View this email in your browser

Unsanitized: The COVID-19 Report for Jan. 5, 2021

Pandemic Recovery in a Plutonomy

The optimistic case for economic growth masks who those benefits might
be reserved for

 

Beyond the aggregates, some people have it much better than others.
(John Nacion/SOPA Images)

First Response

The economic outcome from the coronavirus crisis hinges on a big if
about vaccine distribution
.
But let's think positive for a moment and play out the best-case
scenario. We passed bridge funding for the unemployed and low-value
checks (maybe they'll be larger if Democrats win in Georgia today
),
along with small business support. That should lead to a stronger
economic outlook
,
even if it doesn't fully bridge to normalcy. Maybe the billions for
vaccine distribution and new presidential leadership kick in and we're
in a pretty good situation by mid-year. In particular if you get the
very elderly vaccinated, you reduce hospitalizations and deaths pretty
sharply and you can start to tentatively reopen things that have really
been closed since last March.

Combine that with positive aggregate household savings-in equal
measure

from CARES Act transfers and, less remarked-upon, lack of spending

because there's not a whole lot to do with travel and leisure
dollars-and you have a lot of money burning holes in pockets. This is
often called pent-up demand, and in practice it means that hotels and
restaurants and movie theaters and other discretionary activities will
see a lot of customers once activities can be assuredly done safely. The
post-pandemic will be a big party, under this theory: there's even a
lot of loose talk about a Second Roaring Twenties
.

Support Independent, Fact-Checked Journalism

Matt Yglesias has been one of the primary outliners of this scenario
, and
you should read his take. But I would say that it really only makes
sense if you believe we live in a plutonomy
,
where the lives and fortunes of the rich matter almost exclusively. For
them, rushing out after the crisis has lifted and going on trips and to
the movies is quite probable. For everyone else, not so much. But
inequality has soared to such a degree, especially in the pandemic, that
under the plutonomy theory, all you need are rich people to support the
entire economy. Let's look at how this works, and why the particular
circumstances of the pandemic cut against it.

If you believe in trickle-down, the burst of spending will trigger
hiring for those in the service sector that cater to this wealthy
clientele. That's how a plutonomy functions to support low-wage
workers and build a recovery.

This can also create competition. Yglesias notes how three coffee shops
in his neighborhood have closed, and as herd immunity nears, the
remaining one will see a surge of demand and therefore raise prices.
This will lead to some other budding coffee shop owner to open a store
and undercut the incumbent on price. This new business formation will
eventually lead to a full recovery.

**Read all of our Unsanitized reports here**

Click to Support The American Prospect

There's only one thing: how will this new entrepreneur get the working
capital to open up? Because smaller businesses simply cannot access
credit
,
a trend that started after the financial crisis and has only worsened.
Right now small business lending is at the same level as 2008, which was
a far more pronounced recession. There's been a parallel boom in cheap
lending to bigger businesses, and again this predates the uncertain
economic circumstances of the pandemic. The disappearance of community
banks and the lack of profit margin in small business loans are among
the causes.

Big banks themselves, meanwhile, have just been allowed to engage in
share buybacks

and dividends again, making it even less likely they will search for
profit in small business lending. This leakage to shareholders isn't
enough for the capital class yet
,
but the trendlines are clear. The financial sector is supporting the big
guys. The small business support in the new relief bill, which really
only lasts two to three months, is not seen as enough

to prevent more carnage. There are hundreds of thousands of firms barely
hanging on

that aren't likely to make it, and the system makes it difficult for
upstart replacements.

Meanwhile, we're seeing record profits

at the large incumbents. There are 56 new billionaires

in America since March. Mergers hit $3.6 trillion
for
the year. "These are times when the strong can get stronger," the
CEO of Nike fittingly put it

this fall. There's just no question that the pandemic recovery so far
has been massively unequal, and that's poised to continue.

We Depend on Your Donations

I have written previously

that the disruption in the economy's changing patterns-more working
from home, less business travel, a taste for home cooking and
comfortable frugality-will "strand assets" throughout the economy,
making it hard for the dry cleaner catering to commuters or the business
lunch spot to stay in business. But you have to add to that disruption
the severe difference in economic outcomes

between rich and poor, young and old, big business and small business.
To a certain extent, these two Americas don't even encounter one
another anymore

thanks to the pandemic; shared experience already went out the window
long ago, but there's not even much hope for a twinge of solidarity
with one's fellow man.

Plus, with a Federal Reserve also bought into the plutonomy theory and
conflating propping up corporate assets
with
propping up the economy, there's no real risk at the top. The fact
that Congress canceled the corporate credit facilities except for the
one, known as TALF
, reserved for
financiers wanting to dump bad securities suggests that an escape hatch
has already been created if the corporate debt market tanks
.

What does this mean in practice? The rich, and the lucky poor able to
snatch up the jobs catering to their needs, may be fine. But we'll be
living under such unique circumstances that you might call it the Third
Gilded Age: the first in the 19th century, the second over the past 20
years, and the third from the pandemic onward. A concentrated economy
that stubbornly resists wage growth, a sclerotic economy robbed of
startup dynamism, a disrupted economy that scrambles to reapply business
models to new habits; that's where we could be headed. And it may look
superficially robust, but with dark spots lurking underneath.

Number of Americans Vaccinated

4.66 million
.
30 percent of allocated shots have been administered, with a high of
62.2 percent in South Dakota and a low of 15.3 percent in Kansas.

We Can't Do This Without You

Today I Learned

* I was on the Nicole Sandler Show yesterday discussing various matters.
Watch here . (Nicole Sandler Show)

* The Biden team's plan to fix the vaccine rollout

is a little too focused on supply and not enough on distribution, but
it's a start. (Washington Post)

* Then again, Israel has been so efficient at distribution that it's
running out of vaccine
,
so any plan has to include both elements. (Washington Post)

* How much should Moderna and Pfizer be able to profit off the vaccines
,
which were created with public money? (Los Angeles Times)

* Biden's appearance in Georgia yesterday was all about $2,000 checks
if
the Democrats win. (Daily Poster)

* Meanwhile, Georgia is the only place in America that's had weeks of
in-person early voting, and it's in the middle of its worst surge of
the crisis
.
(Vox)

* Britain is running a vast experiment

on its citizens, prioritizing one shot and allowing "mix and match"
doses of different vaccines, depending on availability. (Stat News)

* The RESTAURANTS Act, which is gaining momentum in Congress, is a
bailout without worker guarantees
.
(Jacobin)

* When the freezer broke at a hospital in Ukiah, California, officials
had two hours to distribute 600 doses
.
And they got it done. Um, why not always do that? (Los Angeles Times)

**Click the social links below to share this newsletter**

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

YOUR TAX DEDUCTIBLE DONATION SUPPORTS INDEPENDENT JOURNALISM

Copyright (C) 2021 The American Prospect. All rights reserved.
_________________

Sent to [email protected]

Unsubscribe:
[link removed]

The American Prospect, Inc., 1225 I Street NW, Suite 600, Washington, DC xxxxxx, United States