Some thoughts on… Championing Goliath

With a ~5% contraction of US GDP in the first three months of the year, we are beginning to quantify the fallout from mismanagement of Covid-19. Reflecting on the economic news, I was reminded of the story of David versus Goliath from the Bible.

In the tale, a smaller hero (David) takes down a heavily-armored, larger opponent (Goliath) using a sling-shot and 5 stones from the nearby river.  Our global culture lauds David for his bravery. The original old-testament legend is retold in the Koran, Goliath is Jalut (جالوت) in Arabic, and has been spun in every world culture – a valiant group of rebels fight a behemoth, a strong mother takes on a large company, a young wizard in school vanquishes a dark force.

As opposed to conventional wisdom, in the case of Covid-19, I am supporting Goliath in two different analogous cases.

The first analogy is more straightforward. Covid-19 is the small entity taking on a larger organism (the human race) and initially winning. In this case, I am of course rooting for humanity to triumph over virus.

The second analogy, is a little more textured.  The social and economic advancement that society has achieved over the past 50 years has been remarkable.  We have vastly improved food supplies; reduced maternal mortality by about 200,000 deaths per year and increased life expectancy by about 15 years.  We have also moved about a billion people out of poverty. 

All these benefits have come with a relentless push toward achievement, advancement, and growth in the economic system, but the cost has been on the planet.  As we have scaled up economic activity, we have also increased environmental degradation.  In some ways, our activities could be considered a virus attacking the larger planet.

By advancing the goal of economic improvement, we have sidelined the goal of environmental security.  The pandemic’s initial spread is a result of our encroachment on wildlife, overutilization of natural resources, and construction of an international economic system.  We are reducing forested habitats, selling wildlife as food, and then transmitting disease through a globally-connected transportation system.

In this second analogy, where the Planet is the larger entity and the ever-expanding economic system is the virus, I am in many ways rooting for Goliath again.  It is ironic, that Covid-19, a microscopic element, can stall the strongest economies in the world and by doing so may save Mother Nature.

Natural viruses are smart.  They cannot completely kill off their hosts, as they will not have a place to live.  Sometimes viruses take a pause between major bouts of infection.  In a similar fashion, maybe what is best for humans and the globe is not to relentlessly keep increasing our economic activity.  Maybe we also need to pause our economic growth or at the least re-think it. Sometimes standing still is the best move you can make.  As for both of these cases, I am rallying for Goliath. 

Some thoughts on... Envisioning the other side

A month into the shutdown, we are transiting from the medical emergency induced by Covid-19 to the economic one.  Talking with Lela (a friend from Kindergarten) about the global and local economic impact as countries slow, I recalled Indian novelist Arundhati Roy’s description of the virus as a portal to a new world.  Here are three socio-economic trends that I am monitoring whose outcomes lay on the other side of the portal.

Trend 1: Community versus Tribe

On the personal level, isolation is making people realize the importance of community and the value of being able to depend on neighbors, family and friends.  Our local theater is running a Zoom event on Fridays called “Sip and Sing” where a professional singer performs songs and displays the words so everyone can sing along.  Over 200 people in Sag Harbor are joining and you can see by video the joy on their faces. At the same time, social distancing is also bringing out inherent biases into the open.  We keep six feet distant from each other but the distance seems to grow when walking near Chinese people.  Will we pull closer together as communities or become more tribal in our views?

Trend 2: Centralization versus Decentralization

At the national level, economies that have created centralized policies to deal with the public health crisis, e.g.  Canada, Denmark, Singapore, New York state, seem to be more successful in containing spread.  Denmark is already considering a partial opening of borders. Decentralized policy making, which is occurring across the 50 states in the USA, sends mixed messages to citizens and leads to confusion around personal conduct.  In the US, will we see support for nationalized public health policies and stronger stewardship at the Federal level or will we rely on continued leadership at the State level?

Trend 3: Nationalism versus Globalization

At the international level, global sharing of knowledge and supplies, has been a critical factor in helping to tamp down the spread of the virus.  Aid is being distributed to poorer countries since fluid borders allow easier transmission through international travel.  Yet by shutting airports and airlines, erecting severe requirements for visa application, and preventing export of medical supplies to foreign countries, many countries are pulling away from global cooperation. Potentially leaving the most vulnerable countries to fend for themselves. Will countries continue to cooperate or will we retreat to national borders?

An underlying theme to all three trends is the recognition of self versus other.  How vividly do we identify our own needs and prioritize our own existence or do we see and care for the needs of others as well?  Moving towards greater self-prioritization, inevitably pushes us as a society towards decentralized, tribal and nationalistic behavior.

As Admiral William H. McRaven describes in his commencement speech, we can better our lives and others through some very simple, personal acts.  The outcome of these trends, is ultimately up to us as individuals.  Our everyday actions – choosing how we interact, who we vote for, how we buy products, how we donate - determine where society will fall on the three questions above.  

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Some thoughts on… Adjusting to a changed world

I have reached out to some of you since the Covid-19 shutdown, but wanted to send this message broadly to check-in.

As we begin adjusting life to a changed reality, I am reflecting on this move to a new equilibrium of social distancing, Zoom videocons and home isolation. In such an altered reality, it seems facile to merely adjust, as it implies a temporary change.  If we’re only adjusting, we simply adjust back in a few months.  Yet we know that is impossible, since life will be intrinsically different by the summer. 

So instead maybe we should be adapting – changing our expectations, desires, needs – to the new world.  This sounds closer to the right course, and it may be a necessary step.  Ultimately, I see us needing to engage with this changed world - understanding the new circumstances, and at the same time using the situation to get to know our community, loved ones and ourselves better.

Over the past 3 weeks, our friends’ 21-year-old daughter, Alexandra, was living with us since her college closed and her parents are in Sweden.  After the initial craze of determining what was happening, we all ended up home bound together with my brother and close friend Mala.  Spending the days together, we learned how much Alexandra loved to bake, had a savvy head for finance, and a surprisingly deep knowledge of Broadway musicals. She was on the flight back to Stockholm yesterday, and we already miss the gift of engagement she brought to our lives. 

Continuing this spirit of engaging, I am enclosing a set of articles which I sent to students in my Principles of Economics class about Covid-19.  

o   Discussion on transmission and what we can learn from Asia

o   Argument for social distancing and other measures

o   Therapeutic options that are being considered

o   The risks doctors are taking to treat patients

o   A demonstration of how people are adjusting and a wonderful performance

Also, for those of you interested in a refresher on counter-cyclical macroeconomic policy (i.e. what the government and Federal Reserve are attempting now), you’re welcome to join my Zoom class on Tuesdays and Thursday mornings.  We will be covering GDP, inflation, unemployment, credit markets, and how governments work to prevent downward economic cycles. Please reach out if you're interested in joining.