Fasten your seatbelts – the economic impact is imminent.
We are entering the third week of COVID19 quarantine, most Americans stay at home barely holding on, or already losing their jobs. What can we expect after a fiscal quarter (3 months) of almost complete business shutdown? Well, let's look at the numbers. Half of the U.S. workers making under $50,000 (according to Nielsen data) to 74% of all employees are living paycheck to paycheck (recent reports from both the American Payroll Association and the National Endowment for Financial Education.)
As of January 2020, over 129.5 million people worked in the private sector vs. almost 23 million for the government. The number of people in the private sector and my rough slowdown/shutdown estimate* look like this:
- Mining and logging (0.5 million) ➜ 100% Shutdown*
- Construction (7.5 million) ➜ 80% Slowdown*
- Manufacturing (13 million) ➜ 75% Slowdown*
- Trade, transportation & utilities (28 million) ➜ 50% Slowdown*
- Information (3 million) ➜ 25% Slowdown*
- Financial activities (9 million) ➜ 25% Slowdown*
- Professional and business services (21.5 million) ➜ 80% Slowdown*
- Education and health services (24.5 million) ➜ 50% Slowdown*
- Leisure and hospitality (17 million) ➜ 100% Shutdown*
- Other services (6 million) ➜ 75% Slowdown*
My slowdown/shutdown estimate may be a bit off, but the general idea stands. We are looking at almost 91 million people out of work! The most affected will be about 16 million self-employed Americans. According to pewsocialtrends.org, self-employed Americans and the people working for them together accounted for 30% of the nation's workforce.
After analyzing the above, it's hard to imagine how small and medium-sized businesses can stay afloat if quarantine continues beyond one month, not to mention three. At the same time, Bill Gates, in his recent Washington Post article, calls for a total shutdown across America, "which could take ten weeks or more." Really?
Unless we kick start the economy soon, we may wake up in stone age, or even Orwellian reality.
Corporatism or Socialism? (Neither one works for me).
Corporatism is nothing else but reverse Socialism, instead of government controlling business, corporations control government (and society). I had a chance to taste Socialism in Poland and decided to run away when I was 18 years old. I sincerely hope that I will not have to run away again. In my opinion, the free-market economy, as bad as it gets, beats all other options on the table. What we are facing today is the imminent danger of destroying the American Dream! The End of Capitalism and our free-market economy as we know it.
If quarantine extends beyond June, small and medium-sized businesses will start falling on a massive scale. Here are possible scenarios that I can think of:
- Businesses close or sell for a penny on a dollar to big players with big money. The government or corporations (bailed out as always) jump-in to fill the void, and we all start working for the state or fortune 500 companies.
- The government prints enough money to help small and medium companies survive, devaluating dollar and at the same time, placing a massive price-tag on all of us and generations to come.
- Businesses close, no one comes to rescue and people start rioting on the streets. The army is called in to uphold peace, which leads to a dictatorship or all-out war, with casualties greatly exceeding the Coronavirus toll.
- Aliens land in the middle of Central Park, and we enter a new chapter in human evolution. I am an optimist by nature, yet, I cannot envision a brighter option. Please help me find one in the comments below.
On the other hand, if quarantine ends within a month, some weaker small and medium-sized businesses collapse, but free-market economy survives. We lick our wounds; however, the American entrepreneurial spirit brings the economy back, and we all learn a valuable lesson about quarantining a whole nation.
The Virus
My knowledge about COVID19 is my weakest spot; as most of us, I don't know enough and what to think about it. Most available information comes from mainstream media, and I just don't trust the media... Turning off the TV and digging into reliable data is the best thing I can do to understand what's really happening, and I strongly encourage you to do it yourself.
The COVID19 virus is real and dangerous but look at the facts that I was able to assemble from CDC data in clear graphs. On average, flu season lasts about 13 weeks. It usually ends by April. According to the CDC, this year's total influenza hospitalization and deaths (including COVID19) do not come close to those in the 2017-2018 season!
I used official CDC numbers to create both graphs; what emerged was entirely unexpected to me. Take a look, what do you think? Don't take figures I present for granted, below are the links, please do your research.
* Data from the CDC website, observed on April 2, 2020.
Summary
When I look back at the Great Depression in the 1930s or even the 2008 financial crisis, I see a disturbing pattern of wealth deprivation of the American middle class. Was all of this engineered? Perhaps a cash leap for billionaires and corporations, or maybe a secret government plan to enslave us all – as conspiracy theorists claim to be. I hope none of the above, but unless we kick start the economy soon, we may wake up in stone age, or even Orwellian reality. Each one of us needs to weight-in the pros and cons of forced quarantine and form an opinion of our own, based on facts, not only on a ratings-driven TV drama. I am not telling anyone what to think, do your own research.
For now, please keep washing your hands, stay away from the crowds, filter mass media and think independently. Is COVID19 so extraordinary to halt the nation? Can we still avoid the imminent danger of complete economic collapse?
Stay safe my friends.
P.S. How to fix the problem? I have some ideas, and this may be material for another article. Do you have any suggestions? Please, share them below.
Reference materials: