So many Americans are complaining about this -- and much else about the economy -- and yet, somehow or other the American economy at present is the envy of the world. Yes, prices went up because of inflation (although wages are moving faster!), but this happened everywhere, and I've tried to explain why before. But this time, I'm going to try to fluff it out more fully, to see if I can get people to understand what the alternative would have been, had governments not spent vast sums just keeping people and businesses alive during and after the pandemic.
One of the biggest problems was that, while many people (myself included) could keep working -- from home or through some other arrangements, millions couldn't. How does a restaurateur and his staff work from home? How do all the bars and shops we frequent do that from home? Small stores can't afford the technology to suddenly become e-merchants with computers and drone delivery systems? Same with health clubs and so many other business.
If the government had not provided significant financial support to those impacted by the closure of stores, restaurants, and other in-person services during the COVID-19 pandemic, the economic and social consequences would have likely been severe:
- Widespread Financial Hardship: Without government aid, millions of unemployed individuals, especially those in service industries like cooks and servers, would have faced immediate financial crises. Many people live paycheck-to-paycheck, so the sudden loss of income could have led to an inability to pay for basic needs such as rent, food, and utilities.
- Massive Wave of Business Closures: Small businesses, especially in sectors like hospitality, retail, and dining, would have faced insolvency without assistance. Many of these businesses were forced to shut down or severely reduce operations, and without aid, they would have been unable to pay rent, cover fixed costs, or keep employees on payroll. This could have resulted in a much larger wave of permanent closures, especially for businesses that couldn't pivot to new models, like delivery or online services.
- Increased Poverty and Homelessness: The financial strain on individuals would have led to increased evictions, foreclosures, and homelessness. People unable to pay rent or mortgages would have been forced out of their homes, overwhelming shelters and social services. The poverty rate would have risen sharply, as millions would have fallen into destitution.
- Economic Collapse: Consumer spending is a huge driver of the economy, especially in sectors like retail and hospitality. If people couldn't afford to spend, demand for goods and services would have plummeted, rippling across the economy. This would have worsened the downturn, leading to a deeper and more prolonged recession or even a depression. Financial markets and sectors that seemed more insulated would have eventually felt the effects due to reduced consumption and business failures.
- Worsened Public Health Outcomes: If more people had been driven into poverty and homelessness, the ability to practice social distancing or follow health guidelines would have been compromised. Poorer living conditions, overcrowding in shelters, and a lack of access to health care would have exacerbated the spread of COVID-19, leading to higher transmission rates and worse public health outcomes. Mental health issues would have also surged, given the extreme financial stress and insecurity.
- Social Unrest and Political Instability: The widespread financial hardship and lack of government support could have led to social unrest, as people protested the lack of assistance. As inequalities deepened, public anger might have been directed toward both government institutions and wealthier sectors of society that were less affected by the crisis. In some countries, economic downturns and stark inequalities have historically led to political instability or even unrest.
By providing financial support, governments were able to cushion these economic and social shocks, helping to maintain stability and prevent what could have been an economic and humanitarian disaster. The aid packages, like Canada's CERB or the U.S.'s PPP and stimulus checks, were critical in mitigating these outcomes, even if they introduced large deficits in the short term.
Now, would you have preferred that all that happen, just so you don't have to spend a bit more at the store? When everybody was hurting, would you have been willing to hurt the rest some more, just to protect yourself?
What government could hope to campaign on the detritus of such a disaster?