BBA Economic Digest: Coming Chaos
The Coming Chaos
The number of known coronavirus cases in the United States continues to grow quickly. As of Saturday afternoon, there have been at least 21,365 cases of coronavirus confirmed by lab tests and 266 deaths, according to a New York Times database.
The estimates are inherently uncertain, and they could change as America adopts unprecedented measures to control the outbreak.
The Trump administration has issued a Major Disaster Declaration for the state, meaning more federal aid is coming to New York as cases of coronavirus show no sign of abating.
Residents of California, New York, New Jersey, Illinois and Connecticut, nearly 85 million Americans — are under orders to stay home.
The U.S. borders with Canada and Mexico was closed as of midnight Saturday.
Senators are racing to finalize a $1 trillion economic relief bill, which could include direct payments to Americans.
Wall Street ended its worst week since the 2008 financial crisis with the Dow below where it stood on the day before President Trump was inaugurated.
281,000 Americans filed for their first week of unemployment benefits last week — a sudden 33 percent jump over the week before. A much larger wave to come.
Automakers idled their plants this past week, leaving many workers to rely on unemployment insurance.
Quoting the Washington Post, "At the heart of their algorithms is a scary but empowering truth: What happens next depends largely on us — our government, politicians, health institutions and, in particular, 328 million inhabitants of this country — all making tiny decisions on an daily basis with outsize consequences for our collective future."
As of Sunday morning, the John Hopkins Resource Center reports 26,747 of confirmed cases of coronavirus with 340 deaths.
Photo by Louie Castro-Garcia on Unsplash
Take the Better Shot
Much of the conversation around the economic effects of the outbreak has centered on the stock market and bailouts for large corporations, but the most acute impacts are being felt on Main Streets around the country. And economic developers are responding.
I am heartened by their efforts that are trying to help people and businesses during this time of great uncertainty. They are too many to mention but I see their posts on social media and by email. My hat is off to you.
Those economic developers who are acting understand that their primary customers are not prospects for business recruitment, but rather the existing employers and workers in their communities.
Famed business consultant Peter Drucker said it best: "The primary customer is the person whose life is changed through your work."
More than half of U.S. small business owners say their business will not be able to continue operating more than three months due to economic strain caused by the pandemic, according to a Goldman Sachs survey of more than 1,500 small business owners conducted March 16-17.
Now is the time, more than ever, to "dance with the one that brought you." Concentrate on helping your existing employers. If you do not have a robust business retention and expansion program, now is the time to set one up.
Now is also the time for regional economic development organizations to do more than just business recruitment. I've recently met with two regional groups, both based in large markets (NFL cities), and neither did anything with BR&E. Big mistake.
“In major metros, larger regional organizations naturally gravitate to business recruitment and FDI activities because market demand pulls them in that direction. This work is important, but I would argue that the most vital role these regional organizations can play is actively managing BR&E," said Laith Wardi, principal of ExecutivePulse Inc.
"These organizations are in a unique position to ensure that BR&E activities within a region have structure and provide consistently strong, seamless customer service—regardless of community boundaries. The absence of regional management in BR&E almost always results in a hodgepodge of localized approaches that don’t follow uniform customer-focused policies and ultimately underperform. Deficiencies in BR&E are hidden during good economic cycles. During episodes like COVID-19, they are exposed but it’s too little, too late.”
Final note: Business recruitment is always, and I repeat always, a long shot. And as someone who spent much of his misbegotten youth in pool halls, I can tell you that sometimes there is no shot at all.
But there is always a shot with BR&E. By the way, Laith and I offer the BBA Community Review/Asset Mapping. It's a SWOT analysis paired with digital resource guide. Check it out.
World leaders are using martial terms in describing the fight against COVID-19. President Trump has referred to himself as a "wartime president."
"We must act like any wartime government and do whatever it takes to support our economy," said British Prime Minister Boris Johnson.
Historically, when a war takes place, private-sector employment plunges, a portion of the labor force is injured or killed, and if combat occurs within a country's borders, infrastructure is destroyed.
Social distancing, a central strategy in fighting the pandemic, is forcing layoffs, but the labor force has been — with tragic exceptions — largely untouched. Indeed, people are eager to get back to work as soon as they can.
The economy's asset base — its buildings, production plants, intellectual property, and the like — is not being harmed at all. Which is why Goldman Sachs expects a sharp rebound in economic activity once America is allowed to get back to work.
The country's infrastructure might be temporarily retooled to support the war effort. GM, Ford, and Chrysler shifted from making cars to making tanks and planes during WWII.
In this fight, the automakers may start making ventilators instead of cars. One thing is looking more certain -- Americans have not had such a disruption to their lives since WWII, which forever changed lives and our economy.
Photo by Aditya Vyas on Unsplash
The New Normal
Public health experts agree we need to “flatten the curve” by social distancing to slow the spread of the virus so as to not overwhelm our health-care system.
In a piece entitled "We're not going back to normal," Gideon Litchfield, editor in chief for MIT Technology Review, writes that Social distancing is here to stay for much more than a few weeks and that it will upend some of our ways of life forever.
"To stop coronavirus we will need to radically change almost everything we do: how we work, exercise, socialize, shop, manage our health, educate our kids, take care of family members," writes Litchfield.
"We all want things to go back to normal quickly. But what most of us have probably not yet realized—yet will soon—is that things won’t go back to normal after a few weeks, or even a few months. Some things never will."
Rather than a short storm, we may be facing a "coronavirus winter," a term coined by Michael T. Osterholm, professor of environmental health sciences and chair in public health at the University of Minnesota, and author of Deadliest Enemy: Our War Against Killer Germs.
It could mean this health crisis is with us for a protracted period of time.
The world is constantly changing. Before the outbreak, I was talking to economic development groups about the Fourth Industrial Revolution, and how we will have to adapt to a new way of living, working, and forging relationships. Same will hold true with this virus.
In the meantime, be kind to others. Let the better angels of our nature rule.
Lessons from the Past
During World War I, history’s most lethal virus erupted in an army camp in Kansas, moved east with American troops, then exploded, killing as many as 100 million people worldwide, including 675,000 in the U.S.
The misnamed "Spanish Flu" killed more people in 24 months than AIDS killed in 24 years, more in a year than the Black Death killed in a century. At the time, there were no vaccines or lab tests to detect the virus.
Officials at various levels ignored the experts and tried to downplay the threat.
President Woodrow Wilson released no public statements. Surgeon General Rupert Blue said, “There is no cause for alarm if proper precautions are observed.” Another top health official, dismissed it as “ordinary influenza by another name.”
But it wasn’t. The Spanish flu had a mortality rate of 2 percent, similar to some early estimates about the coronavirus. This is all documented in the book, "The Great Influenza: The Story of the Deadliest Pandemic in History," by John Barry.
Writes Barry, "The final lesson of 1918, a simple one yet one most difficult to execute, is that ... those in authority must retain the public's trust. The way to do that is to distort nothing, to put the best face on nothing, to try to manipulate no one."
“What’s happening has not happened in our lifetime before ... What we have is a crisis.” -- Ray Dalio, founder of the Bridgewater Associates hedge fund
“We’re looking at something that’s catastrophic on a level that we have not seen for an infectious disease since 1918. And it’s requiring sacrifices we haven’t seen since World War II. There are going to be enormous disruptions. There’s no easy way out.” -- Jeffrey Shaman, professor of environmental health sciences at Columbia University
“I have patients in their early 40s and, yeah, I was kind of shocked. I’m seeing people who look relatively healthy with a minimal health history, and they are completely wiped out, like they’ve been hit by a truck.” -- respiratory therapist in New Orleans
"Our current efforts to fight Covid-19 are the equivalent of fending off a surprise attack. Next we have to wage a sustained war. That means it’s essential to clearly envision the problems we’ll face over the next 12 to 18 months and mobilize to respond right away." -- Richard Danzig, a senior fellow at the Johns Hopkins Applied Physics Laboratory
Photo by Loic Leray on Unsplash
The Risk of Not Enough
Some may wonder if we are overreacting to the coronavirus. I have friends who have suggested as much. (Well, they did last week, maybe not now.)
Even as public health officials repeatedly urged social distancing, many young people this past week spilled out of bars on Bourbon Street in New Orleans and gathered on beaches in Florida.
As Congress debates a trillion-dollar fiscal stimulus plan, decision-makers should consider the risks of not doing enough. Ray Dalio, the founder of Bridgewater Associates, says the fiscal stimulus package should be at least $1.5 trillion to $2 trillion. Former Minneapolis Fed president Narayana Kocherlakota says $2.5 trillion.
Any suggestion comparing the thousands who die on the highways to the coronavirus is a “false equivalency,” said Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases in a White House briefing Friday.
“I don’t think with any moral conscience you can say, ‘Why don’t we just let it rip and happen and let X percent of the people die?’”
Bottom line: The cost of doing too little is measured not only in economic activity, but also in human lives.
Non-Virus Stories We're Reading
The Best Green Salad in the World The New York Times Magazine
This $15 Course Can Teach You How to Scale a Business on YouTube Entrepreneur
Book Review: An “Impossible” Voyage on Foot Across Antarctica Undark
How to become more intelligent (according to Einstein) -- Ladders
These Industrial Robots Get More Adept With Every Task Wired