One of my favourite cartoon characters from the 1970s was the little Japanese-Italian chick Calimero, whose constant, plaintive refrain was: “It’s an injustice, it is!” I have been hearing modern versions of Calimero’s lament a lot recently.
“It’s true that more men are dying than women from Covid-19 around the world,” wrote Ryan Heath and Renuka Rayasam in Politico, “but that’s not exactly cause for celebration.” Not exactly? Then there was the Atlantic journalist Annie Lowrey, who wanted to persuade us that the economic burdens of the pandemic were disproportionately falling on millennials.
Growing up in Glasgow, my friends and I liked to quote Calimero sarcastically at anyone who complained about their lot. “It’s an injustice, it is!”
Let’s get one thing straight: the principal losers in a pandemic are the people the contagious disease kills before their time. They are disproportionately old and (to a lesser extent) male.
The latest provisional figures for deaths registered in England and Wales show significant excess mortality, relative to five-year averages, in the first three weeks of last month. In the week ending April 17, for example, there were nearly 12,000 excess deaths, more than double the five-year average. Deaths attributed to Covid-19 were equivalent to three-quarters (74%) of the excess; 88% of Covid-19 deaths were of people older than 65; and 58% of Covid-19 victims were men.
As we learn more about the excess deaths not attributed to Covid-19, we shall see that most were directly or indirectly attributable to the pandemic — people in care homes who probably did have the virus, or people dying of heart attacks because they were afraid to go to hospitals — so the basic story will not change: this is no virus for old men.
But what about the economic injustices of the pandemic? Hans Holbein’s Dance of Death series makes it clear that death in the era of plague was no respecter of rank. By contrast, cholera pandemics in the 19th century waged class war against an urban proletariat living cheek by jowl in filthy slums.
Covid-19 is different. It began with the relatively well-off jet set — the kind of people who fly to conferences in Singapore and then to ski chalets in the Alps. As soon as it got out of the airports, however, the virus went downmarket, spreading rapidly wherever people are tightly packed indoors — subways in big cities, for example. The mortality rate in poor areas of England is double that in rich areas, according to the Office for National Statistics. In Britain and America, the non-white population is being harder hit. Yet it has been the responses of government that have principally determined how the costs of the pandemic have been distributed.
Wherever you look, the economic data is the worst of our lifetimes. In America, about 30 million jobs have been lost in the space of just six weeks. Donald Trump’s economic adviser Kevin Hassett warned last week that the unemployment rate could reach between 16% and 20% next month, the highest since the early 1930s.
And yet the US stock market has rallied so much since its low on March 23 that it ended last month just 14% below its pre-pandemic peak. In other words, investors think it’s as bad as . . . early October 2019, when the S&P 500 index was last at Thursday’s level. The market has actually rallied 30% since the nadir of March 23.
We are simultaneously a) suffering a public health disaster, with a second wave of infections and illness likely at some point when we go back to work and school; b) inflicting a deep and probably long recession on ourselves, with lockdowns that are the bluntest possible instrument for controlling contagion; and c) breaking the record for an equity market rally. How can we resolve this huge paradox?
The answer is that unconventional monetary policy is being used on an unprecedented scale with the principal aim of shoring up the prices of financial assets. For that is the principal effect of near-zero interest rates and quantitative easing, which has led to a 60% expansion of the Federal Reserve’s balance sheet.
Backstopping Wall Street is not in the Fed’s statutory mandate, admittedly, but it has been the Fed’s practice since the days of Alan Greenspan’s “put” option, which established an implicit floor — but not a ceiling — for stocks. Since Ben Bernanke, the Fed has also done the job of shoring up the rest of the world’s financial assets, via international swap lines.
Under Jerome Powell, all restraint has been cast aside. If the market blinked, even at full employment, he cut rates. Now he is conducting repo operations as well as swaps with foreign central banks. The amount of swaps outstanding is now $446bn (£357bn). I can’t find data on the repos.
It doesn’t hurt that about 20% of the S&P is made up of big tech companies that may ultimately make more money as a result of the pandemic, because we’re all now strongly incentivised to do more in their virtual world than in the real one (Amazon is up 24% year-to-date).
It also helps that we’re getting good news about therapies (remdesivir, for example) and vaccines (Moderna’s, for example), though I can’t help noticing that Wall Street screens out bad news about Covid-19, such as the story about people in their thirties and forties suffering strokes after contracting the disease. And, of course, we’ve flattened those curves of confirmed cases. So the stock market’s rally is not wholly illusory.
Really smart guys tell me that the second wave that I wrote about here last week is already “priced in”. Maybe. But what’s not priced in is the enduring effect the pandemic will have on demand as older consumers steer clear of shopping malls and anything else involving crowds even after lockdowns end. What’s not priced in is the political backlash as people see big companies getting bailed out — the airlines, notably — and the loans intended for small businesses also going to the big boys. What’s not priced in is the psychological depression that will follow when people in America and Britain go back to work without enough reliable testing or contact-tracing capacity to limit the size of the second wave.
At a mid-March press briefing, Trump was asked: “How are non-symptomatic professional athletes getting tests while others are waiting in line and can’t get them? Do the well-connected go to the front of the line?” The president replied: “No, I wouldn’t say so, but perhaps that’s been the story of life.”
Inequality is just “the story of life” — especially when it comes to US healthcare. Well, maybe so: as my father liked to tell his children, nobody said life was going to be fair. But that doesn’t sound like an election-winning slogan to me. Sometimes it’s possible to echo Calimero without being sarcastic: “It’s an injustice, it is!”
Niall Ferguson is the Milbank Family senior fellow at the Hoover Institution, Stanford, and managing director of Greenmantle