We have known and appreciated Brianne Wolf since, shortly after earning her PhD from the University of Wisconsin at Madison, she came to teach political economy at Ashland University. Now she teaches political economy, political theory and constitutional democracy at Michigan State University’s James Madison College of Public Affairs in East Lansing.
As governors and local officials began issuing “shelter in place” (SIP) orders, we contacted Wolf, asking her to talk with us about the intersection between human health and the economy during this emergency. The interview was given on March 25, 2020. Given the quickly changing nature of news around the coronavirus pandemic, Wolf has since worked with us to update, in so far as possible, the information in her earlier responses. You’ll find these updates in the footnotes.
As states and localities extend SIP orders beyond the initial two or three weeks, people are wondering when this will end. Some warn the economy won’t easily recover from business closures. Others insist that we must first of all save human life. Do we face a choice between the health of the economy and that of human beings?
We need to think about both. Lives can depend on the health of our economy. Given layoffs due to our protective measures, there are those who don’t know where their next paycheck is coming from.
We speak of SIP orders, which aim at “flattening the curve” of rising infections, as if these will save us from making choices about who lives and who dies. Yet we are already making those decisions as we take our disease prevention measures. We’ve decided, in effect, that the lives of at-risk populations, like the elderly and the immune-compromised, are our priority. We’ve decided that in order to protect these groups we’re willing to risk the lives of those who perform essential functions—not just health care workers, but grocery store staff and people who work in product distribution warehouses or food production plants. Now we’re seeing reports that some people in those warehouses and plants have contracted the virus. So, we’re already weighing lives and deciding whose life matters.
To protect health care workers, whose expertise we need to protect everyone else, we’ve put in place rules that create psychological distress and threats to the health of those who come to the hospital for reasons other than COVID-19. Initially, some New York hospitals barred the partners of expectant mothers from delivery rooms, on the grounds that this support person might infect the baby or health care workers. Hence many women were delivering babies alone. That has been shown to increase risks to the life of the mother. Across the country, people taken into hospitals due to strokes, heart attacks, or injuries—and those in memory care units or nursing homes—are not allowed to have visitors. I don’t think people should have to suffer or die alone. Public officials and other leaders, religious leaders for example, are trying to “minimize the maximum possible damage” from this pandemic—i.e. loss of life due to coronavirus. Yet there are reports of individuals becoming suicidal because of social distancing, as well as of domestic abuse during SIP orders.
In political economy, we’re always trying to make the individual’s pursuit of self-interest compatible with the interests of others. We have to seek a balance between concern for health and concern for the economy. Prioritizing one over the other will injure both.
What aspects of this emergency threaten the economy most?
Instability, which is caused by uncertainty. Political economists teach that to maintain healthy politics and a healthy economy, government should inform us about measures it is taking; and it should ensure that the rules are the same for everyone. This allows us to plan our lives in accordance with our individual interests, without interfering with other people’s ability to plan their lives in accordance with their interests.
Let’s take one of the big problems we saw at the beginning of the pandemic—the grocery store shelves emptying of things like toilet paper or flour for baking. Why do shortages like that happen? We’re producing the same amount of those items as before news of the pandemic; the supply chains are fine. But people got scared because information was not readily available to them, and because rules about what they could do in their everyday lives were rapidly changing. People panic when they don’t know how to plan their lives.
Most of us think we care about humanity; but at the end of the day, I want to make sure that my family and me are taken care of. If I don’t know what the government’s going to do—whether it will be restricting my movements or closing stores—my instinct is to stock up. After local and state governments saw this panic buying, it took several days for them to say, “Hold on! We won’t close the grocery stores, and we’ll allow you go to them.”
Health care scientists and government officials are doing their best to give us information. In an unprecedented situation, they can’t predict with certainty how the disease will progress. Yet since the emergency began, rules have been changing on a weekly or even daily basis. People don’t know what they can count on. With reports of Amazon workers getting sick, and calls to shut Amazon warehouses down, people are again panicking. If we’re not supposed to be out of our houses except to grocery shop, yet the groceries are out of a lot of things, and now maybe we can’t order from Amazon, people will hurry to gather much more than they need, creating artificial scarcity.
An essay I always assign in political economy courses is Friederich Hayek’s “The Use of Knowledge in Society.” Hayek, a twentieth-century economist of the Austrian school, discusses prices as a key decision-making tool. We use the information they convey so seamlessly that we don’t even notice we’re doing it. If the price of gas goes up, maybe you decide not to take a road trip. Others make the same decision, and these decisions cause price cuts, boosting demand, causing gasoline refineries to increase supply. As long as information about prices, supply and demand circulates freely, individuals can make rational decisions about their money and their lives, and their plans will fit with other people’s plans.
The classical political economists you study had great confidence in the ability of markets to respond to consumer decisions. Did their thinking encompass situations like the current one?
Adam Smith (1720-1793) spoke of measures to prevent famine. In 18th century Britain, Parliament enacted Corn Laws that put bounties on the imports and exports of grain. They hoped to prop up prices for British grain while directing grain toward people who needed it. Smith advocated abolishing the laws. The bounties artificially changed prices and actually interfered with equitable allocation of goods. Smith thought it better to let people trade grain freely.
We’re seeing evidence for Smith’s view now. Trump invoked the Defense Production Act to increase production of COVID-19 testing kits. But before the act was used, private businesses retooled to speed up production. Instead of mandating what businesses must produce, it’s more effective for government to dial back existing regulations. Hearing of the shortage of hand sanitizers and other cleaners, breweries and distilleries wanted to start making these products with the residual alcohol that they can’t use. Yet there were laws requiring that they first obtain permits. They couldn’t begin until the permit requirement was lifted.
Of course, some government regulations are necessary. We can’t mass produce test kits before we know they are effective, or introduce a new vaccine before we know it’s both effective and safe. But we do need movement on the supply chain to obtain tools desperately needed now. Let’s say some of the ventilators now being built don’t meet every single regulatory requirement. If they help people breathe, it seems to me that speed in getting them to people with lung failure is more important at this moment.
Israel Kirzner talks about individuals quickly retooling as they see new profit opportunities. They act quickly to make money ahead of potential competitors. We’re seeing some of our biggest corporations manufacturing the products we now need in high quantities. Ford and GM in one week were able to turn their production from cars to plastic shield facemasks. 3M has doubled its global output of N95 respirators. Clothiers like Gap and several others, including small brands like Elizabeth Suzann in Nashville, TN are making masks that can be used as personal protective equipment. No one had to tell them to do it; they saw a profit opportunity.
We also see companies donating products and services. We see citizens stepping up. People are volunteering to make lunches for kids who depend on the free lunch program at schools. Church services are being streamed. Fitness centers, including the one I went to when I lived in Ohio, are offering online workouts for a small drop-in fee, or for free to those who keep their memberships. People understand what other people need. Altruism, together with the profit motive, prompts people to help each other out.
These innovations help to keep people employed, now and in the long term. New jobs are opening because of the emergency. The re-purposing of industry brings in revenue so that firms stay in business.
Joseph Schumpeter (1883-1950) talked about entrepreneurship as “creative destruction.” The old way we used to do things – old skills, old technologies – become obsolete as people innovate. We were already moving to a more virtual economy, but there will be many more changes coming out of this. Businesses are learning that employees who work from home stay productive, and that these arrangements decrease the expense of maintaining office buildings. Some exercise studios plan to continue the online option even after the emergency ends. I’m more than happy to pay for the online service offered by the studio in Ohio.
Yet the market cannot do it all. There is still a huge role for government.
Presumably one role for government is providing financial relief to hard-hit wage earners and businesses. If our health precautions expose those in “essential positions” to higher health risks, shouldn’t government compensate them in some way? And if SIP orders put other workers out of a job, shouldn’t those workers be compensated?
The stimulus package I would have preferred would offer more to people laid off from small businesses like salons or restaurants—service industry, person to person jobs. We’ve been predicting the highest future job growth in this area, yet they were the first to go. A better stimulus package would have given aid only to those who need it, although I gather it would be difficult and time-consuming to calculate this, which would further delay the stimulus. People like you and me who can work remotely don’t need the help.
I also support increased sick leave or healthcare options for people who are still working, as well as loans to small businesses so that they can survive this period of inactivity. I even endorse plans to give money to corporations that apply for and need it—but I’m happy there will be regulations to prevent corporations from taking the money and buying back their stocks with it. The money should be used to keep workers employed. I do understand, however, reports I have seen that some firms are cutting the salaries of those at the top to keep their stock prices up, while maintaining the salaries of the rest of their employees.
I also support hospitals providing hazard pay to those working in COVID units, although we’ve seen lots of retired healthcare workers volunteering to work in New York, for example. Healthcare workers, like many others working to mitigate problems at this time, are acting out of concern for others, not simply for pay.
Would you support government-enforced moratoria on evictions and loan defaults?
While such measures can be helpful, they cause a “trickle-up” effect. Many landlords need the rents they collect in order to pay their own bills. When you halt any portion of the economy, residual effects are felt elsewhere. I feel better about extending people federal loans to pay their rent, since that helps landlords as well. Likewise, extending loans to business ensures that these business can later repay the American people.
Usually, we offer stimulus packages to persuade people to spend money they’re reluctant to spend, by going out to dinner, taking a vacation, etc. But people can’t do that while confined at home. This relief package only helps them pay for essentials, and only temporarily.
Can the economy survive this emergency without a major recession?
I’m trying to follow Mr. Rogers’ advice: “Look for the people who are helping.” Yet the uncertainty worries me. I don’t think current measures are sustainable, certainly not for the 18 months it may take to develop a vaccine. Let’s say we find our self-isolation measures have caused a decline in the number of deaths. If governors start lifting SIP orders, I’m not sure people will flock back out. They may fear a resurgence. Then the economy will remain stalled. Extending our SIP measures indefinitely would require repeated bail-out measures, which we cannot afford. I’m very concerned about the duration of this. Yet I’m encouraged that governors are working with one another to come up with a plan to safely reopen the economy as the curve flattens.
 Governor Cuomo has since issued an executive order (March 28) allowing women to have one support person during labor.
 Since this interview, physicians in Washington state have observed better outcomes from delaying intubation and ventilator use, instead using CPAP machines or oxygen delivered through nose canula.
 3M has since been criticized for sending masks overseas and the Trump administration used the Defense Production Act to force them to send masks to the US from factories abroad and not to export masks produced in the US. They did strike a deal with the administration to continue to send masks to Canada and Latin America, however.
 Since this interview, and new SIP restrictions, there are reported problems with some aspects of the supply chain for various foods and other goods.
 Since this interview, some businesses, including universities, are seeing major shortfalls and are cutting salaries.
 As of April 16, the Small Business Administration had exhausted the funds set aside for both the Paycheck Protection Program and for the Economic Injury Disaster Loan program.