The global economy is cratering in a manner we could not have imagined just two months ago. Even worse, we do not even know where the bottom is.
All of the Eurozone is in deep recession. China will likely contract, the first time it will do so since the country began modernizing in the late seventies. None of the large BRIC countries, earlier expected to be the engines of the global expansion, is expected to post any growth.
Nowhere are the signs of economic collapse more dramatic than in the US economy. Over the last four weeks, 22 million American workers filed for unemployment benefits. Several hundred billion dollars set aside as stimulus financing for small businesses have been wiped out even as things are still on a downward trajectory. The retail sector is gutted. Large corporations will require expensive bailouts to restart in any form.
Reality dawns on Donald Trump much later than it does for everyone else. Until yesterday, he continued to imagine that his nation’s economy could simply be turned back on like a light switch does. That is not going to happen. As the virus will continue to lurk into the foreseeable future, rehabilitating what was once the most powerful economy will be a long, complex and difficult process.
America’s economic fate is important for us all. When her economy grows like a mountain, we all benefit. When it craters like a sinkhole, we are all in trouble.
As of mid-April, all the gains made by the US economy since the 2008-2009 financial meltdown have been washed away. Horrid scenes of produce being dumped in the farms while families grow hungry in the cities call up memories of the Great Depression that happened in 1929-1920.
Before this viral outbreak, we knew our own economic prospects would be facing strong headwinds. Now, with the global economy heading for a deep recession, we find ourselves in the quagmire.
More than just thinking in terms of a “stimulus” package for our economy, we should be planning for a full-scale rescue of enterprises and jobs. Without enterprises, there could be no jobs. Without productivity, we will have no wealth creation. Without that, we all wallow in poverty.
But we know that difficult times are also breeding grounds for demagogues. They propose simplistic solutions to complex problems as a means to angle for power. The Great Depression provided conditions for fascist movements to thrive in Europe. In turn, that drove the world toward the Second World War.
While we work through the most difficult of times, we have to be vigilant against groups trying to gain advantage by exploiting the people’s pain.
Populists
Sadly, leftist groups have not let up in their agitprop during this health crisis. They have been tireless in their efforts to score populist points for themselves and erode public confidence in government.
At the start of the community quarantine, leftist groups tried to picture the government response as some form of “militarization” because soldiers, not nurses, were manning the checkpoints. Then they foisted the opiate of “mass testing” as a rallying demand. We now know that there is no such thing. Given the practical limits of test kits and laboratories, we can only, at best, have “surveillance testing” to arrive at an educated guess of the infection picture in the communities.
Earlier this month, they tried to precipitate a riot in a slum community. That was a dangerous agitprop experiment that exploits the miseries of the poor for some insurrectionary delusion.
Each time groups like Bayan Muna calls for a press conference, they raise impossible demands simply to score political points. Those demands, woven with misinformation, add to the confusion and compound the economic stresses.
This week, Bayan Muna and allied leftist “consumer” groups, demanded a waiver of electricity bills for a month. This is a truly disastrous idea.
If the distribution utilities are not paid for the electricity they delivered, they will be unable to pay the generation utilities. If the generation utilities are not paid, they could not buy the fuel to run their plants. Then we will have no electricity and the economy will be even more screwed up than it already is.
The electricity coops are particularly vulnerable. They have liquidity problems to begin with and many have been unable to pay the generating companies. If bills are waived, they will simply sink, unable to cover even their operating costs.
Waiver of bills is every consumer’s fantasy. It is this that the leftists are trying to exploit, pushing more opium to the people for partisan gain. That does not square with market realities.
In advancing that destructive demand, Bayan Muna claims to be repeating the demands of the electric coops. That is pure deceit.
The party-list groups representing electricity cooperatives asked government to subsidize one month’s worth of bills due lifeline consumers. These are the poor households minimally consuming electricity. This direct subsidy will not disrupt the payments flow and not cause the domino effect described above.
Bayan Muna, therefore, propagates fake news. No one with the slightest inkling of how economies and enterprises work would make the sort of proposal they advance.
We should be very careful about the sort of populist demagoguery Bayan Muna spews out on a regular basis. It is demagoguery fashioned by an anti-business ideological bias.
There should be no place for this sort of demagoguery in these perilous times. We must understand that any economic recovery will have to be driven by existing enterprises. We ought to conserve them.