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Business and Economy

Maine Professor Says The Pandemic Shows How The Government Is Ill-Equipped For Economic Crises

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Robert F. Bukaty
/
AP File
In this June 16, 2020, file photo, The Standard Baking Company serves customers at their door front in Portland, Maine.

The novel coronavirus has changed the way we think about a lot of issues; the economy is one example. Michael Hillard, a professor of economics at the University of Southern Maine, says wealth inequality has been laid bare by the pandemic and so has the fact that the government is ill-equipped to handle an economic challenge of this size.

Our occasional series of interviews, "Lessons From the Pandemic," asks experts and advocates what COVID-19 has revealed about our world and what we can change in the future.

Ed note: This interview has been edited for length and clarity.

Hillard says the government's response wasn't always this tepid. In fact, during the Cold War, things were very different:

Hillard: There was a time where both contemporarily, and also in the recent past, America thought big when it faced challenges, and I'm talking about the Great Depression. I'm talking about World War II, I'm talking about the Cold War effort. We borrowed massive amounts of money starting in 1940, '41 and '42, to build a wartime economy that won the war for the world. And that was a time when GDP per capita in the United States was half of what it is now. So we have twice the economic capacity, and we're not willing to do you know, even a fraction of what old leaders did in the past. And that's not something that is just Trump. This has been going on for a couple of decades.

But I think it's gotten to the point where we see no national strategy, really for anything with the COVID crisis at this point. I mean, the CDC has been largely shut down. The President is not talking about it at all, he's sort of pretending that it's gone away, and from the start was unwilling and uninterested in harnessing the tools that the government's used in the past. The defense production act was used only to push immigrant meat packers back into factories where they would get COVID , in large numbers, get sick and die just so we can have our bacon. If there ever was a time where I think the country was willing to let the government go big, this would be, it in our lifetime. And I think there's lessons that so many people have across the spectrum from 2009, 2010, after the great recession that we didn't go big then and it was a long dragged out stagnation to find employment. And we're facing the same thing now.

Flaherty: Why do you think this aversion to thinking big that you're talking about, why do you think that has developed?

American business, as a whole, culturally and politically, going back to the industrial revolution, is very anti-government, very anti-labor. And I think when the Cold War went away, it sort of removed the basic foundation for that bigger thinking. And that coincided with this push to say, 'Oh, we just, you know, we can't have a government who can do anything,' and so I think it's just a general hostility that's really ironic because people do, in a crisis, expect the government to step in and help them.

When we spoke in advance of this interview, you said one thing that this has really laid bare is how precarious so many people's lives are financially. Can you talk a bit about that?

One of the signal trends in the American economy for the last four decades has been rising income and wealth inequality. You know, there's been a number of surveys, including a much-watched one by the Federal Reserve that demonstrate about 40% of households, essentially, don't have $500 of ready cash to deal with a sudden emergency. People don't have consistent access to health care. We got Obamacare, which was a significant expansion. Going into this crisis, we had about 30 million people who didn't have access to health care at all and another 50-60 million who had extremely expensive, very thin coverage of healthcare. Retirement security is a huge problem. You put this all together so that, during the best of times, we were having a national discussion about how fragile economic life was for 60% of people, who are people that, among other things, could work their whole lives and not get ahead in any meaningful sense. Businesses have gone away from those expensive lifetime jobs. The sectors that in the economy have grown have kept unions out.

And so if you want a simple explanation, we have inequalities. We've built an economic system — and I would say large corporations haven't done this primarily —- we've built an economic system in which the prosperity that we have is not being shared with the bottom 60% of the population. So sectors of fragility, where there's just like, literally no margin of error for you know, half or more of our population. Again, that's the reason why like we can't rely on people relying on their savings right now to get them through this crisis. Because they just don't have those resources in the bank, so to speak. And because there's so many different ways in which you can wind up being heavily indebted.

What do we need to learn from this experience?

I think we need effective national leadership that can think and act big. I think we need to recognize that much of the suffering right now is due to the chronic extremes of inequality that have become baked into our economic system. So we need a society that, I think is already there or pretty close to there, that's willing to harness tools of policy to reshape our economy so that people have livable wages, so that healthcare is accessible for all and not for some, and that there are forms of economic security that either come through employment or through government safety net programs, so that, you know, people don't have to be on edge almost their entire lives.