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The Road to Reopening the Economy Is Still Long

The Road to Reopening the Economy Is Still Long

Tuesday, 21 April, 2020 - 12:30

Last week, which was 84 years ago, we wrote the pandemic-gripped world is like that kid on the long car ride asking “Are we there yet?” The analogy was off by just a bit, at least in the US: Here, that impatient kid is actually driving the car.


President Donald Trump has obviously been itching to end lockdowns, and yesterday he released guidelines on how states could do it. These were surprisingly deferential to governors, but that didn’t last long. This morning he was on Twitter, calling on Minnesota, Michigan and Virginia to “LIBERATE” themselves from sheltering orders imposed by Democratic governors. His reopening plan emphasizes caution, but it’s full of loopholes, notes Max Nisen, and now Trump is screaming at the top of his Twitter-lungs that states should use them.


The question of lockdown vs. no lockdown is not the simple trade-off skeptics claim, writes Noah Smith. Impatience will end up both killing more people and hurting the economy even more. And though we may have begun to flatten the curve of the pandemic, data from Italy and Spain suggest we’ve just climbed to the top of a flat but very long hill that slopes gradually downward, writes Cathy O’Neil. It’s far too soon to declare victory.


Over all of this hangs our main problem, which is that we can’t safely reopen anything without much, much more testing. Michael Lewis profiles a scientist in San Francisco who built a lab on the fly to run thousands of tests a day quickly, but even he is limited by a lack of equipment, particularly the long swabs you jab up a patient’s nose to get a sample.


An effective treatment would be the best way to get people back to work quickly, and yesterday we got hopeful news on that front, from a small study of a Gilead Sciences antiviral drug. It was one of what Faye Flam calls this week’s four big scientific advances against the disease. But the study was small, lacked a control group and had other limitations that make it way too early to declare this a miracle drug, writes Max Nisen. The stock market of course went ahead and added many billions to Gilead’s market cap. Impatience is also contagious.


Investor optimism in general is out of control, in fact. Stocks capped a second week of rallying today, merely on the promise of a reopening plan. But we still have no idea how bad the pandemic will get, how long it will take to get things close to normal and how much all of this will destroy earnings, writes Marcus Ashworth. Without insight on all of the above, this rally isn’t durable.


Among the biggest market winners are health-insurance companies, which are thriving during the pandemic because they’re not having to pay as much for delayed surgeries and other procedures, notes John Authers. Investors also seem just a little too confident the current health-care system will come out of this intact — an iffy bet when the prospect of 20% unemployment has people questioning the wisdom of employer-based health care.


The pandemic and its accompanying economic crisis will spare no country, rich or poor. But the rich ones have a duty to help out the poor ones, not just because it’s the right thing to do, but also because it will make fighting both the disease and the recession easier. With that in mind, rich countries should enforce a one-year moratorium on debt payments by emerging and middle-income countries, applied to all creditors, write George Soros and Chris Canavan. Otherwise we face a wave of sovereign defaults not seen since the 1930s. And that would help nobody.


Unfortunately, unlike in past crises, we can’t count on China to be the economic tractor pulling the rest of Asia out of the mud, warns Dan Moss.


But there are glimmers of a private-sector revival of the sense of patriotism and community that helped the recovery from World War II, writes Joe Nocera. Companies are rediscovering that helping their customers is ultimately good for business, which will hopefully be the end of a toxic fealty to shareholders above all else. In fact, shares of industrials focused on good environmental, social and governance practices are outperforming their peers during this crisis, writes Brooke Sutherland. Maybe companies can serve both society and shareholders at the same time.


Further Helpful Reading: One easy fix to the problems with the $2 trillion stimulus package: Give all working people a raise of $600 a week. — Karl Smith


(Bloomberg)


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