DEAR LOYAL CUSTOMER,
We understand how concerned you are about COVID-19. We, too, are concerned. We are taking every precaution to protect our employees and our customers. That is why we have a US-based call center to answer any questions you might have about your account– 24 hours a day, 7 days a week, 365 days a year.
We can’t actually suspend or postpone the obligation of any your payments. Oh, heavens no. Those are still due in full, with late fees assessed accordingly. But it is possible that there will be some federal injunctions against us coming after you to collect on debt you may owe, given that an increasing percentage of the economy is shut down right now. We don’t really know.
Rest assured that our lawyers are watching the situation very closely. In the mean time, you have access to our award-winning customer service apparatus by phone, e-mail, or live chat (8-5PM PST only).
Thank you for continuing to do business with us. We really value your support.
Wash your damn hands.
A CEO who doesn’t have to worry about making ends meet, unlike the $12.00 an hour worker at the checkout counter potentially being exposed to COVID.
Is this Handbuilt McSweeney’s? No– it’s more or less a reading-between-the-lines of a few different notices I think we’ve all received over the past couple of weeks from various companies. As the country maintains a holding pattern, waiting for some sort of instructions, many companies are simply sitting on their hands and continuing to do business as usual. As the federal government fails to hand down directives, debt accruals pile up.
A great deal of damage has already been done to the corporate sector. Even with the recent announcement that the Fed will buy an “unlimited” amount of bonds, investors are still riled. Fixing it will require attention to the consumer, not the corporate economy.
HORIZONS OF RESOLUTION ON COVID19
As far as things like debt forgiveness or payment deferrals, no one is moving, because no one else is moving. These things typically have domino effects, as we saw with the sweeping changes in the retail stock brokerage market last fall.
No one is moving because the federal response has been so utterly lackluster. Every press conference of the so-called “Coronavirus Task Force” has largely consisted of President Donald J. Trump getting up behind the podium and rambling for an hour saying things that could have been said in five or ten minutes. He has done little to calm the nerves of markets or to bolster the morale of frontline healthcare workers facing a truly shameful deficit of supplies. Instead, his vitriol and pettiness have been on full display, such as when he viciously attacked Peter Alexander for asking a pretty softball question. Trump has said he is ordering a moratorium on foreclosures and evictions. But this doesn’t solve the problem of people who simply can’t pay their mortgage or rent at all– and need protection.
And, without more concrete guidance from the federal government, banks aren’t moving. Such was the case with Detroit-based TCF Bank (née Chemical; $2.1bn in revenue), which did not return multiple requests for comment for this story. Nor did it get any better in the major leagues. A spokesperson for Chase Bank ($115.6bn in revenue) said that the “firm is monitoring the situation closely” and “will use capital and liquidity to help clients,” but did not respond to requests for additional details.
A STIMULUS PACKAGE– FOR WHOM?
As Congress debates the finer points of a trillion-dollar– possibly two-trillion-dollar– bailout-cum-stimulus package that it’s fairly unlikely the heavily-indebted Trump Administration can even afford– without, say, printing more money– we need to critically examine a problematic truth about the American economy: that it is driven by mass consumption. Mass consumption, or, in other words, mass consumerism, has all manner of ramifications for everything ranging from household debt to climate change. We love to buy things. When consumers can’t consume, the economy falls apart– we’re seeing it happen on the 24-hour news cycle.
Inc.’s Peter Cohan, in a December 2019 article that has not aged particularly well, referred to a Fortune survey on consumer sentiment. Cohan wrote:
…consumer spending accounts for roughly 70 percent of U.S. economic growth […] were it not for increased consumer spending, U.S. GDP would be shrinking. In the third quarter, U.S. gross domestic product grew at a paltry 1.9 percent. The business-related components — exports and private investment — were down 5.7 percent and 1.5 percent respectively, according to the Bureau of Economic Analysis. The good news was that consumer spending rose 2.9 percent — including a 5.5 percent increase in spending on goods.
I do not think the Fortune survey provides convincing evidence of a recession in 2020. However, I think that some industries — such as newspapers and many store-based retailers — are in recession, and if your customers work in those industries, you are already suffering the consequences and should be seeking out customers from growing industries to replace the lost business.
Rewind. You say that we’re already in a recession, but people are still going to keep spending? Really? When consumer debt is at an all-time high? Huh.
COVID19 makes a convenient scapegoat for this recession– that was already coming. We can’t rewrite the entire fabric of our economy overnight; at this immediate moment, it is what it is. As such, the government should focus not on protecting corporations, but on protecting consumers. It’s possible that this could, in the process, dig us out of the current economic hole while substantially reshaping the economy to be more sustainable and equitable.
There are two sides to this coin that should be considered.
Our society becomes extremely precarious indeed if its success and wealth are measured by the number of useless widgets we produce.
1. MASS CONSUMPTION IS NOT SUSTAINABLE.
First, a society built on mass consumption isn’t sustainable. Nor is it possible to have a meaningful conversation about “sustainability” when it is simply predicated on an economic system that allows us to consume as much as we have been consuming. Such is the travesty of the Subaru owner who buys wind energy and shops for groceries by driving to a Whole Foods built on a former wetland– but uses paper straws! Systems are connected, and consumption is a large determinant of the inputs required to keep that system afloat.
Freezing mass consumption in light of COVID19 may well break the entire US economy. Our society becomes extremely precarious indeed if its success and wealth are measured by the number of useless widgets we produce.
Purveyors trafficking in said useless widgets have based virtually all of their growth in the past 12 years on their ability to not only sell widgets, but sell ever more of them. This has required racking up massive amounts of debt. Buy A New Game Boy For The Fun And The Fashion! The Steve Mnuchins and Donald Trumps fret about these corporate actors, who knowingly took on this risk– solely to sell shit.
THE USUAL SUSPECTS
Let’s look at some big-uns. Wal-Mart has around $50 billion in debt. Home Depot has about $29 billion. Target– much smaller than Wal-Mart- still has $10 billion. None of these companies were able to meet their short-term obligations without COVID19. (I raised this question of debt service with regard to the Big Two and a Half last fall. Ford and GM, who are facing an epic downturn in sales right now, are the spitting image of fiscal stewardship in contrast to these three).
Why not? It has nothing to do with the retail apocalypse. It’s about the quest for eternal and infinite growth. More sales, more widgets, better 10-K’s.
Forget Greta Thunberg for a minute. A model based on infinite growth is financially preposterous because it’s not mathematically feasible.
We have to figure out a better way to measure value.
This will happen. The wonks– the types who have MBA’s but may also have souls– are already thinking about ways to incorporate things like ESG metrics or GHG into shopping, investment, and more. This will come because it has to in order to maintain the integrity of nations facing down the threat of climate change.
Let’s move on to the second point about “economy as consumption.”
2. CONSUMERS– AND WORKERS– PRODUCE VALUE.
The second side that must be considered is that, as mentioned before, whether or not this system sucks, it’s what’s for dinner at the moment. It’s probable that we will have to shift our model in the near future. When the entire economy is capitalized based on individual consumers, that means that those consumers hold virtually all of the risk, while But in the mean time, consumers drive economic growth– and so it makes sense to protect consumers, first and foremost.
There is a deeper layer here given that most consumers– indeed, virtually all consumption, dollar-for-dollar- are workers. There is this old chestnut that says that corporate welfare and handouts to the rich are virtuous, because the rich create jobs.
The rich do create jobs– so much is true. But they both consume and produce less per dollar of wealth than lower to middle income people.
This, like the fallacy of limitless growth, is purely mathematical.
VULNERABLE CONSUMERS = VULNERABLE ECONOMY
Senator Elizabeth Warren– whose spectacular primary defeat to the profane, geriatric centrist Joe Biden, astounded many pundits and commentators on the left side of the aisle- made a name for herself in Congress by championing consumer protections (and pissing off establishment politicians in doing so).
She effectively devised the Consumer Financial Protection Bureau, which was established by the Dodd-Frank Act of 2010, before she even got to Congress. Vox’s Emily Stewart wrote last year: “The federal government had, in her eyes, let big business run wild for decades, and that had wreaked havoc on everyday Americans.” Warren has said that she’s a fan of capitalism at large. She’s just not a fan of how it executed in a predatory fashion. This is in line with a wealth of academic analysis that shows that wealth inequality actually costs the economy a lot of money and results in a lot of inefficiency, not to mention the restriction of democratic principles.
Since taking office, Trump has systematically dismantled the protections put in place by Dodd-Frank and the CFPB. He appointed to lead the bureau none other than Mick Mulvaney, who had previously sworn to abolish the agency. Volatility in the stock market has diminished, inversely correlated to the growth in greed as corporations try to squeeze every penny after the myriad of freebies that have been granted them.
BAILING OUT DONORS AND BAD DECISIONS
It should come as no surprise that the new spending package– drafted in secret by Republicans with no Democratic input– has beaucoup support for big business and pocket change for small business and consumers. That’s a problem when trillions of dollars in wealth is offshored. (It may remain offshored, apparently, according to a tweak in the Republican bill).
it’s a problem to give corporations public money when they have proven, time and again, that they’re not responsible enough to handle it.
Beyond the exemption for repatriating cash (Apple and Microsoft account for hundreds of billions of offshored cash alone), it is also a problem when corporations are hoarding massive amounts of wealth while a double-digit percentage of American consumers have a negative net worth. This is not the first time the Trump Administration has shamelessly engaged in a pay-to-play system of regulatory patronage, wherein big donors and corporate interests essentially buy their way to favorable regulation.
Against COVID19, it’s a problem to give corporations public money when they have proven, time and again, that they’re not responsible enough to handle it. Companies didn’t save money to buffer against the threat of something like a global pandemic. As much is true with the airlines, which spent virtually all of their free cash in the past decade on stock buybacks.
Who empowered those companies? Consumers did.
Who runs those companies? Workers. Consumers. Anyone but the executive ringleaders, who, against the supposedly strongest economy the world has ever known, weren’t able to scrounge enough pocket change for a rainy day fund.
Until we fundamentally transform the US economy into an economy where the consumers and workers that create the value share in not only the risk but the upside, bailing out a laundry list of irresponsible corporations is not only irresponsible– it’s antithetical to liberal market principles.
We can have a conversation about remaking the economy. In the mean time, let’s have a conversation about protecting the people who make that economy run. It is time to do better.