We were wholly unprepared for this moment. COVID-19 has hit the world with a mighty uppercut and we are now staggering in the ring. It’s not just that we bobbed when we should have weaved or that we slipped when we should have ducked, it’s like we stepped into the ring without months of training under our belts and then, on top of that, forgot to put in our mouth guard. And the US, well, the US was the least prepared fighter of them all.
As we are now three months into our bout with COVID-19 (the first case was confirmed on January 21, 20201), there seem to be two camps emerging just outside the ring. In one camp are the people who think we need to stay home to fight another day and in the other camp are those who think we need to get back in the ring and do what we did before this opponent arrived on the scene. [Full disclosure, I’m one of the people in the first camp, but I’m not here to defend my camp nor denigrate the other. In fact, as much as it pains me to say it, I admit I’m not smart enough to have all of the answers.]
That being said, I have been trying to listen to people who believe we need to loosen stay-at-home orders and allow businesses to open their doors again, because some of these people have legitimate concerns. The argument I find the most difficult to defend against is that there are millions of people who cannot afford to stay home. Without even getting into how terribly the federal government has bungled the rollout of the multiple stimulus packages they’ve passed, $1200 (or less/more depending on your situation) is not going to go very far for most people. On top of that, the unemployment systems have been overrun with people in need of assistance and therefore have been unable to process the abundance of applicants in a timely and efficient manner.
Now, it is true that there have been deferments put in place for various payments (rent and mortgages, loans, taxes, etc.) but these fixes are temporary and don’t really get at the heart of the problem. And that problem is this: A large percentage of Americans have little to no savings.2 I think many of us probably knew this was the case, but if nothing else before has brought that fact into focus, this pandemic most certainly should. How is it that the ‘richest nation in the world’ has this many citizens on the brink of financial ruin? According to Bankrate3,
less than half of Americans have enough money to make it three months without any income. It’s no wonder so many people are forgoing their concern for the health of themselves and others. Three months have now elapsed, so it's understandable that people are itching to get back to work. I know not everybody protesting against state restrictions are out there for this reason, but some are. We have created a system in the United States where many people are barely able to squeak by, much less endure months, weeks, or even days without pay. I don’t know about you, but I think that’s insane. My question is then, how did we get to this point?
Look, I’m not an economist, but I do my best to be an informed citizen. I’m also one of those weirdos who likes to learn, so I read things like books and articles (in newspapers, magazines, online) and I watch the news. Because of this propensity, I’ve identified some (and I emphasize some) areas that I believe are in glaring need of improvement. Obviously, there are a lot of reasons for how we arrived here, but I would like to focus on the following:
- 1) The stagnation of wages and the loss of purchasing power
- 2) The decrease in labor unions
- 3) The lack of a social safety net
Since 1970, the increase in the purchasing power of the average American’s paycheck has been negligible4, yet, in the last twenty years alone, the price of inflation has been outpacing wage increases by more than 10%.5 That’s a major disparity. The increases in rent, the housing market, college tuition, health care, not to mention everyday expenses, are all causing individuals and families to struggle in ways we haven’t seen in decades. If you’re not in this boat, bully for you, but have compassion for those who are, for they are numerous.
Why is it that wages have plateaued? One of the biggest contributing factors is the change in ethos concerning the relationship between corporations and their shareholders. According to Lynn Stout, the late distinguished professor of corporate and business law at Cornell Law School, in the 1980s
“economists began arguing, confidently, if incorrectly, that shareholders 'own' corporations* and that stock price always captures a firm's true economic value. Thus shareholders should have more power over corporate boards, and executive pay should be tied to shareholder returns. These academic arguments were embraced by activist investors seeking to buy shares, pump up price, and sell for a quick profit. They also appealed to CEOs hoping to enrich themselves by boosting share price by any means possible.”6
*This has led to what’s called shareholder primacy - the belief that the interests of the shareholders must be the primary factor in corporate decision-making. It has become a commonly held misconception that shareholder primacy be required of corporate directors, however, it is not.7
As the belief of shareholder primacy spread throughout corporate America, the concern for the needs and rights of the American worker took a major hit. (This has also led companies to engage in other activities, such as stock buybacks. Though not inherently bad on the surface, this article explains how stock buybacks have become a major bone of contention during the COVID-19 outbreak.)
Also, during this period, the influence of labor unions was on the decline. Though it was in no way a primary cause, the evolution of shareholder primacy and executive enrichment can only have helped to facilitate its fall. Why is the diminishing presence of labor unions a cause for concern? Because as union membership has shrunk, so has middle class income.8 In addition, unions benefit not only their members but nonunion members as well.9 Has everyone forgotten their high school history lessons? Some of the things many of us take for granted - a national minimum wage, weekends off, healthcare and paid sick leave, the 40-hour work week10 - are due to the successes of the labor movement of the mid-20th century. However, this is not an appeal for everyone to run out and join a union (even though you should strongly consider it if not already a member). Even at the height of the labor movement in the US, only one-third of workers were members of a union11, nevertheless, the gains achieved were nearly universal, benefitting union and nonunion workers alike.
Combining the downturn in middle class income with the flatlining of purchasing power, the ability for the middle class to save for a rainy day (or pandemic shutdown) becomes increasingly difficult. Now we find ourselves in the midst of the worst pandemic that most of us have ever had to live through, with millions of Americans having either been forced to stay home without pay or, even worse, having lost their jobs. We have small business owners terrified they might not have a business to return to when all is said and done. People are lining up outside of food pantries because they don’t have enough money to buy food for their families. As I stated above, I wholeheartedly believe we should shelter-in-place as long as possible to minimize the number of deaths caused by this novel coronavirus, but I have both sympathy and empathy for those who feel they can’t afford to do so.
That leads me to my last issue: the lack of a social safety net here in the United States. If you would allow me a moment to return to my boxing analogy, what is one thing every boxer needs? A great cutman. For those of you unfamiliar with the term, a cutman is the person responsible for handling any swelling or lacerations that might impede the fighter’s ability to fight another round. The United States does not have a great cutman. In fact, the blows delivered by COVID-19 have highlighted the mediocrity of our cutman. Who, or what, is our cutman? It’s that social safety net - unemployment for one - but it’s our healthcare system that doesn’t cover everyone, it’s our convoluted welfare system, and maybe it’s our lack of an universal basic income. Whatever combination of factors it is, it’s leaving too large a percentage of people at a disadvantage - hardworking people who are doing everything they can to get by and it’s still not enough.
People all across this country are suffering, either from the virus itself or from the actions we’ve had to take to slow its spread. Though every single one of our healthcare professionals (I thank all of you for your unrivaled commitment to the care of each of us) have shown us how truly wonderful they are, we are seeing the deficiencies in our healthcare system. For those who are not sick, we are seeing how unprepared (and possibly unwilling) we’ve been as a nation to create a society and economy that would allow a larger percentage of people to have enough savings to weather an unexpected catastrophe. Yes, our government is trying, but their game plan and subsequent execution of it, has been woefully inadequate.
To be honest, we shouldn’t have been in this position in the first place. Some may believe this to be some kind of anti-capitalist treatise, but it’s far from it. I’m just one of those people who believes that while we’re in the process of trying to better our own circumstance we can simultaneously have in mind the welfare of our fellow human beings. Consequently, I think we need to learn from this fight we’ve been forced into. We need to find a game plan that will allow every American citizen to step in the ring and go twelve rounds, even if they’re forced to do it from their own living rooms.
One final note: I mentioned it above but I’ll say it again - I do not have all of the answers. In fact, I don’t have all of the questions and I know there are a lot more factors going on to explain everything here, however, that doesn’t negate anything I’ve said. The United States is failing a large portion of its citizens and this fight with COVID-19 is highlighting some of its deficiencies. I know many of you who are reading this probably agree with me but I still just want to put it out there: let’s not be a nation of people only concerned about ourselves. If we want to truly make America great again, we need to look out for one another.
6 The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public. Lynn Stout, 2012
10 https://www.payscale.com/career-news/2019/08/5-awesome-things-brought-to-you-by-the-labor-movement - I’m adding a reference here but we really all should have learned those things in school.
