Ruin and Recovery

A brokerage note I received recently included the following quote:

What has so often excited wonder, is the great rapidity with which countries recover from a state of devastation, the disappearance in a short time, of all traces of mischief done by earthquakes, floods, hurricanes, and the ravages of war. An enemy lays waste a country by fire and sword, and destroys or carries away nearly all the moveable wealth existing in it: all the inhabitants are ruined, and yet in a few years after, everything is much as it was before.

John Stuart Mill, Principles of Political Economy, 1848

Questions for discussion:

–How well has Mill’s assertion held up over the 170 years since he wrote the above?

–Will American recovery from the Coronavirus follow Mill’s pattern, or is there reason to think that it will be different this time, and not in a good way?

7 thoughts on “Ruin and Recovery”

  1. USA will recover quickly, especially since there will be very few casualties and no physical destruction, IF the regulations and government controls imposed during the crisis do not become permanent and the American people are permitted to get on wit the business of working and making a living.

  2. Agree with Lex, and would add that the current situation could be an opportunity for significant deregulation that might leave us better off than before. See this Cato blog post for suggestions.

    Trump, to his credit, has relaxed regulations in a few areas. Systematic deregulation would be even better.

  3. I think the most analogous episode is the Great Depression. I agree 100% with Amity Shlaes that Roosevelt extended it by years. So far, the actual economic damage is largely confined to the travel industry. It wouldn’t take much to extend it though.

    I said in Mike’s thread that Trump hasn’t done anything stupid yet and seems intent on keeping the dumbest ideas from taking effect. Every time some stupid pol says lockdown, another thousand supermarkets get emptied.

  4. Three upvotes. Thank goodness we don’t have another Obama who did much to stifle the recovery that should have happened after 2008 with the dead weight of ACA. More than the actual provisions the extended waiting period for the final (botched) implementation froze businesses in place with little ability to execute plans. If Trump can get things moving before January 2021 we might have a chance at recovery even if he’s not re-elected. My greatest fear as that the Democrats can keep enough panic up to keep these restrictions in place until the election.

    The reason people are hoarding TP is not because they think C19 causes diarrhea but they fear that tomorrow some local tyrant will forbid them to go the store.

  5. No, we are doomed. Having meekly complied with the quarantine, we will meekly travel off to the gulags and the death camps that the Democrats will set up.

    More seriously, not all the impact of the quarantine is harmful. School shutdowns could serve to help ween people off of the public schools.

    There is no reason to reopen the primary and secondary schools. Furthermore, we might as well shut down the Federal Department of Education, and stop collecting property taxes on the school’s behalf.

  6. When an enemy lays waste a country by fire and sword, he generally also eliminates the kings and the nobles. One might argue that Mill’s observation of the historically usually rapid recovery from the devastation is not unrelated to the elimination of the local Political Class. The burdens of excessive government are lifted and new leaders arise.

    Similarly, one could argue that the recovery of Germany & Japan from the devastation of WWII was partly driven by the removal of their respective Political Classes, allowing new blood and new ideas unconstrained by vested interests. We should also remember that their recovery from the war took at least 2 decades.

    If the Media Panic Virus managed to eliminate most of the denizens of Washington DC, it would be reasonable to expect the post-panic economy to flourish. But this fairly mild virus will not cause a massive die-off in the ranks of our Political Class, whereas the “temporary” regulations and handouts introduced during the panic will turn out to be very long-lived indeed.

    Until we are prepared to drastically simplify the tax regime, roll back much of the regulation imposed since the 1970s, conscript every lawyer into the armed forces for front-line service, and take serious action to eliminate the trade deficit, we will be stuck on the current downhill path.

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