Reopening

One thing we know for sure: reopening will not go smoothly. Covid-19 has re-surged in countries like South Korea, Taiwan, and Germany that have managed the virus relatively well. China too has faced difficulties, despite its draconian methods.

In the United States, the initial approach to managing the virus was erratic and incoherent. The Federal government was often counterproductive. Basically the states took the lead, each in its own way. On the whole, Red states shut down less and are opening up earlier. Blue states shut down more and are opening up later. This is due in part to their different demographic characteristics: most Red states are more rural than most Blue states and saw less of the virus in the first wave.

President Trump has encouraged reopening in spite of Federal guidelines that urged more caution. His stated concern is “the economy,” but premature reopening isn’t going to do much to stem the tsunami of unemployed, 38 million total as of this week, or to get people who have alternatives to go back to work in situations where their health is at risk. It looks as if he is setting himself up for a second wave of infections, including in Red states, sometime around August/September, just as the fall electoral campaign heats up.

Politically, that isn’t the worst outcome I can think of, as I hope Trump is not re-elected. But it is terrible for the country, which has already suffered almost 100,000 people dead and another 50,000 or more likely to die in the next few months. The immediate economic toll is simply gigantic: worse than the financial crisis of 2008 and more or less the dimensions of the the 1930s depression.

Even with reopening, the economy will not be going back to its pre-epidemic state. Lots of businesses are closing permanently. Those that reopen will do so in conditions much less auspicious than before. No restaurant can afford to lose half or more of its tables to the need for social distancing without a big impact on the bottom line. Production facilities likewise face requirements to separate their personnel that will be expensive. Universities will find it hard to conduct in-person classes, many foreign students will find it difficult to get visas to enter the US, and dormitories risk becoming Covid-19 hot spots.

The big economic winners from the epidemic are the giant retailers like Walmart and Amazon that take orders remotely and deliver products rapidly. Small shops, gas stations, non-chain restaurants, mom-and-pop groceries are imploding. Most Federal government aid is going to relatively strong enterprises that know how to fill out forms quickly and have established contacts with lenders. The strong will get relatively stronger, while the weak will close.

President Trump is ignoring the virus this Memorial Day weekend, in favor of golf and the usual visits to military cemeteries. He is also urging reopening of schools. His strategy at this point is to hope Covid-19 goes away. That isn’t likely, and the reopening isn’t going to help.