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.
Peter
Big companies who want bail-out money receives it based on no executive whose salary was a million or more gets paid for 3 years while re-structuring the company back to solvency. Salary then comes back in sliding percentages over a 3 year plan.
ReplyDeleteSon works for gov entity and has 49+ employees who recently voted on coming back to work in the office. Only 30% voted to return. He's perfectly fine if he never goes back into an office.
I live in a small town and we've haven't had any restaurants close (don't have many other than chains)and when I was out last week I counted 11 help wanted signs. Not all were great jobs but some were in manufacturing. With Walmart paying $11 and max of 30 hours that's $1,430. per month.
Had 1 peaceful demonstration back in May that lasted an hour. Everyone gathered at the end, shook hands and went home.
So when I read the new, watch TV, read blogs I feel like I'm living in an alternate universe.
Musicians, bartenders, AV folks and all the other support people for the concert industry are still out of work as most of the venues are still looked down.
ReplyDeleteMany of these folks assembled a living working 2 or 3 part times jobs before the pandemic hit.
I read Broadway plans to remain closed until spring of 2021.
How many of those companies are in trouble because of choices they made? For example, airlines were bouncing back pretty well until they colluded together to decide that ALL airlines would have draconian mask requirements with lifetime bans for violating them. I flew in April without problems and would again EXCEPT that I can't wear a mask for the length of a flight, and even if I could I wouldn't want to. They shot themselves in the foot with unreasonable rules and then want my money to pay the consequences!
ReplyDeleteI haven't been in my local mall since June; at that point every store had a different mask/ face covering policy and some were really rude and arrogant about it - again, they are hurting themselves.
These are yet more examples of economic damage from overreaction to what is for most people a minor illness.
Around here, there are help wanted signs everywhere - some starting at 415 an hour. Friends who manage businesses told me that the end of the $600 a week unemployment supplement helped them get the workers they needed to stay open.
Both movie theaters and ordinary hotels are very low-volume employers of part-time people. A theater will have 2, maybe 3, "full time" employees, but otherwise will have 6 or 8 who only work a few hours an evening, and those part timers are often young people still living at home, or retirees who have another income.
ReplyDeleteFrequent travelers have grumbled for the past decade or more that hotel chains insist on importing foreign workers as maids instead of hiring locals, then giving those workers very few hours and pushing them to clean more rooms in less time. As a result: Bed bugs, which were extinct in America when I as young, are now a real problem.
And the single-owner franchise hotels too often don't have any employees other than maybe a couple of desk clerks, instead preferring to have family members do much of the work. Many of these families are fastidious and take great pride in the hospitality of their home, so they are wonderful places to stay safely - but when it jobs to being part of the "jobs engine", they aren't employing enough people for any town to notice the absence.
The money faucet is about to get cut off, then it will get interesting to see what happens next!
ReplyDelete"Going bankrupt, losing your home, your business, decades of your sweat equity evaporating into thin air? Dude, you should have had six months of income and supplies squared away, sucx to be you. I'm fine, got my regular paycheck plus overtime plus hazard bonus working in a hospital. Plandemic's been good to me, long may it continue." --Some blogger in Southern California, perhaps.
ReplyDeleteSome one recently remarked about the financialization of the economy. I have been contemplating that. What it means in this instance is that any bailout will only benefit the ultimate financier and highest shareholders of the business being bailed out. It is only a vehicle to keep the top 0.1% from losing any money.
ReplyDeleteThis feels really cynical, but having watched the last few industry bailouts our government generated that only filtered up, I believe it justified. We need some changes in the way our economy is structured.
So the old "socialism for the rich, free enterprise for the poor" dichotomy is finally coming back to bite us. It couldn't last forever.
ReplyDeleteCharles Hugh Smith is either working overtime at being stupid, or he's passed the Rubicon, and is so stupid he really doesn't know what he doesn't know.
ReplyDeleteHis comments on medical pricing rise to a level of ignorance normally reserved for Karl Deninger, or even Fred Reed, if not quite Shrillary Clinton, and that's saying something.
You're being billed what you are not for the bare-bones cost of the item; you're paying for its prescription and administration by people with world-class skills, from the doctor to the pharmacist to the nurse. Do me a favor: tell the class what it costs to catch a fastball from Clayton Kershaw, and then try and tell me that WalMart sells baseballs for $5, or catch an Uber ride from Kevin Harvick, therefore the price is obviously too high, and see if you can spot the logic fail there.
That's before we get into the fact that legal self-defense is factored into everything in medicine because of out-of-control jackpot lawsuits (you can't swing a dead cat without hitting 50 class-action bottom trawling law firms currently on every channel), nor the fact that, if you have insurance, you're also paying for 40M illegal aliens and 50 million indigent drunks and dope addicts who don't, every time you use it.
But let him prove me wrong: he can show me how smart he and his acolytes are, and start staying home for everything, especially the bona fide emergencies, since in 20+ years, I can count the number of people who can actually tell the difference between those and the silly crap they run into the E.R. for on my thumbs.
Yes, hospitals are hurting financially because they've lost a substantial amount of revenue from elective procedures.
All that proves is that economics works.