Herb Rothschild Jr.: Economic recovery after COVID: The more things change ...
How long it will take for the U.S. economy to recover from its current crisis is hard to predict, and what it will look like when it does is even harder. But whenever and whatever, our inexcusable inequality is likely to increase.
The U.S. economy shrank 5% in the first quarter of 2020, but the shutdown didn’t begin until March thanks to Donald Trump’s difficulty in acknowledging any reality that doesn’t conduce to his self-aggrandizement. The contraction in the second quarter will be far larger. In late March, economists with Goldman Sachs forecast a 24% drop in the gross domestic product (GDP). Probably the numbers will begin improving in the third quarter, but the virus is tenacious, and we are not a well-governed, well-disciplined people with universally accessible health care. By contrast, South Korea, which was hard hit by the virus in February but largely had it under control within a month, suffered a first quarter drop in GDP of about 1.4%. The International Monetary Fund predicts a slightly smaller contraction for the year, mainly because of reduced tourism and exports.
Our low-wage workers in food production and processing have maintained their jobs, although at great risk. Low-wage workers in retail, entertainment and tourism, however, have been laid off in huge numbers, and those who return can expect no further market-driven improvement in pay and benefits. Unless the federal government raises the hourly minimum wage from its current $7.25 to something like $15 and adopts single-payer health care, they will struggle mightily to recover from their months of unemployment and cover current living costs.
If the Republicans retain the White House and/or control of the U.S. Senate, such interventions won’t occur. If Biden wins and Democrats control both houses of Congress, they may or may not. After the 2008 economic meltdown, little care was taken of most workers even though Democrats were in total control. The wealthiest 10% got 95% of the dollar benefits of recovery, and the Affordable Care Act didn’t even include a public option. Obama seemed most pleased at how cheaply he bailed out Wall Street. In his appearance on the Daily Show on Oct. 27, 2010, he boasted, “If you look at how we have handled this financial crisis — if you had told me two years ago that we’re going to be able to stabilize the system, stabilize the stock market, stabilize the economy, and by the way, at the end of this thing, it will cost less than 1 percent of GDP, where the (1980s savings and loan) crisis cost us 2.5 percent of our entire economy — a much smaller crisis — I’d say, ‘We’ll take that,’ because we saved taxpayers a whole lot of money.”
In the 1990s, the UN Development Programme (UNDP) began to produce annual reports on how countries ranked on the Human Development Index (HDI), which scored them on average lifespan and educational level and per capita income. Based on 2018 data, the U.S. was ranked #15 on the HDI. Beginning in 2010, the UNDP also began to use an Inequality-adjusted Human Development Index. That index considers whether people are able to “be” and “do” desirable things in life. Examples include being well fed, sheltered and healthy, and working, attending school, voting and participating in community life. Measured by those criteria, the U.S. dropped to #28.
The Great Depression occasioned enormous progress toward economic justice in the U.S. This crisis is likely to do nothing of the kind.
Herb Rothschild’s column appears in the Ashland Tidings every Saturday.