We Should Have Spent More to Fight COVID-19. We Still Can.
A Q&A with Chicago Booth’s Eric Budish about missteps of pandemic policy.We Should Have Spent More to Fight COVID-19. We Still Can.
Every social world has a peculiar rhetoric that implies a hierarchy of values as well as the activities it holds most dear. Academics talk endlessly about journal citations; television producers, the “talent” that headline their shows. Business professionals—and especially the endless parade of financiers who parachute into television shows such as CNBC’s Squawk Box for, increasingly, a six-minute Skype chat—talk a lot about risk. Risk. Risk. Risk. Hour after hour. Day by day. A cavalcade of risk takers. A catalogue of risk-taking. A banquet of risky business.
To anyone who isn’t a regular viewer of business-network programming, such talk seems odd and, in recent weeks, fairly repellent. It hardly requires advanced studies in financial accounting or formal logic to understand that someone who hazards a considerable sum of money on some speculative endeavor has a special claim on any rewards. Nor does it strain belief that such speculative activity is salutary to economic advancement. Still, the unapologetic celebration of risky behavior, and the tendency to endow a certain type of risk taker with extraordinary social and moral significance, is nonetheless striking in the present moment as well as with an eye to the past.
In many ways, our casual celebration of risky business would have been both perplexing and appalling to those Americans who were members of what is popularly termed “the Greatest Generation.” These are the millions of Americans who came of age during the Great Depression, before the young men among them signed up for service in World War II and the women they left behind exchanged their oven mitts for assembly lines to support President Franklin Delano Roosevelt’s “Arsenal of Democracy.”
Many of us need only look to our parents or grandparents to see what risk meant for this generation. My mother’s father returned home to the family farm in 1930 after financial failure wiped out his father and the bank threatened to put his youngest siblings on the street. He abandoned his private dreams for the common responsibilities of family, and in addition to farming, to make ends meet, he did everything from making moonshine to boxing for dollars to acting as a “heavy” for the very people who could foreclose on him. He succeeded, but as a great aunt once told me of that time, all she really remembered of it was the ache of hunger that never seemed to dissipate.
My father’s parents made out better (solidly lower middle class, it seems), and yet, the fact of so many banks failing when my grandparents were in their adolescence—650 or so in 1929, more than 1,350 the following year—was an experience they clearly couldn’t shake. When their parents died, nearly 70 years later, my father and his brother scoured the house for coffee cans filled with bills. To my grandparents, it seems, the dank recesses of the basement were a safer bet than the assurance of the FDIC.
They weren’t alone. For members of this generation, “risk” was associated with bare subsistence, broken dreams, and, in the case of war, violent death. Small wonder that for so many of them, every effort should be taken, however strenuous or even absurd, to see that it be avoided.
The experiences that defined the Greatest Generation are so distant now that we mostly know them secondhand. And while the decades that followed were hardly without turbulent events—the civil rights movement, Vietnam—what they lacked were traumatic experiences of tragic magnitude that virtually no one could escape.
At the same time, America’s postwar role as a global supplier of first resort saw a decades-long economic boom that not only improved dramatically the life of the average American but increasingly insulated those most fortunate from the calamities which, just a few years earlier, were commonplace among even the elite. Remove the requirements of wartime service, eliminate diseases and conditions that once afflicted rich and poor alike, and smooth out the business cycle to more or less remove the fear of abrupt economic collapse, and suddenly the world seems secure. A lot more secure. Secure enough, indeed, to head to the casino.
To speak in heroic terms about wealthy investors seems hollow and ridiculous when twice in recent memory they have effectively crapped out and had their chips restored to them.
For, in many respects, to the outsider trying to make sense of the financial world, this is what operating at the highest levels of American capitalism looks like. Naturally, like all analogies, this one is neither exact nor entirely fair—much of the financial sector is consumed with somber analysis, staid accounting, and the express mission of slow and steady growth.
And yet, this is hardly the world presented to us in lurid bluster on CNBC and Fox Business, networks whose attentiveness commercial elites actively solicit. There, the focus is less on humdrum, workaday requirements of building something of abiding value. Instead, viewers are bombarded by a never-ending story of big scores and unicorns, of taking gains and weathering losses, of dashing in and out of the market.
It’s all presented with the solemnity of a three-ring circus. That’s how you know the stakes are so big and so small.
The more that what’s at stake retreats from life-or-death matters, the more casually one may treat the very notion of risk. When the types of existential threats that the Greatest Generation faced recede from the pressing concern of the general public, the meaning of risk may evolve and ultimately be redefined. Hence the bombast of so much business rhetoric, especially when it concerns elite players for whom the upshot of risk-taking is “much richer” or “merely rich.”
Which is not to say that the rhetoric of risk doesn’t have an edge to it. Indeed, it is often sharpened on the whetstone of cruelty for those who prove themselves less than financially fit.
Take “the losers,” the sobriquet applied by CNBC’s Rick Santelli to homeowners who fell behind in their mortgage payments as the 2008–09 financial crisis smoldered. In February 2009, the Obama administration proposed diverting funds from TARP (the Troubled Asset Relief Program) to help owners modify their mortgages to keep them from losing their houses. For Santelli, such efforts suggested the new administration fundamentally misunderstood the distributive logic of capitalism and the nature of risk.
“How about this?” Santelli snarked from the floor of the Chicago Mercantile Exchange:
Why don’t you put up a website to have people vote on the internet as a referendum to see if we really want to subsidize the losers’ mortgages? Or would we like to at least buy cars and buy houses in foreclosure and give them to people that might have a chance to actually prosper down the road, and reward people that could carry the water instead of drink the water?
Notably, it didn’t strike Santelli as a little odd to reaffirm the winners and losers of capitalism when so many of the former had effectively been bailed out themselves, just a few months earlier, when the federal government pumped trillions of dollars into the economy to shore up the financial system.
Now, nearly a dozen years after the financial crisis, the federal government has once again taken action that has socialized losses in the economy while privatizing gains. This time, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion relief measure that also includes beefed-up unemployment insurance and forgivable loans to small businesses, sets aside hundreds of billions of dollars for airlines, amusement parks, casinos, movie theaters, and restaurant chains as well as other major industries affected by the COVID-19 shutdown, thereby protecting the same shareholders who have enjoyed bull-market returns since the last round of bailouts.
In an age increasingly concerned with the inequitable distribution of wealth, such efforts, if a fail-safe for economic apocalypse, raise unnerving questions about how the economy might be rigged in favor of plutocratic outcomes. Such concerns have a special urgency, for, as Paris School of Economics’ Thomas Piketty observed in his vital book, Capital in the Twenty-First Century, great chasms between the rich and poor are often significantly narrowed by absolute calamities that destroy the very thing the rich have in ample reserve and the poor have none of: wealth.
The wealthiest Americans dodged that possibility in late 2008, when, but for the government saving the financial sector from systemic failure, so many of them might have learned quickly to do far more with much less. Now, it seems, they have sidestepped another, far more substantial threat to their stations thanks to a second, ongoing government intervention that makes that of the Great Recession seem quaint.
Such action subverts the distributive logic affirmed by those who claim to live by the maxim “No risk, no return,” for if those who take such risks are repeatedly bailed out, their plangent appeal for putative returns seems more than a little absurd. Indeed, held to the courage of their own convictions, they ultimately took no risk and deserve no return.
In another viral moment on CNBC, this time in early April of this year, one guest made just such an argument. Contending that federal intervention should focus on the risk that small entrepreneurs and everyday Americans face in a time when businesses must remain shuttered, venture capitalist Chamath Palihapitiya said that the government should let major companies sink into bankruptcy for having weak balance sheets or inept leaders who failed to plan for a downturn. In such an eventuality, he noted, the “people that get wiped out are the speculators that own the unsecured tranches of debt or the folks that own the equity.”
And by the way, those are the rules of the game. That’s right, because these are the people that purport to be the most sophisticated investors in the world. They deserve to get wiped out.
They do deserve to get wiped out, at least according to the distributive logic underpinning the rhetoric of financial risk. And if they don’t, for the second time in only a dozen years, that logic is vitiated—as is any moral authority among those who fancy themselves “winners.” To speak in heroic terms about wealthy investors seems hollow and ridiculous when twice in recent memory they have effectively crapped out and had their chips restored to them, but it is also squalid and disgraceful at a time when other Americans have chosen to risk everything for mere table scraps or a somber sense of civic duty.
For these are the heroes of this most remarkable moment: the Amazon employees who keep hustling goods at dangerous distances all day long; the cashiers who stand at attention before a never-ending parade of hungry people shedding germs like so much confetti; and the restaurant workers, and the Uber drivers attending them, who make our meals and keep us from venturing any farther than the front stoop. Alongside them are the public employees—cops, bus drivers, and firemen—who continue to discharge their responsibilities at the price of shockingly high infection rates, and of course all those staffing the hospitals, from the doctors and nurses to the custodians, technicians, and administrators. And many, many others.
These are the heroes of the moment. Day after day, they brave a dangerous intimacy, gambling no less than their lives in service of keeping a scared society from slipping further.
The future is clouded by a fog of uncertainty much thicker than we are accustomed to, but, for myself, I believe COVID-19’s outcomes will include a social reassessment of risk. The examples crowed about endlessly on CNBC will continue to be acknowledged, but only in the sterile sense that they are necessary for economic advancement. At the same time, insofar as we have shown ourselves repeatedly prepared to backstop the economy to the greatest benefit of those Americans best prepared to fail, my hunch is that we will reassess the merits of other, more equitable forms of social insurance.
In other words, risk will not altogether lose its claim on our imagination—but it will be put in proper moral perspective, and we will no longer tolerate that either the mind, the body, or the soul should be so susceptible to it.
John Paul Rollert is adjunct assistant professor of behavioral science at Chicago Booth.
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