Since January, Amazon’s stock price has gone up from about $1,850 to about $2,600. The S.&P. 500 — comprising large corporate stocks dominated by technology companies — has recovered most of its recently lost value. And most highly paid professionals and managers have kept their jobs and experienced minimal changes in wealth.
Yet more than 20 million Americans are unemployed.
These are signs that the economic legacy of the coronavirus pandemic could be an increase in wealth concentration that will shock a nation that thought itself numb to such things. Arguments over whether the recovery will be “V-shaped” or “U-shaped” ignore the fact that different socioeconomic classes have been affected differently and will recover differently. Despite its populist airs, the Trump administration is orchestrating what will be, unless something is done, a rich man’s recovery.
While it may seem as if the federal government is throwing money at everyone, there’s a key difference between the support given to large businesses and the support given to small businesses and individuals. Large businesses have been given the security of long-term assistance, mainly through the actions and promises of the Federal Reserve: to buy corporate bonds (including junk bonds), to provide “liquidity backstops” by serving as a buyer of last resort and to lend money against an array of collateral. Collectively, these actions amount to a program not just of extraordinary assistance but also of extraordinary assurance.
By contrast, the money being spent on small businesses and individual workers is short-term and hard to bank on. Not only are many of the sums relatively small — a $1,200 check that might (or might not) come again some day — but the uncertainty also diminishes the value of the aid, since it’s hard to make plans if you don’t know what you can count on.
For small businesses, the Paycheck Protection Program — originally meant to protect payroll for just eight weeks — is an example of the problems of short-term and uncertain aid. When passed in March, its purpose was to lend money to employers to keep workers on payroll until June, when things would be back to normal. Since then, the program has changed repeatedly. While it has become larger and longer-term, which is good, its criteria for loan forgiveness remain prohibitively complex, doing damage to an otherwise well-intentioned effort.
Workers face their own uncertainties. Skills can get rusty or outdated during a long period of unemployment, but more worrisome is the prospect of hemorrhaging household budgets, leading to evictions, foreclosures, personal bankruptcies and homelessness. For individuals, longer-term support that they can rely on is more valuable than another stimulus check. That’s why unemployment insurance should be made to last until jobs come back, and why a universal basic income is worth considering.
When the United States experienced the collapse of the financial sector in 2008, the federal government took measures that saved banks and stabilized the economy, but it left behind too many others, creating a resentment that festers to this day. Now, amid an even more severe crisis, the Trump administration is making the same mistake, offering programs that may seem neutral and necessary on their face, but which disproportionately aid the wealthy.
To be sure, bold steps were needed to avoid a further economic collapse, and the Federal Reserve deserves credit for choosing action over inaction. But an agency like the Federal Reserve is not designed to consider the distributional consequences of its policies, and its aid to large corporations is a regressive subsidy whose effects on the concentration of wealth in this country will remain with us for a long time — unless the government does something to counterbalance them.
It is often said to be a mistake to bet against America. But betting on America means betting on the whole country, not just its largest, most creditworthy corporations.
Tim Wu (@superwuster) is a law professor at Columbia University, a contributing Opinion writer and the author, most recently, of “The Curse of Bigness: Antitrust in the New Gilded Age.”
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