The coronavirus has wreaked havoc on global stock markets, but this may just be the start of a much bigger economic crisis.
Investment professionals on Wall Street spend their days reading financial reports and looking at numbers flash on screens. These numbers record the moment-to-moment changes in the collective wisdom of markets about the value of stocks, bonds, commodities and a distressing array of derivative financial products.
From the comfort of the sealed caverns of Wall Street the actual physical and social world is just an abstraction to be quantified and analyzed. One of Wall Street’s most prominent investment research and management firms released an analysis that says the coronavirus won’t be all that bad for the economy.
Analysts from Morningstar Inc.—which is actually headquartered in Chicago’s cavernous downtown—say that this pandemic will be a “mild pandemic.” I’m not sure how pandemics can be mild, but the analysts outline cases for “moderate” and “severe pandemics.”
One of the things that gives these analysts such a sanguine view, particularly in the United States, is the country’s advanced health care system which is “likely much more prepared for the taxing of our hospital system, as we appear to have a massive lead over other developed nations in the number of intensive care unit beds per citizen.”
And yet, a first-hand report from a physician in those hospitals suggests that there will be very little room for severe corona virus cases in any hospital ICU. Those beds are already being used by patients and not just waiting empty. In all likelihood, hospitals will be quickly overwhelmed and forced to decide who gets critical live-saving treatment and who does not. The “who does not” number could be very large if the Italian experience is anything to go by.
The analysts do admit that lack of health insurance and paid sick leave will likely lead to higher infection rates in the United States than would otherwise be the case. Naturally, people without insurance will be reluctant to seek treatment, and those without paid sick leave may come to work even when ill in order to make enough money to pay their bills.
The surprisingly upbeat report is based on the idea of a return to business as usual. The assumption is that the coronavirus pandemic will not shatter confidence in our institutions which are so clearly incompetent and/or inadequate to the task of fighting this pandemic.
For the first two months of this year the US markets virtually ignored the growing dangers of a pandemic and assumed that any economic problems would be confined to China. In fact, even as infections spread like wildfire in China, market averages touched new highs. The idea that novel infectious diseases for which there is no treatment do not recognize national boundaries just didn’t occur to most investors and investment advisors. Reality, however, began to sink in by late February and led to the historic stock market collapse.
Even now, a friend of mine who is retired reports that the week before last her investment advisor responded sharply when she called to dump half of her portfolio of stocks. The advisor won the argument saying that this is just a temporary slide, and that in the long term all will be well.
The political and social implications of the current meltdown seem lost on the Wall Street crowd. They cannot see that when all is said and done, it is unlikely that very many people will have faith in an advisor who tells them that stocks always return to previous levels and move higher. This will be an indirect result of shattered faith in government institutions that are supposed to protect us in such emergencies and shattered faith in an economic system that leaves so many without the means to respond to such a life-and-death situation.
Large-scale and dramatic rearrangements of our current system worldwide and in the United States are likely to come in the wake of the season of death that is upon us—and in the wake of the economic carnage that results from the breakdown of a system so vulnerable that a tiny virus could topple it at its base. That virus is now calling into question deeply held assumptions about basic security, protection, health care, and also economic and political arrangements that do not seem able to respond in ways that preserve life in the face of one of the most obvious and fundamental threats to it: epidemic infections.