Avoiding another Great Depression through a developmentally layered reopening of the economy
The global economy is on the brink of collapse. Food and other essential supplies may become scarce and erratic. How we act now can make the difference between a mild recession and a replay of the Great Depression, or worse. Because economic sectors were built like pearls over time – each layer dependent on the underlying one – we must harness contemporary and historical insights to recapitulate that history, but on a faster time scale.
The economy cannot “re-open” all at once. But the issue is not just health-based social distancing. It is also what opens first in an interconnected world of just-in-time global supply chains. Doing it wrong could result in disastrous mismatches of materials, labor and funds, causing further disruptions and even economic collapse.
COVID-19-related disruptions to economic sectors are like cracking a pearl in two. You can glue it back together. But it will never be the same.
Agricultural and industrial sectors developed historically by layering innovations over hundreds and even thousands of years. Each new innovation made others possible.
Those preparing for a return to Stone Age living by mastering basic survival skills are onto something. If things really go south, then we may have only our methods stretching back to pre-historic times that allowed us to build shelter, fashion clothing and obtain food through direct handicraft.
But we don’t have to stop there. Historians of technology know exactly how we got from Stone Age tools to 3D printing. We do not have to recapitulate this entire history, but we must know which developmental layers are preconditions for others. With hindsight we can also move more quickly from one layer to the next.
Concerns over the food supply are paramount right now. Disturbing headlines are right out of Steinbeck’s Depression-era “The Grapes of Wrath”: Poor people go hungry while farmers destroy large quantities of fresh food because they cannot afford to distribute them.
The problem in food supply markets is similar to that which led us to bail out major financial players in 2008. When Lehman Brothers and Bear Stearns collapsed, it became clear that ripping out a central player in a complex web of transactions could unravel the entire fabric. Each player is a node connecting other players.
But we cannot simply bail out failing central players this time. If COVID-19 takes down a farming operation, or a processor, or a distributor or a retail outlet, then it is not a problem money alone can solve. We can try to redirect production and distribution, but delays in doing so for perishables is tricky. Hence the current destruction of fresh produce, meats and dairy.
Revisiting modern agricultural history reveals a path forward by re-establishing earlier layers of local food markets. Until the 20th century, food was predominantly produced and consumed locally. Stable local food supplies were the goal, and most locales in the United States were able to achieve this. Consumers ate seasonal produce and routinely engaged in the lost arts of “home economics” involving canning and other methods of stocking one’s pantry and cellar for the lean winter season.
Innovations in refrigerated rail car distribution and then flash freezing food enabled the first wave of mass national and global food markets. Air transportation and further innovations in food production, processing, storage and distribution led to the modern luxury of year-round fresh produce. This made us complacent, however, and few households eat seasonally or stock food for lean seasons.
Fortunately, locavore and farm-to-table movements gave us a head start in re-establishing local food supplies. While a significant segment of these are directed to the affluent, others are reasonably affordable. Community supported agriculture arrangements (CSAs) deliver monthly boxes of seasonal produce to subscribers. Farmers markets vary in prices and availability, often skewed to affluent communities. Some meat and fish markets now source whole animals locally and process in-shop.
The challenge lies in broadening these sources and bridging price-affordability gaps to establish basic food security for a locale’s general population. Federal, state or local governments could give subsidies or tax breaks to producers to cover the price gap, especially for middle- and lower-income households. Alternately, vouchers could go to those consumers to stretch their limited funds. Such measures should also incentivize producers to expand production of staple foods.
On the consumer side, we need incentives and education for households to master traditional food preparation and storage. Seasonal recipes, nose-to-tail eating, household gardening and storage practices like canning can also close the gap between local production and consumption. We also benefit from those who have already embraced such practices, in conjunction with agricultural and cultural historians. While urban residents may be limited by their individual apartments, co-operative efforts could employ common spaces such as basements and outdoor spaces.
Local food supplies are no panacea. There is good reason why food markets went national and global. Even in fertile, advanced agricultural economies, regional droughts and other calamities frequently threatened food supplies. The point is not a permanent return to the past, but rather to re-establish a crucial layer upon which we can rebuild the layers of national and global food markets.
A similar approach can work for other sectors. The Departments of Agriculture and Commerce should convene relevant historians and industry experts for briefs on each sector’s historical development. Plans can then be drawn up to re-establish crucial pre-condition layers. The Internal Revenue Service and Treasury Department can join to implement the necessary tax incentives and subsidies. Once stable local supplies of essentials are secured, we can re-develop subsequent layers.
Time is short. The pearls of our economy are irretrievably cracked. We must avoid another Great Depression – or global economic collapse – by recapitulating essential developmental layers quickly based on the best expert knowledge available.
Sean M. O’Connor is a professor of law, founder of the Innovation Law Clinic and executive director of the Center for the Protection of Intellectual Property at George Mason University, Antonin Scalia Law School.