Updated: Apr 6
Since starting in Wuhan, China, in December 2019, the outbreak of the novel coronavirus which causes COVID-19 has become a global pandemic. While its effects have become less severe in China, it has become a significant problem in the EU and an increasingly serious threat to the US. The resulting shutdown of significant portions of the world economy has caused a significant sell-off of assets in financial markets (not just equities). Central banks have unleashed massive monetary stimulus, while many governments of wealthy nations will be implementing fiscal stimulus.
In the US, Republican Senators have embraced a kind of universal basic income plan, but the more conservative among them want a one-and-done payment scheme. Even President Trump seems to agree with them. The same Republicans want to bail out essential business sectors, such as the airlines, and to demand an equity stake in companies that take advantage of the Federal loans that will likely be offered.
These measures (and others, some of which have already become passed the House and Senate and have been signed into law by the President) will help to prevent a widely predicted recession from becoming a depression. By bolstering both consumer spending and businesses, these actions will provide consumers with extra cash while helping them to keep the jobs upon which they depend to pay the bills. Although furloughs and layoffs have already started and are predicted to cause a huge surge in unemployment claims, the hope is that direct payments to Americans and loans to keep businesses running will mitigate job losses.
It's important to note that progressive measures such as these would be denounced as socialism during periods of prosperity. A universal basic income scheme would be denounced as government confiscation and transfer of wealth. Government equity stakes in corporations would be seen as tantamount to nationalization. However, when the inevitable economic downturns occur, they're just prudent (and, of course, temporary) actions.
When the human suffering caused by COVID-19 has abated and things start to return to normal, perhaps we should reconsider going back to the economic status quo. Perhaps there is a role for transfer payments, particularly for the working poor. Perhaps there are industries (such as healthcare and medical research, for example) in which the government should maintain its presence and influence, rather than ceding it back to market forces. After all, not every product and service is efficiently allocated by more or less free markets. And not every worker is able to bootstrap him- or herself into financial prosperity and achieve the iconic but elusive American Dream.