The Perfect Economic Storm Is Here, And We Aren’t Prepared At All

The Perfect Economic Storm Is Here, And We Aren’t Prepared At All

Coronavirus isn't coming to the United States, it's here. Even if its worst-case scenarios are never realized, the economic -- and potentially political -- pain will be massive.
Christopher Bedford
By

Coronavirus isn’t coming to the United States, it’s here. Even if its worst-case scenarios are never realized, the economic — and potentially political — pain will be massive.

The skeptics are correct that coronavirus is unlikely to kill millions in the United States. We’re not looking at a lost generation. We are, however, looking at a lost spring and summer of travel, spending, gathering, socializing, and productivity. Combine that with the rise of a Democratic candidate who scares the hell out of Wall Street, and that recession we’re overdue for might come a little sooner and last longer.

The most visibly hit thus far have been the stock markets, where investors the world over panicked as the Chinese and Italian economies screeched to a halt. Central banks moved fast to mitigate harm, and for the moment it appears to be working, with The Wall Street Journal reporting, “Stocks shot higher while U.S. government bond yields hit new lows Monday, with investors betting central banks can stabilize markets and shield economic growth from the impact of the coronavirus.” Unfortunately, the effects of the virus are already on Main Street, where they will very likely travel back upstream.

First, there are the supply lines. China exports toys and snacks, but also plastics, electronics, medications, medical supplies, and other essentials. Swathes of its workforce are out sick and cities are on lockdown. South Korea, currently the second-most-affected country, exports many of the same types of products to the United States, albeit in smaller quantities.

We know the virus can incubate for weeks in adults and evidence is beginning to suggest that while they are thankfully spared the impact, children can contagiously carry it a full course without exhibiting symptoms. India, Japan, Vietnam, and other major exporters to the United States, we can safely assume, are next.

We have long operated in an economy that is massively and internationally interdependent while at the same time well-oiled and rapidly responsive. That’s in for a dramatic shake-up. It’s difficult to predict where supply lines will be disrupted and earnings will take hits.

For companies unable to readjust critical supply lines or get the loans they need to carry them through the hard times, all this will mean shutterings. The types of companies this hits first and hardest are the types in our hometowns that aren’t household names, but employ maybe a hundred members of our community.

It isn’t just these local employers. Pay attention over the next few weeks as major American companies begin to announce they’re suspending or severely curtailing international business travel for their staff and consultants. They’re already discussing it internally, I’m told. Watch large American businesses cancel in-person meetings and tell employees to work from home. Efforts to identify which employees can telecommute have been going on behind closed doors for days and weeks already.

In cities across America this spring, expect the same: Business meetings, community events, and social gatherings cancelled; middle and upper-class people who can work from home staying home. Chinese restaurants may have been first hit, but when workers aren’t downtown, communities aren’t gathering and friends are curtailing their nights and weekends out, every shop and restaurant feels the pain.

Companies I’ve spoken to that offer event space and catering for corporate and social gatherings are already seeing indefinite postponements and requests for “coronavirus insurance” should the pandemic come. Clients want to make sure the coast is clear before planning any major events, but for the catering and event companies that need to make rent and payroll, there is no coronavirus insurance.

Some of these shops, restaurants and caterers, although not many, can take the hit. The employees who might get laid off or rely on tips to pay their bills, however, cannot. For many industries across much of the United States, spring and summer are the busy season. This is where the money is made — or isn’t.

Travel, too. Airlines suspended service to China and the United States enacted a travel ban. More recently, a number of airlines suspended service to northern Italy. Thanks to a combination of the European Union’s unprecedented open-border experiments and the difficult-to-detect nature of the virus, coronavirus will spread in Europe.

I cancelled my first trip to Rome this spring. A colleague cancelled a work trip to London. Absolutely, these are trips we can do without, but we’re not nearly the only ones and Italy is reliant on tourism for more than 13 percent of its economy. Airlines, hotels, drivers, guides, museums, restaurants. “For the European economy alone,” German statistic aggregator Statista reports, “travel and tourism directly contributed an estimated 782 billion Euros to GDP in 2018 and 14.4 million jobs through direct employment in the sector.”

For Donald Trump, this means major political risk just in time for the election. Yes, the administration has made a number of quick and drastic moves to curtail the spread, but it’s here now and even if mitigated, the above effects will be felt to varying degrees of severity.

There’s no need to go out and buy bottled water or 50-pound bags of rice. Even in the worst case scenarios for coronavirus, our taps and electricity will stay on. Nor is this Ebola, indiscriminately killing all in its path. But don’t let calls to stay calm blind any to the very real threat we’re facing. Coronavirus isn’t coming to the United States — it’s here. And it will be felt.

Christopher Bedford is a senior editor at The Federalist, the vice chairman of Young Americans for Freedom, a board member at the National Journalism Center, and the author of The Art of the Donald. Follow him on Twitter.

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