Here is how James K. Galbraith, an economist at the University of Texas, explains the effects of coronavirus on the U.S. economy.

• The global market for U.S. exports has shrunk drastically. The U.S. exports high-tech capital goods like airplanes and weapons.
• The U.S. oil industry is pretty much shut down because hydraulic fracturing is not cost-effective at current prices, which are caused by low global demand.
• Car sales are down because people are driving less, and their cars are going to last longer.
• The service economy is largely shut down. He says it will not reboot quickly because many services are basic luxury goods, things people have been convinced to want but don’t necessarily need, and things that people can do at home if they really want or have too. To certain extent, people have gotten used to doing things at home, and there is also the problem that many people have lost jobs (in the service industry) and will not have extra income to spend on luxury goods.
• The service industry business model typically depends on very high occupancy (i.e. crowding) to be viable. Businesses are starting to fail and will continue to fail. Once commercial districts start to have high vacancy, they tend not to come back quickly.
• Unpaid bills and debts are starting to mount, and this will eventually become a problem for creditors and investors.

Here are his solutions, along with my thoughts in parentheses.

• Redirect idle industries that export capital goods to internal goods such as public infrastructure. (Makes sense, although it’s not necessarily the same people and equipment. Retooling and retraining would be necessary.)
• A federal jobs guarantee in industries like teaching and home health care. (Makes some sense, but it makes sense to let the private sector lead in markets that are functioning well. The trick is identifying which sectors like education represent genuine market failures.)
• Nationalization (or the local government equivalent) of some firms and industries that can’t survive at the reduced volumes. (yuck, in general, but maybe industries where this already exists to some extent, like utilities and transportation.)
• Domestic manufacturing (maybe, but makes sense to focus on industries where we have a competitive advantage, plus those with value for risk management, resilience, robustness – certainly food, medical equipment, etc.)
• Just have a universal health care system like all other advanced countries. (For crying out loud, just do it now!)
• Debt forgiveness, especially student and medical debt. This transfers some wealth from creditors to debtors. He says this will occur in either a controlled or uncontrolled way, so we might as well pick controlled. He says major financial reforms might be necessary, like turning banks into public utilities. (Sounds good to me, but can’t happen without major campaign finance reform.)