Economies of Capital without Labor Are Not Economies

An outbreak of tiny thoughtless machines is now ripping apart the cellular functioning of our economic systems.

It is conceivable that entire economies will partially or fully collapse, along with social structures and behaviors.

The fiscal and monetary policies of the past which worked – at least superficially and transiently – have substantially less power to perform their magic. That is because fiscal and monetary policies require economies.

What is an economy? A simple definition is a system of capital and labor working with each other. The better these two powers work together, the healthier an economy. Think cardio-pulmonary systems. Lungs supply currency (capital), hearts do the work (labor).

An economy that is overly capital-intensive eventually suffers from a toxic buildup of oxygen. An economy that is overly labor-intensive eventually infarcts and depletes oxygen.

The current outbreak has revealed the severe intoxication of capital that has plagued global economies for many decades. But now, the cellular components of economic bodies are dying of oxygen-deprevation – they are suffocating to death. Ventilating capital into economies – whatever surpluses are remaining – won’t be enough to oxygenate the system.

Our economies are getting into critical condition, not too dissimilar to how C19 can cause acute respiratory distress syndrome (ARDS). In ARDS, ventilation alone is not enough – intense labor is required to save life.

If we want to either ‘save’ economies or start to re-conceive how to build healthy economies with reliable backup systems, we need to figure out how to get capital and labor to work with each other – neither should be at the expense of the other. Clearly, that model is failing us – it was always apparent, but C19 is forcing us to take a deeper look.

Currently, we are facing the potential for massive displacement of labor. Employers, running out of capital and the prospect capital growth, will start to trim their payrolls, which in turn will reduce their ability to produce and serve…feedback loop.

What could be done, at least in the short-run to make outbreak suppression measures more successful (a crucial goal since those in lockdown will need vital goods to survive for months-long period(s))? On the labor side:

  • Employers with enough capital/cash could consider reducing payrolls only partially rather than full layoffs
  • Governments could apply carrots and sticks to those employers who do their part to alleviate the suffering and danger of lockdowns
  • A fantasy to be sure – but are we willing to just let it all collapse?

On the capital side:

  • Businesses should start thinking of capital in terms of resources, not just monetary capital (e.g. physical assets than can be repurposed to outbreak-related projects)
  • Governments could apply carrots and sticks to those businesses who do their part to get us through lockdowns, as well during as the succeeding wave, or waves, of continued efforts to safely inoculate the population until safe vaccination is established and implemented.

The world has changed. Yesterday is gone. A new world will emerge, one way or another.

The sooner we figure out how to make capital and labor work better together, the sooner we’ll get to the kinds of healthy economies that will be needed to survive global threats. This outbreak is not the only threat the world will face.