“Nothing has defined the 2020 market more than the erosion in the value of human capital,” Bloomberg’s Sarah Ponczek wrote, in a great piece dated Wednesday.
One of the many tragedies of the pandemic is the extent to which it may have accelerated the already rapid decline of labor’s clout in developed markets.
It’s difficult to justify investment in labor when profit generation is increasingly independent of workers — or at least blue collar workers in advanced economies.
This goes well beyond automation. The worsening plight of manual laborers in developed markets (and especially in the US) has been the subject of voluminous research and is linked to all manner of pernicious phenomena, including what economist Anne Case and Nobel Prize winner Angus Deaton, have called “deaths of despair” in America.
That figure, one of the most poignant from Case and Deaton’s book, is astounding.
“In almost all wealthy countries, mortality rates for those aged forty-five to fifty-four declined at an average rate of 2% per year from the late 1970s to 2000,” they wrote. While the comparable figures continued to decline for virtually all other rich countries, Case and Deaton document “an entirely different pattern” for white non-Hispanic Americans.
The book delves into the underlying dynamics, but suffice to say opioids and alcohol play a role, as does the broken promise of American-style capitalism. “Social and economic forces… are making life harder for the working class,” Case and Deaton said. “For those who used to prosper in America, capitalism is no longer delivering.”
The pandemic is likely to accelerate at least some (and likely most) of these dynamics. Civic responsibility has become such an alien concept to Americans, that large swaths of the populace refuse to take even the simplest steps to protect their neighbors (e.g., wearing a mask to the local grocery store).
The decline of community — the fraying of the country’s social fabric — is synonymous with the disappearance of civic duty as a unifying concept. This speaks to the tragic irony of populism in America over the past five years. It seeks to capitalize on the discontent behind the trend shown in the figure (the black line above), but the methods employed entail fostering still more division, further undermining societal cohesion and community as a concept.
It’s difficult to overstate the pandemic’s effect on these dynamics. Stay-at-home orders and containment protocols by definition increase Americans’ sense of isolation, while simultaneously exacerbating economic precarity.
At the same time, the measures needed to curb the spread of the virus are characterized by opportunistic politicians and pundits as an infringement of “rights” and an affront to “liberty.” That narrative was packaged and sold to the very same downtrodden, blue collar, white workers who were already suffering, as documented extensively by Case and Deaton.
This is a precarious socioeconomic situation, and it’s colliding with a renewed push for racial equality in America, which was itself turbocharged by the pandemic as COVID-19’s effects were felt disproportionately by communities of color.
Politicians seeking to shore up their own depleted political capital continue to implicitly and explicitly suggest that the plight of the white working class is jeopardized further by efforts to secure racial and gender equality.
At almost every turn, the tie that binds — income and wealth inequality — is deliberately obscured. And for obvious reasons. If the vast majority of the populace suddenly realizes they have something in common that’s more important (or at least more impactful when it comes to their capacity to live comfortably) than everything that makes them “different,” the system will face an existential crisis. And so will the increasingly small number of people who benefit from its preservation.
And that brings us back full circle to Ponczek’s Wednesday piece. The pandemic has, of course, exacerbated wealth inequality dramatically (figure below).
“At least in the stock market’s cold-blooded logic, 2020 will be remembered as the year when people became superfluous to the cause of progress,” Ponczek wrote. “At a time when the pandemic put 22 million Americans out of work, equity prices nevertheless rose by $5 trillion, thanks to gains in automated tech titans optimized for lockdown commerce.”
The result, Ponczek remarked, is a conjuncture that symbolizes “inequality in the virus age, as money flowed to the rich and the poor got hunger and hardship.”
There are many villains in this movie. Obviously, COVID-19 was the chief antagonist in 2020. Globalization, for all the utilitarian good it’s done around the world, has undoubtedly contributed to middle-class misery in advanced economies.
But I would argue that perhaps more than anything else, we’re witnessing 21st century capitalism indicted in the court of reality, where it’s being arraigned on a long list of charges, all of which are felonies.