That our current global economic system is broken is no surprise. The question is where to turn to for hope. New insights from nature may provide the answer.
A broken economic system
Underlying economic injustices have been magnified by the coronavirus pandemic. Historically underrepresented groups have all fared worse off over the past 12 months since the outbreak of the virus. A younger generation now faces a historic amount of debt, similar to having faced a World War, in addition to the challenges of irreversible climate change and global biodiversity collapse.
A closer examination of this growing inequality reveals just how fragile current economic structures have become, with social unrest bubbling just under the surface in many countries around the world. As hundreds of millions continue to face prolonged lockdowns, higher health risks, lost schooling, mass unemployment and economic ruin, ten billionaires alone saw their wealth increase by $450 billion during the pandemic. The wealthiest 2000 billionaires in the world saw their assets hit new highs, increasing to over $10 trillion in value. An economic system with such disparities, that rewards those with access to capital, is not sustainable.
Political leaders around the world performed poorly in responding to the coronavirus crisis (Bill Gates questioned whether any country merited an ‘A’ grade for their response).
These very same political leaders (many of whom are increasingly authoritarian) are now using taxpayer funds or future borrowing to roll out multi-trillion dollar pandemic stimulus packages around the world. Rather than coordinating such a financial injection to ensure a global economy is rebuilt in a way that is more just, equitable, innovative and harmonious with nature, the world is seeing a fragmented patchwork of short term, reactive measures that do not address the structural faults in the global economy, or appear to be coordinated in any way to address global systemic risks.
The multi-trillion dollar opportunity is being squandered, and history shows that this will be an expensive mistake.
Lessons of hope from history
There are small windows in history when human value systems shift so fundamentally in a short period of time that the entire economic system is forever altered after such crises. In several instances, these shifts in human values have improved the state of the world. For example:
- By the 1850s following a series of revolutions in Europe and the U.S., human values turned against slavery after centuries of this system being the dominant economic driver for European nations and their colonies.
- A century later by the end of the Second World War in 1945 and following the horrors of the Holocaust, the Universal Declaration of Human Rights introduced to the United Nations by Eleanor Roosevelt exemplified and codified a set of fundamental rights that all humans on the planet were entitled to under the newly formed United Nations.
- In the 1960s the Civil Rights, Women Rights and Independence Movements around the world saw a shift of values to mark the end of colonialism, greater rights for women and greater racial equality around the world. Economic systems changed to reflect this reality, with a ream of legislation and business practices designed for greater equality in the workplace.
- By the early 21st century the battle to win hearts and minds for the environment is still very much being waged as the world faces all time high deforestation rates, a global collapse in biodiversity, irreversible climate change, industrial overfishing and melting icecaps. Although there have been some important victories, there is still strong resistance by well funded extractive and fossil fuel organizations, and an elder generation holding onto senior leadership positions with a different set of values to an increasingly vocal younger generation of workers, investors and consumers.
The last decade has seen a regression of much of the progress of the 20th century as inequality of opportunity has risen around the world. The international responses to the 2008 and 2011 financial crises were wasted, as the then $1 trillion stimulus packages coordinated via the E.U., G20, World Bank and IMF ended up recreating existed cleavages in society, which were already unsustainable, as a decade of austerity eroded critical social safety nets around the world.
With social cohesion breaking down and irreversible climate change soon upon us, the time for timid steps are over.
‘Building Back Better’ means bold choices
Building back better must mean that the means should justify the ends. There cannot be a rush toward more a sustainable economy that create new green monopolies. The growth must be inclusive.
The core to building back a better economic system will require the architects of the post-pandemic economic order to come to terms with a foundational error in science from 150 years ago, that continues to plague the global economy today.
It is to do with a fundamental misunderstanding of the natural world, which led to the birth of modern economic thinking. It is this system of incentives that now define the winners and losers of the global economic system, including its impact on the society and the environment.
Advances today in molecular biology and advanced genetics are revealing new insights into how misguided this science was 150 years ago, and the profound implications for how the economic system can be redesigned.
The birth of Natural Selection
In 1859, a 48-year old Charles Darwin famously completed his iconic book the On the Origin of Species, after travelling the world on a scientific expedition on board The Beagle. Origin of Species became the seminal work that provided a unifying theory for evolution and natural selection for the first time. Indeed, the full title of the book was, “On the Origin of Species by Means of Natural Selection, or the Preservation of Favoured Races in the Struggle for Life.” It became the predominant doctrine of many leading thinkers of the time such as Alfred Wallace and Thomas Malthus.
At the core, was an assumption that there were winners and losers in evolution. This led to the term the ‘Survival of the Fittest’ to explain who the winners of evolution were. This process was termed ‘Natural Selection.’
The notion of a Natural Selection of winners was swiftly taken up by researchers at the time as the lens through which to study nature, wildlife and biology. European biologists were captivated by the notion that brutal forces of nature defined that only the fittest or most selfish would survive. Darwin’s work led to a unifying-theory of a well-structured biological pecking order, explained by a simplified and precise mathematical formula that defined the position of each species, with the most powerful on top. It was very Victorian England.
Nothing exemplified this more than the imagery of the powerful, carnivorous lion chasing its herbivorous prey across the plains of Africa. A process of natural selection would determine which species would be at the top of the food chain, a product of what skills they needed to survive over thousands of years of evolution. Those at the top of these biological pyramids could expect to die of old age, whereas life for other creatures lower down would be brutal, short and defined by constantly being on their guard.
Although a fringe notion at the time in the 1860s, it would take another seventy years for Darwin’s theories of evolution, natural selection and the ‘survival of the fittest’ to become mainstream by the 1930s.
This theory of natural selection explained by the concept of ‘survival of the fittest’ then went on to dominate scientific thinking for the next 100 years through to today.
‘Survival of the Fittest’ becomes an economic doctrine
Darwin’s theories originated in evolutionary biology, but soon infused itself into the leading economic, social and political thinkers of the time.
In the fervent first three decades at the start of the 20th century with a World War, a Spanish Flu pandemic, a Great Depression and New Deal Recovery, economists and political scientists were searching for new unifying economic theories to find an alternative economic models than one of dominant robber baron monopolies built during the modern industrial revolutions of the late 19th and early 20th century.
Darwin’s ideas around ‘survival of the fittest’ soon fit in well with notions of what was seen as a ‘natural order’ for business, economics and the social sciences.
Iterations of this brutal ‘winner rises to the top’ world became core to business and economic thinking over the course of the twentieth century. This mantra defined internal working cultures within companies, competition regulations, and core decision-making at the very top of corporations where the Board of Directors had a disproportionate say over the direction of a company, overriding concerns from employees, the environment, suppliers, and the local community. It was a scarcity mindset where there was only room on top for just a handful of organizations or leaders. Relatively little effort was made to invest in alternative, more collaborative business models or ecosystems.
It was a way of thinking that valued competition above collaboration, selfishness above empathy, aggression above pacifism.
For over a century, it was believed that only the most self-serving businesses or leaders (usually alpha-male) should be allowed to survive. The thinking was that this would create a fitter and more robust economic system as a whole. Even if every decade, the list of most valuable businesses may change as different sectors reached their zenith, there was faith that shareholder capitalism would lead to a better outcome for society. GDP and market capitalization became the new Gods.
However, what it ended up creating was a more brutal version of business. One where quarterly results trumped all decision-making within a company. Business executives would do anything to hit quarterly targets. Other stakeholders (customers, employees, suppliers, the environmental, the local community) were given significantly lower weight, and were usually seen as marketing gimmicks.
Even companies whose humble origins once gave hope that such a system could be upended – companies like Google and Facebook – have now become the poster children for this ‘winner takes all’ business model. Just as banks were ‘too big to fail’ a decade ago, Big Tech’s dominance has created major weaknesses in modern economic and social systems. The pursuit of quarterly profits mean that efforts such as ethical A.I. or ensuring full external oversight of operations, were scaled back.
For national economies to ‘build back better,’ this broken model of shareholder capitalism has to be fundamentally addressed as part of any stimulus package.
It requires re-evaluating what ‘Survival of the Fittest’ means.
The fundamental misunderstanding of science
In recent years, new advancements in molecular biology and DNA technology have fundamentally challenged Darwin’s thinking and inferences on natural selection.
It has allowed biologists to go further and deeper in their understanding of evolution, and question whether natural selection really was due to a ‘survival of the fittest.’ Indeed, it questioned what ‘fittest’ actually meant.
Studying fossils, ancient DNA and using large datasets and machine learning to develop unprecedented insights, scientists have been able to peer back through deep time to see when various species started to evolve along the tree of life.
A search through deep time reveals that species that have survived the longest are ones that live in groups, have symbiotic relationships with other species and who behave kindly within the communities that they live in. This completely flips on its head some of thinking from 150 years ago that only humans had higher faculties of intelligence, empathy and peaceful co-existence in group settings.
Taking these learnings from nature and transplanting them into our current economic systems has fundamental implications for how to build back better and the sorts of institutions that will be needed. Let’s first understand the science behind ‘Survival of the Kindest.’
Safety in numbers
It turns out that species that live in groups – whether herds, shoals or flocks – tended to have survived as a species for longer than those that are more solitary.
- For example, modern lions likely evolved as separate species around 30,000 years ago. What was once seen as a weaker species, the modern zebra, is now believed to have evolved as a separate species around 2 million years ago. This is true of other species that exist in groups, herds or flocks. This is forcing a rethink of what the ‘fittest’ means.
- In the ocean, Hammerhead Sharks are believed to have evolved as a separate species around 20 million years ago. However, bluefin tuna, who swim in shoals, appear to have evolved twice as long ago, with bluefin tuna fossils being discovered that are over 50 millions years old.
- Even our understanding of modern birds are now changing, with many of the most common birds are now believed to have existed 40 million years earlier than first thought, at the same time as dinosaurs roamed the Earth. Again, these would be birds who lived in communities and flocks rather than being individual predators.
Charles Darwin did not have the ability to study the deep genetics of species when writing Origin of Species. Otherwise, he may have concluded the importance of a community surviving, rather than individual animals.
A more recent and deeper understanding of wildlife has revealed how dependent many species are on symbiotic relationships. The survival of one is highly dependent on the existence of another species. This is not an extractive, food-dependency, but one where the presence of both species working in harmony leads to flourishing communities growing.
Here are some notable examples:
- The symbiotic relationship between corals and algae relationship began over 200 million years ago. It is this unique form of algae and bacteria that give corals their color. The coral provides the algae with a protected environment and chemicals that are needed for photosynthesis. In return, the algae produces oxygen and helps the coral to remove waste.
- Nile Crocodile and Egyptian Plover. Although ferocious toward most prey, the Nile Crocodile allows the Egyptian plover to remove rotting meat from its teeth and gums. This allows the plover to have a meal, and the crocodile to avoid rotting gums. Footage of plovers in the open mouths of crocodiles (seen on the right) reveal the power of these unorthodox relationships.
- Sharks and Pilot Fish. Pilot fish helps rid sharks of parasites and clean fragments of food caught between their teeth, and in return sharks offer pilot fish protection from other predators.
- Drongos and Meerkats. Meerkats live in burrows and scurry out to find prey. Whenever there is a predator near by, the drongo bird acts as a lookout, and issues a warning cry so they can hide back in their burrows. Excess food from the meerkat is eaten by the drongo, who has a strong incentive to see healthy populations of meerkats surviving.
- Urchin Crab and Fire Sea Urchin. The urchin crab uses a fire sea urchin as a shield. It carries the spiny sea urchin as a shield against other predators, and has evolved specific rear legs for this task. This benefits for the sea urchin is that it can find new feeding grounds.
So collaboration – rather than competition – with different animals is critical to the survival of both species. Certain species have even developed evolutionary traits (such as the rear legs of the urchin crab) to take into account this symbiotic relationship with other species. Again, these were observations that Charles Darwin was unable to take as he rushed around the world taking observations of plants, animals and fossils he could see in the time he had available.
Kindness among animals
Some of the most seminal work on animal intelligence and animal empathy has been done by Frans de Waal of Emory University. His detailed studies of chimpanzees and other Great Apes have revealed previously unrecognized behavioral patterns in animals where kindness and collaboration are rewarded in communities in which they live.
This reward structure means that apes that demonstrate the greatest empathy and collaboration often receive the highest rewards. Also chimpanzees given a free choice between helping only themselves or helping themselves plus a partner, prefer the latter.
This flips on the head the notion that nature is selfish, brutish and short for animals compared with human existence. It has given rise to an entire new field of study for morality grounded in biology, centered around values of cooperation, altruism, and fairness.
Such research is challenging some of the root causes of natural selection and the simplistic reasoning behind ‘Survival of the Fittest.’
As such knowledge is being revealed, it raises the question whether a new theory is needed to explain natural selection over deep time.
Perhaps it is less ‘Survival of the Fittest’ and more ‘Survival of the Kindest.’
Survival of the Kindest
Taking this new understanding from biology into our economic systems, opens up radically new possibilities.
These new possibilities challenge the current orthodoxy that business systems should only incentivize strong corporations that seek to defeat competition, maximize corporate behavior that is self-serving and diminish the responsibility to other stakeholders (such as customers, suppliers, workers, the environment, the community) in order to only satisfy only one stakeholder – the shareholders as represented by a Board of Directors.
If kindness becomes an attribute that is core to how a business or economic system is evaluated, a different form of organization may emerge. An organization that sees their duty as performing a societal duty, much like a village market or local neighborhood grocery store performs. An organization that seeks to serve in a more balanced way rather than aggressively extract value from others in its ecosystem.
Advances in technology (such as open source software) has opened up new and innovative collaborative business models that could create more symbiotic corporate relationships with a wider ranger of participants, rather than the natural monopolies that the tech giants of the FAANG’s (Facebook, Amazon
) have created.
‘Survival of the Kindest’ will take a new form of regulatory mindset, as well as leadership mindset at every level of an organization. It means a fundamental evaluation of what kindness means, and how this value can be demonstrated toward a customer, an employee, a supplier and the environment.
Creating an economic system that rewards kindness over power, may start to right the injustice and fragility with the current economic model. If it is the key to longevity for many species in deep time, there may be valuable lessons for the way that humans should be thinking about organizing society.
It may also require a new set of systems thinkers in Board Rooms and among regulators to start to rethink how the global economy needs to be built back. Getting thinkers who operate the current to imagine a radically different future is akin to asking a lion to design a system that would better suit healthy gazelle populations.
Those who have demonstrated such kindness may be the most credible role models to start that reconstruction. It will take a different sort of organizational muscle and diverse talent to build such kinder organizations, but one that is not that hard to find if one knows where and how to look.
The extension from biology to political-economy seem may appear far-fetched, but as the economic system stretches further and further into the natural world, there are more connections than may immediately be imagined. And advances in science and technology are revealing just how little we truly understand about ourselves and the planet.
Perhaps this starts with ‘Building back Kinder.’
Biden’s Vaccination Goals Could Lift the Economy – Barron's
This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.
Too Much Stimulus, Too Few Shots
The Leuthold Group
Jan. 21: The broad U-6 unemployment rate is currently 11.7%, and the regular U-3 rate is still 6.7%. Unemployment is higher today than about 73% of the time since 1950, so it is understandable why both monetary and fiscal policies remain full tilt.
Economic programs traditionally take time to improve unemployment after a recession. However, the Covid-19 crisis created a unique divergence within the job market that will not be solved by customary economic policies, but instead by vaccinations.
Consequently, with literally a “shot in the arm,” the job market may come back to life much quicker than almost anyone anticipates. Should this occur, policy officials will be left with a nearly fully employed economy and massive, excess stimulus—potentially creating additional problems down the road.
The fastest route to economic recovery—and perhaps the best approach to minimize unintended consequences longer term—is not another round of relief checks, but instead greater resources behind President Joe Biden’s desire to “put shots” in 100 million arms within 100 days.
—James W. Paulsen
Investor Advisory Service
Jan. 20: Outside of imperiled commercial real estate, almost no asset class looks cheap right now. Bonds certainly do not impress, with safe yields still near zero while inflation knocks on the door. Equities look better. The Wall Street Journal estimates the S&P 500 index’s forward price/earnings ratio at 25, almost exactly where it stood a year ago at this time. Investors will need to be selective. Corners of the market are clearly in bubble territory. This doesn’t have to end badly for investors, as the 2000-01 “tech wreck” left many stocks unscathed even as speculative stocks fell sharply.
Some of the stories we are witness to right now can scarcely be believed. The CEO of a fashionable growth company with a P/E over 1,000 and a market cap of almost $1 trillion recently tweeted his support for a social-media upstart called Signal. Investors responded by blasting money into an unrelated penny stock called Signal Advance, which saw its share price increase from $0.60 per share to a high of $70.85. Again, this is a totally unrelated company with a similar name. The stock cooled off somewhat, but as of this writing, Signal Advance remains up more than 1,000% from its unaffected price. The market is littered with similar stories of rampant, uninformed speculation.
Investors who stick to reliable companies backed by solid fundamentals still have a good chance to grow their purchasing power over time, even in an elevated market. Investors who throw their money into the wind will lose it. It is as simple as that.
Goodbye, Financial Crisis Funk
2020 Fourth Quarter Investor Letter
Pelican Bay Capital Management
Jan. 14: We believe that the theme for 2021 will be optimism. Society is poised to emerge from isolation and deprivation wrought by the pandemic. We collectively faced a crucible, and while it still may be hard for many to recognize it, we are all stronger and better prepared for the future….
Looking back at the pandemic, it may prove to be a blessing for society, providing the trigger that shakes us out of the funk we have found ourselves in since the financial crisis. The digitization of work and productivity is a boon for workers everywhere, as many are finally free of the 9-to-5 grind and daily commute to a large, stuffy office building. The interior of the country will have a renaissance, as high-quality jobs no longer require a cubicle in unaffordable city centers along the coasts. Suddenly, the immense challenge and costs of reversing climate change seem less daunting. Most important, we have unlocked a medical miracle that will have a profound impact on health care and longevity, akin to the engineering gains ushered in by the space race of the 1960s.
Covid Relief Could Shrink
Jan. 22: We view Biden’s $1.9 trillion proposal [for Covid-19 relief] as an opening bid and not necessarily an outline that will be translated into bill language verbatim. But, the 19-page outline is fairly detailed for an opening bid, and it firmly signals that another Covid relief deal will be a day-one legislative priority for the Biden administration.
Our expectation is that a deal will eventually be struck, probably in March, but that the final legislation will be much smaller than what is in Biden’s proposal and more along the lines of the $900 billion package that was enacted in December.
We think that the balance of risks is skewed towards a smaller deal, or no deal at all, rather than a bigger deal closer to the initial Biden proposal. That said, when paired with the $900 billion package enacted at the end of December, this should be plenty of fiscal support to see the U.S. economy through to the summer when, hopefully, vaccine distribution is well on its way to completion.
—Michael Pugliese and Hop Mathews
Needed: More Houses
December Existing Home Sales
Jan. 22: Existing-home sales ended the year in a familiar place—stronger than expected. The December sales pace increased to 6.76 million units, up slightly from November though down somewhat from October’s 14-year high. For the year, existing-home sales totaled 5.64 million, up by more than 5% from 2019. It would have been hard to foresee that back in April!
The release strikes an optimistic tone, as the National Association of Realtors, or NAR, expects demand to remain robust in 2021, which seems like a good bet to me, as well. The biggest impediment to higher sales at this point is a dearth of available supply. The number of existing homes on the market fell by 16% from November and by 23% from a year ago. The months’ supply figure dropped to 1.9%, the first time ever below two months (going back to 1982). The NAR release applauds the sharp increase in housing starts in recent months but argues, as I have, that starts will probably need to remain vigorous for at least another year or two to catch up to the once-in-a-generation rise in demand for homes that occurred in large part because of the pandemic.
In Japan, Ouch!
Daily Notes on the Global Economy
High Frequency Economics
Jan. 22: Here is more bad news about Japan’s overall economic situation: National department-store sales in December were 13.7% lower than a year ago, according to figures this morning from industry association JDSA. In November, they were 14.3% lower than a year ago. Sales are not only depressed by public health measures, but also the population is aging fast and shrinking. That means fewer young households establishing new homes and families, and fewer customers for large-scale retail stores overall. Declining retail spending as the nation depopulates is a secular crisis, upon which the pandemic has been overlaid. Ouch!
—Carl B. Weinberg
To be considered for this section, material, with the author’s name and address, should be sent to MarketWatch@barrons.com.
What does the economy need now? 4 suggestions for Biden's coronavirus relief bill – The Conversation US
Editor’s note: The Biden administration has made it clear it wants to inject more money into the U.S. economy and provide more aid for priorities like vaccines, reopening schools and state governments. We asked four economists to share what’s on the top of their wish lists for Biden and Congress, and why.
A better way to save businesses while helping workers
Steven Pressman, Colorado State University
Since March, 20,000 U.S. businesses have failed every month, on average. Small companies, which employ nearly half of all workers, have been hit hardest. The U.S. economy will struggle to recover without significant support for small businesses and their workers.
One way Congress addressed these problems back in March is by offering small companies forgivable loans if they kept workers on their payroll for 10 weeks. While helpful, the Paycheck Protection Program came with major flaws, such as a design that led to lots of fraud. In addition, billions of dollars went to companies that didn’t need it, while some of those in greatest need couldn’t secure adequate funds.
The U.K. had a different solution. Its government created the Coronavirus Job Retention Scheme, a form of wage and job insurance for workers. The government pays up to 80% of usual wages – subject to an income cap – to furloughed workers that companies retain as employees. Companies cover another 20% of usual wages. Low-income workers also receive additional monthly payments of up to the equivalent of about US$500.
Workers can be partially furloughed, working three or four days per week rather than five. This solves the problem of what to do about workers whose hours get cut or who go from full-time to part-time status.
The plan has helped companies reduce their labor costs, while maintaining flexibility to bring workers back when conditions allow. Importantly, aid goes to workers – not companies – which has ensured workers and their incomes have been protected throughout the crisis. And aid goes only to workers whose companies experience problems due to the coronavirus pandemic.
Unemployment rates in the two countries tell part of the British success story. In the U.K., unemployment increased gradually last year from 4% pre-pandemic to 4.9% in October. U.S. unemployment, in contrast, almost doubled from 3.5% to 6.7% in the that same period, peaking at nearly 15% in April.
In the U.K., fraud has been limited because companies don’t get the money. And the government has encouraged workers to become whistleblowers, while imposing large penalties on the officers of companies engaged in fraud.
Rather than continuing to fund the Paycheck Protection Program, Congress and the president should switch gears and enact a program like the U.K.‘s that will see America through the crisis, however long it lasts.
Addressing the eviction crisis
Melanie Long, College of Wooster
The sharp rise in unemployment due to the pandemic has left many Americans struggling to pay the bills. Renters have been among the most vulnerable.
The result has been a looming eviction crisis that has been staved off by a patchwork of federal, state and local moratoriums. Millions of renters could face homelessness once existing moratoriums expire and accumulated back rent comes due.
To address this crisis, I believe Congress needs to both provide short-term solutions and long-term fixes.
For starters, it’s vital that the Centers for Disease Control and Prevention’s eviction moratorium continue. On Jan. 20, Biden extended the moratorium – which was set to expire at the end of January – to March 31. But that will likely need to be extended further.
Another critical need is rental and housing assistance. Biden’s proposed stimulus package already includes $30 million to help renters and support struggling landlords. Adding even more assistance could have major economic benefits as low-income beneficiaries especially are likely to spend every extra penny on food and other goods, stimulating the economy.
Access to affordable housing has been worsening for years, especially in communities of color. The gap between black and white homeownership rates has widened since the 1960s. The fact that only 42% of Black Americans own their homes, compared with 72% of their white peers, means most of them are renters, making them more vulnerable to losing their homes. It’s also largely to blame for the stark racial wealth gap in the U.S., which in turn reduces economic growth.
Congress could begin to address these deeper problems by providing down payment assistance in historically redlined communities, which would help households that are not currently on the edge of a financial cliff take advantage of historically low interest rates as so many others have.
Helping women get back to work
Veronika Dolar, SUNY Old Westbury
During the pandemic, unemployment has been felt most acutely by women.
One reason for this is that women are more heavily represented in sectors that saw the biggest job losses in December, such as hospitality and private education. But another important one is that women generally have been expected to increase their already disproportionate share of household child care duties after COVID-19 shut down schools.
All of this could lead to a significant decline in women’s total wages over time – one estimate puts it at $64.5 billion a year. This would result in a sharp drop in economic activity and billions in lost tax revenue for state and federal budgets.
But Congress could help offset this outcome in several ways.
One of the most critical is helping parents find affordable child care facilities. More than a quarter of child care centers in the U.S. remain closed because of the pandemic, and those that are open are often unaffordable. Child care costs have increased 47% during the pandemic.
While this funding would go a long way to ensuring mothers have access to affordable child care, the lack of flexibility at most providers means women with uncertain work hours or who need other accommodations will still struggle. A more comprehensive plan should include some support to hire babysitters or even child support vouchers that could be spent as needed.
The other side of this issue is ensuring new mothers and fathers can take time off work to care for their children themselves. Biden’s proposal includes up to 14 weeks of paid family and medical leave, which will help ensure women don’t have to choose between a new baby and their career.
Unemployment insurance reform
R. Andrew Butters, Indiana University
Millions of Americans who have lost their jobs as a result of the pandemic have relied on the unemployment insurance system to pay for bills, rent and food.
But that system, in terms of staffing and technology, wasn’t designed to handle the unprecedented need seen today. About 5 million people made continuing claims for jobless benefits in January. That’s down from a record 25 million in May but still near the highest the figure had ever been previously.
Aid packages passed in March and December extended the benefits to people who don’t normally receive them – such as gig workers and part-time employees – and included a federal supplement. But these changes added strain to the system and made it more difficult to prevent fraud and process legitimate claims.
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Keeping unemployment benefits flowing to people out of work due to the pandemic is essential to the economic recovery, both so that the unemployed can afford to live and also for the broader economy, which depends on consumer spending.
But this requires ensuring the system is effective and reaches everyone who needs help. Lawmakers could begin to do this by making some temporary changes permanent.
For example, traditionally, independent contractors, part-time employees and some other categories have been ineligible for unemployment benefits. In March, Congress created two programs that specifically provide them with benefits. But those programs expire in March. Lawmakers shouldn’t simply extend them again but ensure these growing segments of the workforce always have access to benefits.
Lawmakers could also make sure extended benefits – that is, allowing the unemployed to receive up to 50 rather than only 26 weeks of insurance – don’t expire in the March.
And I believe the relief package should also consider investing to help state offices hire more workers, update their technology infrastructure and coordinate more effectively with other states. This should lead to timelier and more accurate payments and protect against the most sophisticated attempts at fraud.
Biden's rescue plan will give U.S. economy significant boost: Reuters poll – The Guardian
By Indradip Ghosh and Richa Rebello
BENGALURU (Reuters) – U.S. President Joe Biden’s proposed fiscal package will boost the coronavirus-hit economy significantly, according to a majority of economists in a Reuters poll, and they expect it to return to its pre-COVID-19 size within a year.
Biden has outlined a $1.9 trillion stimulus package proposal to jump-start the world’s largest economy, which has been at the epicenter of the COVID-19 pandemic having lost over 400,000 lives, fueling optimism and sending Wall Street stocks to record highs on Thursday.
Hopes for an upswing in U.S. economic growth, helped by the huge stimulus plan, was reflected in the Jan. 19-22 Reuters poll of more 100 economists.
In response to an additional question, over 90%, or 42 of 46 economists, said the planned fiscal stimulus would boost the economy significantly.
“There are crosswinds to begin 2021 as fiscal stimulus helps to offset the virus and targeted lockdowns. The vaccine rollout will neutralize the latter over the course of the year,” said Michelle Meyer, U.S. economist at Bank of America Securities.
“And upside risks to our…growth forecast are building if the Democrat-controlled government can pass additional stimulus. The high level of virus cases is extremely disheartening but the more that the virus weighs on growth, the more likely that stimulus will be passed.”
For a Reuters poll graphic on the U.S. economic outlook:
The U.S. economy, which recovered at an annualized pace of 33.4% in the third quarter last year from a record slump of 31.4% in the second, grew 4.4% in the final three months of the year, the poll suggested.
Growth was expected to slow to 2.3% in the current quarter – marking the weakest prediction for the period since a poll in February 2020 – amid renewed restrictions.
But it was then expected to accelerate to 4.3%, 5.1%, 4.0% in the subsequent three quarters, a solid upgrade from 3.8%, 3.9% and 3.4% predicted for those periods last month.
On an annual basis, the economy – after likely contracting 3.5% last year – was expected to grow 4.0% this year and 3.3% in 2022, an upgrade from last month.
For a graphic on Reuters Poll – U.S. economy and Fed monetary policy – January 2021:
Nearly 90%, or 49 of 56 economists, who expressed a view said that the U.S. economy would reach its pre-COVID-19 levels within a year, including 16 who expected it to do so within six months.
“Even without the stimulus package, we had already thought the economy would get back to pre-COVID levels by the middle of this year,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets.
“With the new stimulus package there will be more direct money in people’s pockets, easily boosting the economy, provided a vaccine rollout progresses in a constructive manner.”
But unemployment was not predicted to fall below its pre-pandemic levels of around 3.5% until 2024 at least.
When asked what was more likely for inflation this year, only one said it would ease. The other 40 economists were almost evenly split between “a significant pickup” and price pressures remaining “about the same as last year.”
Still, the core Personal Consumption Expenditures (PCE) price index – the Federal Reserve’s preferred inflation gauge – was forecast to average below the target of 2% on an annual basis until 2024 at least, prompting the central bank to keep interest rates unchanged near zero over the forecast horizon.
“I don’t think it will be an increase in underlying (inflation) trend, it is sort of a rebound in prices that have been depressed during the pandemic,” said Scott Brown, chief economist at Raymond James.
(For other stories from the Reuters global long-term economic outlook polls package:)
(Reporting by Indradip Ghosh and Richa Rebello; Additional reporting by Manjul Paul; Polling by Mumal Rathore; Editing by Rahul Karunakar and Hugh Lawson)
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