By Ramin Mazaheri for the Saker Blog
The 2008 crisis was top-down – the bankruptcy of Lehman Brothers came out of the blue to the average person. Contrarily, a result of the Western coronavirus overreaction, the 2020 economic implosion is building from the bottom-up: it will occur from the result of millions of tiny Lehmans throwing in the towel.
Reality was ignored for 12 years: small- and medium-sized businesses need as many rounds of QE as their corporate & high finance counterparts. Fatally for the West’s “real” economy, QE was hoarded instead of downloaned. They still aren’t getting loans: In the US only three million small businesses are getting federal aid out of 30 million – 90% remain frozen out of public policy.
There is a very important difference between the relative ease big companies can get back to work, and the enormous inertia faced by small businesses. Corporations can reportedly get back to normal in 5 to 8 weeks – this is why a corporate-focused media talked with such certainty about a “V-shaped” recovery when the Great Lockdown began. They ignored the outlook of the small businessperson, who often doesn’t have the savings to get back to work and, more crucially, maybe not even the desire.
Me, I never wanted to be a small-business owner – it seems like a LOT of stress for usually very little profit. And owning a restaurant, just so I can freak out twice a week over the possibility of being stuck with unsold fish? Pills are a much easier way to cause my early death. But only an inexperienced and judgmental teenage Che Guevara would not realise that these “humble capitalists” often display global values like hard work, thrift, diligence, etc.
Because of a dogmatic hatred towards capitalism and a disinterest in how economics works, many modern leftists foolishly do not include small proprietors in the proletariat (modern far-rightists do not dismiss their importance, however); and yet they do include craftsman, essentially entrepreneurs who can be even more overcharging, prone to bribery and lordly (nowhere more so than in Paris, in my experience). In France the precarious small shopkeeper is very often an ardent supporter of the Yellow Vests, for example.
The reality is that socialism is mostly a worldview, mindset and acceptance of an idealistic and never-ending task: to assume something about somebody because they are in a certain class or group is stupid prejudice. Deng Xiaoping rightly declared that journalists are in the working-class, and we are… but should we really include all those journalists who get paid an Uber-like/freelancer pittance and yet slavishly champion the upper class and their faux-values to class-jump as soon as possible?
The Western economy hinges on the loneliness of Mom and Pop – give them QE (and a phone call)
One one hand, all Westerners need to do is to get back to work (to satisfy their creditors even more than their Protestant workaholism) – who cares if nobody buys a car as long as cars are being made: Over-supply would be a temporary problem, but it would provide a solution to the problem of the lack of wages being paid. Once people have wages, then they can buy and reduce that oversupply.
On the other hand, many jobs are expressly about getting people to buy – retail, restaurants and many Mom and Pop shops, for example. But how can they put their Confucian values in practice when they aren’t allowed to open up their stores? To me it’s extremist and absurd: After all these weeks we really can’t arrange ANY safe way for Mom and Pop to sell some goods for even ONE hour a day?
There’s another problem just as big – the long-term depression of consumer demand which seems like a certain outcome of the Great Lockdown: what’s the point of opening up when finally allowed if consumers are so scared of making purchases that nobody shows up to buy? The compounding parallel problem of not having any wages to buy with also applies here.
The prospect of multi-month loneliness and poverty for the small business owner is thus a huge variable in the determining the severity of the upcoming economic chaos.
Furthermore, a lot of what small businesses sell isn’t actually necessary – you can, in fact, just eat at home. Yet most Western economies are consumer economies heavily predicated on consumption; why anybody needed a yearly iPhone upgrade was only explained by the University of Missouri’s Thorstein Veblen and his theory of conspicuous consumption, but how will you know if you are impressing the opposite sex when they’re all wearing masks? (LOL, this is not a good era to be single!)
Many business owners are going to have a light flipped on – they don’t need the hassle anymore. They’re going to shut the lights before the bank repossesses the light bulbs, and live off the public dole while they brainstorm and query contacts for a new job. So not only will they be added to the unemployment ranks but – even worse – their employees as well. Corporate layoffs make the headlines but small businesses provide half of all jobs in the US.
Another thing is certain – this can only happen once: a second Great Lockdown is a financial impossibility for the Mom and Pop shop, and likely stroke-inducing as well.
Yet many nations are planning exactly that: staggering and dragging out lockdowns through the summer, like France’s insane (but still tentative) plan to shut down both international and domestic tourism even though it’s at least 10% of their economy. The Eurozone has a huge competitive advantage upon reopening because they actually cared about protecting jobs and supply chains – he who restarts first, and better, captures market share – but their policy-making idiots are poised to squander it via prolonged lockdowns.
If we extend “the greatest economic shock in our lifetimes” then it is no longer just a “shock” but a long-term policy; this policy is not something which small businesspeople can withstand without QE injections similar to what big banks have been given to prevent their own bankruptcies.
What’s certain is that half of all US small business owners said they could only last two months under Great Lockdown conditions – 80% of Americans were on lockdown on April 1.
Hubei was locked down for 76 days, with CCP members bringing people food thanks to a modern, 99%-focused, socialist-inspired democracy (with both direct and indirect aspects, just like West democracy) which actually listens to the needs of their people. That’s a “good” lockdown, which the West cannot/will not do for their 99%. Anybody who said in January, “The neoliberal Western economy has safeguards which would allow it to survive two months of no profit-making/wage-making,” would surely have been laughed at, after all.
I have crunched the data and May 17 should be circled on your calendars as the “tipping point”. If the Great Lockdown is not rolled back by then, there is no going back – the West’s Everything Bubble 2 economy will have been popped by the corona hysteria.
Western policymakers only understand corporate psychology, not Mom and Pop’s, nor that of (working, single) Mom
The stories from the US lower classes are just staggering: The Chicago Tribune’s Feeling hopeless? Worried? Chicago-area pandemic survey shows you’re not alone was not a emotion-focused piece – its poll found that a stunning 42% of locals think it’s unlikely they will have a job by the end of May, and that 23% had run out of food in the last month and had no money to buy more. That portends economic catastrophe.
Such a study of the general public is not an outlier: Over half of poor US households say someone has already been fired or taken a paycut, and that study was from two weeks ago.
I could not be more sympathetic to US workers, who are basically third-world in their instability: Eighty percent of Americans live from paycheck to paycheck, which is a very tiny step above daily hand-to-mouth. From the beginning I have said that they should not go back to work in unsafe conditions but… it is America! What else can they do in a system geared towards the aristocrat/landlord/massa like in the 18th century? Leftists say that the needs of the average worker must be considered by Western policy and I agree, but back in March I was realistic that this type of a “cultural revolution” would not be taking place by the end of April – it has not.
Anybody advocating a three-month Great Lockdown until July 1 simply isn’t working within realistic paradigms: by then supply chains will break down, goods will be in short supply and thus prices will increase amid the “liquidity issues” of the lower class masses. Corporations will join their small-business counterparts with bankruptcies and layoffs. Dogmatic leftists insist that factory workers are oh so very much more rightly-guided and politically knowledgable than Mom and Pop Shopkeeper – so then why are US autoworkers planning to reopen on May 18?
Considering how many Western invasions and blockades are launched to control it, we’d be remiss not to mention oil: storage will run out as early as May 18. Capping and restarting wells is extremely difficult, with no guarantee a restarted well will return to the same production level. Can we imagine the world’s oil producers shutting down and what long-term effects that could have on the “lifeblood of the modern economy”? This alone seems to make a May restart vital.
But in the Western system it’s all about the banks:
After three months of Great Lockdown the stresses on their banking system will be unprecedented and well-beyond the designs of any post-2008 government-regulated “stress tests”. At what point do they say – and corporate banks have essentially already said this, even if community banks realise their viability is tied to their local Main Street: “We don’t have the ability, the bureaucratic size and efficiency, the will, nor the profit motive to work through round after necessary round of small loans,”? What Mom and Pop needed was direct government loans, but in the Western anti-socialist/anti-government “bankocracies” they are forced to go through these parasitic middlemen first, last and always.
The fatal flaw of this very Western system should now be totally exposed: Bankers can very easily quit and say, “I didn’t sign up to save the Western economy,” but that is exactly what neoliberals expect them to do, because they refuse to – sensibly – hand this task to government. Bankers became bankers to get rich, of course. Small businesses held out hope (and held back on layoffs) of government assistance only to be reminded that they have no influence in a Western system dominated by very high-priced “free speech” (and lobbyists).
Perhaps the good news is that we shouldn’t care about stock prices anymore: they will go up, always. Even though there is no way that corporate profitability will return until 2022 or 2023, the past couple months have merely seen a “bull-market pause”, LOL. This is due to the official confirmation of what everybody already knew: central banks will print money to enable stock buying and now also corporate debt – capitalist fundamentals no longer matter.
Western media focuses on the stock market, and the needs of corporations, and only rarely can even see as far as protecting supply chains, but they do not care about Mom and Pop – focusing on them are mere “human interest” stories. However, ignoring the lower classes is the hallmark of the Western aristocratic/bourgeois liberal system – making the lower classes the priority has only ever been documented in socialist-inspired systems.
At heart we have three main issues driving this bottom-up implosion: 1) policymakers who only do anything as a result of high finance, 2) policymakers who don’t understand the needs and psychology of the lower classes, and 3) policymakers who underestimate the enormous economic importance of the lower classes. There is a solution to push back my fail-by date: Massive, rapid and new rounds of People’s QE (i.e. to workers and small businesses) – merely extending the extra $600 unemployment benefits until July 31 won’t be nearly enough, but anyway those Unemployment benefits will be reduced after July 31.
Why my May 17 assessment is so very rightly-guided
Readers know this is a historic era: We are currently in the middle of the worst Ramadan month ever. It’s like the Christmas season has been cancelled.
The 23rd night of Ramadan for Shia is known as the last of the “Night of Destiny” (27th for Sunni, but the night must be “searched for” among the odd-numbered nights of last 10 days as the exact date was never revealed) – this is when it is believed that Mohammad received the Koran’s first verses. Many stay up the whole night worshipping and meditating because the rewards of prayer on the Night of Destiny are better than those of a thousand months combined. It is also the night when God issues his annual decree for what will happen over the next year, thus “Night of Decree” is actually a better translation of Laylat al-Qadr.
This year the 23rd night likely falls on May 16, and – while you will surely allege that I am biased – I think it is very appropriate to say that this is the night upon which the fate of Western neoliberal economics hinges. Thus, if Western leaders do not start acting correctly – which many would view as a Ramadan miracle – it seems certain that their economic fate will be determined by the morning of May 17.
Perhaps what the West’s leaders may have needed was a culture which regularly allows for times of humility and reflection, and for putting a temporary stop to ambition and worldly grasping? Not necessarily an Islamic culture – as Islam is forbidden to be imposed, which is why there are no missionaries – but something which allows space for these ideals, and the neoliberal form of capitalism decidedly does not.
Going until June 17 and still avoiding bottom-up economic catastrophe? You must be out of touch with the lower classes. Until July 17? You must be a lab-bound epidemiologist with a very comfortable salary, savings and home. Until August 17? You are either hysterical, or plan to profit from human suffering, or plan to have your guns blazing amid the West’s World War III.
Still scoffing at my Islamic socialist analysis, eh? FYI: if you didn’t have usury (compound/excessive interest) you probably wouldn’t be in such a huge mess in the first place. But fine, let’s use capitalist competition as our gauge: Do you really think the West’s Great Recession/anti-interventionist economy is even 75% as capable as China’s 76-day Hubei lockdown? That would equate to a May 28 opening.
No, by May 16 most of us will be praying for divine help and for a very, very different calendar year to come – they can give this year back to the Indians, as far as I am concerned. On May 17 that year will be permanently set in motion.
Please note that my date is just a prediction and educated guess – I am certainly not the decree-issuer! And, full disclosure: many have said for many years that I am obviously not even rightly-guided.
Corona contrarianism? How about some corona common sense? Here is my list of articles published regarding the corona crisis, and I hope you will find them useful in your leftist struggle!
A day’s diary from a US CEO during the Corona crisis (satire) March 23, 2020
If Germany rejects Corona bonds they must quit the Eurozone – March 30, 2020
Pity post-corona Millennials… if they don’t openly push socialism – April 14, 2020
Coronavirus – Macron’s savior. A ‘united Europe’ – France’s murderer – April 22, 2020
The same 12-year itch: Will banks loan down QE money this time? – April 26, 2020
The end of globalisation won’t be televised, despite the hopes of the Western 99% (2/2) – April 27, 2020
Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books ‘I’ll Ruin Everything You Are: Ending Western Propaganda on Red China’ and the upcoming ‘Socialism’s Ignored Success: Iranian Islamic Socialism’.