The Great Pause Was an Economic Revolution
Governments stopped the world in its tracks during the pandemic—and our relationship to the economy will never be the same again.
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We know from every disaster movie that time is supposed to accelerate, not stand still, during a catastrophe. If asked to draw a scenario months ago, most of us would have imagined moments of chaos and disorder, akin to the profound social chaos in Florence during the plague as described by Boccaccio in his 14th-century work The Decameron, “all respect for the laws of God and man … broken down.”
Instead, for weeks after the coronavirus pandemic arrived, silence and composure seemed to reign. Economies were stopped in their tracks—deliberately and methodically—and this, too, confounded expectations. For the first time, an economic crisis resulted not from the sudden loss of control over economic processes but from a collective decision to switch off large segments of the economy. On a graph, it seems less appropriate to plot a rapidly nosediving line than one frozen in time.
Pandemics are a recurrent phenomenon in human history. The “great pause” is new. In assessing the historical significance of the pandemic, the way we chose to respond may be more revealing than the natural event itself. Paradoxically, modern societies governed by continuous movement responded to the crisis by stopping a large part of social and economic activity. As a public policy choice, it may have been inevitable. As an experiment, it was unprecedented.
With the Spanish flu a century ago, people adapted their individual behavior, but social life proceeded more or less as before. “Public places of amusement” were shuttered, but work and business were little affected overall. Many workers suffered, dying in factories and mines; but in the United States, real gross national product actually grew in 1919, albeit by a modest 1 percent. Retail was barely affected, and businesses did not declare bankruptcy at unusual rates.
With the coronavirus, the response was very different. Abruptly and with little notice, the economy was put on pause. In part, that’s because we now have the tools to do so: the internet and other information and logistics technologies to keep essential services going, and activist central banks and governments to manage the resulting economic shock. The illusion that economic time cannot be stopped—that the economy is an organic entity outside of social control—was tacitly shattered.
A health official in the United Kingdom recently explained that at first, no restrictive measures were put in place because no one knew it was possible—let alone easy, as he put it—to impose a lockdown in a modern society. Without the pandemic, we might never have found out. Like the hero of a bildungsroman, we had to wait for an unexpected crisis to discover the true extent of our powers. The crisis will leave scars but also awaken new and unsuspected forces. The explosion of public protests over racial injustice in recent weeks is just one example—a foreshadowing of other movements to come.
Someone once said that it is easier to imagine the end of the world than to imagine the end of capitalism. It is a plausible formulation, even in its comical effect. And yet, the current crisis proved the opposite. Capitalism was remarkably easy to stop—or at least to interrupt. All that was needed was a genuine environmental crisis, a crisis where the external conditions for a capitalist economy were suddenly removed.
The new coronavirus achieved in days what both progressives and nationalists have long fought for. Powerful economic interests were sidelined, whole industries had to temporarily close down, oil consumption plummeted, national borders were closed, and export bans were imposed. It was a humbling experience, as the ripples of politics paled by comparison to the giant natural wave of the pandemic. But it was also a conversion moment, where one could finally see the social and economic system for what it is. The “great pause” revealed a hidden truth, and, once revealed, it cannot be forgotten.
Among the once unquestionable beliefs that may now take a new meaning is the idea of the economy as a living organism. It is not an insignificant idea. Modern economics has been based on the notion of an autonomous economic sphere—markets capable of creating innovation by their own power and resistant to outside manipulation. Without this concept, Western societies would not have been able to produce either the economic dynamism they have enjoyed for the past century or the extent of political consensus that enabled it.
Under the inherited view, the economy is too complex to be engineered. It is grown, not made. Knowledge is not fully accessible. It is hidden in billions or trillions of interacting units, too mysterious to be spelled out. Just as living systems retain a state of stable dynamic equilibrium or homeostasis, the market can also regulate itself through negative feedback and similarly automated mechanisms. A different way of looking at the economy would mark a new beginning in the history of modern capitalism.
The poles of Western economic debate in the 20th century even shared the same underlying metaphor, although with slightly different emphases. When the conservative icon Friedrich Hayek compared a modern economy to a living organism, he wanted to provoke a kind of respect or wonder directed at the market order, and thus place economic knowledge beyond human control. As he explained on one occasion, to assume that the existing economic system must be deliberately controlled is the last remnant of the primitive mind, which sees an intention in everything. Instead, we should think of the economy as “an organism in which every part performs a necessary function for the continuance of the whole, without any human mind having devised it.”
The idol of contemporary left economics, John Maynard Keynes, did not disagree. He, too, viewed a modern industrial economy as a living organism and was strongly influenced by Darwinist thought in his early writings. His disagreement with classical economics hinged on the question of whether an economy could be relied upon to keep itself in good shape—in equilibrium—or whether some occasional intervention by public authorities might be necessary. The question was not whether an economy should be regarded as a living organism but whether this organism might sometimes need a doctor.
Keynes believed that fluctuations in aggregate demand need to be managed, since they determine the general state of the economy, including aggregate output and, thus, employment. If anything, Keynes only stressed the carousel nature of a modern economy: The postponement of spending or investing represents an immediate loss in revenue and income to the industry producing the good or equipment. Stop one element of the economy, and everything comes tumbling down.
But, if both Hayek and Keynes saw the economy as a living organism or natural intelligence, we are on the cusp of seeing it as something akin to a computer program, an artificial intelligence. After what we’ve witnessed during the pandemic, it makes sense to compare the economy to computer code. The “great pause” imposed by authorities was analogous to a computer programmer removing a handful of routines and subroutines from her code and letting the rest run largely unmodified. With the shutdown orders in March, at least one quarter of the U.S. economy—everything that could no longer work safely in the new environment, from restaurants to gyms to movie theaters—was taken offline, while the rest continued to operate with limited disruption.
Among the surprises was that this could work. At the beginning of the pandemic in Europe and North America, the widespread fear that economic and social life would be irreparably damaged prompted many consumers to stock up on essential goods. Photos and videos circulated on social media showing long lines outside supermarkets and empty shelves inside. As amateur economists, we all knew one thing: Given a deep enough external shock, the economy could well collapse like a house of cards.
In fact, supply chains adapted and readjusted at extraordinary speed. Walmart started shipping e-commerce orders from 2,500 stores to keep up with a boom in online ordering brought on by the pandemic. E-commerce sales grew 74 percent year over year in the first quarter. Shipping directly from stores has been part of Walmart’s strategy, but the company quickly hired more than 235,000 new workers in order to adapt to shifting demand in the time of the coronavirus. “One of the pieces of innovation that might go unnoticed here is that our team figured out how to hire people in a much shorter period of time,” CEO Doug McMillon explained in a recent earnings call. “What would have taken us days and weeks was taking us hours and days.”
In Italy, when the government ordered extended closures for nonessential businesses, some 100,000 companies applied for a legal exemption on the grounds that they were part of a supply chain to businesses that were themselves essential. Thus, for example, a company that makes power generation systems might be allowed to remain open because its customers are in essential supply chains. The company would send a certified email to the authorities, and the information it provided would be checked against available records and information provided by other companies. Tire-maker Pirelli reported in March that production in Italy wasn’t affected at all, with road travel permitted between containment areas. The company said it received real-time information to manage logistics. This level of dynamic analysis of the supply chain—simulations continuously being run and updated—would have been impossible before recent developments in information and communication technology, the same developments facilitating the growth of complex value chains.
Demand for robotics has exploded, especially in the food supply chain. If workers are kept at home or unable to travel across borders because of the pandemic, machines that can harvest and deliver food are an obvious solution. In other cases, there has been a surge in demand for disinfection robots, equipped with tools such as ultraviolet light to kill viruses. There are many similar examples where the latest technology is helping limit disruption to supply chains.
None of this has anything to do with the spontaneous interplay of individual economic units that economists like to talk about. In fact, it comes remarkably close to what Hayek called an organization, something akin to a collective mind. In some cases, the government took over the function of reorganizing economic activity; in others, large dominant platforms performed that task. The internet brought the leading actors together and helped them align their views and methods. Any resistance from opposing interests was effectively co-opted or overcome.
It is still unclear how much output will be further lost if there are additional demand shocks from higher unemployment and the loss of household wealth and business spending; government stimulus programs cannot fill the gap. But it should be kept in mind that the shutdown has reshaped patterns of consumption, diverting money to those sectors still operating at near to full capacity. About 35 percent of food expenditures—more than $2.5 trillion globally—is up for grabs as consumers shift to dining at home and experimenting with new buying channels. In Amazon’s first quarter, its online net store sales grew by 24 percent year over year. March grew at a rate of around 40 percent. Before the pandemic, online groceries accounted for less than 5 percent of the U.S. grocery market. That share is now expected to exceed 10 percent this year.
There has been plenty of speculation on whether these changes will become permanent. They almost certainly will not. There will be considerable reversion to the mean once the worst of the pandemic is over. Nor is that the most interesting question. What should strike us is not the appearance of one irresistible historical trend or another—remote work, the end of globalization, a Chinese world order—but the sudden awakening of a new collective power to steer society in new directions.
It is deeply disconcerting to find oneself living in a programmable economy. Suddenly, what every economist and politician had assured us could not be done—build an economy for the sake of highly specialized social purposes—has materialized before our eyes. The full meaning of the experience is only now starting to be understood.
A few years ago, Marc Andreessen argued that software was eating the world. He described a dramatic and broad technological and economic shift in which software companies took over large swaths of the economy. Software was even swallowing much of the value chain of industries that are widely viewed as primarily existing in the physical world.
That process may now be so advanced that the best way to think about the economy is as the longest computer program in the world, composed of continuously evolving, and manipulable, lines of code. That should not be understood as a license to just follow our wishes. These lines of code are interconnected, and even the smallest bug, if left undetected, can lead to a system crash. What the metaphor promises is the ability to stop, think, and change our circumstances. Ultimately, we stand outside the economic system, and it can be changed in strikingly new ways. As opposed to a living organism, a computer program is not something formed but can exist in different, potentially infinite, versions.
At the height of the lockdowns, roughly one-fourth to one-third of our economies were put on pause. There is no doubt that many things will have to change moving forward: A recent study estimates that 42 percent of the recent pandemic-induced layoffs will result in permanent job loss. Whole sectors have been singled out for closure. Others will be created anew. For many on the radical left and the radical right, this is the doctrine they have been preaching. If whole economies can be reprogrammed to eliminate the risk of a viral infection, then it must be possible to do the same for the sake of other, equally desirable social purposes. When the virus arrived, the same authorities who had always claimed nothing could be done about homelessness quickly found the resources to house the indigent. In brief: Stop the historical clock and reorient economic activity in new directions, while preserving the core of social and economic order.
That takes us to the recent protests for racial equality, which in the United States quickly became a social movement on a dramatic scale. When George Floyd was killed by police while handcuffed and lying face down on a city street, the nation dropped the fight against the virus and turned to its inner demons and the fight for racial equality. It has been an exalted moment, with protesters and rioters descending on the streets, wearing masks but joining together in large groups, against all previous health advice.
The quick succession from lockdown to protest was far from coincidental. The “great pause” was itself a social movement, the largest in memory and global in nature. In a matter of days or weeks, the virus managed to reorganize society around a single purpose, while a set of powerful tools were developed and perfected. The protesters have learned from that collective effort, whether consciously or unconsciously. Above all, they learned that another world is possible. (Coming as it does during a pandemic, the lesson should probably read: Another end of the world is possible.) The virus taught us that social life can be reprogrammed. It left open the question of what changes should be made to the social program.
The “great pause” was predicated on the thesis that social engineering works, or at least that it can work. Once this thesis is accepted—and it has generally been accepted in the fight against COVID-19—all sorts of social calculations become difficult to resist. Thus, a letter was signed by dozens of American public health and disease experts arguing that white supremacy is a lethal public health issue that predates and contributes to COVID-19. One epidemiologist wrote that the public health risks of not protesting for an end to systemic racism “greatly exceed the harms of the virus.” I remember seeing a protester carrying a sign with this simple message: Treat racism like COVID-19—by assuming you could have it, listening to experts about it, and changing everything about your life to end it.
How are these calculations—about how far to push social and economic change—to be made? There is no objective answer, of course. We are not even used to asking the question because we never believed we had the kind of power that would make the exercise anything but otiose.
Modern Western societies like to think of themselves as being part of the accelerating movement of history—progress broadly understood. Too often, however, the feeling in these societies is that we have lost control over all the movement or agitation taking place around us: The economy has its own logic and should be left to its own processes. Society has a predetermined direction, one we can applaud but not shape. The winning values have been determined, and our task is merely to realize them. Being on the path of progress felt like being driven by forces beyond our control. Stopping or pausing was something no one would dare to imagine, even as it comprised the indispensable first step of a society deciding its own future. That the historical clock could stop—in whatever form—seemed an impossibility.
The impossibility arrived in the form of a global catastrophe. Was time revealed as an illusion? Perhaps not in the simple forms it takes in our individual lives, but time as a historical reality has indeed acquired a new, radical meaning. The future is not given. The future is programmable. The pandemic will not be remembered as a pandemic but as a revolution.