To spend or not to spend

That is the question. The analogy with Hamlet’s soliloquy in the nunnery scene ends here.

Economies, like businesses, are not built in a day – but they can be destroyed in a night. Covid-19 has proved that. They can also revive pretty quickly. Imagine, if we had had only one round of coronavirus, and herd immunity had kicked in to protect us, we would be a good way along the road to revival already. In some places they are. Where the virus is delivering another crushing blow, economies are suffering greatly.

Revival depends on spending. Where only four months ago the prudent savers who had stashed away some money for a rainy day were being praised, now the spenders are being called forth to distribute largesse in order to get economies working again. Go and empty your bank account in the High Street – or Amazon as it is now called – and you will be regarded as a saviour.

We can be forgiven for wondering what to do, save or spend.

Governments’ views are as ambiguous as ours. If we save they won’t have to support us, at least not as much. If we spend, they will have to mitigate the worst effects of the crisis. How to decide the right way to behave? There’s an analogous situation for companies deciding whether to turn green at the – hopefully only short-term – expense of profits or stay, pardon the pun, filthy rich. Raise your eyes a little over the horizon and you’ll get the balance between ‘now’ and ‘later’ right.

The snag, of course, is that we cannot see the horizon – in this case, the point at which we escape the virus by hook (medicine) or by crook (herd immunity). Lack of current evidence of the latter is not proof that there is none. If you take a Darwinian approach and rely on the rather desperate survival of the fittest, there certainly is. The price of this is allowing many of our seven billion people to die. That or the rather improbable extinction of humans altogether.

However, you are not required to adjudicate upon the dissolution of humanity before you decide whether or not to buy your next winter coat or summer lounger. It will suffice that you look at your asset statement, divide it by the average monthly outgoings you have incurred in the last four months and conclude whether the monthly rate of expenditure enables you to survive without depleting your assets by more than fifty percent over one year. If the answer is ‘yes’, go ahead, indulge – but prudently. Throw in a cup of coffee if you want to be very daring. It is almost as good as a donation to charity.

The more sombre side of the story is that, sadly, the majority of people don’t have the luxury of making such an asset calculation. In most cases they haven’t earned enough, in some cases they haven’t saved enough. The cause of their present situation is not our concern here, though it needs much discussion and correction for the future. But for now they are the hardest hit in society. They should go to any refuge they can for the necessities of life. Family and friends are the frontline of help; charities will donate where they are able.

Governments are creating money for the present but their limit is the credibility of the payback. While they can, they will provide against the worst poverty caused by job loss and hardship. In the end the world pays for its borrowing and leaders are right to encourage a return to work and ‘normal’ life as soon as reasonably safe. The price of not taking the necessary steps early is ably illustrated by the Southern States in the USA.

Political judgment has always been a rat race. It is even more so now because, frankly, it is anybody’s guess whether the greater suffering will come from the virus or from the poverty that protective lockdown entails. If you are Minister of Health you will know where your duty lies. If, Minister of Treasury, you will have crystal clarity. If you are boss of both you’d better pray.

Provided my dear reader’s choice is rational and not purely emotional you should make good decisions about spending. Not, perhaps, easy ones but surely reasonable ones.

For the risk of Covid-19 is isolationism with all the nonsense of sovereignty that implies.

And the lesson of Covid-19 will be reason and cooperation.

With all the opportunities they will open up.