# ↳ Covid19

## An interview with Mark Blyth

Mark Blyth is William R. Rhodes Professor of International Political Economy at Brown University and a Faculty Fellow at Brown’s Watson Institute for International Studies. His research examines how the interests of states and economic actors shape ideological consensus and institutional development at the global scale. He is the author and editor of many books, including Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century (2002), The Future of the Euro (2015), and Austerity: The History of a Dangerous Idea (2013).

His latest book is Angrynomics, in which he and co-author Eric Lonergan argue that the rising tide of anger dominating global politics has its roots in decades of macroeconomic policymaking. Earlier in the pandemic, I spoke with Blyth about the economics of the Covid-19 crisis, the various approaches that governments and central banks across the globe have followed in order to tame it, and what an alternative program for the global economy might look like.

## PUBLIC HEALTH FEDERALISM

Catastrophic deficiencies in the federal response to the Covid-19 pandemic have led to renewed discussion over federalism and its discontents. The divergence among state responses to the crisis in the absence of federal guidance has produced analyses of Trump’s unique, “narrow” sense of federalism, pronouncements of “a new era of federalism,” and hopes for a solidarity-minded “civic federalism.”

In a 1997 article, health law professor JAMES G. HODGE JR. analyzes the impact of state-centric “new federalism” jurisprudence on the government’s ability to realize public health goals. Hodge places new federalism in the context of decades of increasing intrusion by the federal government on states’ power over public health policy:

"The impact of new federalism on the field of public health law is seen in the history of public health regulation. The metamorphosis of public health regulation from purely local to predominantly national means resulted from increased federal presence in the field corresponding to a deemphasis on traditional federalism. It is an inescapable conclusion that an increased federal presence shifted public health goals. National public health priorities dominate local ones. New federalism restrains the federal intrusion on state public health powers by requiring Congress to operate within the constraints of the political process. As a result, state police powers exercised in the interest of public health are strengthened emphatically by the political process confining federal authority to enter the field."

Full paper available here.

• In an article published this April, Hodge reassesses federal vs. state public health powers in light of disparate responses to the pandemic: "Americans are left wondering, 'which level of government is actually in charge here?' In the face of a pandemic like Covid-19, the answer under principles of federalism is increasingly clear: neither." Link.
• "American federalism—with its fissures and fractures—haunts the state of emergency." A March post from Phillip Rocco. Link. (See also Rocco's recent post on fiscal federalism in Notes on the Crises.) Along similar lines: Rocco, Daniel Béland, and Alex Waddan on the fiscal barriers to pandemic response. Link. And Nicole Huberfeld, Sarah H. Gordon, and David K. Jones argues that the pandemic has magnified the state-level inequities fostered by federalism. Link.
• For another view on the relationship between federalism and public health: A 2014 paper by Adam Varvel on the West Nile outbreak of 1999. Link. See also: A post-SARS policy brief on the impact of federalism on international health regulations. Link.

## What the pandemic teaches us about poverty measurements

Since the onset of the Covid-19 pandemic in the United States, more than 40 million people have applied for unemployment benefits. In April, unemployment spiked to nearly 20 percent, almost double the rate observed at the peak of the Great Recession. To blunt the financial blow, Congress passed the CARES Act, a package that included, among many other things, around $500 billion in income transfers for the U.S. population. With my colleagues at Columbia University’s Center on Poverty & Social Policy, I have worked to understand how the CARES Act might affect annual poverty rates in the U.S. Our findings took us by surprise: despite the rapid rise in unemployment, we find that the CARES Act’s two major income transfers—the Recovery Rebates (one-time stimulus payment) and expanded unemployment benefits—have potential to return projected poverty rates to pre-crisis levels if access to the benefits is adequate. Jason DeParle of The New York Times neatly brings life to the findings here, while our full report can be found at the Center’s website. The report also details the many important shortcomings of the CARES Act, such as its exclusion of undocumented immigrants, the difficulties that families are facing in accessing the benefits, and the upcoming expiration of the top-up to unemployment benefits. ### May 19th, 2020 ## Plate Study ## STABLE SHOCK ### Remittances across contexts Among the many corona-induced shocks rippling through the global economy is the crash in remittance payments to developing countries. The World Bank predicts that remittance flows will fall 20% this year—a decline of$100b—largely as a result of shutdowns and wage losses in the global north. The politics of remittances are complex: the scholarly literature both touts the positive development effects of countercyclical cash inflows, and questions the effects of a system that supports consumption at the expense of longer-term economic development.

In a fascinating study on remittances from GCC countries—where migrant workers tend to have few rights while making up a large share of the population—FAISAL Z. AHMED looks at the political effects of remittance economies.

"Using duration models of government turnover for a sample of 97 countries between 1975 and 2004, this article demonstrates that the combination of aid and remittance inflows can empower governments in autocracies to survive longer. The link between the effects of foreign aid and remittances on government survival hinges on the fact that these inflows of money constitute forms of unearned foreign income that a government can potentially exploit for nefarious purposes. This is achieved via two channels. In the first, governments direct some foreign aid to finance patronage goods (income effect). In the second, governments respond to shocks in unearned and largely untaxable household income (i.e., remittances) by diverting expenditures from the provision of welfare goods in favor of patronage goods (substitution effect). My findings suggest that domestic political institutions (and the incentives they generate for governments) mediate the impact of aid and remittance inflows on the quality of governance and the endurance of governments in autocracies."

• A 2019 analysis from the Financial Times provides an excellent overview of remittances to emerging market economies. Link. Part of a FT series on remittances, including case studies on Zimbabwe and Nepal, and reporting on the nations attempts to issue "diaspora bonds" to attract the earnings of expatriate workers. Link to the series.
• A paper by Muhammed Tariq Majeed looks at the effects of remittances on poverty across 65 countries from 1970-2008. Link. Relatedly, a 2015 paper by Phanindra Wunnava et al looks at the impact of financial liberalization on remittances across 84 countries from 1986-2005, and finds mixed results: increased economic freedom in the financial sector has a positive impact, while improved robustness of financial markets has a negative and lagged effect. Link. h/t Alison Oh
• A 2011 paper by Rui Esteves and David Khoudour-Castéras examines remittances and capital flows in the European periphery from 1870-1913. Link.

## GREATER SHAPE

### Public opinion and policymaking

Covid is changing popular attitudes towards the public sector, prompting many commentators to anticipate a new period of welfare expansion. Others are more skeptical, noting that public opinion undergoes rapid fluctuations, which rarely resolve into a new equilibrium.

Like its forebear in debates over the 1981 Meltzer-Richards model, the present discussion assumes a strong relationship between public opinion and policymaking. A 2012 book by political scientist MARTIN GILENS demonstrates the flaws underlying this assumption.

From the book:

"Democracy is commonly understood to entail a substantial degree of political equality. This ideal of political equality is perhaps impossible to fully achieve in the face of economic inequality—in every democracy citizens with greater resources are better able to shape government policy. But the degree of political inequality in a society tells us much about the quality of the society’s democracy. I aim to document and explain patterns of representation in the United States over the past few decades by examining the relationship between the policy preferences expressed by the American public and the policies adopted by decision makers in Washington. To do so I have assembled a dataset of survey questions reflecting the policy preferences of hundreds of thousands of Americans at different income levels on all sorts of government policies—from raising the minimum wage, to restricting abortions, to sending U.S. troops to Bosnia.

When preferences across income groups diverged, only the most affluent appeared to influence policy outcomes. Representational inequality was spread widely across policy domains, with a strong tilt toward high-income Americans on economic issues, foreign policy, and moral/religious issues, and only modestly greater equality of responsiveness to the middle class and the poor in the social welfare domain. Even this partial exception to the dominance of the affluent was accounted for by the fortuitous confluence of preferences between middle-class citizens and powerful interest groups on issues like health care, education, and Social Security. Yet the importance of political conditions in shaping responsiveness means that our political destiny is not predetermined. The obstacles to enhancing representational equality in America are considerable, but the costs of not doing so are considerable as well."

• Jacob Hacker and Paul Pierson's much-cited Winner Take All Politics outlines the mechanisms of policy influence in the US. Link.
• A new paper by Matias López et. al examine the economic and social factors which shape elite attitudes towards redistribution in Brazil. Link. h/t Paul
• "In 1893, the historian Frederick Jackson Turner famously argued that the American frontier fostered individualism. We investigate this thesis by tracking the frontier between 1790–1890 and constructing a novel, county-level measure of total frontier experience (TFE). Long after the closing of the frontier, counties with greater TFE exhibit more pervasive individualism and opposition to redistribution." Samuel Bazzi, Martin Fiszbein, and Mesay Gebresilasse on the historical roots public opinion. Link.

## Security for the People

### Ethics in mitigation

Following the comparative success of South Korea and Singapore to flatten the Covid-19 curve, governments around the world have been discussing the merits and feasibility of tech-aided contact tracing systems. (Whether these comparative public health successes are actually attributable to such systems remains a point of debate.) In the US context, app-based tracing proposals have been floated by various think tanks, and Apple and Google have released protocols for their design.

Privacy concerns are paramount, as are questions of efficacy and the opportunity costs of new mitigation tools. In a white paper last month, Danielle Allen, Lucas Stanczyk, Glenn Cohen, Carmel Shachar, Rajiv Sethi, Glen Weyl, and Rosa Brooks examined the ethical and legal bases of pandemic mitigation.

From the paper:

"We are currently in the initial stage of facing the spread of an epidemic, with clear emergency needs to secure our health system while seeking to minimize lives lost and ensure that all patients, including the dying, are treated with dignity. We have to fend off a near-term catastrophe, and in that regard we are in our 'triage' moment. We are currently making triage decisions across all sectors of society.

Securing our health infrastructure and minimizing loss of life requires changing the trajectory of transmission through screening, testing, contact tracing, mobility restrictions, and social distancing. Whereas contact tracing and individualized quarantine and isolation suffice in non-pandemic circumstances, community quarantine and isolation become necessary under pandemic conditions in order to address the emergency. Here the challenging questions are to create the right package of temporarily adjusted norms, regulations, and laws around rights of mobility and association, and to determine whether the relevant packages of norms, regulations, and laws are best."

The authors propose guidelines for decision procedures that promote mitigation without violating civil liberties, justice, democratic institutions, or the "material supports of society." Link to the paper. h/t David Grant

• An evolving list of projects using personal data for Covid-19 response. Link.
• From a 2019 paper on the efficacy of contact tracing and epi models: "A major concern identified in future epidemics is whether public health administrators can collect all the required data for building epidemiological models in a short period of time during the early phase of an outbreak." Link. A 2018 paper on contact tracing's role in the 2014-2015 Ebola outbreak in Liberia. Link.
• Previously shared in this newsletter, a technical paper for the Decentralized Privacy-Preserving Proximity Tracing (DP-3T) protocol. The tweet-length summary from researcher Michael Veale: "Health authorities learn nothing about users. Users learn nothing about other users. Users learn if they were too close to others who tested positive. Governments learn nothing about users. No-one is coerced: everything based on genuine, voluntary consent." Link to the paper. (And link to a comic strip explanation of how it works.)
• An excellent blog post from Ross Anderson at Cambridge's Department of Computer Science and Technology on contact tracing in the real world. Link. See also "Apps Gone Rogue: Maintaining Personal Privacy in an Epidemic." Link.

## The underlying problems in the US economy

Today’s Bureau of Labor Statistics (BLS) report hardly registers the cataclysm in the US job market. The sharp 0.9 percent uptick in unemployment—itself newsworthy—only grasps the very beginnings of the shutdown of the American economy. Since the BLS surveys were conducted in the week of March 12, 10 million people have filed for jobless benefits. Only when the April numbers are released at the beginning of next month will we begin to get a fuller statistical picture of the magnitude of the Covid-19 crash. Unemployment rates are expected to rise to 20 percent or more. Given the 10-year-long, bull run of the stock market, one might imagine that the US economy was in good shape before that crash began, and that the labor market will therefore bounce back from the novel coronavirus’s punch once the public health crisis ends. However, the opposite is true: the fundamentals of the US economy were already incredibly weak. They have been for some time. After a decade of slow economic expansion, the US labor market was barely beginning to recover from the last crisis in 2008. If the past is any guide to the future, it will likely take even longer to recover from this one. We are only starting to get a sense of the true extent of this disaster from the perspective of American workers.

## The shape of the Covid-19 recession

It is hard to see how the United States can avoid a recession. Unemployment insurance claims have already surged, and this week's numbers look to be in the millions. All indications point to one of the fastest plunges of GDP in US history. Facing this, we may want to turn to previous American recessions to think about our immediate future. But the dynamics of this recession will be different in at least one major way from the recessions of recent memory: services. In most recessions, services are basically acyclical—they just don't move up and down with the booms and busts of the economy. The exception here is the Great Depression (see Figure 1 below), but there the decline in investment is much more severe, as is the upward swing in the recovery. Services, it seems, just don't fall that much—even in the Depression.