The 2020 Hangover

Mother Nature proved again in 2020 who controls this planet, and it’s not us. Further, she’s finished when She says, not when we say.

As noted in Becker’s Hospital Review, nearly 1.8 million US workers called out sick in November. The peak absentee rate was 2 million in April, and we may see that again.

Yes, we have several vaccines now for Covid, but not are available in the quantities needed. With justification, the first available are going to medical workers and the elderly. However, that won’t keep shop or factory doors open or grocery shelves stocked.

For each business, there’s a critical absentee level that makes operations impossible. Before that, absentees can affect the ability to meet schedules. There’s only so much extra work others can pick up. That leaves the business owner with the quandary — do I force people to come in and risk the rest of my people getting sick, or do I try to cope and hope no one else calls out? It’s not like most companies have a lot of under-used staff hanging around. The big corporate dinosaurs might, but not most companies.

A problem in production in one company affects others. Every company exists as part of a network that connects raw materials to end users of products made from those materials. If one company slows or stops, it affects both its suppliers and its customers, forcing them to cut back as well. In an expanding circle, that affects the other companies with which those suppliers and customers do business.

Consumers exist is a similar network. We earn so that we can pay people to provide things to us or do things for us. When the money stops, so does the spending, and that affects the people to whom our money would be going. In turn that affects the people and companies they would be paying.

The illness issue will be with us until there is sufficient distribution of the vaccines, and that will be well into 2021, if not 2022. That means a sluggish economy and continuing high levels of unemployment for months to come.

So don’t get too excited about a change in the calendar. There’s a lot of debris from 2020 that’s yet to be taken out to the trash.

By the way, this discussion raises several other questions worth some thought:

  1. What’s more important — assuring businesses have capital to keep functioning, or ensuring that consumers have money to spend? That’s the classic difference between “old Republicans” and Democrats. The traditional GOP felt that as long as businesses were propped up, they would hire and put money into circulation that could be used to buy products. New Deal Democrats saw first hand that the GOP approach didn’t work, and opted to provide money to consumers to create demand that businesses would ramp up to satisfy. Trump broke with traditional GOP principles by supporting massive deficit spending and handouts to consumers — although much of that spending in the end went into the pockets of his campaign donors.
  2. Companies that have invested in robotics are less dependent on human workers and less vulnerable to epidemics. Does this mean we will see faster displacement of humans in the future?
    (Someone into conspiracy theories might wonder if the slow response to the virus in the US was intentional — basically to reduce the number of people alive and requiring government assistance.)
  3. We have a large group of companies that sell to government, and the Federal government can simply print money to buy whatever it wants. That’s largely what Trump has been doing for the last three years, and why some of us expect a huge inflationary period to arrive soon. In any case, these companies will have consistent demand despite the pandemic, although they may have issues with suppliers. Does that mean that consumer spending will take a back seat to government spending in the future? And is that why some major investors are advocates of higher taxes, to keep government spending at high levels? Are we moving from a consumer-driven economy to a government-driven economy?

You can indeed start the new year with a headache, even without touching alcohol.



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