“We remain optimistic about JCPenney’s ability to weather this pandemic,” chief executive Jill Soltau said in a news release. If that’s actually true, she’s about the only one. Burdened by debt and struggling with declining foot traffic, many of the nation’s venerable retailers were already vulnerable to a killing blow. And the burgeoning recession is hitting much harder than even the Great Recession did. Revenue is not merely soft; in many cases, it has fallen toward zero.
A recent analysis by Miguel Faria-e-Castro, an economist at the Federal Reserve Bank in St. Louis, projected that one-third of Americans could end up unemployed. Outside of groceries and a few basic essentials, even online sales — which made up only 11 percent of overall sales before covid-19 hit — have suffered since the quarantines began. This includes categories we might have expected to do well among a nation of shut-ins, such as DIY, home furnishings and sporting equipment, according to analytics firm Contentsquare.
Unless the world reopens for business almost immediately — and it’s difficult to see how that can happen safely — Americans may find that many of the stores they used to frequent remain shuttered, permanently, when the virus finally subsides. And that the list of dead storefronts could stretch well beyond retail to include many of their favorite bars and restaurants, their local movie theater, their gym, their co-working office.
Good government policy can mitigate some of the damage, for example, by giving businesses cheap loans to help pay their bills. But many businesses are too indebted to survive a long period with no revenue, while others will discover that a post-pandemic America no longer demands their services so much. The government shouldn’t save those businesses, and moreover, it won’t. Even if overall output recovers, that will leave a lot of fallow real estate and displaced workers.
Which is why, over the past few weeks, so many people have been arguing that strict social distancing imposes not merely a heavy economic burden but an intolerable one. I think those people are wrong, and not just because the unfolding crisis in New York is providing a painful lesson in the non-economic costs of doing too little, too late.
The United States is an immensely wealthy nation, one of the richest in history. We can afford to sacrifice a substantial chunk of our gross domestic product to save a substantial number of lives. What better do we have to spend our money on?
If what we are doing is unprecedented, it is only because earlier societies simply weren’t wealthy enough to manage it — as tragically, many developing countries still aren’t. The last time we saw such a plague was 1918, when average household income was about a third of what it is today, in inflation-adjusted dollars. We could shut down the entire economy for four months, produce not one good or service, and still be, collectively, twice as rich as our ancestors who lived through the 1918 flu pandemic.
Besides, we aren’t actually shutting down completely. We’re going to be providing quite a lot of health care, making a lot of masks and ventilators, crash-prioritizing a lot of scientific research. We’re also tossing out regulations that were crippling innovation in areas such as telemedicine. Some of that effort is simply the expense of virus fighting. But some of that effort will result in long-term gains, just as fighting World War II did.
But that’s paltry comfort to those who have sunk decades of their lives into building businesses that are threatened, or gaining skills and industry contacts that could suddenly become useless. So, while you’re cheering the health-care heroes running to the front lines, save some mental applause for the millions of people who are sitting inside right now and quietly, desperately, watching their expectations evaporate.
When this is over, they, too, will deserve our deepest gratitude — and all the help we can give them to get back on their feet.