I pointed out earlier this morning that left-wing politicians were using the COVID-19 pandemic as a reason to reshape society according to their perspectives and wishes. That's a very dangerous development . . . but politics isn't the only area where such reshaping is happening. Business and commerce in general have seen the pandemic speed up an already ongoing transition to an enormous extent, so much so that certain sectors of the economy are in danger of complete collapse.
Trouble is, the transition is coming so fast that there's been no time to find alternative employment for those affected - and, in fact, there may not be any alternatives available for them. The companies and organizations affected are also bombarding the US government with requests for multi-billion-dollar bailouts, when in fact those bailouts will only prop up, temporarily, a failing business plan that can't survive the changes going on in society as a whole. To grant them would be to pour even more money down the drain.
Let's look at a few examples.
- CINEMAS AND MOVIES: According to Wolf Street, "People are watching more movies than ever. But they’re doing it at home: Before the Pandemic, the number of tickets sold had dropped by 22% from the peak in 2002 through 2019 ... Netflix and Amazon were among the big winners in the Pandemic as consumption of goods and services – including entertainment – has shifted even more online. Movie studios, seeing the writing on the wall, have piled into it. And as brick-and-mortar malls are finding out: much of the shift to online during the Pandemic wasn’t temporary but has been staying online, and hasn’t returned to malls when they reopened ... Now even folks who didn’t stream movies before the Pandemic have gotten used to streaming and watching movies at home, and perhaps upgraded to a nicer screen while at it. It’s going to be tough to get them to go back to a cinema."
- AIRLINES: CNN reports: "Air traffic has picked up from the more than 90% drop where it was in late March and April, when the first round of assistance was passed by Congress. But traffic passing through TSA checkpoints is still down about two-thirds from year-ago traffic levels, and airlines aren't expecting a total recovery for years ... the industry has already trimmed about 45,000 jobs." Many informed observers forecast that demand won't recover to pre-pandemic levels until the mid-2020's. Airlines spent billions before the pandemic on buying back their own shares, enriching their executives and stockholders, but doing nothing for travelers. Now they want those billions and more to be paid to them again in the form of government subsidies, all in the name of securing jobs and keeping themselves afloat.
- HOTELS: The American Hotel & Lodging Association reports: "4 Out of 10 Hotel Employees Are Still Not Working ... Almost 2/3 (65%) of Hotels Remain at or Below 50% Occupancy. That’s Below the Threshold at Which Most Hotels Can Break-Even and Pay Debt ... Consumer Travel Remains at All-Time Low ... Industry’s Leading Employers – Urban Hotels – Face Collapse with Cripplingly Low Occupancies ... COVID’s Impact on Hotel Industry Felt in Major Cities Across The Country." Yet again, the Association is lobbying for billions of dollars in government support - ignoring the fact that the market had already been over-supplied before the pandemic. Now, it's so vastly over-supplied that the only realistic solution is to close a great many hotels permanently, and adjust the stratospheric prices demanded by others to bring them more in line with market demand - yet those steps are resisted by the industry, which wants to continue to make money, but at taxpayer expense this time instead of its customers.
- HEALTH CARE: CNBC reports: "When hospitals across the United States halted elective procedures back in March, they immediately started hemorrhaging revenue. That's in large part because U.S. health systems make a sizable chunk of their revenues from high-priced, non-emergency procedures. Conservative estimates indicate that U.S. hospitals are losing more than a billion dollars per day..." As Charles Hugh Smith has pointed out (we quoted him yesterday), "The concern of insiders isn't the declining health of America's populace, it's the decline in revenues as fewer 'customers' come in for the financial scalping of emergency care." I've been in emergency rooms too often, thank you very much. Hundred-dollar aspirin tablets? Check. Fifty-dollar Band-aids? Check. I've seen them all. I've seen an ER visit billed at five figures, only to be whittled down to my medical insurance for a few thousand dollars - but I reckon the value of the care I received could probably be realistically measured in hundreds, not thousands, of dollars. I think most health care in the USA is over-priced by orders of magnitude . . . yet that industry asked for $100 billion in government bailouts. As far as I'm concerned, it's criminal, particularly because the health care swamp has not been drained. I'd rather let COVID-19 do the draining, if nothing else can.
I think we're going to have to look at some way of helping those left with little or nothing by this crisis. I don't see any short- to medium-term employment-based solution for them, so we may need some sort of universal basic income system rather than temporary unemployment benefits. I don't like that, but pragmatic economic reality says it's going to be needed. If so, I suggest that one way of paying for it will be to cut back on corporate bailouts, and use that money to help those who've been left jobless as a result of economic changes. That might be better for society as a whole. It's no longer the case that what's good for companies is good for the country; in fact, companies appear to be viewing the country (and its taxpayers) as a cornucopia of free goodies to enable them to carry on in the same old way (and pay their executives the same old inflated, unjustifiable salaries and benefits).
Stein's Law warns, "If something cannot go on forever, it will stop." That's where we are now. We simply can't afford to continually bail out industries with money we can't spare. Something's got to give.