What Are the Three Concurrent Crises of the Coronavirus Depression?

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Yves here. Like many of those who are taking this crisis (or crises) seriously, Nathan Tankus has proposed launching new government programs as a way to tackle specific problems created by the crisis. While this is eminently logical as well as sound, don’t expect anything like that to happen. As political economist Tom Ferguson pointed out in a presentation we discuss today, the US and most other advanced economies are taking a neoliberal approach, channeling money and aid through existing institutions (too often private).

By Nathan Tankus. Originally publishes at Notes on the Crises

In the first month of this newsletter, I wrote a lot of more big picture pieces about the nature of our current crisis. The last major piece I wrote on this topic was “How to Pay for the Pandemic War”. My view hasn’t changed much but it’s always worth reiterating and restating in new ways what our major problems are in order to conceptualize how to deal with them. One way to think about this crisis is it’s really three interrelated crises happening all at once. An Interesting way to frame these crises is to differentiate them by the economists who focused on their unique problems. We will take them in turn.

The Keynes Crisis

This crisis, and its association with Keynes, is the most obvious and straightforward. John Maynard Keynes is renowned as an economic theorist who showed in his book The General Theory of Employment, Interest and Money that there are no automatic processes operating in the private sector to return economies to full employment and, in fact, they can sustain large degrees of unemployment for significant periods of time. He referred to this as an “unemployment equilibrium”. While the book itself actually spends very little time on government spending, the obvious conclusion of his work was that government spending had the power to increase incomes and employment and thus could deal with shortages of demand. This lesson, hard learned and easily forgotten, remains as relevant today as when it was first taught during the Great Depression. It remained relevant a decade ago during the Great Financial Crisis.  We have a grievous lack of demand today, especially for labor.

The most obvious and straightforward way to increase demand is through government spending and grants. It can be hard for analysts to really focus on this aspect of the crisis because it is relatively analytically uninteresting. What needs to happen is painfully clear to everyone but Donald Trump,  congressional leadership and the most ideological economists. The only analytically interesting point regarding the nature of this crisis as a demand crisis is that despite the disruption to production, the demand effects are much more important and foundational. Notwithstanding the difficulty that intellectually solved problems have for holding the attention of analysts, this point needs to be pressed again and again. We have a demand problem. The most persistent and problematic effects of a collapse in demand is the social and skill effects on workers. Thus, a policy to increase demand should focus on direct employment of labor. This problem needs to be responded to and the answer for how much to spend is “Whatever It Takes”.

The Minsky Crisis

The Minsky Crisis is related to, but distinct from, the Keynes crisis. Hyman Minsky was a mid-to-late 20th century economist who built his work on top of Keynes and a number of other economists who were quickly ejected from mainstream conversation. His work grounded concerns about overall demand, and the demand for labor, in balance sheets and cash flows between economic actors. He focused his gaze on the causes of financial crises which he correctly saw as distinct from demand problems. What’s important about his work now is that it teaches us that the most urgent problem of the sudden utter and complete collapse of payments which has happened in the past few months is the corresponding collapse in cash flows and the threat of a wave of defaults and bankruptcies. Especially as the production of services can’t be safely restarted (and certainly not at its previous level), the immediate cash flow problem can’t be solved by increasing demand.

As a result, businesses must be given direct grants from the federal government. The Small Business Association’s Payroll Protection Program is meant to do that. As I’ve discussed at length however, it has a number of problems. My alternative proposal is an emergency basic income for all businesses. Dealing with the cash flow problem in this matter can also help to relieve the Keynes crisis by maintaining and/or increasing the business demand for labor. In addition to the business cash flow problem, there is also the cash flow problem of households. Providing them with direct cash payments is critical, as is extending the supplementary unemployment insurance. In this respect, it’s encouraging that the Treasury is now providing unbanked and underbanked people access to their 1200 payments with debit cards. Hopefully this will be expanded and improved upon in the weeks and months to come. Of course, state and local governments also need basic incomes and the safety net needs to be further nationalized. There is no reason that the monetary burden of unemployment insurance should be placed on state governments.

The Means Crisis

The economist that this type of crisis is named after may be the most obscure one on this list. Gardiner Means was one of the most important economists within the New Deal. First at the Agricultural Adjustment Administration within the Agriculture department, then in other positions throughout the government, he theorized both the causes of the Great Depression and ways of remedying it using monetary policy, fiscal policy- and planning . One of his most notable positions was with the National Resources Planning Board. He rejected the idea that there was a “price mechanism” that allocated physical resources to different uses which functioned in the American economy. Instead, he argued that prices were “administered” by industrial businesses, especially the largest corporations. Instead of prices allocating resources, it was the direct resource and spending decisions of businesses and governments which directed them. The Means Crisis is thus the crisis of the physical allocation of resources between different uses. To respond to it, we need to bring back the notion of resource planning and the regulation of supply chains. The idea of resource planning has been severely out of fashion for decades but it’s hard to imagine it not making a comeback because of the Coronavirus Depression. If it somehow doesn’t revive in this crisis, the Climate crisis will surely revive it.

What his work teaches us is we can’t rely on prices to reallocate resources. Existing prices and existing patterns of production and consumption can be sustained relatively easily by private action. However, profit-seeking businesses are bad at reallocating resources in response to crises. The uncertainty of how long the crisis will last and whether the costs of retooling plants and restructuring supply chains can be recouped discourages bold action. It is often perceived to be cheaper to simply leave productive resources unused than go through such expenses and uncertainties. Even farms are letting crops rot and euthanizing animals rather than trying to find ways to reorganize their supply chains. What Means work teaches us is that the government should step into this breach. It should be directly physically reallocating resources and organizing production through hiring workers and guaranteeing private producers markets. Resources left unplanned, are predictably unorganized. Private Sector planning works at dealing with medium and long term resource questions but struggles to move quickly and effectively in times of crisis.


One key ingredient in the policy mix which responds to this crisis should be an “Emergency Responder Corps”. As it happens, Representative Tlaib has made just such a proposal. Such a labor force could help respond to all three crises at once. It could be mobilized to facilitate the reallocation of resources, especially their delivery directly to those who need it most. It would provide many households who are now facing unemployment with an income- and thus a cash flow. This wouldn’t be a cure-all- we still need the suite of policy programs I described above. This crisis can be managed far better than it is currently being managed. It is impossible to avoid pain- both medical and economic- at this late date. However, we can relieve the worst symptoms and put our economy on the road to permanent resource planning so that we don’t ever have to be caught as unprepared ever again. These three concurrent crises have lessons we badly need to learn in order to deal with the next crisis- the Climate crisis.

In case you missed it (it seemed to miss most people’s mailbox), here’s a round-up of the Second Month Anniversary of this Newsletter Yesterday. If you are impressed by seeing the interviews, prominent citations and praise Nathan Tankus’ writing has gotten, please consider supporting that writing by taking a paid subscription here.

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  1. VietnamVet

    The future has taken a hard turn towards the cliff. The Coronavirus Pandemic has turned the exceptional nation into a pariah state. The governments of USA, Brazil, UK, Spain, Italy, Sweden, France, Germany and Russia have been proven to be incapable of protecting their populations. Corporations and/or oligarchs corrupted them. They simply serve to funnel money to the 99%. The pandemic also shows that the failed states are incapable of addressing other existential threats; climate change, living with the earth’s limited resources or the thousands of nuclear armed ICBMs. When the globe’s tribute money stops flowing west, the worldwide unpaid mercenaries will stop fighting. The problem is that in the global chaos, the red button could be pushed and the earth irradiated.

    1. JBird4049

      Yes, our current governments are incompetent, but I would suggest willfully blind as even governments on the gold standard could provide free food or large building programs; it is not about being able to deal with the crises, but choosing not to as people like Donald Trump, Nancy Pelosi, and Mitch McConnell have access to the same, or better, information as any of us do; they just chose to ignore the screaming and game the crises for their own and their patrons’ benefit. The Treasury and the Fed both are saying in their opaque statements that direct stimulus is needed. Our political leadership chooses to ignore the near certainty of a second wave of infections, likely more virulent, and the even greater probability of the economic collapse of the United States with all the likely riots, deaths, and possible uprisings.

      1. Bsoder

        “These three concurrent crises have lessons we badly need to learn in order to deal with the next crisis- the Climate crisis.’’ NeedIng to learn, I suppose is ok, needing to act, now, would be preferred. Not knowing how to solve a problem is not ness are in solving it, it is done all the time in physics. It can be made complicated, to what I keep saying is the outcome we are going to get: a much simpler set of living arrangements with reality. I do a lot things on any given day, but I haven’t stopped modeling ‘reality’ using systems theory, since 2006. It always puts me on edge when economists quote other economists and various theories of economics to explain reality. No offense, but all that leads to is some analysis, on iffy data leading to maybe action, but action very limited to the status quo, the cannon, and whatever’s in the codex. I do think it was very well written and as far as economics all in the relearn of possibility. People being reasonable and all, which they ain’t. The problem, let’s call in an ‘extinction level event‘ (really events) is that it needs to be ameliorated, because ‘stopping’, is long past.

        1. Tomonthebeach

          Alas, as Tankus points out, we do not need to learn lessons.

          The Trump government quite intentionally chose to ignore the problem because the fallout would allow them to achieve their neolib agendas behind the curtain of natural disaster. Just like 9/11, COVID-19 enables further erosion of civil liberties. It will/has suspended inconvenient banking and finance rules, etc.

          While it will not restore jobs that were headed for obsolescence anyway, WS will restore the NYSE numbers in time for the November election (barring a pandemic resurgence YTB).

          1. Tony Wright

            I think “barring a pandemic resurgence” is an unrealistically optimistic assumption, especially given the following:
            Social pressure to relax shutdowns, especially in the US,
            Lack of Covid19 herd immunity (which has to be well into the majority to be effective),
            Likely absence of effective vaccines,
            Likely absence of treatments better than marginally effective,
            Early anecdotal evidence that even naturally acquired Covid19 antibodies may not confer lasting protection from reinfection,
            Likely Covid19 viral mutations (very much a known unknown),
            Widespread worldwide Government incompetence, incapacity and uncoordination regarding Covid19 management strategies,
            “Cat herding” problems in most countries.
            Having said that Powell and Mnuchin are likely to throw every financial kitchen sink that they can print, con, beg, borrow or steal at financial markets in a herculean effort to protect their dear leader’s electoral prospects for November.
            More “interesting times” ahead I think.

  2. casino implosion

    The solutions discussed here in dry technocratic terms would be a revolutionary change in power, wealth and expectations. They won’t be happening unless things get much worse for the decision makers.

  3. Stephen The Tech Critic

    I think this is an excellent break-down, and it’s interesting to me that all three of these seem to be weighing substantially on our present situation.

    However, I see too much short-term optimism here. As best as I can tell, our elites have gone completely mad and may be irredeemable at this point. I mean this for real. A huge swath of elites and PMCs too believe that robots that can do all the *essential work* are *just around the corner*—that the elimination of the working class in less than a decade is baked-in. TINA.

    Roubini wrote the other day that if our cold war with China escalates, the re-shoring of manufacturing would leave out workers because it’d all be done with automation. He’s wrong though. The re-shoring won’t happen because all the capital investment will be in apps, software, and robots, like Elon Musk’s “alien dreadnought” concept. He *believes* this crap. So do seemingly many Democrats who appear to be trying to legislate the working class out of existence while offering a $4000 “coding school” credit as a consolation prize.

    So I would add that there is a fourth economic crisis, which is the economic suicide pact. Elites see Coronavirus as their comet Hale Bopp. They think they can see the robots (aliens? alien robots?) waving at them from the sky. All they have to do is take the plunge—commit economic suicide—in order to ascend to a higher state of existence. I think we can name this mad cult the Exit Cult, after planet Exit in Bruno Latour’s “A Fictional Planetarium”. The Exit doesn’t have to be as literal as launching into space or to Mars. For the Silicon Valley true believers, it’s as much about *transcendence* from a lower/lesser version of human to a “more advanced” form.

    My policy solution for this 4th economic crisis? I think we should fund (whatever it takes) construction of a very large rocket ship, big enough for all the elites to board to make their Exit. Ahh yes, the ship will be pretty crowded, but we can promise them their own private bunker-like dwelling on Mars when they get there. Convince them all to get on-board, and then launch away! I wonder what the economic multiplier on *that* would be.

  4. GramSci

    Seems to me that a $30/hr minimum wage and a 20 hr work week would go a long way toward righting the ship.

    1. cripes

      “Seems to me that a $30/hr minimum wage and a 20 hr work week would go a long way toward righting the ship.”

      The Germans have long done this in economic crashes, insuring low unemployment, partial subsidy of wages, less work hours and guaranteeing return to place of employment.

      Can’t have stability here though, it would reduce the desperation, poverty, foreclosures, evictions and the capture of all assets and incomes to the pathological hoarders.

  5. Amfortas the hippie

    the third one (https://en.wikipedia.org/wiki/Gardiner_Means) interests me the most.
    Ive considered myself a Doomer since the Second Invasion of Iraq sent me looking for the unstated reasons.
    From peak oil to peak pretty much everything, I went through the stages of grief and finally accepted that This Can’t Last…..and that it sure looks like Decline and Fall, to me.
    so i started thinking about how to prepare for this, and learned that it does indeed “Take a Village”…but this presented it’s own difficulty: namely that unless the crisis/crises is/are evident, and more than obvious, people will stick to what they know.
    Intellectual Theorising just isn’t enough to justify even small disruptions to habit and routine.
    So…even out here in my little petri dish of a county…it’s difficult to do anything that is a clear break from Normal…like a farmer’s market(we have one,finally…i have yet to attend(busy or painful)…hear tell it’s rather bourgeois )…or some kind of functional public transportation(regional and sporadic and authoritarianly unpleasant…more and more people walking last 10 years).
    But in the midst of a crisis, it’s really too late…
    That the idea of planning ahead…outside of Market…is regarded as either silly, dangerous or a necessary evil to be handled and passed by, is a testament to how far we’ve come in the last 40 or so years….rather, how well we’ve been remade.
    Since my Doomer Awakening(lol), I’ve tried to become an Appendix…backupdrive of the alimentary microbiome…a library filled with classics, and a working giant garden that relies on fewer and fewer inputs, with the seed saving and general 1850 AD knowledge base that I figured might be useful.
    but it won’t be enough.
    it takes time and resources and effort to switch gears so rapidly(20 years)…as well as the will and perceived need for doing so.
    we’ve, instead, been trained to be practically the polar opposite: a shoegazing mob of hyperindividuals myopically grasping at crumbs and stubble.

    1. Jeremy Grimm

      The writing I see on the wall in big red capital letters: “We near an End”.

      I believe there is only so much any individual or group or community can do for… now. I believe the highest and best actions we can take are to save as much knowledge as possible and make sure it will survive to the next TWO generations. I am not sure the next generation will be able to do much more than survive and help their children survive. To their children will fall the task of rebuilding, reshaping, and reimagining a more Human Society. Knowledge will be the most vital tool catalyzing that process.

      I believe your library and your stored and taught ways are a highest and best use of the time we have remaining. However, if you can, you should add knowledge up to circa 1980 to the knowledge up to 1850. The classics are worth saving but I believe they will be less valuable than technical monographs, texbooks, and the patent literatures. Wisdom, if lost, can be relearned. I fear much of our technical knowledge and Science once lost may be lost forever.

      Before retirement I worked as an ‘engineer’ — a remarkably flexible work category. My schooling, training, and work experiences burden me with a particular regard for technology, Mathematics, and Science — that 10,000 readings of “Little Home on the Prairie” could never expunge from my soul.

      1. Amfortas the hippie

        between 2002 and 2009, when the printer finally died, i printed out gobs of material…ATTRA, and all manner of diy and hacks for real life and big sand filters with biofilm and just a whole lotsa stuff.
        it’s in boxes with mothballs and bar-bait.
        this in addition to my sort of haphazard collection of textbooks and manuals and the whole Foxfire series.
        I worry about acidic paper, and silverfish and whatever else eats paper.
        the Library is a funky broken down old trailer house.
        there’s only so much one can do.

  6. The Rev Kev

    I too, was struck by that Gardiner Means. No invisible hand of the market for that boy. It is all really about businesses, especially the largest corporations, doing the actual deciding. That is why so many economies have been decimated. They are run by people who only think in terms of this financial quarter’s targets and any bonuses up for grabs. Means has lots of interesting thoughts and if you go to the Wikipedia page on his 1932 book “The Modern Corporation and Private Property”, you see the following-

    ‘Berle and Means argued that the structure of corporate law in the United States in the 1930s enforced the separation of ownership and control because the corporate person formally owns a corporate entity even while shareholders own shares in the corporate entity and elect corporate directors who control the company’s activities. Compared to the notion of personal private property, say as one’s laptop or bicycle, the functioning of modern company law “has destroyed the unity that we commonly call property”. This occurred for a number of reasons, foremost being the dispersal of shareholding ownership in big corporations: the typical shareholder is uninterested in the day-to-day affairs of the company, yet thousands of people like him or her make up the majority of owners throughout the economy. The result is that those who are directly interested in day-to-day affairs, the management and the directors, have the ability to manage the resources of companies to their own advantage without effective shareholder scrutiny. ‘


    1. Geof

      This article about the Beer Game suggests that the problem may be more fundamental:

      The Beer Game is an in-person supply chain simulator, where players play in teams of four roles: beer retailer, wholesaler, distributor, and manufacturer. The goal is to minimize costs, with the team who has the lowest costs winning. . . . a single, one-time persistent bump-up in customer demand plunges the system into wild boom-bust oscillations. Consistently. Consistently. Always.

      Players communicate only via the market. The system always goes haywire – and stays haywire – in response to shock.

      Though having just finished Yanis Varoufakis’s excellent Adults in the Room I have little faith in the capacity of contemporary technocrats to plan effectively. The antagonists in the book can be divided into two categories: scoundrels and cowards. The cowards are utterly unreliable (Varoufakis considers some of the most reliable people are former “company men” who turned coat). But even the scoundrels cannot be relied upon because the complexity of the institutions and the cowardice of the people within them drains their ability to act:

      The cynic would say that Dr Schäuble was playing a larger game . . . Grexit to him was an instrument with which to pursue his vision of a smaller, more disciplined Eurozone, with the troika firmly entrenched in Paris. The cynic would be almost right. Except it would not be the whole story. As I departed that day, I was not leaving behind me a Machiavellian dictator; I was leaving behind a sunken heart, a man ostensibly more powerful than almost anyone in Europe who nevertheless felt utterly powerless to do what he knew was right. As the great tragedians have taught us, nothing causes greater wretchedness than the combination of supreme authority and wholesale powerlessness.

      1. aleph_0

        Fantastic link. I usually think that game theory is a solution looking for a problem, but that discussion of the Beer Game and fragility of supply chains was great.

    2. Jeremy Grimm

      I first became aware of Gardiner Means through listening to a web-lecture: William Waller: Thorstein Veblen, Business Enterprise, and the Financial Crisis (July 06, 2012). [https://archive.org/details/WilliamWallerThorsteinVeblenBusinessEnterpriseAndTheFinancialCrisis]
      On first hearings of this lecture I noted: Veblen has no theory of markets ~minute 9:00 — prices? Gardiner Means memo on where do Industrial prices come from.

      Veblen when asked why he claimed to be an economist but never wrote about markets had quipped “I would write about Markets, but I have never seen one outside of economics texts.” [Extremely LOOSE paraphrase]. Near here I recall a reference to Gardiner Means 1935 essay “Industrial Prices and their Relative Inflexibility”, published by the US Government Printing Office. Strange … after searching for almost an hour for a copy of this document — which inspired many economics research papers — I was unable to locate an online copy of the essay [my bad — even Google Scholar indicated “NOT AVAILABLE” — strangely?].

  7. Susan the other

    Interesting. Spotlighting our powers of denial. Never heard of Gardiner Means. More on him please.

    1. Mel

      I’ve been citing John Kenneth Galbraith’s New Industrial State for the notion of large-scale private sector economic planning. Time to dig that book out and look at Galbraith’s bibliography.

    2. Jeremy Grimm

      Please post any references you find that terminate in downloadable papers or books by Gardiner Means. I tried to find a copy of his paper “Industrial Prices and their Relative Inflexibility” published by the US Govt. Printing Office 1935 … but I couldn’t find any web copies.

      The Depression is long enough ago and recent enough to serve as an interesting model for the selective permanence of information.

  8. Jeremy Grimm

    Nathan Tankus has very neatly described the triple threats of Corona and thereby described some of the avenues for making use of the Corona crisis by those less interested in the Public Good than their own good. I have found similar clarity in his other posts.

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