How sturdy will our capitalist systems prove to be, in a time of international pandemic? More specifically, are our present day organizational structures more fragile than we previously imagined?
If only it were possible to address this crisis with more utilitarian options, additional fiscal stimulus might prove worthwhile. Instead, most current fiscal stimulus - other than provisions for pressing healthcare needs - will scarcely alleviate the financial burdens which emerge during the course of this pandemic. And unfortunately, too much of our non tradable sector capacity is structured in ways that are profoundly anti-utilitarian. A lot of fiscal stimulus is going to be lost to portions of the economy which are not basic to getting things done, in the days ahead.
In recent decades, much of our supply side capacity became focused on experiential and "quality product" markets. While these markets are valuable, all too often they leave few options for lower income citizens - as consumers - to meet life's basics first. For the most part, our non tradable sectors chose anti-utilitarian routes, in that they were largely designed to create the greatest good for the least number of participants. As governments come to the aid of these now (unexpectedly?) fragile systems, policy makers will find it difficult to meet the needs of their most vulnerable citizens. Unfortunately, the sum total of fiscal stimulus in the days ahead, will create additional debt burdens which still don't address overall economic stability or a safety net for lower income levels.
Eventually, people are likely to demand more basic and utilitarian systems than we presently have, for what are largely non discretionary needs. As Arnold Kling noted in a recent post, "Normal is not an option...Expect supply chains in the future to have a lot more redundancy and to be less driven by cost minimization." An important challenge, however, is to also preserve wealth and productive economic complexity as best we can. The sooner we bring a more utilitarian and flexible approach to our non tradable sector markets, the better.
Regular readers know how much I've praised tradable sector activity in general, since much of its dynamism stems from a uniquely utilitarian impulse. How so? Tradable sectors tend to create the greatest economic good for the greatest number, via product options which represent all income categories, not just those of the middle and upper classes. This is a profound utilitarian result which underlies the prosperity of the recent era we have mostly taken for granted.
But achieving such results in our domestic settings, would mean a refusal to arbitrarily limit supply side definitions in (mostly) non discretionary markets. Until non tradable sectors gain some room to breathe freely, our economic systems are going to become increasingly fragile. Alas, it has finally become evident that strict adherence to specific definitions of quality product, costs lives. At a White House conference earlier this week, Dr. Deborah Birx defended our late start in diagnostics testing for COVID-19, and in doing so she often repeated the need for "quality" product. I must have cringed every time she did so. While the quest to allow only "quality" product is understandable, unfortunately it has led to fragile and incomplete markets, especially in housing and the use of time centered knowledge and skill.
Only recall for example, how continuous calls for quality product eventually led to losses of healthcare provision in rural areas. David McCullough wrote in The Pioneers that when Dr. Samuel Hildreth settled in Marietta, Ohio (1808), the town had "about 180 dwelling houses, and nearly 1500 inhabitants". Yet Dr. Hildreth would be sharing his new practice with five other doctors who were already there!
In all of this, there are both physical and intellectual dimensions to the kinds of utilitarian markets which are urgently needed. Once we finally open the participation of applied knowledge to all citizens, we may also gain greater chances of surviving pandemics. Likewise, should we decide to build a full range of living options representative of all income levels, utilitarian capitalism could come to the rescue of both lives and financial systems. Granted, all such efforts will take time. But it is worth pursuing them now, to make a difference for personal and economic stability in the years to come.
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