An independent view on the economic impacts of the Coronavirus, informed by relevant insight from American history – in this case, Black Wall Street/Tulsa, Oklahoma, may better explain the exact nature of the problem the country now faces.
The Greenwood District in Tulsa, Oklahoma was one of the most prominent concentrations of African-American businesses in the United States. It was razed to the ground in the Tulsa race massacre of 1921, in which white residents massacred as many as 300 black residents, injuring hundreds more. Our analysis starts by comparing the economic devastation wrought by this incident to that of the coronavirus, since, like the virus, business properties were rendered uninhabitable. In addition, broad swaths of the population were instantaneously unemployed. Wealth, for both Blacks and whites, was destroyed on a massive scale, .
Our analysis shows social costs from the virus total $30 trillion. The economic costs are $15 trillion. (Note: these are NOT the actual impact numbers from our analysis. They are correct ordinally, however. For more, email us at info@creativeinvest.com and see https://twisri.blogspot.com/2018/11/william-michael-cunningham-on-impact.html.)
The bottom line: economic impacts pale in the face of human pain and suffering. This mandates a focus on the human, not the economic.
The rush to open the economy reveals the greed and inability to operate in the public interest that is the cause of the unethical financial institution behavior observed in recent decades. Mainstream economists missed this. This exposes larger issues about the true nature of the economy and western economists. The celebrity veneration, money worship and focus on shareholder wealth maximization that dominate business strategy dictates the economy be reopened as soon as possible.
In the push for short-term profits to meet the demands of investors - a small, nonminority, nonrepresentative group - human considerations are subordinate. (A Former Wells Fargo CEO wants people to go back to work and 'see what happens.' He said 'Some may even die, I don't know.' The ex-CEO of Goldman Sachs wants “those with a lower risk to the disease return to work,” in a few weeks. These are simply greedy, unpatriotic institutions and individuals whose lack of empathy, in the midst of this crisis, is the textbook definition of a psychopath.) Regulators and policymakers have been excessively deferential to this group of investors, to the exclusion of human needs.
Cost reductions, the main tactic used to maximize shareholder wealth, eliminated excess financial capacity across the economy. This is what various fiscal and monetary programs have attempted to replicate. They have failed so far.
This is key. The interruption in revenue that is the main result of the shutdown has driven many firms out of business, but, in the face of a highly contagious virus, reopening the economy now makes little sense. In addition to the human suffering this will cause, it will eventually lead to a second or third shutdown. Thus, a focus on the economic is not only inhumane but inefficient.
In order to address the current crisis, efficient monetary and fiscal demand side stimulus is required. Monetary policy operates through banks, a small set of privately owned, profit maximizing institutions. These lower both social and financial return. Fiscal policy is suspect as well, as proven by the failures of the Paycheck Protection Business Loan (PPP) program. As we indicated, and as the head of the Atlanta Federal Reserve Bank confirmed, U.S. small businesses alone may need $6 trillion on an annual basis to ensure their survival through the coronavirus crisis.
As with much of the current situation, rational planning focused on human needs is absent. Such a plan would involve global coordination, with global virus testing and synchronized global fiscal and monetary stimulus. Current political, cultural and economic practices are completely unsuited for this level of cooperation. (We note that this stimulus could be generated efficiently, at a very disaggregated level through a widely held cryptocurrency.)
Until we have a rational plan, any attempt to reopen the economy will, in the long run, generate massive social and financial costs.
It will, in other words, fail.