April 15th, 2020

Scarcity is always the real crisis

The ongoing coronavirus crisis is reminding people of some life lessons which I think most people have generally subconsciously known in the backs of their minds, but have not consciously wanted to think about. We've known that human society is vulnerable to disease pandemics; we've known it since before recorded history. But this crisis is showing us all too clearly one lesson which most people know but don't want to admit openly: Life really is all about money.

This lesson is apparent from war, as well. The ongoing civil war in Syria has killed people, but the war has rendered far more people economically destitute than dead: The people who died in the war number a few hundred thousand, but the number of displaced people runs well into the millions. The giant migration lines of "war refugees" which have stretched from Syria to Europe for several years do not consist of people who were killed, nor of people who are fleeing the threat of death, but people who have no money and thus cannot afford to live sustainably. This is always the real, long-term impact of war: Soldiers are killed in wars, and some amount of civilians die in war as well, but the lasting effect of war which persists for decades is the economic disadvantagement which it leaves behind.

Even during World War II--history's largest war in terms of people who fought in it--most people continued with their normal lives. Soldiers died on the front lines, but not too far away from that, while their countrymen were getting shot and bombed, people still worked their jobs, went shopping, dined in restaurants, studied in universities, socialized in dance halls and bars, read and wrote books, went to the cinema to watch movies, got married and had children, and generally did all the things that people do in everyday life even when there's no war going on. When we think of the aftermath of World War II, we often think of the destruction it left behind, of the burned-out cores of cities like Dresden and Warsaw, but the fact is that even at the end of World War II, most of Europe was physically intact. There are large and famous battles fought in wars, but it is neither logistically feasible nor desirable to blow up every square centimetre of an entire continent. When the war blows over, there are some wrecked buildings and some dead people, but vastly exceeding the numbers of the dead are the people left behind who still need to eat.

To be fair, it's a bit simplistic to say that life is all about money; not everything can be bought or sold for money, so let's say that life is all about resources. I often say that one of my biggest surprises in college is how much I enjoyed my Economics class. I had always thought of economics as just being about money and how money is distributed, but actually, economics is not only about money, although money is part of it; what economics is really about is the flow of capital, and contrary to what many people think, "capital" is not just money, but anything which can be sold for money, traded in a barter system, or used in some valuable way, including food, land and other natural resources, manufactured goods, and even human beings themselves. (The view of human beings as exploitable goods is not a modern one; even in pre-historical times, slaves existed, human beings to be bought and sold the same way you'd buy or sell an orange or a blanket.) The way all of these parts interact together in a giant economic system which is strongly influenced by money but also exists somewhat independently of monetary trade is the study that we call economics, and it is fascinating to study because it influences our everyday lives in various ways that are incredibly important but often not obvious to people. The central thesis of economics is and always has been: Life is all about scarcity. People want or need something which they don't have, because what they want or need is scarce, i.e. not extant in sufficient quantities to satisfy everyone who wants or needs it, and so people do weird and crazy things to get what they want and/or need. That's what economics is about, but in a larger sense, that's what most of life is about: People pursuing something which they don't have, whether it's food, housing, health, happiness, love, luxury, travel, information, or security. All of these are things which can be bought or sold for money, but they're also exchanged in non-monetary ways, because people value things besides money too.

The everyday life lesson that we can learn from wars, disease pandemics, and similar disasters and disruptions is: Scarcity is always the real crisis. For every person who dies in a crisis, there are usually at least 10 people whose economic livelihood is threatened or destroyed by the crisis. When lives are threatened, people are inclined to say "Who cares about money? People are dying!" This is true, of course, but people who are not yet dead still need to live somehow, and if they don't have a way to work to make a living, they won't be able to buy food, and again, the number of people who still need to eat is usually much higher than the number of people who don't need to eat anymore. Every moment of every day, the threat which hangs over every person's head is the threat of scarcity: Of not being able to eat anymore, of not having a place to live anymore, of not being able to work, of not being able to get the things they want or need. And this scarcity manifests itself in our lives every day, in ways which we often don't think about consciously, but which are very present in our minds subconsciously. The need to conserve scarce resources is constant and ubiquitous.

When I was a child, I often wondered: Why do people do careless things like live in houses without putting smoke detectors in every room, such a small and simple thing to do which could save lives? Why do people drive cars without maintaining them properly, putting not only themselves but also other drivers at risk? Why do people neglect doing things which are well-known to be important for safety and health? Are people really that lazy and uncaring? Now I understand: It's mostly about money. When you're under constant pressure--and I really do mean constant, lifelong pressure to pinch pennies, saving small amounts of money wherever you can to survive, then yes, people do say "I can probably live without smoke detectors, because the chances of needing them are low", or "I can probably let my car go without maintenance a little longer, because it probably won't break down yet". Yes, that's taking a risk, but here's the lesson I learned about life: The biggest risk is always having no money. Far above your house burning down, your car getting into an accident, or your personal health taking a sudden turn for the worse, the biggest life risk which hangs over everyone's head constantly, the real threat which faces every person, every moment of every day, is not having enough money. And when you live in that kind of environment, that impulse motivates you more powerfully than the knowledge that buying smoke detectors at $50 each could save your life in a fire, or that replacing your car's tires at $100 a pop could prevent them from skidding or going flat while you're driving.

This lesson is becoming particularly clear in the current coronavirus crisis, because this particular virus is actually not as deadly as most historical pandemics: Yes, people are dying, but more people survive the virus than die from it. In fact, many people who become infected don't even realize they have the virus--so mild are their symptoms. The virus is deadly and quite contagious, which is the reason for the current measures, but the economic effects of these measures, tantamount to shutting down nearly every business in the world for months, are unprecedented. We're heading for what is likely to be the largest economic recession in all of modern history, and the effects of it will remain with us long after the pandemic itself is over: The number of people who have lost their jobs as a result of the business closures is already millions more than the death toll from the virus is likely to ever be, and because the economy is such an integrated network, because any economic shift has countless unpredictable but significant knock-on effects, it's likely that we will not be able to fathom the true extent of the loss of wealth for a long time to come. Even prominent German doctor and virologist Alexander Kekulé recently made news when he publicly stated that the social, cultural, and economic damage caused by the lockdowns will end up being worse than the damage caused by the virus itself.

Some people have taken the frankly ignorant view that no actual wealth has been lost: That even if people are not spending their money right now, the money still exists where it is, so when life returns to normal (if it ever returns to what had been normal before, which right now seems like a big if), people will simply start spending the money which they would have spent anyway, and thus the recovery will be quick. This view clearly reveals the importance of studying economics, because as mentioned previously, economics is not just about money, but about what money can buy, and the reasons and motivations that drive people to exchange things for not only money, but also non-monetary means of exchange. Wealth is not created by printing money; wealth is created by creating things that people are willing and able to trade with money. When business shuts down, there are no manufactured goods being produced, there are no valuable ideas or products being developed, there is no research or development going on, and all of this constitutes a loss of what people could or would buy with money--and thus a consequent loss of business and employment. Yes, people who don't spend their money will still have their money, but the loss of value in the world is the biggest loss of all.

Forget idealistic fairy-tale notions of virtue, the idea that you can make the world a better place by smiling at someone or saying a few nice words to them. If you don't have money to give, you cannot improve the state of people's lives. The only thing which people need, the only thing which makes life sustainable in this world of ours, is money, and the most common tragedy, the biggest tragedy which destroys people's lives around the world every day, is not having money. People may get sick and bombs may explode, but in the aftermath, we see more clearly than ever: Scarcity is always the real crisis.