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Opinion: We're already in a Great Depression
by Jeffrey D. Sachs - CNN - Monday, May 18, 2020
Instead of an imagined "tradeoff" between reviving the economy and
safeguarding health, President Donald Trump's policies are delivering
both a great depression and tens of thousands of deaths at the same
time. That's because a tradeoff between economy and health doesn't
exist, except in Trump's fantasy. Unless people are confident about
their safety in the midst of the pandemic, they will not resume normal
life. By allowing a premature reopening, which ensures that the epidemic
will rage, Trump most likely has condemned America to economic collapse.
The fantasist promotes magical thinking, and perhaps even believes it
himself. Trump said that the virus wasn't a threat. He said that it
would go away by April. He said that it was fully under control. He said
in March that we have all of the testing we need.
The epidemic is controllable when government is serious. Australia,
China, Japan, South Korea, New Zealand, and Taiwan, among others, all
have kept deaths below 10 per million population, compared with 271 per
million in the United States. Those other countries implemented public
health policies at national scale; the US did not.
With US reported Covid-19 deaths nearing 90,000 -- and almost certainly
higher based on a comparison of deaths this year and last year -- Trump
now tries to discredit the death count. In Trump's fantasy world, there
are no deaths if they are not reported.
Trump's maneuverings also won't save the economy, which is in a free
fall. States can open now and thereby spread more disease and death. But
again, economic fantasy won't replace reality. Consumers will not
suddenly start buying. Builders will not suddenly build buildings when
so many stand to be empty or underutilized.
Some of Trump's followers may head to crowded places -- and if so, many
will contract the virus -- but most Americans will not.
Of the record 20.5 million jobs lost in April, most will not come back
any time soon, whether or not states declare their economies open. The
continued spread of the virus itself will block any meaningful rapid
recovery. So too will deep structural changes that will cause a
significant, albeit unknowable, proportion of today's job losses to be
permanent.
Here are some of the jobs that are not returning: E-commerce will
displace many brick-and-mortar retail jobs. Big name retail chains are
now going bankrupt week after week. The result is that many retail jobs,
down 2.1 million comparing March and April 2020, will likely not return.
Jobs created as a result of online shopping won't equal those lost in
brick and mortar stores.
Many business firms will reorganize their workflows to allow for far
more work from home, and this will leave office complexes sparsely
populated. Many companies will downsize their space, meaning new
commercial construction will remain depressed for years to come.
New oil and gas drilling has collapsed and will not recover to past
levels given the long-term glut in world oil markets and the collapse in
oil and gas prices. Travel and tourism will remain depressed as long as
the epidemic is uncontrolled, keeping down employment numbers in
accommodations, leisure, entertainment and restaurants.
Trump's remaining idea is to force companies to return home from China
and rebuild their supply chains at home. This is yet another fantasy. By
intensifying the attacks on China -- including new measures to cut off
Chinese companies from American semiconductor technology -- Trump will
crush the growth prospects of much of America's high-tech industry,
whose business includes international markets, including China's vast
population. Trump's moves will invite Chinese retaliation and hasten the
day when China competes with the US in various dimensions of
semiconductor manufacturing and design, such as specialized chips for
artificial intelligence and 5G.
One obvious area of retaliation will be for China to buy planes from
Airbus instead of Boeing. Even before the pandemic, Boeing was in a very
deep crisis because of its flagrant mismanagement of the 737 Max.
Trump's failure to contain the epidemic and his intensified attacks on
China will deepen Boeing's woes. Boeing stock fell 2 percent on May 15,
the day after Trump's new anti-China measures, and Boeing stock is down
by more than 70 percent from the peak on March 1, 2019.
Trump will try to save moribund companies, no doubt including his own
family business. He will try to save the oil and gas sector, though no
banks will touch it. He will prop up the failing companies of friends,
cronies and campaign contributors. He will lie, try to hide data, blame
others, and produce a deepening disaster.
But there are three true steps out of the new great depression.
First, and most urgently, we must end the epidemic through the public
health measures -- testing, tracing and quarantining -- that Trump has
consistently neglected.
Second, we must work with other countries, including China, to stop the
epidemic everywhere in the world so that trade and travel can safely
resume, and so that the millions of jobs dependent on trade, transport
and tourism are at least partly restored.
Third, we must build new industrial and service sectors, not prop up the
old and moribund ones. Recovery will come not through oil and gas
fracking, but through a boom of US companies producing solar panels,
wind turbines, advanced batteries, advanced electric vehicles and the
hardware and software of smart grids; combined with a service industry
boom based on new models of low-cost healthcare, education and office
work, that combines online and in-person service delivery.
By being smart and fair, we could look forward to new high-tech
industries, more shared leisure time, shorter commutes, cleaner skies,
universal access to affordable healthcare and higher education and a
guaranteed living wage for all workers.
For all of this, we need a new administration and Congress and a new
approach for our nation. Until then, Trump's fantasy world is our
nightmare. Hang tight. A new dawn is coming.
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