While sicknesses and death mount from the coronavirus pandemic, the responses by all levels of government have been overwhelming.
School closings, business closings, cancellations of sporting events and concerts, “stay in place” orders, hysterical panic spread by the corporate press, and massive government “stimulus” and bailout plans have all been justified as a means to save lives and “flatten the curve” of the spread of the virus so the healthcare system isn’t overwhelmed.
These efforts have been made in an attempt to head off what some are predicting would be a historic mass pandemic resulting in hundreds of thousand or possibly a million deaths in the U.S., according to some preliminary, worst-case scenario projections.
No doubt such a result would spur sizeable social and economic upheaval. Such a momentous number of deaths and illnesses would cause mass panic and grind the economy to a halt. In strictly economic terms, to the extent that the workforce is reduced (most deaths would be to the elderly population), a supply shock would diminish productivity for a noticeable duration. Supply chains would be disrupted and need to adjust to the new labor market.
During the outbreak, non-specific capital goods would be converted to the production of medical supplies to address the virus, similar to how factories were converted to producing tanks and guns during WWII.
There would be at minimum a significant economic downturn during the crisis, and depending on the government’s response, it would take a considerable amount of time for the economy to shift back to normal once the virus subsided.
The coronavirus’ threat to health and the economy is indeed serious, and the trade-offs of “doing nothing” have been often discussed to justify the unprecedented response.
What seems to be missing from the discussion, however, is the notion of any trade-offs coming from the government’s actual response. The government’s measures are positioned as but temporary inconveniences needed to stave off mass illnesses and save lives. Better to be safe than sorry, goes the justification.
But what if trying to “be safe” comes with dramatic costs as well? Why is nobody talking about those costs?
As Mises Institute Research Fellow Peter G. Klein tweeted:
“I hear ‘lives vs. livelihoods’ as if the cost of shutting down economies to flatten the curve is inconvenience and reduced economic growth. But what about the immediate and long-term public health harms from shutdown?”
To drive the point further home, Mises Institute President Jeff Deist wrote in a Facebook post:
“A broken economy, crazed fiscal/monetary responses by Congress and the Fed, not to mention egregious & illegal violations of liberty, are not all justified by this virus. Our actions will kill & impoverish people, perhaps far more people than the virus. The lesson of Bastiat’s seen and unseen remains unlearned.”
Indeed, it’s easy to see the government’s response and attribute a slowed infection growth rate and lower mortality figures from the virus to those measures.
But what of the negative impacts the government’s response will have? These “unseen” impacts, as Bastiat would frame them because they are much harder to detect, will be numerous and possibly more deadly the coronavirus itself.
Massive job losses may increase suicide, depression, substance abuse
Due to the mass panic being spread by governments and media (not to mention government edicts shuttering the doors of many businesses), many industries are being devastated. Especially harmed is the hospitality industry. Sadly, panic is a result of the government’s response to head off the panic that would result if government failed to act to prevent the spread of the virus.
Some estimates are predicting more than 2 million people will apply for unemployment this week, which would be the highest one-week figure on record.
The stress and uncertainty of joblessness has numerous negative consequences, some of them deadly.
A study published by The Lancet found “the relative risk of suicide associated with unemployment was elevated by about 20–30%” in their study period.
The study further attributed roughly 45,000 suicides per year worldwide to the mental and psychological toll of unemployment.
The hope for many laid-off workers is that their unemployment will be temporary, but there remains great uncertainty just how long this will last. The longer this economic shutdown and its consequences last, the more suicides there will be.
Moreover, as the substance abuse rehab clinic Recovery Ways notes, “One study from 2017 found that every time unemployment rises by one percentage point in a given county, the rate of opioid deaths increases by 3.6 percent and the rate of emergency room visits increases by seven percent.”
In sum, research has shown the anxiety of joblessness leads to increased rates of suicide and drug abuse.
Furthermore, a study published by the National Institute of Health concluded: “Results suggest that unemployment is associated with young adults’ heavy episodic drinking,” This is of particular concern given that the hospitality industry workforce tends to be younger.
Another NIH study found “Unemployment increases the risk of relapse after alcohol and drug addiction treatment,” and that “Unemployment is a significant risk factor for substance use.”
Shutdown will have much broader economic impact, exacerbate other health problems
The current shutdowns and mass hysteria are having first order effects largely on the travel and hospitality industries. But the negative financial consequences will not be contained.
As economist and financial advisor Doug Casey said in an interview published at LewRockwell.com:
A restaurant closes down, but the owner still has to pay his mortgage. And the staff mostly lives on tips. How are they going to pay the rent—and if they don’t, then how’s the landlord going to pay his mortgage? The consequences of businesses shutting down, and going bust, are just huge.
The economic contagion and domino effect could indeed be very significant. Recall how the bursting of the housing bubble triggered the Great Recession. We may now be facing similar effects, as small businesses struggle to pay their rents and laid-off workers struggle to make rent and mortgage payments. As debt defaults mount, banks lose their cash flow and become extremely cautious about creating new loans. Liquidity freezes and grinds the economy to a halt.
There is a very real chance that the orchestrated economic shutdown can trigger a much broader economic collapse. Keep in mind, of course, that prior to the virus outbreak the economy was largely propped up by fiat Fed money printing, and that bubble was bound to burst eventually.
The hysterical response to the virus is serving as the pin to pop that bubble, and make things worse.
We’ve already seen how unemployment leads to severe health consequences. Full-blown recession serves to double down on them, and then some.
One study found that the Great Recession was linked to an additional 260,000 cancer deaths in OECD countries alone, with the authors suggesting “increased joblessness during the economic crisis may have limited people’s access to health care, leading to late-stage diagnoses and poor or delayed treatment.”
Moreover, with the stock market taking a major hit, it’s not just Wall Street fat cats taking a haircut. Thanks to decades of absurdly low interest rates driven down by Federal Reserve policy, average workers can no longer set aside their retirement savings into safe, interest-bearing savings accounts. Instead, they have been driven to invest retirement savings into the stock market. The economic shutdown has caused current retirees and those nearing retirement to lose a significant share of their retirement nest egg. Senior citizens facing such high levels of stress will be more likely to suffer ill health effects, like stroke or heart attack.
Anxiety from mass hysteria weakens immune systems
Politicians and the corporate media are in 24/7 mass hysteria mode. There is no way to avoid constant chatter about the impending doom of coronavirus.
The most visible signs of this ginned up mass panic can be found in retail stores across the country with empty shelves. Panic-buying of hand sanitizer and toilet paper has been well publicized.
But there is a more serious consequence of spreading mass panic among the populace. In a very bitter case of irony, the anxiety and stress caused by the reaction to fight the spread of the coronavirus can actually weaken your immune system and make you more vulnerable to the spread of viruses. As reported at Healthline.com:
But if you repeatedly feel anxious and stressed or it lasts a long time, your body never gets the signal to return to normal functioning. This can weaken your immune system, leaving you more vulnerable to viral infections and frequent illnesses. Also, your regular vaccines may not work as well if you have anxiety.
Panic can also drive up suicides, while panic-stricken grocery shoppers gather in long lines in close proximity to each other holding shopping cart handles that are likely riddled with germs and bacteria.
The federal government’s fiscal response to the coronavirus pandemic and subsequent economic shutdown has been unprecedented.
The Federal Reserve has slashed interest rates to near zero, while pumping $1.5 trillion of fiat money in an attempt to prop up the economy. A “stimulus” bill to bail out affected industries and send money to households is being negotiated, and seems to grow by the day, with latest reports indicating it could top $2 trillion. With the federal government already $23 trillion in debt and running trillion-dollar deficits, most – if not all – of this stimulus spending will need to be funding by newly-printed fiat money.
By comparison, President Obama’s stimulus package to combat a global financial meltdown was estimated to be less than $900 billion.
While households will no doubt welcome the financial relief of government checks, this level of new money printing will have dire effects. The new money may help temporarily prop up some industries, but it will ultimately wreak havoc on the economy and hurt low-income households the hardest.
With so much newly-created money sloshing around the economy, price inflation is sure to follow the current shutdown. Price increases will impact low-skilled, low-income workers and those on fixed incomes the hardest, as they will not be able to keep pace with the rising cost of living. More people will fall further behind, exacerbating the mental and physical health consequences mentioned above.
Finally, the mad money printing by the Fed will at best temporarily re-inflate the economic bubble. But it’s during the bubble that the seeds for the next recession are planted, and the current massive money printing will serve to deepen the next recession.
The deeper the next recession, the more deaths from suicide, anxiety and substance abuse there will be.
Bastiat’s warnings about the seen vs. the unseen continue to be ignored. The negative consequences of the government’s hysterical response to the coronavirus stretch far beyond a temporary economic disruption. Higher rates of suicide and substance abuse, anxiety-induced illnesses, and a deeper recession that worsens these public health issues will be among the steep price we pay.
It may be time for more to question if the cure will be worse than the disease.
Bradley Thomas is creator of the website Erasethestate.com and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.
Follow him on twitter: Bradley Thomas @erasestate