting us into a worldwide reality show aimed at paralyzing our brains with fear and turning the world at large into a immense farm of automatons.
We thus aimlessly run to the supermarket to grab everything in sight. We have cleaned each closet about ten times. We have cooked a pool of jams, soups and sauces. We have ironed and starched grandma’s table cloths and bed spreads for the first time in ten years. And we have cleaned our computer systems of digital garbage.
A price tag for this laborious dedication to domestic chores and digital cleanliness just for the U.S. would be close to $317 billion. Indeed, the Bureau of Economic Analysis has found that if the value of household production were included in gross domestic product (GDP), it would add approximately $3.8 trillion to the U.S. economy.
In contrast, the country shutdown will most probably munch up about 10% of our GDP, which means we will lose about $ 1.9 trillion.
To be sure, should we add the losses attributable to paralysis in the most vulnerable activities such as transportation services, restaurants, lodging and entertainment services, the tab reaches $175 billion per month or $2.1 trillion a year or 14% of consumer spending. And the ancillary cost in reduced payrolls represents $574 billion.
Shutdown thus earns the country $317 billion per month while taking away over $749 billion given that we have not considered in this analysis more resilient economic activities than will also shed employees and reduce operations. Add to this rather somber picture the fact that the U.S. debt has been piling up since the Iraq invasion to reach the staggering number of $23 trillion.
This has surpassed all debt levels of the past. Truly, debt levels during the Civil War reached 37% of GDP. World War II saw the level rise to 115%. By 2020 we have reached 118% and it was forecast before coronavirus to reach 155% by 2050.
Thus concerned and responsible citizens are ill advised to watch newscasts given that each is full of two lethal concoctions for our economy: more debt and less work.
The question thus arises as to whether it was necessary to adopt the Chinese formula and shut the whole country down.
Could not we strike a kind of Nash balance in public policy-making and create incentives for people to work harder and to protect themselves from the virus without suspending economic activity?
The UK seems to have followed this road — at least until this week. And Switzerland and Singapore have displayed testing operatives and information fallouts to restrict lockdowns to areas where contagion is thriving.
In contrast, the highly celebrated lockdown in China has been ruthless, abusive and despotic. I truly do not see any reason to praise China which was the Pandora Box for this catastrophe.
But in the West those of us that live in fully operational democracies need to advocate balance in our public policies so that lockdowns serve the purpose of planting the pillars for a strong rebound.
And this could be achieved if Americans get the much heralded cash aid wrapped in distance learning courses that teach them robotics, coding and software writing.
But just giving the public cash — without using the opportunity to offer retraining — could worsen their predicament as many economic activities are going to use the lockdown period to deepen their digitalization. This means less traditional jobs and more digital valuable jobs.
Published by laht.com Monday, March 23rd, 2020
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