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the coronavirus, an analyzer of the uniteD states' economy and society
April 11, 2020
by Robert Boyer, Researcher and Vice-President of the Scientific Committee of the Institut des Amériques
The Coronavirus eruption has brought to light and accentuated most of the distinctive traits that were forged in the US's long history.
THE AMERICAN EXCEPTION
The statement of the American exception came up right from the beginning of the crisis. The appearance of the Coronavirus in China, and then its progressive spread in Europe over the months of February and March 2020, gave president Trump the opportunity to boast about the effectiveness of the country's protection with respect to the epidemic and its health system. He was following a long tradition. When Japan emergent in the 1190s as a major industrial power, the automobile manufacturers in Detroit did not believe that their Japanese competitors could dominate an industry they had built. In the same vein, while the financial liberalization was causing a series of financial crises on all continents, of which the 1997 one in Asia, American leaders never thought these events would reach them. So they were caught unprepared when the financial system crashed in 2008. And today, the current economic elite cannot imagine that China could develop a powerful system that innovates, their autoritarian regime being so adverse to scientific research. Huawai's growing independance as compared to the systems Google developped means the possible likelihood of a rude awakening. This entrenched feeling of superiority did not facilitate an awareness in the deciders facing the pandemic. And so protective measures were initially hesitant and delayed.
THE ECONOMY FIRST!
The United States has been an entrepreneurial country for a very long time, so much that economic logic is predominant. This trait is found in the decisions the Government makes with respect to the pandemic: maintaining economic activity by helping large companies seems at least as important as adopting stringent confinement measures. More so than a huge mortality, it's the specter of the 1929 crash that haunts the Unites States: a repeat, even worse, of the 1929 to 1933 depression, partially halted by the New Deal and only really overcome after the second world war. To avoid this, a public program replicating the one that helped defeat the 2008 subprime crisis has been put in place, exception being that in 2020 help is given to non-financial businesses and families and not just to Wall Street. However, the explosion of unemployment filing (16.8 million in the past three weeks) shows that the risk of cumulative depression is not warded off. The incredible speed at which production in a number of sectors stopped, of which some very important to the American economy, made the salary support measures ineffective because they cannot stimulate a production that has been frozen by sanitary measures. The current crisis is nothing like the others, neither 2008 nor 1929, and governments are at a loss.
THE FEDERAL GOVERNMENT, A SAVIOR BUT NOT A REGULATOR
The American economy is often presented as a symbol of a financial capitalisme dominated by market adjustments and competition, in comparison to european societies that are affected by more sweaping governmental interventions and have strong health insurance systems that are meant to be a national right. The large amount of the relief plan for the economy ($2 trillion) shows the the American Government is still there to socialize loss and stop a catastrophic development, if not put in place new intervention measures that will re-establish economic stability, for example the unconditional stimulus checks to american families. As soon as he became president, Donald Trump announced the return of a federal government capable of confronting company strategies, for example requiring the relocation of production on the American soil. In April 2020, he even used a law put in place during the Korean war (the Defense Production Act) to force automobile companies to produce ventilators, a good example of an industrial political decision made with a sense of urgency. Time will tell whether this position was taken because of popular opinion by a president that continues to follow his business intincts or a turning point toward permanent industrial politics and no longer a belated reaction to a dramatic lack of medical equipment. This is a reminder of Georges W. Bush's CNN statement on December 16, 2008: "I’ve abandoned free-market principles to save the free-market system".
You can measure the institutional heritage of past wars and the fact that, despite holding a posture of quasi absolute economic liberalism, the Federal Government has never stopped playing a central role even during periods of growth (financing research, specifically through military and health deductions, huge NASA programs, etc.). It is the savior of economic interests and a crutch to businesses during crisis periods.
ACCESS TO HEALTHCARE, A DISPARITY FACTOR
In absolute amount and in percentage of GDP, the United States spends more on healthcare than any other country, but there exists a painful paradoxe that the pandemic eruption has cruelly brought to light: the healthcare system is expensive and exclusionary. Despite the progress of the Affordable Care Act (or Obamacare), which has been severely unraveled by the current administration, for the most part health coverage continues to be linked to a job position, so that millions of Americans will lose it when they are let go. Already suffering from bad health conditions, specifically because of the prevalence of diabetes and obesity, African Americans and Latino Americans who hold jobs that are not well paid and that put them in contact with diseases, represent a disproportionate rate in terms of deaths by coronavirus. This widens the study of inequalities: in health, heritage, political influence, lifestyle and finally access to healthcare, in other words life expectancy.
Robert Boyer is an economist, specializing in the comparative and historic study of contemporary economies. Until 2008, he was a Senior Scientist at EHESS and CNRS. He is now a Researcher and Vice President of the Scientific Committee at the Institut des Amériques.