May 13, 2023 - Economy

Felix Salmon on what he got wrong about the COVID economy

Illustration of a broken crystal ball.

Illustration: Aïda Amer/Axios

One of the most notable characteristics of the pandemic was that the truth became elusive and unknown — which meant that all of us were wrong even more frequently than usual.

Confession: My own biggest error was believing that economic growth wouldn't get back on track unless and until the virus was under control.

Why it matters: The epistemic Covid crisis caused millions of people to feel that their easy reliance on solid facts was being ripped out from underneath them.

  • It's not easy to live with that kind of radical uncertainty — and as a result, many people simply chose a set of facts, often about masks or vaccines, they were comfortable with and stuck intractably with them no matter what new evidence emerged.
  • Covid thereby acted as an accelerant into the post-truth era.

Flashback: In March 2020, I quoted Fed chair Jay Powell saying that "if we get the virus spread under control fairly quickly, then economic activity can resume."

  • I added, in my own words: "A strong economy requires confidence. None of us are as confident today as we were a month ago, and it's impossible to see that confidence returning so long as the pandemic rages."

By the numbers: At the time, the total number of U.S. Covid deaths was a terrifying 1,387, and I extrapolated that number to suggest that "hundreds of thousands of Americans are going to die of COVID-19." Readers pushed back aggressively, calling my estimate "grossly exaggerated."

  • Where we agreed was that such an outcome — hundreds of thousands of deaths — was one where the pandemic very much continued to rage and, therefore, one where confidence, and the economy, would not return.

Where it stands: In the end, more than 1 million Americans died of Covid, a number that continues to tick up by more than 1,000 per week. A number that was terrifying in March 2020 barely rates a mention in May 2023.

  • Clearly, the virus wasn’t remotely under control. And yet, the economy really did bounce back, faster than anybody thought possible, and it even managed to do so in a way that decreased inequality.

The bottom line: What I'd failed to anticipate, even as I was pitching a book titled "The Phoenix Economy," was just how quickly we could build a whole new economy that worked around the virus and could operate at even higher velocity.

  • In the New Not Normal, the downside can be much larger than expected — but the upside can be, too, at exactly the same time.

Go deeper: Listen to the Axios Today podcast, where host Niala Boodhoo and Felix Salmon talk about the next COVID-level shock to the economy.

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