Let's be clear about this. The U.S. city, and, for that matter, Main Street, is presently in an economic situation that is like no other.
Over the past 400 years of capitalism, the concatenation of a crash has been this: Up there, a bubble pops; the rich (those with the means to play the markets) rush to safe assets or cash; then capital dries up, and vital loans become impossible to find for small and large concerns; redundancy spikes.
That sequence of events usually takes some months to reach its end—the conventional economy. And when it does, unemployment explodes, small businesses go belly up, people get tossed out of homes, and we have a recession or a depression. But this is the way it used to happen; it's not how it's happening now. The markets are crashing at the exact same time as urban or Main Street (conventional) economies are crashing.
This is terrifying because it means, in a city like Seattle, we are already in the recession before the other recession hits.
Businesses are laying off workers, businesses are empty or boarded up, businesses are closing. And for a good reason. State, county, and city governments must contain or manage, as best as they can, a new virus with a lethality that threatens to kill people not just directly but indirectly.
It is this aspect of the crisis that is often poorly or badly grasped. What public health professionals well understand about COVID-19 is that it's lethal enough to overwhelm our health system. When this happens—and in some places it's already happening—a much larger segment of the population, those who are seemingly safe, or who were told they were low-risk by Fox News, will be pushed down to the region of high-risk. And the more who enter this deadly region, the higher becomes the risk for each individual in the society as a whole. The terrifying idea that should be in your head at all times, at every moment you take a walk or eat a meal or meet up with friends: Moderately bad illnesses or injuries become life-threatening when a health system is compromised. This is why aggressive social measures are all that can keep large sections of the population from the brink of the abyss.
But here is the economic problem that's as novel as COVID-19: We live in a society where dramatic public health measures cannot be easily decoupled from an economy that has, of all things, finance (banks, investment banks, debts, money management, 401k plans, and so on) at its core.
Dow Jones lost almost 3K points today by closing. The $2.2 Trillion dollars pumped into it by the federal government did absolutely nothing. That money could have been used to help every US citizen ($7,700 per adult). Instead, now they have to worry about quarantine and bills. pic.twitter.com/xsXUG8DAEN
— Anonymous (@YourAnonNews) March 16, 2020
In a conventional capitalist economy (which is certainly not without its serious problems—more on that in another post), one that does not direct all kinds of revenue streams (income, loan payments, mortgages) to Wall Street or the City or Frankfurt, this decoupling would, for sure, be painful but not catastrophic. A conventional capitalist society is one that is dominated by entrepreneurs and actual things—though many of these things are useless (and hence the danger of leftist critiques that place too high a value on the use-value of commodities). But what we have today is an economy totally governed by exchange value (as opposed to use value) and money mangers. And what this class of capitalists has achieved over the past 40 years is the economic, social, and political centralization of the business of exchanging money, or dicey or not-so dicey forms of assets.
As the economist Mariana Mazzucato writes in The Value of Everything: Making and Taking in the Global Economy
Today, the [financial] sector has sprawled way beyond the limits of traditional finance, mainly banking, to cover an immense array of financial instruments and has created a new force in modern capitalism: asset management. The financial sector now accounts for a significant and growing share of the economy’s value added and profits. But only 15 per cent of the funds generated go to businesses in non-financial industries. The rest is traded between financial institutions, making money simply from money changing hands, a phenomenon that has developed hugely, giving rise to what Hyman Minsky called ‘money manager capitalism.’
Yes, only 15 percent of what goes on in finance ends up as real investments, and, sadly, a huge part of these actual investments end up as luxury apartments in Seattle, or posh retail enterprises in Manhattan (this is why we should not be uncritical of use value, or what others call "the real economy"). But shutting down this fragile (and indeed almost wholly idealist) financial structure has very real consequences—for many, it is a matter of living in a house or on the street. The reason why is best explained by the increased naturalization or objectification of capitalist forms of realism (this is when, to use Werner Bonefeld's words, "economic laws impose themselves behind the backs of the acting subjects that sustain society, and society is governed by the movement of real economic abstractions").
We should be able to respond to a public health emergency without giving the financial sector a second thought. That seems obvious enough. But at present, the structure of our culture and political system has made any attempt to disregard or displace the financial sector a fantasy. In the last crash, the U.S. spent a world-historical $29 trillion keeping dead banks and speculators alive. In this crash, we find that the government has already been pumping equally world-historical amounts of money into these markets before the crash. And every decision made during this crisis (even the bailout to commercial airplane companies) has had as its objective the survival of these asset markets.
And so, what exactly is our situation today? We have, on one end, a recession caused by the emergency response to COVID-19; and we have a market crash on the other end. The crash of the fall of 2008 began in the fall of 2007 and hit ordinary lives in Seattle in early spring of 2009. The crash of 2020 will hit us in about three months (when we are finally coming out of our homes), and this will compound the recession we entered in the second week of March. Mayors and governors can barely deal with the recession that is happening now, let alone with the one that is coming down the pipeline.
To make matters worse, Seattle is a city that's vastly overvalued, which means housing values could crash like never before. When the housing bubble burst in 2007, by 2009, a Seattle house worth $400,000 lost about 25 percent of its value ($100,000). These same houses are now worth about $800,000. But homeowners are now facing two market crashes, one that begins with the local and one that begins with the national. In this scenario, it's not hard to imagine a 50 percent devaluation of the average home, which means a homeowner will need a lot more equity (50 percent of the value) to be above water.
The bad news is if you are not thinking along these dire lines, then you may as well be telling us about how you discovered a solution to the virus crisis in a dream you had last night.