The first two quarters of 2020 certainly have not gone the way any of us would have expected, but the shocks of the COVID-19 pandemic and economic slowdown doesn’t mean there is no good news. IFWE’s Dr. Anne Bradley discussed why she is “cautiously optimistic” about the economy on a recent episode of Afternoons with Bill Arnold on Faith Radio. Here are a few highlights of their conversation.
Arnold: Do you see any bright side for the average American consumer through this recession? Will there be a correction in the market?
Bradley: Creativity is what will get us the furthest out of this. People will find new innovations and new ways to do things. We have to go through a lot of economic damage to get that so I prefer not to repeat this, as would everyone.
What I’m trying to say is that people are innovative. People are clever. People are creative. The market will find a way out of this if we allow it to. So I do think things will settle down.
Take the example of toilet paper. If you were following the stories about toilet paper during COVID, it was fascinating to see what was going on. At the beginning, my husband would go to three stores to find one four-pack of toilet paper. The toilet paper was just flying off the shelves, and I thought that was curious at first because COVID doesn’t have GI effects. But it’s like when there is a snowstorm and people buy toilet paper and milk, and maybe that’s what they were doing. I think people were buying more.
But what was really going on was that overnight the demand between residential toilet paper changed. Prior to COVID, the demand for toilet paper was mainly commercial since many of us spend eight or nine hours of our day out of our house. Then overnight the demand became entirely residential and there was no demand for commercial toilet paper. And as it turns out, you can’t just switch the production process overnight.
That temporary rise in prices and shortages on the shelves gets solved when the market gets put in motion, which is why we now see more toilet paper, more hand sanitizer, more bleach and cleaning products, and things like that.
The beauty of this is that the market allows for and tells entrepreneurs that there is a shortage and that we need more of this or that we need to find a new way of doing that, and then the market gets into action. So I really think that there are silver linings.
We’re going to have to “social distance” for a long time so we need to be creative. How do you take an Uber ride? How do you go to a hotel? How do you do all these things in the new world that we live in?
It’s human creativity that’s going to help us figure that out. And I’m optimistic about that.
Arnold: In any recession some will thrive (like the toilet paper industry) and some will suffer.
Bradley: In a recession, everyone suffers to some degree because the economy is depressed. We want to end the recession as fast as possible because what we are really worried about is people being able to get their jobs back and to pay their mortgage and pay their bills and take care of their family. As fast as we can possibly do that, we need to. And the way that we’re going to get there is to figure out how to get people back to work in a safe way.
Arnold: Do you find it amazing how few shortages we’ve actually had? And is that not a credit to the free market?
Bradley: Oh my gosh, yes it is! My friend Antony Davies, an economist, showed a picture of somebody walking down the aisle of a grocery store where there is hardly anything on the shelves, and said, “Capitalism looks sometimes what socialism looks like all the time.”
I heard that and I thought, wow. In capitalism, those shelves get restocked. Maybe not the day you want them to because you have the prices and profit and loss in motion telling entrepreneurs what to do. And that’s how we mitigate the suffering, we get people the things they need.
You know when my husband went to the store and found some hand sanitizer and texted me, “We won the lottery!” When would you ever text somebody that you were excited to buy hand sanitizer? Never! Which is why it has been fascinating to see that wineries and distilleries and places that produce alcohol are realizing that they can produce hand sanitizer.
That’s the market at work, and that’s what we need.
Editor’s Note: You can listen to the whole conversation here.