Wayne O'Leary

The Pandemic’s Winners and Losers

It should come as no surprise that the impact of the coronavirus pandemic has varied widely across the American spectrum. We may be “all in it together,” but the economic sacrifice has not been equally borne. As is usually the case under our system of laissez-faire capitalism, there have been winners and losers, with the losers far outnumbering the winners.

So far, the biggest losers have been the members of the nation’s working class, the wage-earning majority. In May, the official US jobless rate approached 20% (up from 14.7% in April), the highest level experienced since the Great Depression. It’s lately eased somewhat due to the partial reopening of the economy, but remains stubbornly in double digits and is expected (per the Federal Reserve) to fall only to 9.3% by year’s end, nearly triple the pre-pandemic unemployment rate.

Hardest hit have been the least affluent workers and their families. The US Chamber of Commerce reported that, as of mid-May, over one-quarter of the workforce was unemployed in 11 states; more to the point, a Federal Reserve survey discovered, nearly 40% of households with annual incomes under $40,000 included someone whose job was lost between the start of the pandemic and early April.

Jobless benefit claims reflect the scale of the disaster. Filings for unemployment insurance totaled 38.6 million nationwide for the period mid-March to mid-May, according to the US Labor Department. The desperate search for replacement income continued unabated, with insurance applications topping one million a week for a record 19 straight weeks by July.

Having to file for unemployment benefits would be discouraging enough, if those applying could at least count on getting help; that’s not always the case. The pandemic’s economic losers are penalized twice, first by loss of employment and then by an unemployment-insurance system stacked against them. Polling done for the New York Times in May, the peak of the current jobs crisis, indicated that half of those applying for benefits were unsuccessful. Numerous austerity-minded states were taking a hard line against applicants, as they have since the program’s inception in 1935.

It’s a quirk of the American system that the states, not the federal government, establish the rules for assistance — who’s eligible for jobless benefits, how much they can collect, and for how long. The unemployment-insurance program is really a collection of state programs, even though it’s under Social Security; Washington oversees it and sets the guidelines, but does not exercise direct control.

In April, the Pew Research Center determined that during the first wave of pandemic-related job losses, in March, only 29% of out-of-work Americans received unemployment benefits. There were wide regional discrepancies: nearly 66% of jobless Massachusetts residents received payments, for example, compared to fewer than 8% of jobless Floridians. Maximum weekly cash allowances ranged from $823 in Massachusetts to a niggardly $235 in Mississippi.

Predictably, the conservative South was in the forefront of denying worker’s compensation. Of the 10 states where fewer than 15% of the unemployed received benefits, seven were Southern, while nine of the 12 where over 40% of the jobless collected benefits were in the Northeast or the Midwest. Similarly, seven of the 10 states paying the lowest maximum benefits (under $350 per week) were in the South.

The foregoing is an obvious argument for centralizing this country’s unemployment-compensation system, but that’s a subject for another (post-pandemic) time. For now, it’s just further indication of who the pandemic’s main economic losers are as the crisis deepens.

But the unemployed will doubtless be reassured to know that if they’re losing, some of their fellow Americans are winning — big time. Unsurprisingly, these include the members of the so-called investor class. Bank shareholders, for instance, have been allowed by the bank-friendly Federal Reserve to continue receiving dividends through the pandemic despite the teetering economy. Estimates are the biggest institutions will distribute $40 billion in dividends during 2020, taking advantage of relaxed Fed regulations on the amount of capital they must hold on hand.

In addition to succoring the Wall Street banks, the Trump-era Fed is pledged to bolstering the markets in general. Its chairman, Jerome H. Powell, was quoted in an unguarded moment as follows: “The one thing I can absolutely guarantee is that the Federal Reserve will be doing everything we can to support the people we serve.”

He’s carried through for the people he serves (the investors), holding interest rates to zero and pumping $2 trillion into the financial system by printing money and purchasing government-backed and corporate bonds, thereby reducing costs for corporations borrowing in the bond market. Stocks have responded by soaring 30% since the start of the pandemic, ignoring the recession afflicting the real economy. The winners: shareholders in America’s corporations, which are now the dominant players in the stock market.

The pandemic has produced other economic winners as well. There are the CEOs of companies declaring recession-related Chapter 11 bankruptcy, who have nevertheless departed with golden parachutes worth millions. There are the lawyers, lobbyists and political consultants on Washington’s K Street, whose lucrative firms somehow qualified for bailout aid under the CARES Act’s small-business Payroll Protection Program (PPP). There are the owners of luxury hotels, restaurants and resorts, who also managed to get PPP funds intended for mom-and-pop businesses.

Then, there are the biggest potential winners of all, the drug manufacturers competing to bring treatments and cures for COVID-19 to market. These include Gilead Sciences, whose new ameliorating drug remdesivir, developed with $70 million in federal subsidies, will be priced at a nonnegotiable and obscenely profitable $520 per vial ($3,120 per treatment), a nearly 100% markup over investment.

As for vaccines, the Trump administration is already secretively picking the winners. Under the Department of Health and Human Services’ optimistically named Operation Warp Speed, selected pharmaceutical companies with political connections and/or dominant industry positions are being given the inside track to government R&D money. So far, nearly $5 billion of $10 billion appropriated has been doled out to the handful of lucky firms in the running. The stock of one, Novavax, has already jumped 30% in value. Two others, Moderna Therapeutics and Pfizer, admit they would never sell their prospective vaccines at cost.

The pandemic is about to produce a few more winners.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, September 1, 2020

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