The coronavirus crisis has triggered a deep and sustained economic downturn in the US that will have lasting effects, writes John Clarke
Donald Trump may have mused about ‘the cure being worse than the problem’ and blustered about reopening the economy by Easter but, just like UK advocates of a Malthusian ‘herd immunity’ approach to the spread of COVID-19, his administration has had to accept the utter impossibility of allowing the virus to run unchecked through the population in the interests of ‘business as usual.’ Reluctantly, belatedly and with deadly exceptions and omissions, stringent measures of physical distancing and economic shutdown have had to be taken. The effects of this are devastating on a scale that is nothing less than historic.
The idea that the pandemic is a so-called ‘black swan’ event that has devastated an otherwise healthy global economy, is complete nonsense. The failure of the lengthy but incredibly sluggish post-2008 recovery to resolve the crisis of profitability in the global economy was pointing to an impending economic slump before anyone became sick with the Coronavirus. Still, this devastating pandemic was a powerful tipping point that has increased the scale and intensity of the downturn massively. The impact of the lockdown on the US economy in particular has been shattering.
The payroll figures for the first two weeks of March, before widespread lockdown measures were undertaken, register the loss of 701,000 jobs across the US. The downturn in the economy that this begins to reflect is utterly devastating. ‘Economic number-crunchers are struggling to keep up with the speed of the slide,’ reports ‘The Atlantic.’ In mid-March, Goldman Sachs initially suggested that economic growth would be 0% in the first quarter and decline by 5% in the second. Several days later, J.P. Morgan, issued more pessimistic figures projecting a 4% first quarter decline and a 14% loss in the next three months. Goldman Sachs then revised their second quarter forecast and suggested a catastrophic fall of 24% in the second quarter. This would mean the loss of 14 million jobs. During the Great Recession, a little more than a decade ago, 8.7 million jobs were lost but this took place over several years. This economic disaster would unfold during one spring season.
The former Federal Reserve Chair, Janet Yellen, said this week that the current data does not reflect the enormity of the situation. If it did, she suggested that the unemployment rate would be shown to be ‘as high as 13%’ and the overall economic contraction would be about 30%. Yellen questioned the assumption of a quick ‘V-shaped’ economic recovery with a rapid rebound taking place. Pointing to the fact that ten million US workers have filed for unemployment insurance in the last two weeks, she suggested that
“the more damage of that sort is done, the more likely we are to see a ‘U,’ and there are worse letters like ‘L,’ and I hope we don’t see something like that.”
The picture that is being painted here is one in which the entire 2009-2019 recovery is wiped out with incredible rapidity. If the obvious comparison to the crash of 1929 and its aftermath is made, we look at a downturn that rivals or exceeds that historic calamity but that, again, unfolds, not over several years, but in the space of a few short months.
Already the impact and consequences of the lockdown are sending shockwaves through US society. First of all, the very ability to secure the relative safety of physical distancing, in face of the danger posed by the virus, is very unevenly available. Poorer workers have few options in this regard and are placed in harm’s way. In Chicago, ‘70 percent of Covid-19 deaths are black,’ and in surrounding Cook County, “While black residents make up only 23 percent of the population in the county, they account for 58 percent of the Covid-19 deaths.” The virus doesn’t discriminate but leaves that to the US society it is passing through.
A survey by the Society for Human Research Management (SHRM) has found that 58% of US workers ‘won't be able to pay rent, buy groceries or take care of bills if quarantined for 30 days or less.’ The lockdown, of course, is likely to be considerably longer than 30 days. Food banks are being rapidly overwhelmed, and a representative of Feeding South Florida reports that, “We’re seeing about a 650% increase in our request for support.” The ‘rescue package’ adopted by the US Congress, with its $1,200 emergency payments and extended unemployment insurance coverage, is inadequate and mired in bureaucratic inertia. Meanwhile, breadlines are forming ‘a four-minute drive across the lagoon from Mar-a-Lago, President Donald Trump’s private club.’
As the lockdown proceeds, workers and communities in the US are taking action to protect themselves and ensure their basic needs are met. With their workplaces effectively deathtraps for themselves and their families, Amazon workers have launched strikes. Bus drivers in Detroit struck to win an agreement that passengers could enter by the rear doors and that they would not have to collect fares. The rent strike has captured imaginations and is gaining momentum across the country while, in California, housing takeovers are being organised by people desperately in need of safe living space, where physical distancing is possible. The scale and intensity of such struggles for survival will increase as the lockdown continues and in response to the abandonment of those with little or no income.
Any serious examination of the calamitous economic situation in the US can’t possibly lead to the conclusion that the end of the pandemic lockdown will mark a rapid return to normality. Apart from the likelihood that the COVID-19 health crisis will reverberate well beyond the initial efforts to contain it, the US economy faces a deep and sustained downturn. Moreover, the bill for the vast bailouts of major companies that have been provided during this period will be due and an attempt will be made to collect in the form of greatly intensified austerity measures. The Governor of New York State, Andrew Cuomo, has not even waited for the Coronavirus death rate to reach its peak before declaring that the costs of the crisis will be paid for in brutal social cutbacks.
In the US, as elsewhere, the period following the pandemic will be a harsh one indeed. It is sometimes accepted as axiomatic on the left that periods of economic slump and mass unemployment don’t lend themselves to upsurges of working class struggle. This, however, will be a downturn without precedent. A crisis of public health will give rise to a severe economic crisis and, at every turn, the question will be posed of who is to pay for these crises. Fighting demands, bold plans of action and radical alternatives will resonate deeply and mass struggles can arise at such a time. The post-pandemic crisis will be international but the fight that is taken up in the US, at the very heart of global capitalism, will be of huge importance.
John Clarke became an organiser with the Ontario Coalition Against Poverty when it was formed in 1990 and has been involved in mobilising poor communities under attack ever since.
More articles from this author
- CPTPP: More freedom for capitalists, more exploitation for workers
- False hopes: the crisis will not be solved by slightly nicer capitalism
- Engels 200 – His Contribution to Political Economy - book review
- Imperialism is driven back in Bolivia
- Antisemitism is weaponised in Ontario
- Bolivia defies the Washington Consensus
- Justice for Joyce: Canada’s racist healthcare system