The coronavirus is supposed to change everything about the U.S. economy. Analysts and commentators have found a new energy speculating about what the economy will, or should, look like after the pandemic. Foreign Policy’s Adam Tooze recently wrote an analysis headlined: “The Normal Economy Is Never Coming Back.” New York Gov. Andrew Cuomo doesn’t want to reopen his state, he wants to reimagine it. Others have likewise called for the United States to be deliberate about change, to build back better, and to build back greener.
There is good reason to think change is warranted. Prior to the pandemic, the global economy was not on track to meet the emission goals set by the Paris climate deal, both inequality and corporate debt were surging, and productivity growth had plummeted. In the United States, meanwhile, as of 2016 the net worth of a typical white family ($171,000) had become nearly 10 times that of a Black family ($17,150).
There is also good reason, of course, to believe that change will be hard to come by. Similar calls for reform followed the 2008 financial crisis—remember Occupy Wall Street? Not much happened. Demands for economic justice and fundamental reform will inevitably be stymied when the most powerful economic institution in the United States and, arguably, the world—the U.S. Federal Reserve—is working, intentionally or not, to sustain the status quo.
The Federal Reserve is on a preservation mission. The central bank is doing all it can, and more, to return the financial system to its pre-pandemic form. Perhaps this shouldn’t be a surprise. After all, contemporary central banking is, as one former Fed official put it, “a quest for stability”—price stability, financial stability, economic stability. The problem is, this quest for stability has become a mission to preserve. Although it might be easy to mistake one goal for the other, the gulf between stability and preservation is vast. Stability is the opposite of volatility; preservation is the opposite of change. A stable world can progress. In contrast, a preserved world may be stable—think of a bug in amber—but it doesn’t change and, thus, cannot progress.
Politicians, analysts, activists, and citizens are calling for change. Monetary policymakers are working to preserve. There might seem little to be done about the tension, but it is possible to put into practice the desire to build back better—to reimagine, rather than simply reopen. The Black Lives Matter (BLM) movement offers the most sophisticated playbook to date.
The state creates infrastructure. It builds physical infrastructure, like roads and bridges; it establishes political infrastructure, like voting systems; and it creates social infrastructure, like the police force. This infrastructure constitutes the pipelines through which citizens interact. We redistribute wealth via taxes, disseminate knowledge to one another via the education system, visit one another via the roads, and so on. The genius of the BLM movement is that it is not just about cultivating anti-racism among individual Americans. BLM does not hang its success on the hope that all the police officers in the United States will become successful and committed anti-racists in the near future. Rather, it calls for the United States to change its existing infrastructure.
The police are one particular pipeline in the social infrastructure—a large one. The United States depends on the police to address homelessness, domestic violence, stranded cats, missing property, and much more. This particular pipeline was established to seek social stability. And just as the Fed seeks economic and financial stability through preservation, the police forces in this country work to establish social stability through preservation. In so doing, the police have preserved the systemic racism built into the fabric of this country.
Recognizing this, the BLM movement has coalesced around the idea of defunding the police and, in so doing, dismantling this particular piece of U.S. social infrastructure—eliminate the force designed to preserve a social arrangement characterized by systemic racism, because some things aren’t worth preserving. Replace it with a new social infrastructure, a set of pipes and conduits that allow citizens to relate in ways which don’t preserve, but rather improve, our society. Defunding the police entails taking responsibilities and powers away from the police force that are more appropriately and more effectively executed by others: social workers, mental health facilities, educators, job creators, and the like.
There are lessons from the BLM movement for the U.S. economy, where monetary policy infrastructure is dominated by private financial institutions. Consider the Fed’s coronavirus response.
The Fed is fighting the current economic crisis with all the tools in its arsenal. Every action it takes, every time it injects funds into the economy, it goes via the financial system. Scholars have referred to this fact as the infrastructural power of the financial sector. Take one example: The Fed is working to support the Small Business Administration’s efforts to get loans out to small businesses. To do so, the Fed has purchased those loans on the secondary market, thereby (hopefully) incentivizing banks to make more such loans, but inevitably enriching any financial actors involved in buying or selling them.
Meanwhile, out of urgency on the part of the Fed to get the banks to lend to small businesses, the central bank has temporarily reduced regulations on Wells Fargo that were originally implemented because of “widespread compliance and operational breakdowns that resulted in harm to consumers.” In other words, the Fed is easing up regulations meant to make Wells Fargo less predatory in hopes that Wells Fargo will, in turn, help those in need. All because the Fed itself cannot make those loans directly. The channels, the infrastructure, that are required to forge a better economy simply aren’t there.
The Fed’s coronavirus response is much like giving the police more power, more money, and more resources, and then increasing the police presence in Black communities in hopes that doing so will fix racism. That wouldn’t work, and nor will the Fed’s efforts. Giving more power, more resources, and more support to the Fed may achieve a certain level of preservation, but it won’t permit progress.
Just as the answer to the problem of racism in America is not to make each individual police officer anti-racist, the answer to the problem of inequality and access to economic resources in America is not to ask the Fed’s leadership (multimillionaires and either former or perhaps future financiers) to be less focused on finance. The answer is to change the infrastructure.
Instead of depending on the Fed to decide if and when to create new money, and insisting that it be disseminated via the financial sector, it is worth considering the creation of a national investment authority, designed to invest in American businesses, nonprofits, and state and local governments. Instead of the Fed investing heavily in finance and the corporate sector to preserve the existing economy, perhaps this national investment authority would prioritize investing in Black-owned businesses, green businesses, and those businesses with good employment practices.
The United States should have a system of banking for all. A quarter of American households are underbanked or unbanked. It’s no wonder it’s hard for the government to disseminate stimulus checks or provide loans to individuals or small businesses. Access to economic resources in America is privatized. If the Fed were to give every American a public bank account (perhaps via the post office) that would change.
Perhaps recognizing the task ahead, the chairman of the Federal Reserve System, Jerome Powell, gave a speech on Juneteenth this year. “It is not lost on me that we are meeting on Juneteenth amid a renewed reckoning of racial injustice,” he said, continuing:
The pandemic has again exposed a range of troubling inequalities, most of them of long standing. As the national discussion continues, it is critical to remember that equity includes access to education, work, and economic opportunity. I am reminded that Dr. King delivered his “I Have a Dream” speech, just a few short blocks from the Federal Reserve, at a rally whose full title was the March on Washington for Jobs and Freedom.
And, of course, he’s right. Education, work, and economic opportunity are essential for establishing a just society. The problem is that contemporary economic infrastructure is set up to preserve the existing economic arrangement, and that means preserving an arrangement in which large swaths of society don’t have access to the things Powell says they should.
Currently, both American policing and American monetary policy are designed to preserve, not progress. And in both cases, the country is holding on to something not worth preserving. We don’t need to identify the perfect future in order to let go of a rotten past; we just need to establish the infrastructure that will allow things to get better.