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We're Already in a Great Depression

Opinion by Jeffrey D. Sachs

May 18, 2020   |

Editor's Note: Jeffrey Sachs is a professor and director of the Center for Sustainable Development at Columbia University. The opinions expressed in this commentary are those of the author; view more opinion articles on CNN.

(CNN) Instead of an imagined "tradeoff" between reviving the economy and safeguarding health, President Donald Trump's policies are delivering both a great depression and tens of thousands of deaths at the same time. That's because a tradeoff between economy and health doesn't exist, except in Trump's fantasy. Unless people are confident about their safety in the midst of the pandemic, they will not resume normal life. By allowing a premature reopening, which ensures that the epidemic will rage, Trump most likely has condemned America to economic collapse.

The fantasist promotes magical thinking, and perhaps even believes it himself. Trump said that the virus wasn't a threat. He said that it would go away by April. He said that it was fully under control. He said in March that we have all of the testing we need.

The epidemic is controllable when government is serious. Australia, China, Japan, South Korea, New Zealand, and Taiwan, among others, all have kept deaths below 10 per million population, compared with 271 per million in the United States. Those other countries implemented public health policies at national scale; the US did not.

With US reported Covid-19 deaths nearing 90,000 -- and almost certainly higher based on a comparison of deaths this year and last year -- Trump now tries to discredit the death count. In Trump's fantasy world, there are no deaths if they are not reported.

Trump's maneuverings also won't save the economy, which is in a free fall. States can open now and thereby spread more disease and death. But again, economic fantasy won't replace reality. Consumers will not suddenly start buying. Builders will not suddenly build buildings when so many stand to be empty or underutilized. Some of Trump's followers may head to crowded places -- and if so, many will contract the virus -- but most Americans will not.

Of the record 20.5 million jobs lost in April, most will not come back any time soon, whether or not states declare their economies open. The continued spread of the virus itself will block any meaningful rapid recovery. So too will deep structural changes that will cause a significant, albeit unknowable, proportion of today's job losses to be permanent.

Here are some of the jobs that are not returning: E-commerce will displace many brick-and-mortar retail jobs. Big name retail chains are now going bankrupt week after week. The result is that many retail jobs, down 2.1 million comparing March and April 2020, will likely not return. Jobs created as a result of online shopping won't equal those lost in brick and mortar stores.

Many business firms will reorganize their workflows to allow for far more work from home, and this will leave office complexes sparsely populated. Many companies will downsize their space, meaning new commercial construction will remain depressed for years to come.

New oil and gas drilling has collapsed and will not recover to past levels given the long-term glut in world oil markets and the collapse in oil and gas prices. Travel and tourism will remain depressed as long as the epidemic is uncontrolled, keeping down employment numbers in accommodations, leisure, entertainment and restaurants.

Trump's remaining idea is to force companies to return home from China and rebuild their supply chains at home. This is yet another fantasy. By intensifying the attacks on China -- including new measures to cut off Chinese companies from American semiconductor technology -- Trump will crush the growth prospects of much of America's high-tech industry, whose business includes international markets, including China's vast population. Trump's moves will invite Chinese retaliation and hasten the day when China competes with the US in various dimensions of semiconductor manufacturing and design, such as specialized chips for artificial intelligence and 5G.

One obvious area of retaliation will be for China to buy planes from Airbus instead of Boeing. Even before the pandemic, Boeing was in a very deep crisis because of its flagrant mismanagement of the 737 Max. Trump's failure to contain the epidemic and his intensified attacks on China will deepen Boeing's woes. Boeing stock fell 2 percent on May 15, the day after Trump's new anti-China measures, and Boeing stock is down by more than 70 percent from the peak on March 1, 2019.

Trump will try to save moribund companies, no doubt including his own family business. He will try to save the oil and gas sector, though no banks will touch it. He will prop up the failing companies of friends, cronies and campaign contributors. He will lie, try to hide data, blame others, and produce a deepening disaster.

But there are three true steps out of the new great depression.

First, and most urgently, we must end the epidemic through the public health measures -- testing, tracing and quarantining -- that Trump has consistently neglected.

Second, we must work with other countries, including China, to stop the epidemic everywhere in the world so that trade and travel can safely resume, and so that the millions of jobs dependent on trade, transport and tourism are at least partly restored.

Third, we must build new industrial and service sectors, not prop up the old and moribund ones. Recovery will come not through oil and gas fracking, but through a boom of US companies producing solar panels, wind turbines, advanced batteries, advanced electric vehicles and the hardware and software of smart grids; combined with a service industry boom based on new models of low-cost healthcare, education and office work, that combines online and in-person service delivery.

By being smart and fair, we could look forward to new high-tech industries, more shared leisure time, shorter commutes, cleaner skies, universal access to affordable healthcare and higher education and a guaranteed living wage for all workers.

For all of this, we need a new administration and Congress and a new approach for our nation. Until then, Trump's fantasy world is our nightmare. Hang tight. A new dawn is coming.



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