Coronavirus and The Affluent Society

The coronavirus pandemic has highlighted the importance of healthcare, food, shelter, and jobs to a greater extent than any other crisis since World War II. It is serving as a stark reminder that the health of loved ones and access to the basics are the most important things.

Fortunately, lawmakers recognize the existential risks of an economic breakdown and have responded with large stimulus measures. And they realize that they can continue to do so, with multiple rounds of stimulus if necessary. As President Trump, America’s first president to implicitly embrace modern monetary theory, replied when asked how we’ll pay for it: “It’s our money. We are the ones. It’s our currency.” As long as we remain within our nation’s resource constraints, we can simply print the money (or issue the debt) necessary to do the things we consider valuable.

Despite an acknowledgement that we have the ability to ensure that every American has access to life’s essentials, there is a risk that economics will eventually return to “business as usual”: a focus on efficiencies and GDP growth to the neglect of distributional concerns and building a resilient economy. This crisis is making the limits of the neoclassical framework clear. In The Affluent Society, first published in 1958, Ken Galbraith lamented our focus on GDP growth at the expense of a push for broad-based prosperity: “The ancient preoccupations of economic life -- with equality, security and productivity -- have now narrowed down to a preoccupation with productivity and production”. The basic framework of neoclassical economics was developed in the 18th and 19th centuries, when a stronger focus on productivity made sense. In the subsistence world of the Malthusian trap, a large drop in GDP meant starvation for a large part of the population. Today’s world is different -- we are wealthier than when we declared independence from Great Britain. But the priorities of economics have not been sufficiently updated to account for the material abundance of modern developed economies.

In the midst of the worsening crisis, economic forecasters are calling for a short-term drop in GDP of around 30 percent. These numbers sound harrowing. They are also a remarkable reminder that even if GDP drops by 40 or 50 percent, our nation is wealthy enough to provide decent healthcare, food, shelter, and jobs to every American, if we choose to do so.

Galbraith ends The Affluent Society with “To furnish a barren room is one thing. To continue to crowd in furniture until the foundation buckles is quite another. To have failed to solve the problem of producing goods would have been to continue man in his oldest and most grievous misfortune. But to fail to see that we have solved it, and to fail to proceed thence to the next tasks, would be fully as tragic.”

The next task is building a more resilient economy. President Roosevelt’s Second Bill of Rights, in which he declared employment, food, clothing, housing, medical care, social security, and education to be a right of every American, might be a good place to start. That is a matter for the democratic process to decide. Here’s hoping that the current tragedy will be a catalyst for policy that delivers more economic rights to all Americans. A stronger focus on equality and security, to go along with our focus on productivity, will make our economy fairer, stronger, and more resilient.