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Coronavirus Brings US Decline Out in the Open

Coronavirus Brings US Decline Out in the Open

Friday, 3 July, 2020 - 05:30

The US’s decline started with little things that people got used to. Americans drove past empty construction sites and didn’t even think about why the workers weren’t working, then wondered why roads and buildings took so long to finish. They got used to avoiding hospitals because of the unpredictable and enormous bills they’d receive. They paid 6% real-estate commissions, never realizing that Australians were paying 2%. They grumbled about high taxes and high health-insurance premiums and potholed roads, but rarely imagined what it would be like to live in a system that worked better.

When writers speak of American decline, they’re usually talking about international power -- the rise of China and the waning of US hegemony and moral authority. To most Americans, those are distant and abstract things that have little or no impact on their daily lives. But the decline in the general effectiveness of US institutions will impose increasing costs and burdens on Americans. And if it eventually leads to a general loss of investor confidence in the country, the damage could be much greater.

The most immediate cost of US decline -- and the most vivid demonstration -- comes from the country’s disastrous response to the coronavirus pandemic. Leadership failures were pervasive and catastrophic at every level -- the president, agencies such as the Centers for Disease Control and the Food and Drug Administration, and state and local leaders all fumbled the response to the greatest health threat in a century. As a result, the US is suffering a horrific surge of infections in states such as Arizona, Texas and Florida while states that were battered early on are still struggling. Countries such as Italy that are legendary for government dysfunction and were hit hard by the virus have crushed the curve of infection, while the US just set a daily record for case growth and shows no sign of slowing down.

This utter failure to suppress a disease that most other countries managed to contain will have real economic costs for Americans, as fear of the virus drives people back into their homes and businesses suffer.

In addition to worrying about their jobs and livelihoods, Americans must now be subjected to months of images of Italians casually walking around on the streets while they cower in their houses. It’s a painful and stark demonstration of national decline. Even more galling, the US’s Covid failure means that its citizens can no longer travel freely around the world; even Europe plans to impose a travel ban on Americans.

But the consequences of US decline will far outlast coronavirus. With its high housing costs, poor infrastructure and transit, endemic gun violence, police brutality and bitter political and racial divisions, the US will be a less appealing place for high-skilled workers to live. That means companies will find other countries in Europe, Asia and elsewhere a more attractive destination for investment, robbing the US of jobs, depressing wages and draining away the local spending that powers the service economy. That in turn will exacerbate some of the worst trends of US decline -- less tax money means even more urban decay as infrastructure, education and social-welfare programs are forced to make big cuts. Anti-immigration policies will throw away the country’s most important source of skilled labor and weaken a university system already under tremendous pressure from state budget cuts.

Almost every systematic economic advantage possessed by the US is under threat. Unless there’s a huge push to turn things around -- to bring back immigrants, sustain research universities, make housing cheaper, lower infrastructure costs, reform the police and restore competence to the civil service -- the result could be decades of stagnating or even declining living standards.

And a biggest danger might come later. The US has long enjoyed a so-called exorbitant privilege as the financial center of the world, with the dollar as the lynchpin of the global financial system. That means the US has been able to borrow money cheaply, and Americans have been able to sustain their lifestyles through cheap imports. But if enough investors -- foreign and domestic -- lose confidence in the US’s general effectiveness as a country, that advantage will vanish.

If capital begins to abandon the US and the dollar in large amounts, the currency will crash and Americans will find themselves paying much more for everything from cars to televisions to gasoline to imported food. Interest rates will be raised in an attempt to lure back investment capital, and the country might undergo a period of stagflation worse than the 1970s. Large-scale unrest would undoubtedly result and -- in the worst-case scenario -- the US could collapse like Venezuela.

This is an outcome to be avoided at all costs. But it’s an outcome that is no longer out of the realm of possibility, thanks to the complacency, arrogance and misplaced priorities of US leaders and the deep and bitter divisions among US voters. If the US goes from rich, world-straddling colossus to floundering dysfunctional developing nation in just a few decades, it will be one of the most spectacular instances of civilizational decline in world history. Every mind in the country should be bent towards the task of reversing the decline and restoring national competence.

Coronavirus is exploding in big southern states such as Texas, Florida, and Arizona. This entirely preventable disaster will have devastating consequences for these states’ economies.

The outbreaks that slammed the Northeast and much of the Midwest in the spring are now mostly under control. But in much of the South and the West, the virus is now on the rampage. Hopes that the summer sun would suppress the disease have been dashed -- in fact, by driving people inside to mingle in air-conditioned spaces, the heat may be facilitating the spread.

This was a human blunder. Leaders such as Texas governor Greg Abbott and Florida governor Ron DeSantis started reopening their state’s economies in early May, long before the threat of the virus had passed. And many voters scoffed at the threat of the virus; some even loudly disdained the practice of mask-wearing.

Fortunately, death rates are not yet as high as they were during the epidemic’s Northeastern wave -- possibly because society is doing a better job of isolating the old and vulnerable, possibly because treatments like dexamethasone are saving the lives of the critically ill. But even those who survive the virus often suffer severe long-term health problems.

In any case, the economies of states like Florida and Texas are going to take a big hit. Research shows that fear of coronavirus, rather than lockdown policies, is responsible for the vast majority of the economic impact of an outbreak. This will be true of the new wave as well. Already, restaurant reservations -- an early bellwether of virus avoidance behavior -- are falling in the new epicenters:

The obvious losses will accrue to local service businesses. But the hit to tourism could be even more damaging. The industry is Florida’s largest, accounting for an estimated 11% of the state’s gross domestic product. . Although less famous for beaches and amusement parks, Texas took in $164 billion from tourism in 2018 (more in dollar terms than Florida’s $112 billion). Arizona and Southern California also depend a lot on the sector. All these places will suffer, as their names become more associated with uncontrolled disease than with sunshine and fun.

Health care is another vulnerable Sun Belt industry. Hospitals and medical offices are some of the most obvious places to catch coronavirus, so people suffering non-life-threatening problems or needing routine care will tend to stay away. The sector generates about $150 billion a year in Texas and $132 billion in Florida, and has recently been the single biggest driver of job growth in Arizona.

These tentpole industries are important because they bring in outside dollars. Reduced tourism echoes through a state’s economy, as fewer tourist dollars mean less spending by locals. Less health care spending hurts cities, as fewer people drive in from surrounding towns to see the doctor. Reductions in tax revenue hurt education, infrastructure, transportation, and everything else state and local governments spend money on.

It’s important to reiterate that these economic losses will not stem from lockdown policies. Even if Florida chooses to keep Disney World open, people will be scared to go there. Allowing routine medical procedures won’t make hospitals any less terrifying.

Instead, the losses are the direct result of a failure to control the virus itself. Texas, Florida, Arizona and California have lagged badly in terms of hiring contact tracers, so they can’t use test-and-trace approaches to contain the pandemic. They also have avoided strict mask requirements in public places, despite masks being proven to reduce spread. And they opened restaurants, bars, and other high-risk crowded indoor spaces too soon. Thus, when the economic hit comes, they will largely have themselves to blame.


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