The economic lessons we should learn but most likely won’t. The economic turndown is the fault of government policies not free markets. Government told businesses to shut down to stop the pandemic and as one meme noted, we had our 30 days of socialism, how did you like it? Yes, it was socialism and many governors and mayors has shown their inner dictatorship as they issued all kinds of rules and regulations, some of which contradicted each other. Many states are looking to reopen but others are not in a hurry, so we are looking at the nation rolling out over the next two or three months to get going.
First lesson is that pandemics are not good for the economy and shutting down the economy may be looked at an extreme mistake down the road. The original data coming from China was there was nothing to worry about and may of Trump own scientists didn’t fear the virus only to become fearful when we found out the Chinese were lying and World Health Organization proved to be their puppet. Original numbers showed high mortality rates with Italy at 10% mortality rate, but these data were based on incomplete data.
The data was based on two things, the first is definition of Covid death was expanded and inflated the total and the second reason is that we were not counting mild or asymptomatic cases. Recent studies done including Austria, California, and Germany are showing morality rate between .1 to .8, underneath 1% mortality rate. At the lower range, it is similar to the flu and the upper range certainly higher than typical flu season or even the worse flu seasons. It is far less than 3 to 10% numbers often use and leaving policy makers wondering do we go too far. We used incomplete data and models that proved to be inaccurate by wide margins. We saw models revised as much as 20-fold downward. Countries like Taiwan and South Korea showed the virus could be contain without sinking the economy and Sweden decided to not to shut down the economy and we are now witnessing an experiment on Swedish model versus the shutdown model.
The lessons from the 1918 to 1920 Spanish flu was that pandemic had an impact on the economy but so did interventionist government policies. Federal reserve money pumping along with an economy that still had many features of the war economy in place including boards controlling industries and high tax rates. The situation today is similar with the Federal reserve pumping out money, a deep recession as result of government interventionist policies on a Federal and State levels. The recovery from the 1920 recession came as result when Harding administration moves toward austerity accompanied by tax cuts and budget cuts plus tariffs. The recovery came in the second half of 1921. We have seen how to recover from deep recession or depression, and it begins with free market policies and the relaxation of government policies. UCLA Cole and Ohanian research showed that the government interventionist polices of Hoover caused the Depression and FDR policies in his first term delayed recovery as the unemployment never went below 10 percent in the 1930’s.
Obama recovery paled in comparison to the Reagan recovery even though the unemployment even though unemployment was slightly higher than unemployment at the beginning of the Obama recession. Obama recovery was far weaker than the Reagan recovery and present Democrat proposal are far more government interventionist and essentially socialistic and worse than the present government policies. The key will be removal of the present government policies as oppose keeping them or expanding them.