IMPACT

Coronavirus Will ‘Absolutely’ Make Inequality Worse. But We Can Change That.

For some, the COVID-19 pandemic is an inconvenience, says a former Lehman Brothers executive. For others, it’s life and death.

Inequality is nothing new in America, but the coronavirus pandemic has ruthlessly laid bare just how fractured our society is. 

Some people are able to easily work from home ― articles welcome the “cozy catastrophe” and the new digital happy hours where we sip “quarantinis” with friends. Meanwhile, underpaid essential workers on the frontlines of this emergency are risking their health every day to keep us safe and fed. And for a very large portion of society, this pandemic means they are unable to pay rent or bills.

The number of people claiming unemployment benefits in the United States reached 6.6 million on April 2 as companies continue to close and lay off employees. Mothers are skipping meals to feed their children while young people are dying of the coronavirus because they don’t have health insurance.

Some people are just treating this, at least so far, as some sort of mild vacation, and others are in an existential crisis. Nate Hagens

Economics expert and former Lehman Brothers executive Nate Hagens calls this gap between the haves and the have-nots ― where only a fraction of society reaps the benefits of economic growth ― the “bifurcated economy.” HuffPost spoke with Hagens, who now teaches at the University of Minnesota and sits on the board of the Post Carbon Institute, to ask him how we got here and whether it’s possible to rebuild after COVID-19 in a way that doesn’t further entrench inequalities.

The interview has been edited for length and clarity. 

The COVID-19 outbreak has triggered a stunning collapse in the U.S. workforce, with millions losing their jobs. Economists wa
The COVID-19 outbreak has triggered a stunning collapse in the U.S. workforce, with millions losing their jobs. Economists warn unemployment could reach levels not seen since the Depression.

What does a bifurcated economy look like? Were we already living in one or is the pandemic pushing us towards it? 

We already had a bifurcated economy. Coming out of the Great Recession, most of the gains were going to the top. 

But the economy was still working. Even if they were making low-income wages, people were making some wages. They were able to pay for Netflix and food and pay their mortgages, etc. But now, the heartbeat of the economy has stopped due to an outside force. It really lays bare the existing inequalities ... some people now truly have nothing.

So, while it may be true that the best things in life are free, that adage is only true if basic needs are covered, and for most Americans, basic needs are not covered: like health care, utilities and food. This crisis is a health crisis on the surface. But it’s [also] an economic crisis, which will impact businesses and individuals. And I think we’re going to have to support those two demographics and the only entity that’s big enough to support those is the U.S. government.

Do you think the 2008 economic collapse set up these inequalities and made us more vulnerable?

This is a really long conversation. But capitalism ... is like this game that continually funnels things towards the top. It’s like playing a rigged game and every year, you roll the dice and 80% of the benefits go to the top 20% and that’s happened over and over again. And the end result of that is half of society is barely holding on.

In social democracies in Europe, there are larger safety nets that take this into account, but the United States has not had that. The American dream of 30 or 40 years ago, where all you had to do is get a college degree and then you have lots of jobs open to you, that doesn’t speak to [the bottom half of society] now. 

So, that’s what I mean by a bifurcated economy. Some people are just treating this, at least so far, as some sort of mild vacation, and others are in an existential crisis. And what we need to understand is those people that are viewing it as a vacation, they need to step up and contribute in their own communities, give back and support other people.

The coronavirus pandemic will "absolutely" make inequality worse, warns Hagens. But there is an opportunity to change that.
The coronavirus pandemic will "absolutely" make inequality worse, warns Hagens. But there is an opportunity to change that.

Do you think the pandemic will strengthen these inequalities if we don’t take the right measures?

Yes, it will absolutely make it worse, which is a potential catastrophe, but it also maybe opens up pathways to systemic change that wouldn’t have been able to happen without a crisis.  

On the catastrophe side, if we continue business as usual right now, and we’ve just shut down half of the economy, within weeks, there are going to be riots and looting and other things because a certain percentage of the population doesn’t have any money to buy what they need. 

We've consumed beyond our means for a generation and now the bill is coming due suddenly. Nate Hagens

I live in Wisconsin and the governor here just announced that during the crisis, you won’t be evicted, no matter what. So if you can’t pay your mortgage, you’re not going to get kicked out of your apartment or house. Measures like that have to scale. We have to have coordinated massive support for people.

A lot of people are living paycheck to paycheck, week to week, month to month. They have income and expenses. Now they have no revenue, but they still have expenses. And our system is not constructed to help that many people at once. 

The good news is that we never, under business as usual, would have had this discussion about poverty because the conservatives don’t want to bail out people and the liberals don’t want to bail out companies. And now we’re gonna have to bail out both. I think the poverty that we’re going to witness in the next month is going to really wake people up on both sides of the aisle to “Oh my God, we have a real problem in this country.”

The answer isn’t a $1,000 check but $1,000 a month via some SNAP card or EBT prepaid card that’s mailed to Americans, and for the duration of the crisis, you get $1,000 a month. But we could maybe use that as a segue to universal basic income that supports the bottom half of society with enough to pay for basic needs.

Hagens argues that a universal basic income needs to be adopted to help support people's essential needs.
Hagens argues that a universal basic income needs to be adopted to help support people's essential needs.

Do you think something like a universal basic income is the way to go, or are there other ways to help provide society’s basic needs? 

This is one of those all-hands-on-deck situations. Our culture is systems blind. We look at issues like climate change or renewable energy or poverty and we don’t think of how everything fits together. And right now we’re lacking a map of how to go forward. 

I think we have a crisis that has to be solved in the next two months, which is bailing out businesses and supporting individuals. And then our system is going to be weakened by that because the government’s going to have to borrow a lot more money and be on the hook for a lot of potentially failing businesses.

I think the eventual answer here is we’re going to have to stop having GDP as our cultural goal. Because we won’t be able to continue to have GDP [as a metric of success], we’re going to have to shift to a well-being kind of a checklist of how people are really doing in their lives. 

I really hope that we navigate this crisis without systems breaking. But I also really hope that if we navigate it, that we don’t just go out and have this orgy of consumption and back to normal without learning anything from this. 

How can we be proactive in our response efforts to make sure that we don’t further entrench inequalities?

I personally think there needs to be universal basic income and there needs to be some other cultural objective other than growth. Because if we don’t have universal basic income, we’re not going to have a society because there’s going to be starving, angry hordes of people. We have to support them. There’s no other option. 

Socialism is such a bad word, it’s almost like devil worship in our country, and yet we are a socialist country already. Look at the National Parks, look at the Central Bank, look at all the things that the government does to make goods and services available to people. We’re not nearly as socialist as Scandinavian countries. But the government has an important role and, like it or not, it’s gonna have to get bigger.

"The biggest thing that’s going to contribute to better futures is social nodes of communication and social capital," s
"The biggest thing that’s going to contribute to better futures is social nodes of communication and social capital," said Hagens.

This all reveals just how complex and immense this problem is.

Well, I can summarize it in a sentence or two. We’ve consumed beyond our means for a generation and now the bill is coming due suddenly. The bottom half needs to be supported. Otherwise we have no society. 

You mentioned that people who are able to work at home, should give back. How do we do this in a meaningful way?

No matter how this all unfolds, the biggest thing that’s going to contribute to better futures is social nodes of communication and social capital. Because what we’ve done in the last generation is we’ve replaced normal human interactions and social capital with technology and money. And we’ve done that with a deleterious impact on our health and our happiness because technology and money hijack our brains in a stronger way than slow, kind of boring conversations do and yet that’s our heritage. That’s where we’re headed back to again. 

I think the biggest thing we can do, the “haves,” is once these spatial distancing rules are relaxed, we need to have conversations in our communities about our future. And we need to start knocking on the doors of people that we politically might disagree with, because we’re all going to be going through this crisis together in the place that we live, and start building these nodes of social communication that are going to help in all kinds of different futures.  

And if you’re a super rich person ... instead of investing in the stock market, maybe take some of that money and invest it locally.

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HuffPost’s “This New World” series is funded by Partners for a New Economy and the Kendeda Fund. All content is editorially independent, with no influence or input from the foundations. If you have an idea or tip for the editorial series, send an email to thisnewworld@huffpost.com.


 
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