The economy post-pandemic will boom — but not for all
As the post-pandemic economy begins to surge forward, the Biden administration has an awkward economic problem. The rewards of renewed prosperity are likely to be distributed very unequally, with rich people and companies getting richer -- adding to the United States’ racial and economic injustice.
Our economic system is starting to roar back, with Goldman Sachs forecasting a whopping 6.8 percent growth rate this year. That will be fueled partly by the justpassed American Rescue Plan, which will raise incomes of the neediest. But the post-pandemic economy will be leaner and potentially meaner than before, too.
Over the past year, my Post colleagues have gathered evidence about the post-covid future through a series called “The
Path Forward” that’s streamed on Washington Post Live. We’ve done 42 interviews with chief executives and other business leaders, and we’ve been hearing the same basic message over and over: The precovid economy is gone. Companies and people that don’t adjust will be left behind.
Chief executives tell versions of the same story: The pandemic accelerated the pace of change. Companies that could quickly move their businesses online and decentralize operations prospered. So did adaptive employees with technology skills. The nimble gig economy thrived; airlines, hotels and other industries geared to the old normal of business travel got hammered.
“In every single industry, you actually have leaders and laggards,” said Julie Sweet, chief executive of consulting firm Accenture, said in an interview streamed on Dec. 9. Her message was that the pandemic had produced a “digital acceleration” as nimble companies transformed how they operated.
My worry is that by increasing the spread between leaders and laggards, the pandemic will reinforce what economists Robert H. Frank and Philip J. Cook described in a 1995 book as “The WinnerTake-All Society.” Frank, a professor emeritus at Cornell, told me this week: “During the pandemic, gains at the top have far outpaced anywhere else.”
“This shock has been so brutal and so harsh … that everyone is rethinking and reconsidering,” Christine Lagarde, the head of the European Central Bank, told us on July 22. She predicted an “acceleration of transformations,” and a global economy that was more “green,” more digital, and with tighter supply chains.
The Biden administration understood that the unequal distribution of rewards -- tipped toward the tech billionaires and their adroit, market-dominating companies -- was feeding populist anger in the country. That’s one reason they pushed so hard for the American Rescue Plan’s $1.9 trillion in spending, to pump cash to lower-income families with children. But this cash infusion, welcome though it is, doesn’t address the deeper causes of inequality, which may have a tighter grip on our post-pandemic economy than before.
Income inequality has widened so much in recent decades that it will be hard to close the gap. The share of aggregate income held by the wealthiest Americans rose steadily from 1980 to 2018, and the gap is wider than for any other advanced economy in the Group of Seven, according to a January 2020 study by the Pew Research Center.
The pandemic made those distribution problems worse. “It’s an even more unequal recession than usual,” former Federal Reserve chair Ben Bernanke told Post reporters in September, noting that “the sectors most deeply affected by covid disproportionately employ women, minorities and lowerincome workers.”
The post-pandemic economy could make it easier for the federal government to address fairness issues -- simply because the government is now so much more involved in business. Take the pharmaceutical industry, which after decades of wary standoffs with regulators, embraced the vaccine drive of “Operation Warp Speed.”
The fact is: Government rescued corporate America this past year. Now it’s giveback time, and the Biden administration should keep fighting to rebuild a middle class that’s been hollowed out.
Stimulus checks will provide short-term help for minority and lower-income workers who have suffered disproportionately from the pandemic. But that’s just a beginning. The rules need to change in our winner-take-all distribution of rewards. Otherwise, no matter how prosperous the economy looks, the political fissures in the United States will deepen.