The devastating damage of Covid-19 on consumer-based societies

In New York City alone, the first wave’s 78-day lockdown cost an estimated $ 13.5 billion; the unemployment rate went from an all-time low, 3.4% in February, to 20.4% in June.

Of course New York is not America, but it is certainly one of its economic engines, the drop from which we understand the temperature of the sea, a sea that has never been so rough since the postwar period. International Monetary Fund analysts estimate a 4.3% drop in US GDP in 2020; it is no small feat, and in an economy like the American one this figure is bound to have a devastating impact. But it is still a more contained figure than that of the other large G7 economies, and this also thanks to the huge aid packages that have been put in place: 3 trillion dollars allocated only between March and July to help the economy.

The US has certainly not spared its impressive firepower if you consider that the European Union between Recovery Fund, Mes, Sure program for employment and loans of the European Investment Bank does not manage to mobilize half of the American funds, among other things with much longer delivery times. On the other hand, in an electoral year in which the economy was to be his flagship, President Trump did not want to save resources, also helped in an initial phase by the Congress which tried to put aside the differences to achieve initially a series of bipartisan agreements that avoided the collapse of families and businesses in a country where traditionally one goes on from week to week without social safety nets.

Healthcare funding, postponement of tax payments, rent moratoriums, education investments, loans to small and medium-sized businesses, federal unemployment benefits from $ 600 a month then dropped to $ 400, and most importantly a $ 1,200 signed check by Donald Trump for all incomes below $ 100,000 a year: Americans have suddenly discovered the benefits of public assistance, even if the results at the macroeconomic level have not been what they had hoped for.

According to estimates by the Congressional Budget Office, debt will skyrocket in 2020 with a deficit of 16% of gross domestic product, numbers not seen since 1945. However, and this must be counted among the merits of Trump who did not never hesitated when it came to putting his hand to federal money, this crisis has managed to sweeten the rigid idiosyncrasy of American politics, and in particular of the Republicans, towards public spending. A sudden and revolutionary change of course that is destined to open up new scenarios.

To anticipate the positivity of this new approach was Wall Street which marked a summer of record high for this too, but not only. “The market is now detached from the real economy: this crisis is perceived as transitory, the impression is that with the treatment or the vaccine the recovery will be rapid”, explains the executive vice president of Goldman Sachs, John FW Rogers, when we meet for an interview that mostly will have to stay off the record. We are still in the early stages of the reopening of New York. The forty-second floor that houses the offices of GS executives is completely deserted. Unlike what happens in Italy, here the individual offices are all alike, and even the top executives have relatively modest personal spaces and strictly with transparent glass walls. On the other hand, some meeting rooms are reserved and, according to needs, can be set up for lunches, dinners and breakfasts.

The only constant is the breathtaking 360 ° view: New York and world finance are literally at your feet, an architectural choice that I don’t think is accidental. From the southwest side you can admire the 1,776 feet (exactly like the year the Declaration of Independence was signed) of the Freedom Tower designed by Daniel Libeskind, a crystal spear that has given light to the wounded sky of Manhattan. “On September 11, our headquarters were on the opposite side of the towers from where we are now,” John tells me in an unusually more hesitant voice. “I didn’t come home for a week, I slept in the office, I only went out on the night of the attack because I wanted to see what the situation was like on the street and because I wanted to collect some of this,” he says, showing me a small glass vial full of dust: the dust of the disintegrated Twin Towers that one of the most powerful men in world finance always keeps on display in his office bookcase to remind himself that in life even what seems most solid, solid and indestructible can be shattered in an instant .

“And how will this crisis be? Why is the stock market reacting so positively? Only because you see her as a passing person? ‘

“For this and because we are witnessing a shift in investments towards lower-risk and, right now, very high-yielding products such as technology and pharmaceuticals. Investors are directing their portfolios to these sectors and also see that the state is intervening with massive injections of liquidity to mitigate the damage. But the autumn will be long and complex and not just for the elections: we need to understand if consumer spending will pick up ”.

Consumption, in fact, has suffered a worrying collapse: -12.9% in April, + 8.6% in May when the first public checks began to arrive, before falling back to 6.2% in June and 1.9% in July and just to 0, 5% in October. Not good news in a country where two-thirds GDP is made up of private consumption (in Italy the impact of consumption on GDP is around 60%, while it drops to around 50-52% in France and Germany) . And here lies the real pandemic hoax for the American economy: this is a virus that infects and destroys consumer-based societies from within.

It forces you to stop, to stay at home, not to interact, not to travel, to avoid closed spaces and crowded streets; this virus is the black plague for economies that are founded on citizen spending, which are built to push it to the extreme. From New York’s megastores to shopping malls, major meeting places in urban suburbs across the country, from the mega-screens of Times Square to the pervasive advertising strategies of Silicon Valley giants, America is designed to constantly whisper in the ears of citizens one mantra: buy, buy, buy …

But the Coronavirus has silenced this rumor, has reset priorities, there is no more space or availability for the superfluous, every purchase is weighted. Widespread uncertainty leads to savings by questioning consolidated economic and social mechanisms and forcing us to reconsider the paradigm hitherto predominant in the shadow of the Wall Street bull or the dome of the Capitol according to which every person, before being a citizen, is a consumer.