Some companies are suffering others and are uneffected and a few are even benefiting. Restaurants may be shut down, but farmers are still growing food, and some tiny toilet paper factories are operating at 120% capacity. Trying to subsidize everyone erodes the idea of capitalism, it’s politically expedient but that’s not to say it’s a great idea.
Destroying the foundations our society is built on for temporary gain is generally really bad. People look at say gerrymandering and think, it’s just how you play the game. But, they forget elections are there to avoid civil wars.
On it’s own, just this time, it’s no big deal. But this is the 4th black swan extraordinary event leading to bailouts in the last 20 years and they don’t stop coming. If we are giving up on the idea of capitalism, perhaps we should consider what we are replacing it with.
What? Non sequitur about gerrymandering aside, capitalism is not "the foundation of our society" in either a historical sense or a sociological one. It's our current mode of operation, but it's by no means axiomatic.
We should be looking at the "black swan" events as systemic failures of capitalism and be looking for ways to replace it.
What exactly do you feet is the foundations of our society other than a representative democracy using a capitalist economic system? We don’t have much else that actually cross all elements of society.
Our society certainly didn't start as a representative democracy or a free market -- slavery was very much still a pillar of the government and economy.
Fast forward a hundred years to the early 1900s and you have things like the Kern Resolution finding peonage and unfree labor in West Virginia mines.
Another century later and today we have ~7 million people under the purview of the prison system in the US [1], including people in prison for debt. (And in many places, these people are used for forced labor.) We have poverty level minimum wages and many systematic failures that prevent people from participating in democracy. It's subtler now than it was a hundred years ago, but there are still plenty of people who are excluded from participating from the economic or democratic institutions in this country.
Also, even if everyone had access, we used to have a vigorous labor movement, and socialism was considered a valuable part of our society. [2] There are plenty of people today who would argue that our society is at least partly socialist (and should be more socialist).
You can't claim a representative democracy and capitalist economy if there are unfree people and forced labor. Or if there are unequal access to either.
This has nothing to do with capitalism. Companies plan for contingencies in the normal course of business.
A major halt of economic activity in order combat a pandemic is not normal, and no different than similar drastic changes that have occured during world wars. Serving the people, especially in exigent circumstances, is the entire purpose of government. Keeping the commercial sector artificially afloat is in the best interests of everyone so that we have a quick recovery instead of a global depression.
Subsides where not handed out for the 1918 pandemic and no recession occurred. Hell this was the middle of WWI and society survived just fine.
So, your argument is society has become more brittle over time, but that’s hardly a reason to make companies even more dependent on government handouts. People and companies are over leveraged, based on assumptions that don’t line up with reality. The basic capitalist idea is lot let them benefit or lose their shirt when reality hits them in the face.
Wartime spending was the subsidy. It always kickstarts the economy although it also changes several industries that are retooled for the war effort.
There is no such thing as a completely free market. There are constant regulations and oversight by government to provide a fair and stable environment to conduct business. When that changes, government again steps in to restore the balance. Again, it's there to serve the people. What exactly is the benefit of letting everything fail and plunging the country into another depression?
Wartime economies during the first half of the 1900s were very different than now. The US Military was essentially subsidizing industry through contracts to support the war effort, increasing government spending to unprecedented levels: https://eh.net/encyclopedia/u-s-economy-in-world-war-i/. BTW, they financed this by printing money. A lot of it. They did all this because they recognized that the war was an existential threat to America. It would be interesting to see what the reaction to the flu would have been without WWI going on, but in many ways, the government reaction is not so different — simply targeted at different industries. One benefit of the reaction then as opposed to now is that less of the subsidies went into the hands of finance and more to businesses who actually employ people.
However, I can agree with you in principle. Let’s start with the banks though — who have received so much in subsidies over the last two economic downturns that they’ve actually made money. Oh and can’t forget investors, who have been kept afloat by the Fed pumping money into the economy. If we let them fail in practice, it is likely that large companies/hedge funds/investors would be much more careful. But of course, that would also eliminate much of the wealth held by people in tech. Probably yourself included? Are you ok with that in service of pure capitalism?
I guess this all comes down to what kind of society you want to build. Part of the myth of prosperity after the US turn towards a service economy and away for manufacturing has been the idea that scrappy entrepreneurs can build their own businesses. So much of society and economic policy has been built around that idea. If we remove that, economic inequality would probably be too much for the average person to bear — where will the jobs come from when 74 percent of the employers are gone? The unrest that would appear in our society then would surely make 2020 feel a lot more like 1918 as well.
A great many companies are still doing business just fine. I can name several that are doing better than normal.
The capitalistic approach is to say this is the 3rd major respiratory pandemic of the last 110 years. Get some https://en.wikipedia.org/wiki/Business_interruption_insuranc... if you’re at risk for a prolonged shutdown or accept the risk of failure. Governments trying to hedge business risks are a giant slippery slope that doesn’t end.
If you disagree that’s fine, but perhaps come up with a general idea of how you want the country to operate longer term for the next crisis. Or worse, as what’s considered a crisis changes over time.
No insurers will underwrite against a nationwide shutdown caused by pandemic (or war or other meteor strike or any other similar economy-halting event). They'd literally go bankrupt the second they start paying out because the idea of insurance is that not everyone tries to cash out at the same time. That's why you typically see all these plans, business interruption insurance included, make exceptions for exceptional events.
And before someone links the Wimbledon, they have bargaining power beyond most companies' capabilities, and their insurance was custom written. There's no way standard businesses will ever be able to get insured against pandemics.
PathogenRX, a product it launched in 2018 to provide financial protection to companies hit by an infectious disease outbreak in the United States and Asia. The product includes a policy underwritten by Munich Re, one of the world's biggest providers of cover to protect insurers against big losses.
Sales had been slow, partly because the insurance was viewed as expensive given the risk, Christian Ryan, the head of US hospitality, sports and gaming at Marsh, told CNN Business. But the coronavirus pandemic is rapidly changing that perception, he said.https://www.cnn.com/2020/03/19/business/pandemic-insurance-c...
It was considered expensive specifically because companies where underestimate the risks.
The target industries for this product are Hospitality & Gaming, Travel & Tourism, Aviation, Public Entity, Education, Real Estate, Sports & Events and Retail/Wholesale Food & Beverage.https://www.marsh.com/us/campaigns/pathogenrx.html
Well doesn’t that sound exactly like the industry’s at risk during a shutdown.
I'm 100% in favor of capitalism, but that's not what you're standing up for. Capitalism doesn't mean you never intervene when disaster strikes, it just means that markets are the engine that drive the economy and you mostly let them function unimpeded. When something threatens the proper functioning of the market itself, a functional capitalist system should intervene (in non-market-based ways if necessary) to keep the flywheel spinning when the crisis passes.
Put another way, laissez faire capitalism might be fine when the system is operating in a normal regime, but most capitalists don't take that as a prohibition on taking action when things like wars or natural disasters strike. All of the usual arguments in favor of letting the market just do its thing break down when you're temporarily in an environment that differs hugely from business as usual, and letting the market decide for itself could end up optimizing for the wrong behavior. Specifically, we probably don't want to allow a natural selection event that cuts so deep that anyone without a 12 month cash buffer goes bust, since if every company operated to maintain that it would not be optimal behavior during the steady state.
"Free markets, except when the markets do not work" is not particularly specific - I fail to think of any mainstream party in the West that do not agree with this principle. The disagreement is about 1. when do markets fail and 2. what are the acceptable policies to fix it.
For instance, environmental externalities could justify an endless list of regulations, a massive carbon tax and/or cap-and-trade policies, as well as tariffs for countries not complying with environmental regulations. Because the markets does not work. Yet this is clearly not something everyone agrees with, despite being a market drive the economy but intervene to keep them spinning until the (climate) crisis passes.
I do not mean to enagage in politics and suggest the example I gave is what we should or should not do.
My point is that most people beliefs about the economy are a lot more specific than "markets with some intervention".
Totally agree with pretty much all of this; I'm just arguing that "don't subsidize, ever" is a very extreme vision of capitalism, and doing a one year or less intervention is nowhere close to throwing away the whole system (which GP is implying very clearly elsewhere in the thread, and to be fair I probably should have responded to those specific comments instead of this one).
I agree that when and how we intervene is important to discuss, it's just important to argue the details, not "but muh capitalism" as a way to argue against every government action ever.
Some companies are suffering others and are uneffected and a few are even benefiting. Restaurants may be shut down, but farmers are still growing food, and some tiny toilet paper factories are operating at 120% capacity. Trying to subsidize everyone erodes the idea of capitalism, it’s politically expedient but that’s not to say it’s a great idea.