The Lockdown Luxury Our Forebears Wouldn't Understand

I’ve been relatively quiet on the subject of Coronavirus (just 3 blog posts, see here - which is quiet for me! Heh!). One reason is because I’ve been very busy; another reason is that articles on Coronavirus are fraught by being riddled with incomplete information (which we won’t know until after this is over) and are therefore full of pointless projections and comparisons; and a third reason is that whatever you believe with regard to whether or not domestic governments have handled the crisis well or poorly, I would prefer a spirit of kindness and encouragement on the grounds that I think, by and large, people are trying their best to get things right, and I commend them for that.

The more interesting point I want to make here is that our response to Coronavirus is a demonstration of capitalism at its finest, and a demonstration of socialism as a beneficial adjunct to the market when applied properly. This delineation is what I call the market economy and the socio-personal economy. The principal distinction is that the market economy has exchanges that are precisely recorded in terms of cash exchanged or increases/decreases in 1s and 0s on banks' computers, and the socio-personal economy has exchanges that are less-precisely recorded in terms of helpful gestures and voluntary transactions for the good of one another (there is lots of overlap between the two, of course - a financial economy has a necessary social economy woven into it, because it’s hard to be successful in business without good socio-personal qualities).

The key difference between their operations is roughly this. In the financial economy the demand almost always exceeds the supply (of a limited range of labour, goods and services), because suppliers maintain their status differential (principally income) by increasing their prices or their supplies (or a combination of both), and endeavour to become top of the supplier tree by out-competing their competitors. Whereas in the socio-personal economy, the potential supply (of a nigh-on unbounded range of actions) almost always exceeds the demand, and suppliers who care enough about others maintain their status differential (primarily their character and reputation) by trying to summon up new ways to improve their surroundings and become better people.

The key take home lesson of the temporary lockdown of much of the economy is that our ability to do so is testament to the success of capitalism and how well-off we’ve become relative to any time in history. We can afford to take 6 months off in ways that would have killed our progenitors in the fraction of the time. I’m not saying there won’t be dire economic consequences of the lockdown. But the fact that we can do it at all and pull through together is because our economic prosperity is so prodigious, our capacity to help each other (with time, with donations, with resources) is so plentiful, and our technological advancements (laptops, mobile phones, the Internet, Skype, Zoom, etc) are so impressive. None of our ancestors could have afforded a lockdown like this.

There’s no question that people living 100 years ago wouldn’t have been able to give up work for 6 months and survive; and people of 50 years ago would have done slightly better than them, but still would have only been able to give up a fraction of their work time compared to now. The consensus for a lockdown was equally a consensus (whether known or unknown) for the triumphs of capitalism. And the consensus for the benefits of pulling together and voluntarily helping each other is equally a consensus (whether known or unknown) for the triumphs of a socio-personal-kind of socialism (the one I’m always advocating) that doesn’t interfere with the fundamental beneficial mechanisms of the free market. 

And if you’re tempted to respond that the government’s financial rescue mission during the Coronavirus is a testament to the powers of a socialistic redistributionist economy, then your error is a bit like a man who sees a passer-by jump into the river to save a drowning boy and thereby concludes that it’s a good thing when we all jump into rivers, mess our clothes up and risk drowning ourselves in the process as we get tangled up in the reeds and stuck in the muddy river bed. 

Here’s why. The principal metric of a successful financial economy is in ascertaining value (which is consumer surpluses + producer surpluses). Created value helps us determine whether resources are being allocated well or poorly, and prices provide the information signals that help us determine whether resources could be allocated even more optimally. The sharing of ideas through competition is what helps us advance, not just in terms of improved allocation of resources, but also in terms of better products at cheaper prices and more readily available to meet increasing demand. The government hand-outs are a necessary act to help in a crisis – but they are an attempt to save trees that have already been planted, not to irrigate once barren ground in the way that capitalism does. It's only because of capitalism that there is any government or socialism at all.