Already six months in the not-so-new COVID-19 pandemic of 2020, we are all obviously scared for our and our families’ lives, and our panic can get us to make some illogical conclusions about the way the world works. Unfortunately, our wrong assumptions turn into the societal request, heard by the government, and turned into a full-blown social policy.
Q1 2020 hedge fund letters, conferences and more
We’ve heard much talk about how greedy capitalists and crony governments are choosing the health of the economy over the actual health of the society. These cries draw a clear distinction between what the economic goals and public safety goals are, which, even though some people are honest and sincere in their resentment, is wrong at the fundamental level.
“Choose public health over the economy”
The mainstream media is particularly active about this issue. They actively target all the government policies and decisions that are directed to ease up the lockdown restrictions on businesses and deem them as destructive to public safety during this health crisis.
From The Washington Post’s “Should Older Americans Die to Save The Economy?” to Forbes’ “Letting People Die to “Save” The Economy Is A Losing Idea,” the popular media is deliberately painting the dichotomy of choosing the economy over the public health as the main battle we have to fight.
But as much as this simplistic perception of our problem may seem real, it’s not, and even worse: it can have a much more damaging effect on public health than just the pandemic.
Understanding the economy
The issue at hand here is that the people in the United States, as well as in any other country, have a very vague understanding of what the economy really is. Despite a widespread belief that the economy is this monster that concerns itself with the CEO salaries, profits, and interest rates, it actually represents how an everyday citizen can improve their living standards.
The economy isn’t a rigid institution that has its CEOs and high-echelon actors; it is an open space where all people interact with one another and exchange goods and services. If you go to a barber’s and get a haircut, you are the economy; if you go to the grocery store and buy two loaves of bread, you are the economy. It’s with these everyday exchanges that the strength of the economy is measured.
Let’s have another example: let’s say you have a steady job and an income that easily provides food, housing, clothing, and other basic necessities for yourself and your family. In this case, your paycheck isn’t the goal for which you’re working; it’s those basic necessities that you’re after, which is why a paycheck is the means used to achieve those goals.
Now consider that due to a heavy lockdown guideline imposed by the government, you lost that job and the income with it. Suddenly, you find yourself in a situation where you cannot clothe your kids who are growing so fast, you can hardly afford a quality meal, etc. In short, your ability to fulfill basic necessities has dwindled. And what was the reason behind it? The choice that mistakenly puts public health over the economy.
The experience shows that when described on the individual level, people tend to understand economic ideas far better than when they’re offered macro-economic explanations. And with the above-mentioned example, it’s easier to comprehend how an economic slowdown can affect a regular person’s life.
And that’s pretty much the same for businesses and productions. People tend to be negatively inclined towards the revenues of a company, simply because they’re led to believe all of it goes to those greedy CEOs and in their salaries. But in reality, revenue is not a goal; it’s a means that companies use to pay their employees, maintain the current production volume, and invest in the new capital to increase that volume and lower the price.
So, on both individual and corporate levels, an income is not something that the actors are striving towards; their main goal is to live better and have larger outputs that satisfy more people. Therefore, the economy is, by nature, the process of pursuing a better life.
Are we really choosing between the economy and public health?
So, is the dichotomy between saving the economy and protecting public health really relevant? Should heavy lockdown restrictions be imposed on companies in order to limit their “cold-blooded” pursuit for revenue and as a result, magically improve the public health condition?
Painting the current situation like this is nothing more than the public avoiding to face the truth: that there’s no dichotomy between public health and the economy and the two are heavily intertwined with each other.
When people started panicking after the heavy blow from Coronavirus, many companies underwent serious financial losses. And as hurtful as those losses might be for them, the society will ultimately come out of it stronger than it was before: the companies will get an incentive to shift their focus on things that are more important for the society at that point.
One great example of this shift is the society’s dependence on new cars. General Motors is one of the biggest car manufacturers in the United States, and it often manages to remain profitable. Yet when the COVID-19 became a global pandemic, GM experienced a considerable drop in its car sales. And what did the company do? It temporarily halted automobile manufacturing and started producing more valuable products: face masks, respirators, and more.
This trend of going from traditional manufacturing to face masks can be witnessed all over the place. Among the companies that have started producing face masks, hand sanitizers, gowns, etc. are GM, Apple, Ford, Tesla, Prada, Jameson Irish Whiskey, and many many more. And this list doesn’t only include big companies; there are lots of small-time businesses, as well as individual entrepreneurs, that stand beside the society to fight the crisis.
Since the supply of the basic medical toolkit has increased significantly, the price on them is dwindling super-fast. Just a couple of months ago, there was a huge shortage of the Personal Protective Equipment (PPE) masks in America, as well as respirators and other necessary tools. And today, you can hardly hear complaints about the shortages. Wonder why? It’s because the companies are heavily contributing to their supply.
What’s more, many of them donated the masks for free or at a lower cost. But still, whether they did what they did for the sake of their goodwill, public image, or “greedy” revenue, it doesn’t really make a difference for the ultimate outcome: we now have medical supplies that will save thousands of doctors’ lives, not to say the lives of millions of civilians.
Now, imagine this: what would happen if these companies that have been deemed “essential” were closed down by the government? Millions of medical equipment units would simply be lost because these companies wouldn’t have produced them in the first place. And even if they did that for the sake of the profit, there’s nothing wrong with that because a company becomes profitable by selling goods that people really want.
And to imagine how better the current situation would’ve been if more companies were allowed to participate in this process is simply depressing. In this futile fight between the economic benefit and public health, we have effectively diminished our ability to fight back the pandemic with as many equipment units as possible.
The dichotomy that doesn’t really matter
The economy doesn’t exist if people don’t exist; the only true purpose of the economy is to help people raise their living standards and allow companies to help people in doing that. If you lose a job and cannot afford to feed your own children, you will find any way to bring some food on the table, regardless of the hell that’s brewing outside.
In our fight against Coronavirus, we should remember that there’s no abstract economy that doesn’t concern us but rather rich old CEOs that sit in their palaces undisturbed. The state of the economy, as well as the state of public health, is measured by how people are living their lives and how they attain the basic needs. And we shouldn’t have to choose one thing over the other; they’re practically inseparable.
