The USA is changing - has changed - and is a different place with different values to the ones we had come to assume. To help us keep things in perspective, we have asked Henry Thomson for help understanding these changes, and to do so in the style of a "Letter from America". We hope this becomes a regular column. Here is his first correspondence.
After six weeks under a stay-at-home order designed to contain the COVID-19 pandemic, the view from America is uncertain. Most Americans live in states that have so far managed the pandemic well, and although the virus casualties are tragic the direst predictions of overwhelmed health systems and associated mortalities have not been realised. But the economic costs of the pandemic and lockdowns are tremendous, unprecedented and unclear. As we stay home and count the human and social cost of COVID-19, we have one eye on the economy and wonder what its trajectory will look like when we emerge from the immediate crisis.
In Arizona, the pandemic shutdown has amounted to a six-month extension of Spring Break: schools and universities didn’t resume in-person classes but moved hastily to online instruction in mid-March and subsequently extended this directive through the rest of the school year. Students will not be back in classrooms and lecture halls until August, at the earliest.
At the end of March, our governor issued a statewide stay-at-home order that he extended yesterday until May 15. These sorts of measures rolled out around the same time across practically the entire country – only the sparsely populated Great Plains and parts of the Mountain West have been spared – but their severity has varied.
In New York City, residents are instructed to leave their homes only for essential business. Given the seriousness of the public health crisis there, most are probably like my good Kiwi friends who live in Manhattan and more than happy to adhere. In Minnesota, where I lived for five years (go Gophers!), the stay-at-home order has been almost as strict, though allowances are made, including for hunting and fishing. Here in Arizona and in other parts of the West, swathes of the economy have remained open. This includes not just essentials like hospitals, grocery stores and funeral homes but construction, manufacturing, banks, hardware stores and professional services. Most bars and restaurants are open for delivery and takeaway, and fast food joints are doing a roaring trade. The In-N-Out Burger near my home has doubled its drive-through capacity to cope with demand, and cars are still backed up onto the street most evenings.
The onset of the pandemic has given unusual prominence and importance to state governors and city mayors, as they have made the most consequential decisions in response. Doug Ducey is a Republican who was CEO of the Cold Stone Creamery ice cream empire before being elected state Treasurer in 2011 and Arizona Governor in 2014. I had not heard of him when I moved to the state, and before the COVID-19 pandemic he had a solid but hardly ostentatious profile as a moderate, cautious executive. His signature achievement over the last few years was to build up a $1 billion state rainy day fund; a policy that was heavily criticized at the time but is now looking prescient as state revenues are set to crater. During the crisis, Ducey has proven a remarkably effective communicator, teaming up with the Democratic Superintendent of Public Instruction to announce school closures and giving interviews and detailed PowerPoint presentations to explain policy changes.
The effectiveness of what Ducey calls a “later timing, lighter touch” stay-at-home order has come as a relief.
The curve of new infections has been flattened, the state’s intensive care wards have ample capacity, and only 30% of our ventilators are in use. A new blitz of 60,000 COVID-19 tests is about to begin statewide; the University of Arizona, home of the Wildcats, has plans to test all faculty, staff and students; elective surgeries have resumed at hospitals; and next week even retail stores will begin to reopen. It feels like we can start to hope for a return to life as usual. My general appreciation for our state’s response to the pandemic is shared by most Americans: In surveys at the start of April reported on FiveThirtyEight.com, around 70% of respondents approved of their governor’s handling of the coronavirus outbreak.
Indeed, it is hard not to be struck by the matter-of-fact response of my colleagues, friends and neighbors to the COVID-19 crisis. For all the talk of Americans’ rugged individualism, hard-nosed capitalist self-interest and love of personal liberty (let alone the pursuit of happiness), we have stayed home and made do with scarcely a murmur of dissent.
At the university where I work (go Sun Devils!), faculty made the transition from in-person to online instruction on three days’ notice, and by all accounts disruptions to our students’ studies have been minimal.
My neighbors have dealt admirably with the challenges of working from home while juggling a double duty taking care of their school-age kids. There are rumors of shut-ins at local bars that had to be closed down by the cops, and a couple of weeks ago there was a protest against the lockdown by some folks in pickup trucks at the state capitol trying to create a traffic jam. But these are isolated incidents.
In general, Americans have taken it all in their stride: The little things like canceled pick-up basketball games and happy hours; and bigger things like missed school and college graduations, holidays and visits to family, the NCAA college basketball finals, and going out to our favorite bars and restaurants. There have even been some positive aspects to the lockdown. Even in my suburban college town, I have never seen so many people outside, and our own evening strolls are often pleasantly extended by long chats with neighbors and encounters with their dogs. I finally have an excuse to indulge my love for fast food and am gradually testing every burger available from a drive-through window in the city (let’s not talk about the lockdown’s effects on the waistline). And recently I read that they are going to re-open some drive-in movie theaters. In my more fanciful moments, I imagine how our neighborhoods could be revitalized if many of us kept working from home when this was all over. Our suburban strip malls could reinvented as piazzas.
But there is a sinister undertone as the first phase of the coronavirus crisis passes. A colleague from Philadelphia lives near one of the largest emergency hospitals in Pennsylvania. He can predict the next day’s infection and mortality statistics from the ambulance sirens that accompany his work from home.
The warning signs of the impending economic fallout from COVID-19 and the lockdown are not as palpable, but they are there. As you readers will know, weekly unemployment claims jumped from around 200,000 nationally to almost seven million at the end of March, and last week were still running at over four million. This trend is reflected in Arizona, where in a state of 7.3 million over 130,000 initial claims for unemployment insurance were filed in the week ending April 4 – thirty-four times as many as in the same week in 2019 – and last week the figure was still 53,000. There are relatively generous benefits available – in Arizona, the maximum weekly unemployment benefit has been increased with federal support from $240 to $840 – but state bureaucracies are overwhelmed by the volume of claims and people don’t know when they will see their money. The incidence of late credit card payments has skyrocketed. Air travel has basically ceased, as the number of travelers decreased from two million per day in April 2019 to 100,000 in 2020.
Our state governor has described the process of re-opening Arizona’s economy as “turning up the light.” But we simply don’t know whether advanced industrial economies can be temporarily shut down, placed on life support with surges of liquidity from government and central banks, and started up again a few months later. It has never been tried, and for good reason: it imposes tremendous social and economic costs.
Many are comparing the current pandemic to a wartime situation, and indeed the strong government action and social solidarity are similar to what we see during inter-state conflicts. But during wars, economies are often stimulated by massive government spending and increases in output.
Our government-mandated lockdowns and compliance today are linked to a dramatic reduction in economic activity because many people are not allowed to go to work.
So we wait to see what happens when the government puts their finger on the dimmer switch and turns it up: Will the economic situation become brighter? For whom and how fast?
Henry Thomson is originally from Amberley, North Canterbury and is now an Assistant Professor of Political Economy at Arizona State University. His research focuses on the political economy of authoritarian rule and transitions to democracy. You can read more about his research here and follow him on Twitter @HenryRThomson
33 Comments
the maximum weekly unemployment benefit has been increased with federal support from $240 to $840.
Better weekly earnings than many have ever experienced. One of our son's friends in Montana who owns a contract cleaning company has employees that don't want to go back to work.
Scaredy cats.
But who can blame them for enjoying for once in their lives getting money for nothing, something the elites have had for their entire lives? Money for absolutely nothing.
It could be something like that feeling people no doubt had just after a successful socialist revolution. Now the government will look after me...
I think cleaning work would be fairly safe, with gloves masks and lots of chemicals. We've sacrificed so much for people in rest homes, surely someone is cleaning them? Supermarket checkout operators would seem riskier yet the statistics show that this is a safe job currently. I'm convinced that many people have lost their minds due to the virus though.
Really? I'm just back from living there, and everyone I know is frustrated by the lockdown but understand that it has to happen. When you know people with the virus, and see even how 'mild' cases can take you out for a month with some very scary symptoms (not even thinking about the serious cases), you feel like even going to the supermarket is like going out to battle. It sucks, but reality is they still don't have the contact tracing and testing ability to go back online.
I think there's quite a bit of cognitive dissonance involved with this issue when you try to view it from both personal (my busines, my income) and utilitarian views (caring for the vulnerable, economy as a whole) with equal weighting. Its attacking the heart of capitalism (the invisible hand, pursuit of selfish interests) as pursuit of those selfish interests risks harming others, but if you don't, you harm yourself.
It sure is, many thanks to interestconz for probably the closest to objective report (from someone on the ground) coming out of the US on this site.
After being bombarded by partisan media that the US has capitulated to the virus which was further echoed and amplified through Chinese whisper style news here, there and everywhere, we finally see how blue the sky really is in certain states and will become across the United states of America. What was really refreshing was the omission of trump.
Banks triage for $45b bad debt tidal wave
James Eyers and James Frost
May 2, 2020 – 12.01am
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The major banks are setting up special triage units to prepare for a "tidal wave" of bad debts that could reach $45 billion over three years at the big four alone.
AFR
Estimates of losses from COVID-19 across the big four of $45 billion tops previous estimates by $10 billion. AAP
National Australia Bank, Westpac and ANZ this week announced additional provisions to cover the costs of COVID-19 totalling $3.4 billion, and analysts say that is just the beginning.
Evans and Partners' Matthew Wilson updated his bad-debt scenario for the big four banks on Friday, estimating 1.5 per cent of total loans would not be repaid – elevating COVID-19 to the status of a global financial crisis-level event, where 1.6 per cent of loans turned sour.
Bank forecasts of losses to date were "modest" and assumptions were "underpinned by the hope of flawless government policy", Mr Wilson said.
"We expect provisions to iterate much higher and approach $45 billion in total losses."
ANZ CEO Shayne Elliott said the bank was preparing for tough decisions in September, when the six-month repayment holidays that banks had given to struggling customers endedand payments would need to either resume or lenders and borrowers would have to work out alternative arrangements.
"That is going to be a very important data point," Mr Elliott said. "I would be imagining a reasonable number – it's not going to be zero – will not be able go into normal repayments."
Customers will recognise the branch they thought they needed to access services is no longer required.
— Ian Pollari, KPMG
"The issue is there is a bit of a tidal wave. Just over 100,000 [ANZ customers] will hit the conversion rate at the same time, and across the industry multiply that by four or five times."
Banks are also accelerating plans to deliver more services digitally to respond to older customers who had held out from moving online but were forced to engage with banks remotely over the past six weeks to protect themselves from the coronavirus.
Half-yearly earnings reports from ANZ and NAB this week showed not only the mounting costs to banks from the crisis but the grim reality facing many businesses that won't reopen.
"The reality is the economy is going to look very different [after the crisis] and a lot of companies, sadly, won’t be viable in that new economy, and people won’t go back to the same behaviours," Mr Elliott said on Thursday.
As it prepares to deal with the September tidal wave, Mr Elliott said ANZ would be "sympathetic" when customers couldn't repay. The bank could deploy a range of measures, from extending the deferrals to renegotiating loan terms to extend repayment periods or even allowing for partial repayments.
Bigger picture
Banks will have to triage not only individual customers but also whole sectors of the economy. Hotels, tourism operators, education providers and businesses in hospitality are likely to get back to work at different speeds.
Other sectors, such as commercial property, could face structural changes, especially if companies decide to allow more of their employees to work remotely, reducing demand for expensive head-office space.
COVID-19 will also accelerate digitisation of banking services, leading to reductions in the use of cash and reduced traffic through branches. This could allow banks to improve customer service at the same time as reducing costs.
"Banks will use COVID-19 as a catalyst to accelerate simplification, digital transformation and operational resilience efforts," said Ian Pollari, head of banking at KPMG.
Westpac, which will report its interim numbers on Monday, has been running television advertising throughout the shutdown to encourage customers to get familiar with digital banking.
Speaking to analysts on Thursday, ANZ's chief financial officer, Michelle Jablko, hinted at fewer branches and smaller headquarters, saying: "We remain committed to further absolute cost reduction over time. How we get there will evolve with the environment.”
Mr Pollari said Australia had reasonably high levels of mobile and online banking, but "we expect to see a permanent shift in customer behaviour, as cohorts of customers who might not have previously engaged through mobile banking will reassess the need for passbooks and use of physical cash".
I think one of the big outcomes of this whole crisis is, at end of all of this, a lot of that cost will not creep back into corporates.
— Shayne Elliott, ANZ CEO
"Customers will recognise the branch they thought they needed to access services is no longer required, presenting cost opportunities for the industry and allowing them to invest further in digital and automation for their customers' benefit."
Despite all pressures, NAB and ANZ committed over the past week to their existing targets to reduce costs, after Reserve Bank governor Philip Lowe called for the productivity agenda to be a positive legacy of the crisis.
Mr Elliott said he had been surprised at the strong response of companies to reduce operating costs and go into "survival mode" to get through the economic shutdown. He said there was a strong chance many expenses that had been cut would not return.
"I think one of the big outcomes of this whole crisis is, at end of all of this, a lot of that cost will not creep back into corporates. I think they will take this as an opportunity to bake in productivity gains."
Fact is Trump didn't succeeded is stopping the coronavirus did he, too little too late!
Even when he so called closed the US boarder with China, US citizens and certain qualified foreign nationals were exempted. Nearly half a million people had travelled to the US from China since the coronavirus was announced to international health officials in January, The New York Times reported on April 4. There were 1,300 direct flights between China and 17 US cities before Trump's order, and many who travelled received "spotty screening" upon arrival, according to the newspaper.
https://www.aljazeera.com/news/2020/04/trump-coronavirus-claims-fact-ch…
Yep so glad Jacinda Ardern held her ground over that one, other wise we would have end up in a similar infection rate as the UK or Italy. National would have buckled in seconds over the Chinese ambassador saying "When in prosperity friends know us, and when in adversity we know our friends."
Speaking at a Chinese New Year celebration reception at Parliament, Prime Minister Jacinda Ardern diplomatically indicated she wasn’t being swayed.
Link: https://www.interest.co.nz/news/103725/prime-minister-jacinda-ardern%C2…
Trump's handling of Covid-19 has been appalling - mainly being compromised on a wish for a strong economy come November.
We can be critical of our four week Level 4 lock down in New Zealand; however, our death rate remains at 4 per million and sadly that mainly due to the virus getting into a couple of rest homes.
Despite lock downs, USA still has a climbing death rate fifty times ours climbing from 110/million a week or so ago to currently 199 and climbing by about 8/million a day. New York's death rate currently 1,227 / million and still climbing. (And these rates only include those who have died in hospital!!)
Highest national rate is Belgium - 665 / million. Rates for many European countries despite lock downs longer than ours around 400 to 500 / million.
To look at 20 deaths in NZ and say was the lock down worth it is not considering what it could have been. Same death rate New York with its lock down would put our deaths over 6,000 (and still climbing) and even for European countries also with lock downs would have put our deaths at 2,000 to 2,500 (and still climbing)
Go early, go hard may not have been as early and hard as some wished . . . but it still was the correct thing.
Trump is still falling in the polls. In fact you can almost cross correlate it with the states that have had the biggest impact from the virus switching to Biden.
538 Article: We’ve Got Some Early Trump vs. Biden Swing State Polling. "It’s now clear who the Democratic nominee will be and that the novel coronavirus pandemic will be a major part of the campaign."
Link: https://fivethirtyeight.com/features/weve-got-some-early-trump-vs-biden…
actually the betting market has come in a bit on trump $2.08 to bidens $2.42
https://www.betfair.com.au/exchange/plus/politics/market/1.128151441
Could be more Biden's recent interview fumbles and that pesky unresolved MeToo case against him...
As the dems found - to win you have to have a candidate people like.... god they must have hated the wicked witch
I don't support either just watching the numbers move
They're certainly good entertainment value. And as for the unresolved MeToo case against Biden. Trump makes him look like a choirboy in comparison.
How many sexual assault cases are there against Trump now (Not to mention all the other stuff)? Last I heard Trump had; "26 incidents of "unwanted sexual contact" and 43 instances of inappropriate behaviour."
Article The Independent: https://www.independent.co.uk/news/world/americas/us-politics/trump-sex…
the issue for the Dems is that the more they paint Trump as a non saint, the more they have to put up a saint themselves with no history... quite hard to find in the corruption of US politics... Bloomberg was never going to be that man, he likes Busty Blondes too much, way too much
I'm not surprised In Out Burger has cars lining up around the block it really is quite good food, as far as burgers go. As for the road ahead? I think we are all discovering what life without hyper consumerism can look like...not sure the titans of industry like the idea of that one little bit!
Good article, nice to hear from someone, (and involved in economics), that lives in the states.
A timely reminder that people of a nation are not the govt of their nation. I agree with the effect on the waistline, yet their senator being prudent and saving up a nice rainy day fund. He must be old school, as this is so counter to today's thinking. Clearly it will help Arizona somewhat going forward. Such an approach would have gone a long way globally, yet the practice of borrowing to the max, wait for equity growth, then borrow more, has been a prevalent practice. Thought of permanent changes as a result of lockdown conditions, and their far reaching economic, and personal implications have many pondering just what the future may look like, possibly the first truly global pass time. Thanks for the article.
Alistair Cooke would be happy with that effort.
I concur. I hope you keep these letters up. Nice to be reminded that the average person in the US thinks much like NZ, despite that it is essentially ungovernable at the centre. Federalism seems to be giving way to fragmentation to leadership at state level. I’ve no idea where that might take the country - given “states rights” was the basis of the confederate states cesession and the civil war.
I follow this guy mainly because he's good on farm stuff. If you go to 37:30 in the guy talks about what's going down in California, which is same as my friends are telling me.
https://podcasts.apple.com/us/podcast/the-vance-crowe-podcast/id1463771…
Things seem to have deteriorated further with increasing death toll and even lack of facilities to store bodies before they are buried, creating separate health hazards. Protests to open up are increasing and the Federal Government seems to have washed its hands off the matter and dumped it on the States to do as they like.
I am surprised at this. When the country could come together as one after 9/11 and close up to protect itself, creating the Department of Homeland Security to deal with the terrorism threat. It is surprising that they have not realised that Coronovirus is a more dangerous threat to the Homeland. Why have they not acted to use the Federal Emergency Management Act, depolyed the National Guard, Army etc to enforce a stricter nation wide lockdown to contain the spread of the virus ?
Now American governance and efficiency and management of crisis has been exposed and it has become the worst Third World Country today, unable to save its citizens. Even the President is now talking about 100s of thousands of fatalities, after denying the crisis. They are using the China ploy to divert attention from their own inefficiencies.
Tragic that even the Democrats have no sane voice to propose drastic steps. What is Obama doing ? With his prestige and reputation he should rally the Nation to pressure the Government to act immediately. He can't continue the charade that ex-Presidents don't offer advice to sitting Presidents. This is a National Emergency and Obama and the Bushes have a role and reponsibility.
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