Survival of the Biggest

By John Mauldin 


The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process… At the heart of capitalism is creative destruction.

…Situations emerge in the process of creative destruction in which many firms may have to perish that nevertheless would be able to live on vigorously and usefully if they could weather a particular storm.

—Joseph A. Schumpeter


The most important feature of an information economy, in which information is defined as surprise, is the overthrow, not the attainment, of equilibrium. The science that we have come to know as information theory establishes the supremacy of the entrepreneur because it appreciates the powerful connection between destruction and what Schumpeter described as "creative destruction," between chaos and creativity.

—George Gilder


In its purest form, capitalism is an evolutionary process. Businesses that best adapt to changing conditions survive and grow. Typically, that means offering a product or service superior to current ones, or giving consumers more choices. 

Weaker or poorly managed businesses that don’t adapt to the new situation wither and eventually die. That’s not always pleasant but it’s how nature works. Joseph Schumpeter coined the term “creative destruction” to describe the process. It is not pleasant when you are on the destruction end, but the creative side can bring innumerable joys and sometimes even wealth.

The difference, however, is we don’t have capitalism in its purest form, or anywhere close. It has been tweaked, modified, corrupted and/or regulated into something else, the particulars of which vary. The common thread is that survival depends not only on impersonal nature, but on other non-random forces that can be manipulated. Governments can and often do create barriers to entry, protecting favored constituencies and groups from competition.

Now we are in an odd situation where something from nature is generating an unnaturally negative economic outcome. The virus—or specifically the political response to it—is causing a mass extinction event for small businesses in certain sectors. At the same time, some large businesses are reaping a bonanza of revenue from the same pandemic. This isn’t happening randomly, nor is talent (or lack thereof) determining who wins.

One of the main factors is something else: size. In the most-affected sectors, the largest players are winning and the smallest ones dying. Instead of survival of the fittest, we see survival of the biggest.

The problem: Biggest isn’t always best.

Small Business Slaughter

You already know the bad news: This pandemic is slaughtering small businesses. Not all small businesses, mind you. Some are fine. This pandemic seems laser-focused on those involving personal contact, the ones whose owners and employees actually see us in person, smile at us, and sometimes even touch us: restaurants, bars, hotels, hair salons, gyms, spas, shops. Many types of healthcare. The list goes on and on. Those are the prime victims, economically speaking. And often medically, too, since that same personal contact puts the owners and workers at higher infection risk.

I want to partially repeat one of the quotes from Schumpeter above (emphasis mine):

…Situations emerge in the process of creative destruction in which many firms may have to perish that nevertheless would be able to live on vigorously and usefully if they could weather a particular storm.


The COVID-19 storm has been particularly brutal to many. Initially, the US made at least some attempt at a reasonable policy response. The Paycheck Protection Program was supposed to help small businesses continue paying people for eight weeks and also cover some fixed expenses. 

In practice, doing that proved a lot more complicated than expected. 

Hundreds of thousands, maybe millions of small businesses got nothing. 

Some who did get benefits found the rules prevented them from using the money in the ways they needed. And then even that money ran out.

And not surprisingly, larger companies benefited more in terms of dollars received than truly small businesses. The chart below looks like a confirmation of Pareto’s principle, the famous 80-20 rule: Almost all the money went to a small fraction of the companies.


There’s more, too. Small businesses have been disproportionately harmed by haphazard, inconsistent local orders restricting how they operate or sometimes closing them completely. I get the health concerns. The initial closures last spring made sense, given how great the threat looked and how little we knew at the time. 

We have since learned a lot. Governors and mayors can be more precise and, very important, help small businesses operate safely. Instead, they have often produced the worst of both worlds, harming businesses and workers and still not slowing the virus.

But here again, the federal response (or lack thereof) is part of the problem. 

Local authorities are in near-impossible positions. Closing businesses, even when it’s the right move, reduces their own tax revenue and creates expensive community turmoil. 

But they fear opening everything normally would intensify the pandemic. So they flail around, learning by trial and error. It is a messy and ugly process even if everyone is sincerely cooperative and willing to sacrifice, which is not the case. It would be going a lot better if Washington offered clearer guidance and financial help.

However you assign blame, and there’s plenty of it, the results are the same. Small businesses aren’t just wounded. Many are dying. Here’s a recent survey of owners, almost half of whom say they are in imminent danger of permanent closure.


Source: Forbes


I know better than most the risk of opening a small business, having been a serial entrepreneur, sometimes successfully and sometimes not. Startup risk is high in the best of times. If these owners had made poor decisions or failed to deliver what customers want, then their demise would be sad but necessary. It would be “creative destruction” at work, the invisible hand telling owners to do something else. But that’s not what happened.

This pandemic is more like a natural disaster. Actually, it’s worse. If you own a beachfront bar, you know to expect hurricanes. You can design your business and insure yourself for the possible harm. Earthquakes shouldn’t surprise you if you build your factory on the San Andreas Fault. These are known risks. You can calculate whether they are worth taking, and maybe build your factory somewhere else. But there was no way to anticipate this scenario. The insurance industry regards pandemics as literally uninsurable.

We talk, rightly, about “protecting the vulnerable” from COVID-19. That is the government’s proper role and should be everyone’s goal. We do it (or at least try) even for the elderly who may die soon anyway, because protecting life is in everyone’s interest.

Similarly, we should protect the most vulnerable businesses from the pandemic. Maybe they wouldn’t have made it anyway, but the economy will sort that out. They deserve a fair chance.

Sadly, the opposite is happening.

Triumph of Bigness

My friend Neil Howe, of Fourth Turning fame, recently referred to a New York Times op-ed by Austan Goolsbee. You may recall Goolsbee as a White House economic advisor in the Obama years. Needless to say, we disagree on some policy questions but he was on target in this column, titled “Big Companies Are Starting to Swallow the World.”

Goolsbee describes how the pandemic created a troubling split in the economy. Many large companies are seeing strong growth while small businesses, as described above, struggle to survive. He thinks this explains some of this year’s stock rally. The market seems to believe public companies will benefit from rising demand while facing less competition from small businesses. I fear he is correct.

He notes it isn’t new to see large companies buy smaller competitors, or otherwise try to stifle competition, but he thinks this time is different. And he thinks he knows why.

What is unusual at this moment is the extreme divergence in the health of different types of companies: Many of the biggest are flush with money, while smaller competitors have never been in more precarious shape.

The Federal Reserve’s Flow of Funds latest data (from the first quarter of 2020) shows that at the outset of the pandemic, nonfinancial businesses were sitting on an eye-popping $4.1 trillion of cash—the largest hoard ever. These companies also received huge tax reductions in the Tax Cut and Jobs Act of 2017, including incentives to acquire other firms. Then, earlier this year, the Coronavirus Aid, Relief and Economic Security (or CARES) Act, aimed at rescuing the economy from the ravages of the coronavirus, empowered the Federal Reserve to provide up to $5 trillion in subsidized loans for large businesses.

Given such enormous resources, many corporate giants are in great shape, but the rescue money for firms without access to public capital markets ran out at the end of July, and the prospects for many small businesses are bleak.

In his own comments, Neil Howe adds this:

To explain the extraordinary gains of large businesses over small in 2020, we need to point out the unique advantages that the pandemic has conferred to the scalable and impersonal giants—most obviously, in digital tech and communications, but also in pharma, consumer credit, discount retail, and fast-food chains. This stands in contrast to everything small, local, informal, and personal—which has gotten hammered. Yet we also need to acknowledge how the response to the pandemic has practically guaranteed that the big would get still bigger, by providing market support and near-bottomless liquidity to the giants who already possessed the most cash-in-hand… [JM—and I would add access to cheap loans.]

… [E]ver-larger scale inevitably creates monopoly pricing power for the incumbent giants and suppresses start-ups, job churn, mobility, and innovation among the smaller players.

In time, he [Goolsbee] suggests, this cycle can become self-perpetuating. In product markets, monopoly rents enable the bigger players to underprice or buy out (in "killer acquisitions") smaller competitors. In financial markets, the herding of passive investors into massive ETFs furnishes the giants with the lowest cost of capital and leveraging. And in politics, the bigger players can make sure the rules favor them and that antitrust enforcement remains ponderous and underfunded. Goolsbee points out that, while merger activity has roughly doubled over the past decade, federal spending on antitrust enforcement (through the Justice Department and the FTC) has fallen sharply along with the number of enforcement actions.


Now, some of this actually is market-driven. Scale matters. Large restaurant chains can buy their meat and produce in quantities that let them demand rock-bottom prices. 

This gives them an advantage over small local owners. The same for many other businesses. Amazon can offer fast, free shipping on many products because it gets lower rates and has a vast warehouse network. Sometimes big companies can more efficiently provide what consumers want. That’s just life.

This time, however, the big companies have those advantages and the benefit of low-cost Federal Reserve financing and less competition because so many smaller companies are struggling or out of business. That is not natural. It is what Neil Howe calls “monopoly rents” and it wouldn’t happen if not for government and central bank interventions.  

This is a problem not just for small businesses, but for everyone. Large organizations do certain things very well. Quick innovation typically isn’t one of them (although there are some clear exceptions). Bigness breeds caution and discourages the kind of risk-taking that leads to breakthroughs, although without them, the economy becomes sclerotic and growth slows. We’ve seen this over the last decade; we don’t need it to get worse. (Technology is the exception that proves the rule.)

Moreover, small businesses are the academy of entrepreneurship. People start businesses and learn the ropes. Even if they fail, they frequently go on to contribute in other ways. We need more small businesses, not fewer of them.

Every life lost in this pandemic is tragic. In a different way, every lost business is tragic, too. Their absence leaves a gap in the economy and in our lives.

Zombie Companies

My friend Niels Jensen at Absolute Return Partners has a new letter entitled “The Zombies Are Coming,” by which he means not actual zombies (though that would be on par for 2020) but zombie companies. He defines them this way.

A zombie company is simply a company that is neither dead or alive. In other words, it is in so much debt that any cash generated is being used to pay off the interest on the debt […]. This means that there is no spare cash or capacity for the company to invest or grow. This means that it is unable to employ more staff but on the flip side, as long as the company is not actually losing money on an operational basis, it does not need to make further redundancies either.

Then he goes on to begin to cite studies from the BIS and OECD from 2017 and 2018. It has gotten worse.

Quite interestingly, BIS found that, from virtually non-existent as recently as 30 years ago, by 2016, more than 12% of all listed, non-financial firms in the world had been zombified (Exhibit 2). At the same time they found that, whilst the prevalence of zombie firms is on the rise, so is the probability of them staying (barely) alive for longer.


Source: ARP


Cheap loans for large companies aggravate this “zombification” problem, disrupting the creative destruction which brings prosperity and jobs. Niels also demonstrates a link between cheap loans and bank health. The more companies that banks lend to that are on debt life-support, the harder it is for them to call the loan and take a hit to their own capital.

Why is all this important? 

Because it stunts economic growth.

Let’s begin with the zombie share’s impact on productivity. In a paper from 2017, researchers from OECD documented a link between the share of zombie firms and labor productivity when measured relative to labor productivity in non-zombie firms (Exhibit 4). OECD defined a zombie firm precisely the same way BIS defined a broad zombie some 18 month later, so the two studies are comparable in that respect.


Exhibit 4: The share of zombie firms vs. labour productivity (average across 8 OECD countries)
Source: “The walking dead? Zombie firms and productivity performance in OECD countries”, Economics Department Working Paper no. 1372, January 2017


When workers go from a zombie company to a productive company their own labor productivity increases, benefiting the total economy. Keeping large companies on life support is one reason that economies are growing slower than in the past. Leuthold Group calculates 15% of large US companies are in some form of Zombification.


Exhibit 7: Percentage of zombies in Leuthold 3000 universe
Source: Financial Times


How long can those zombies hold on? From Friday’s WSJ:

Economic indicators are pointing to a second wave of bankruptcy for businesses of all sizes as well as households, likely to hit in the second half of next year, according to Ed Altman, the finance professor and bankruptcy guru, WSJ Pro Bankruptcy reported. 

A number of signs suggest a coming surge in defaults for nonfinancial companies, which picked up with the onset of the COVID-19 pandemic but have been somewhat muted thanks to unprecedented support for financial markets from the Federal Reserve. 

Chief among the indicators pointing to another bankruptcy wave ahead is the ratio of nonfinancial corporate debt to gross domestic product, which spiked to an all-time high of close to 57 percent in the first half of 2020, Altman said.

But it’s not all bad. Good things are happening in the background…

Small Business Startups Are Increasing

Well over 100,000 small businesses failed this year and we could lose many more. 

But I continue to believe those entrepreneurs have something in their DNA that will get them back on the playing field. We now have data that demonstrates it, too.


Source: Business Insider


Clearly, a significant group of entrepreneurs has decided that now is the time to start out on their own (perhaps again). If you are looking for green shoots, there is no clearer example.

So where do we go from here? Obviously, a great deal depends on how fast the vaccines roll out. The most optimistic view suggests sometime this summer for “herd immunity.” More realistic analysis says late 2021 for the developed world. We should note, though, the innovation is still underway. I am personally following a vaccine candidate that should be out this summer with a novel platform, with likely very few side effects, no need for refrigeration and other positives. I bet we see more like that.

Although the Labor Department suggests unemployment is 6.7%, we have also seen massive dropouts from the labor force. Adjusted for that, unemployment would be roughly 10%:


The US and the rest of the developed world will begin to recover, especially after widespread vaccinations. But it is going to be a lot slower than most people think. Coming back from 10% unemployment is difficult. Buying patterns, personal habits, how we conduct both our personal lives and our businesses, much has changed. Consumers and businesses of all sizes have to adjust. For some businesses, it is going to be very difficult and for others will be like riding a rocket ship.

An Opportunity for You

Mauldin Economics is a small business like many others. We are thankfully getting through this trial better than most, so we try to help however we can. 

Recently we offered a no-obligation “open house” weekend for some of our most popular research services. I know many of you took advantage. We hope you found it useful.

Soon we’ll have another opportunity that might help you. Our Alpha Society exclusive membership service will be taking a limited number of new members until December 21. It gives you lifetime access to all our premium services for as long as we publish them, at a dramatically lower price than subscribing annually. Members get some other special benefits, too. You can find all the details here.

Final Thoughts and Valuations

Here in Puerto Rico we have new pandemic restrictions. For some reason, the governor thinks that selling alcohol on the weekends will contribute to coronavirus spread. Restaurants are limited to 30% capacity. Sundays are total lockdown for everything. Beaches except for exercise, and never in groups, are off limits.

That being said, there is so much opportunity everywhere I look in Puerto Rico. Then again, that would probably be the case in much of the world. I just see opportunities…

I haven’t mentioned much about the stock market and valuations lately, though I intend to write about my view of the markets soon. For now, I will just share this table from my friend Doug Kass, which I pretty much think says all we need to know about valuations:


Source: Doug Kass


More on valuations and such things later, but for now let me hit the send button and wish you a great week!

Your ready for 2021 to get here analyst,



John Mauldin
Co-Founder, Mauldin Economics

Will Past Be Prologue for Janet Yellen at Treasury? A Review of Her Career Offers Clues.

By Matthew C. Klein

Former Federal Reserve chief Janet Yellen, shown during her last news conference in office in 2017, has said the U.S. should “seriously consider taking the risk of making our economy more rewarding for more of the people.” / Alex Wong/Getty Images


Janet Yellen is about to make history in more ways than one. Aside from becoming America’s first female Treasury secretary, as the former boss of the Federal Reserve and the head of the Council of Economic Advisors, she will also be the first person ever to have held the U.S.’s top three macroeconomic policy making jobs.

This experience gives observers plenty of policy views to consider. Barron’s has pored over 25-plus years of speeches, papers, and Fed meeting transcripts to get a sense of what she thinks, particularly on the issues that will matter most in her new job.

While she’ll have important input into the Fed’s management of its pandemic-era credit facilities, most of her time probably won’t be spent on the monetary policy questions she’s focused on for much of her professional career.

Instead, she’ll probably be focused on the areas specifically relevant to the Treasury: coordinating with the White House and Congress to set the federal government’s budget and borrowing, regulating the U.S. financial system as head of the Financial Stability Oversight Council, and working with foreign counterparts as well as institutions such as the International Monetary Fund.

Here is a look at Yellen’s views on several issues:

The federal budget. The persistent problems of low interest rates, slow growth, and weak inflation are market signals that consumers, businesses, and governments aren’t borrowing enough to keep the economy on an even keel. 

Yet Yellen has argued for decades that higher taxes—and possibly cuts to Social Security and Medicare—are necessary for long-term stability. The alternative, in her view, is that public debt will rise relative to gross domestic product, which will eventually lead to higher interest rates, lower business investment, and slower growth in living standards.

In the beginning of 2009, her contribution to the ongoing debate about how to deal with the shock of the financial crisis was to warn that “responses need to be consistent with long-term fiscal discipline.” If not, “long-term real interest rates are likely to rise in response, undercutting, conceivably even overwhelming, the short-term stimulus.” 

In 2011, she was even more alarmist, warning that “failure to put in place a credible plan to address our long-run budget imbalance would expose the United States to serious economic costs and risks in the long term and possibly sooner.”

These don’t seem to be old views that she has since abandoned in light of the world’s experience with ultralow interest rates. In recent years, Yellen has said that if she “had a magic wand, I would raise taxes and cut retirement spending” and has warned that “we’re not living within our means.”


Yet there’s no evidence that government borrowing costs respond to changes in the budget balance. Indeed, inflation-adjusted yields on Treasury debt were much higher when the government ran budget surpluses in the late 1990s than in later years when politicians had supposedly become far more profligate. 

If anything, Americans have been living below their means.

Despite her consistent warnings about the deficit, Yellen has shown she believes that the government should spend more when the economy is in trouble. 

Most relevant for today, she appreciated the “substantial dose of funding for state and local projects” included in the 2009 stimulus bill because she thought it would help prevent unneeded budget tightening. 

Later, when it turned out that the initial aid package was too small—and that politicians responded to the constant warnings from her and others about the debt by curtailing spending—Yellen lamented that “discretionary fiscal policy hasn’t been much of a tailwind during this recovery.”

During the pandemic, Yellen has been a consistent advocate for spending more to support the incomes of households, businesses, and state and local governments. But investors might worry that Yellen would push Biden and Congress for a premature return to austerity—despite a career focused on the costs of joblessness for workers and their families. 

After all, she has consistently underestimated how low the unemployment rate could go without risking inflation, and while that’s normally considered a problem for the Fed more than the Treasury, when interest rates are near zero—and expected to stay there for years—her views on the subject could affect her judgment on the levels of taxes and spending needed for the economy to perform at its best.

Financial regulation. One of the Treasury secretary’s most important jobs is heading the Financial Stability Oversight Council, which brings together all the main regulators across the federal government as well as state insurance commissioners. 

When Yellen ran the San Francisco Fed from 2004-10, one of her main responsibilities was to supervise the banks in her district, which included the housing debt bubble hot spots of California, Arizona, and Nevada.

Yellen was far from alone in missing what was happening, but her failures in the precrisis period are noteworthy nevertheless. For example, she argued in 2005 that high house prices were justified because “equity held in residential real estate is a lot more accessible today than it has been in the past” thanks to the growth of home equity loans and the rise of the cash-out refinancing. 

She didn’t believe that “creative financing” was having much of an impact on the housing market, arguing as late as 2007 that the problems in subprime weren’t significant for the broader economy and claiming in early 2008 that “the banking system entered this difficult period in a strong position.” 

But this sanguine assessment underestimated both the banks’ fragile capital structures as well as the outsized importance of rising home prices and falling credit standards for sustaining consumer spending.

The good news is that she seems to have learned from this experience, acknowledging in 2010 that she and her colleagues had been “lulled into complacency.” In her view, “we need macroprudential policy makers ready to take away the punch bowl when the party is getting out of hand” by imposing limits on borrowing and even by altering “compensation policies that control incentives for excessive pro-cyclical risk-taking.” 

Her subsequent years at the Fed—culminating in the asset cap imposed on Wells Fargo for the fake accounts scandal—suggests she is willing and able to do that job.

International economics. The Treasury secretary is the lead official in the U.S. government on international economic and financial issues. Yellen has consistently been a champion of free trade and “free capital mobility,” although she has come to appreciate that free trade works best when everyone plays by the same rules. 

If some countries close their markets to Americans, or manipulate their exchange rates, the arguments for openness are less compelling.

In 2011, for example, she urged China, South Korea, and other countries to spend more to address the world’s “dearth of aggregate demand” and compensate for the austerity in the rich countries, where “the scope for fiscal stimulus is limited by concerns about sizable budget deficits and longer-term sustainability.” 

She noted that “the Asian economies continue to add more to global supply than to global demand” and that this was because household spending there was so low.

This has been a perennial problem, particularly in China, and is becoming even more of an issue in the recovery from the pandemic. As Treasury secretary, she could potentially bring this macroeconomic perspective—which the Trump administration ignored with its focus on bilateral deals—to trade negotiations with other countries.

Yellen has also obliquely criticized governments that she believes take advantage of America’s openness by manipulating their exchange rates, noting that “countries with current account surpluses and restricted capital flows have been able to resist currency appreciation for prolonged periods,” which has “served to inhibit the global rebalancing process” and create “adverse consequences for the global economy.”

More recently, Yellen has criticized the Chinese government’s subsidies for its companies and support of intellectual property theft, although she also warned against efforts to “decouple” the U.S. and Chinese tech industries because of the potential impact on global innovation. 

That could have an impact on how she would manage her responsibilities as the head of the Committee on Foreign Investment in the United States, which under the Trump Administration had been trying to limit the Chinese military’s access to advanced American technology such as microchips and AI.

Inequality, the role of government, and student debt. Yellen has a long record of caring about issues that have just begun to get more attention, most notably the increase in income inequality and income insecurity. Back in 2006, she pointed to polls showing rising dissatisfaction and greater fear for the future.

Years before protestors chanted about the 99%, Yellen noted that “much of the gain from excellent macroeconomic performance has gone to just a small segment of the population.” Making matters worse, she said, the apparently low levels of unemployment masked a sharp increase in “involuntary displacement from permanent jobs, due to layoffs or downsizing,” even among Americans with college educations. 

That, in turn, had large effects on household budgets both by leading to big drops in pay and by threatening access to health insurance. In a prescient warning, Yellen feared that these developments were building “resistance to globalization, impairing social cohesion, and could, ultimately, undermine American democracy.”

While her preferred approach was to increase education spending, she also noted that the U.S. had a particularly ungenerous system of unemployment benefits, family leave, and other forms of welfare, while also mandating a low minimum wage. While “improvements in the social safety net entail costs,” she believed the U.S. should “seriously consider taking the risk of making our economy more rewarding for more of the people.”

Yellen didn’t discuss the topic again in her public remarks for some time, but in 2014 she kicked off a series of conversations about inequality from her perch as Fed chief, noting the contrast between “significant income and wealth gains for those at the very top and stagnant living standards for the majority.” She questioned whether that was “compatible with values rooted in our nation’s history.”

Much of her concern was focused on access to educational opportunities and the distribution of public school funding, but she also noted that “the relative burden of education debt has long been higher for families with lower net worth, and that this disparity has grown much wider in the past couple decades.” 

Yellen, in other words, could be sympathetic to “canceling” some of this debt by administrative fiat—a plan that Biden is considering and that is backed by many Democrats.

Past is often prologue, and Yellen has demonstrated some consistent beliefs over a long career, but she’s also demonstrated she can change her mind in response to big events, especially on the crucial issues of financial regulation and international capital flows. 

The question for investors is whether she—or anyone—will be up to the challenges presented by this moment.

How Janet Yellen will deploy her soft power at the Treasury

Former Fed chair knows how to get other economists to think the way she does

Brendan Greeley

Janet Yellen, pictured in 2019, has been in Washington long enough to know that to change policy over the long term, you do not push other senior economists around © AP


Just over four years ago, when Janet Yellen was still chair of the US Federal Reserve, she gave an address at the central bank’s Boston arm.

Fed chairs normally give only two kinds of conference speeches: brief invocations that say nothing, or carefully timed guidance to financial markets about policy. In Boston, however, Ms Yellen pulled on a different lever of power. She told America’s macroeconomists what she was curious about.

Joe Biden, the US president-elect, is expected to nominate Ms Yellen as his Treasury secretary. She will advise him on spending but decisions are ultimately up to Congress and the White House. Instead, Ms Yellen will have economic sanctions and some financial services supervision in her portfolio. She will be able to enforce tax laws and financial regulation. She will serve as a diplomat, talking to finance ministers she knows from her time at the Fed.

She has already shown, though, that she commands an under-appreciated source of soft power in America. Ms Yellen knows how to get other economists to think the way she does.

It is impossible to make policy in Washington without first consulting a macroeconomist. They are scattered around the capital like priests in the Holy See. 

They sit on the president’s two economic councils, in the White House’s budget office, on the staff of the joint economic committee in Congress. When out of power, they retreat to think-tanks in the city — the monasteries of their respective orders — or to the bishopric of an academic chair in Massachusetts, California or Illinois.

They do not just offer advice. They make predictions. Macroeconomists at the Congressional Budget Office model the effects of legislation on economic growth and tax revenue. The answers those models supply can kill a spending bill before it ever gets to a vote. 

At the Fed and the regional Fed banks, staff macroeconomists generate predictions that inform policy. Some of their analysis is published for investors to interpret. There are macroeconomists making predictions at the departments of commerce, at labour and at agriculture.

They all report up, through their agencies. But they also report out, to each other. They trained together. They publish papers together. They referee those papers. They talk to their own mentors. 

They eat dry chicken together every January at the huge conference of the American Economic Association, where, as president this year, Ms Yellen has been pushing for more diversity in the profession.

Macroeconomics is not just a social science. It’s a culture. You could argue that sociologists and historians should also have this much access to power, but they do not, and they will not anytime soon. 

If you can shift the entire culture of macroeconomists, just a little — and get them to change their models — then you can alter how they make predictions and give advice. And that will change the conversation at every agency in Washington.

That is exactly what Ms Yellen was doing in Boston in 2016. She suggested that macroeconomists think about whether a collapse in demand — when people suddenly stop spending money — might discourage companies over the long term from building more capacity to supply products. 

She asked whether it therefore made sense to act “aggressively” to keep Americans spending after a shock. She suggested looking at how different groups of people behave differently during a recession — whether the poor pull back while the rich spend. And she asked whether economists really understood what created inflation.

None of these were new questions. Macroeconomists had already been publishing and debating at conferences about how their models had failed during the global financial crisis, and the slow recovery that followed it. But Ms Yellen defined the questions clearly for the profession, said Maurice Obstfeld, a former chief economist at the IMF, now at the University of California at Berkeley.

Raghuram Rajan, who ran the Indian central bank and is now at the University of Chicago, added: “The ability to ask the right questions is extremely important.

“There are a lot of people in the system who can then work to give you the answers.”

Ms Yellen, who previously ran the Council of Economic Advisers under Bill Clinton, has been in Washington long enough to know that to change policy over the long term, you do not push the other senior economists around. 

Instead, you signal to the new PhDs where they might want to run out ahead and gather new research. She was known for this at the Fed, as well.

Now, eight months into a pandemic, following a collapse in demand, there is new academic work to point to on the importance of generating demand after a shock, and keeping it high into the recovery. 

As the rich and poor respond differently, there is a wider acceptance of economic models that accommodate those differences. The Fed has shifted its focus away from fighting inflation. 

As Ms Yellen prepares for another new job, she has already helped write the catechism the entire city will follow.

The Vaccines Are Coming. A Divided and Distrustful America Awaits.

A vast majority of people will need to be vaccinated to create a decisive decline in infections. Health officials are scrambling to make that happen.

By Simon Romero and Miriam Jordan

With the federal government poised to authorize distribution of the first Covid-19 vaccine in coming days, Americans are deeply divided about what comes next.Credit...Ted S. Warren/Associated Press


As the Lopez family of Truckee, Calif., gathered to prepare dinner on a recent evening, one subject dominated the conversation: the coronavirus vaccine that will soon be shipped out across the country, giving Americans the first concrete hope that the pandemic will eventually end.

Enrique Lopez, 46, who runs a snow-removal business, explained how he was trying to persuade his skeptical employees that the vaccine was safe. His wife, Brienne, 41, a middle school teacher, said she was desperate for the vaccine after a September bout with Covid-19 sickened her for weeks. Their two daughters just wanted to know if the vaccine would enable them to return to their pre-pandemic lives.

“I know a lot of people are scared. They don’t know what the side effects are going to be,” said Mr. Lopez, who had seen half his work force stricken with the virus. “It’s a risk we have to take. It’s going to make us safer and go back to normal.”

After months of anticipation, the arrival of the first vaccine is near. It lands in a country that is both devastated by the virus and deeply divided over almost everything concerning it.

The Lopez family in Truckee, Calif. Enrique Lopez, 46, who runs a snow-removal business, is trying to persuade his skeptical employees that the vaccine is safe.


The Lopez family in Truckee, Calif. Enrique Lopez, 46, who runs a snow-removal business, is trying to persuade his skeptical employees that the vaccine is safe.Credit...Constantine Papanicolaou for The New York Times

The first Americans will most likely receive shots of the Pfizer-BioNTech vaccine in the coming days, and the government is expected to approve other vaccines as well. Health officials are working to ease public doubts about the safety of the injections, emphasizing that large numbers of Americans — perhaps between 60 to 70 percent — must get vaccinated to produce a decisively sharp decline in transmission rates. So far, there is work to be done.

Stephanie Bennett, a psychiatric nurse in Tulsa, Okla., said she fully understood the importance of the vaccines and expected to be near the front of the line as they were made available. Still, she is torn.

“I do have risks in being a frontline health worker,” Ms. Bennett said. “But just being a mother, I do have this crushing guilt in getting a vaccine that my child would not have access to at the same time.”

Even so, Ms. Bennett said she felt doubly responsible as a nurse and a member of the Kiowa Tribe of Oklahoma to get vaccinated, in part to help ease skepticism among her neighbors.

“There’s a lot of distrust in our community,” Ms. Bennett said. “I want to show people, at least in my family and my community, that this is safe and we’ve got to do this.”

Still, wariness persists, even for some who know the toll the virus can take.

Maria Isabel Ventura, 59, who lives in Blythe, Calif., a rural area near the Arizona border, saw the dangers of the virus up close on Nov. 22. That was the day she rushed her husband, gasping for air, to the emergency room. Her husband, Alfonso Velazquez, a farmworker, spent two weeks being treated for a severe case of Covid-19.

“Why not start with vaccinating the president and the people who developed the vaccine?” asked Ms. Ventura, a Mexican immigrant who makes ends meet by cleaning, waiting tables and cooking. “I am afraid more than anything of this vaccine because we don’t know what reaction we will have to it. Maybe in a few months we’ll know more.”

An Associated Press poll, released this week, found half of all Americans ready to take a vaccine — with a considerable partisan divide. Six in 10 Democrats said they would get vaccinated compared with four in 10 Republicans. 

A recent Gallup survey showed more acceptance, with 63 percent of Americans now saying they would be willing to get a vaccine approved by the Food and Drug Administration, up from 58 percent in October and 50 percent in September.

The authorities are working to dispel doubt about the vaccines’ safety and enduring concerns over unethical examples of medical research in the United States, especially in African-American, Latino and Native American communities that have been hit especially hard by the coronavirus but remain wary because of historical abuses by the medical system.

As virus deaths in the country climb toward 300,000, the toll is influencing how many view the vaccines. Adam Wyatt, the pastor at First Baptist Church in Leakesville, Miss., decided to enroll in Moderna’s vaccine trial after one of his congregants died of the virus in August.

Aesha Mahdi, 42, who lives in Gwinnett County, Ga., was infected with the coronavirus in April and is eager to take a vaccine.Credit...Nicole Craine for The New York Times


Mr. Wyatt views hospital visits as one of his most important obligations as a pastor, and recalls feeling helpless as he gathered with the congregant’s family in a hospital parking lot, barred from entry by pandemic precautions.

But Mr. Wyatt, 38, did not tell many people about his decision afterward to enroll in the trial in Hattiesburg, about an hour’s drive west of his small town. “You hear, ‘This vaccine is the mark of the beast, don’t get this, it’s Bill Gates’s population control, you’ll get the microchips in you,’” he said. “A lot of my folks probably won’t get it.”

Now that the vaccine is on its way, Mr. Wyatt is preparing to speak publicly about his participation in the trial, hoping to ease his community’s concerns. “It’s something I can do,” he said.

Aesha Mahdi, 42, who lives in Gwinnett County, Ga., also knows how the virus can upend lives. She got infected in April and identifies herself as a Covid-19 “long-hauler,” still experiencing symptoms such as a racing heartbeat and shortness of breath going up stairs. Her rheumatoid arthritis has become worse, and sometimes she has trouble walking.

Ms. Mahdi, who is eager to be vaccinated, now works in contact tracing, helping to slow the virus’s spread. She said she was alarmed at how family members have fallen victim to misinformation campaigns that vaccinations are harmful, especially on Facebook and YouTube. “They’re kind of following a disinformation or misinformation train that is leading them down a whole conspiracy theory,” she said.

For others, the first vaccine’s arrival creates moral quandaries. Pat McKeage, 85, of Grand Rapids, Mich., said she understood why older people were expected to get the vaccine before others, citing risk factors and how intensive care units around the country are near or above capacity. Still, Ms. McKeage, a published poet, said it struck her as “obscene” that she could get the vaccine before her long-term caregiver, who is 30.

With distribution of a coronavirus vaccine beginning in the U.S., here are answers to some questions you may be wondering about:

“I told her, ‘I have lived my life. You have not,’” she said.

LaMont C. Brown II, a bus driver in Detroit, said the pandemic has exposed just how little his profession is appreciated.Credit...Cydni Elledge for The New York Times


Others who are eager to get the vaccine fret about being low on the priority list. LaMont C. Brown II, a bus driver in Detroit, said the pandemic had exposed just how little his profession was appreciated. While police officers, firefighters and medical workers are treated as heroes, he hears little celebration of drivers who interact with the public, potentially risking their health.

Now he worries that the same dynamic will play out with vaccines.

He has heard that medical workers and other emergency personnel will be first in line. But he has heard nothing about making sure that drivers get vaccinated soon — not from his union, from the city’s Department of Transportation or from city leaders, he said.

“We’re basically second-class citizens,” Mr. Brown, 55, said.

The arrival of a vaccine is also nurturing talk of a return to normalcy, or something resembling it. Tani G. Cantil-Sakauye, California’s chief justice, said she was imagining how the vaccine could change things for the nation’s largest court system, which is grappling with a huge backlog as many crucial proceedings are pushed online.

“If you envision the Supreme Court, every door is open, people are in the hall leaning against doorjambs, talking, chatting, laughing,” Chief Justice Cantil-Sakauye told reporters on a Zoom call this week. “That’s now completely absent, and the place is silent.”

She and her colleagues have debated whether judges and other court officers should be given priority for a vaccine. No one, after all, would deny that the courts were an essential function of society.

But Chief Justice Cantil-Sakauye said she ultimately came to believe that judges could not “stand on title” and be vaccinated before emergency workers and nursing home residents.

“We think that others need to go first,” she said.

Bryan Diaz, 15, of Nuevo, Calif., is also yearning for normalcy. Distance learning has been difficult with his 7-year-old brother, Kevin, vying for his attention, and he misses playing video games and kicking a soccer ball with a friend he has not seen since early in the year.

The Diaz family spends an afternoon in their home out in Nuevo, California. “I feel excited that there’s a vaccine so we can go back to the school,” Bryan Diaz, right, said.


The Diaz family spends an afternoon in their home out in Nuevo, California. “I feel excited that there’s a vaccine so we can go back to the school,” Bryan Diaz, right, said.Credit...Carlos Gonzalez for The New York Times

“I feel excited that there’s a vaccine so we can go back to the school,” he said.

Bryan, whose father is a mechanic and mother is a homemaker, knows several people, including his godfather, who have contracted the virus. But his parents, Mexican immigrants, are suspicious of the vaccine.

“We talked about it, but my parents don’t want us to try it until it’s 100 percent,” he said. “They want to be sure it’s safe.”

David Leavitt, a novelist and professor of English at the University of Florida, said the prospect of a vaccine had given him a feeling he had not previously experienced during the pandemic: “Well, this will end. I never really allowed myself to think about how it will end.”

When it is over, Mr. Leavitt looks forward to traveling once again to Italian book festivals. But then he reflexively reins himself in. After all, Italy thought it had conquered the virus after a brutal spring, and that, Mr. Leavitt says, turned out to be “wishful thinking.” He does not want to fall prey to delusion.

So as he waits to find out his position in the vaccine line, he lives by a motto he attributes to one of his favorite Mel Brooks movies, “The Twelve Chairs”: “Hope for the best. Expect the worst.”


Reporting was contributed by Ellen Barry, John Eligon, Thomas Fuller, Ruth Graham, Anemona Hartocollis, Giulia McDonnell Nieto del Rio and Will Wright.


Answers to Your Vaccine Questions

If I live in the U.S., when can I get the vaccine? 

While the exact order of vaccine recipients may vary by state, most will likely put medical workers and residents of long-term care facilities first. If you want to understand how this decision is getting made, this article will help.

When can I return to normal life after being vaccinated? 

Life will return to normal only when society as a whole gains enough protection against the coronavirus. Once countries authorize a vaccine, they’ll only be able to vaccinate a few percent of their citizens at most in the first couple months. 

The unvaccinated majority will still remain vulnerable to getting infected. A growing number of coronavirus vaccines are showing robust protection against becoming sick. 

But it’s also possible for people to spread the virus without even knowing they’re infected because they experience only mild symptoms or none at all. Scientists don’t yet know if the vaccines also block the transmission of the coronavirus. 

So for the time being, even vaccinated people will need to wear masks, avoid indoor crowds, and so on. Once enough people get vaccinated, it will become very difficult for the coronavirus to find vulnerable people to infect. 

Depending on how quickly we as a society achieve that goal, life might start approaching something like normal by the fall 2021.

If I’ve been vaccinated, do I still need to wear a mask? 

Yes, but not forever. The two vaccines that will potentially get authorized this month clearly protect people from getting sick with Covid-19. But the clinical trials that delivered these results were not designed to determine whether vaccinated people could still spread the coronavirus without developing symptoms. 

That remains a possibility. 

We know that people who are naturally infected by the coronavirus can spread it while they’re not experiencing any cough or other symptoms. 

Researchers will be intensely studying this question as the vaccines roll out. In the meantime, even vaccinated people will need to think of themselves as possible spreaders.

Will it hurt? What are the side effects? 

The Pfizer and BioNTech vaccine is delivered as a shot in the arm, like other typical vaccines. The injection won’t be any different from ones you’ve gotten before. 

Tens of thousands of people have already received the vaccines, and none of them have reported any serious health problems. 

But some of them have felt short-lived discomfort, including aches and flu-like symptoms that typically last a day. It’s possible that people may need to plan to take a day off work or school after the second shot. 

While these experiences aren’t pleasant, they are a good sign: they are the result of your own immune system encountering the vaccine and mounting a potent response that will provide long-lasting immunity.

Will mRNA vaccines change my genes? 

No. The vaccines from Moderna and Pfizer use a genetic molecule to prime the immune system. 

That molecule, known as mRNA, is eventually destroyed by the body. The mRNA is packaged in an oily bubble that can fuse to a cell, allowing the molecule to slip in. 

The cell uses the mRNA to make proteins from the coronavirus, which can stimulate the immune system. At any moment, each of our cells may contain hundreds of thousands of mRNA molecules, which they produce in order to make proteins of their own. 

Once those proteins are made, our cells then shred the mRNA with special enzymes. 

The mRNA molecules our cells make can only survive a matter of minutes. The mRNA in vaccines is engineered to withstand the cell's enzymes a bit longer, so that the cells can make extra virus proteins and prompt a stronger immune response. 

But the mRNA can only last for a few days at most before they are destroyed.


What’s Ahead for the Stock Market?

Wharton’s Jeremy Siegel talks with Wharton Business Daily on SiriusXM about what’s ahead for the U.S. stock market.


The U.S. stock market is likely to continue its strong cadence well into 2021, with “a good election” and encouraging signs that a COVID-19 vaccine will be available soon, according to Wharton finance professor Jeremy Siegel. 

The Dow Jones Industrial Average has been trending up since late March, notwithstanding intermittent dips, and hit a milestone of 30,000 on November 24.

“The vaccine will be rolled out and things in 2021 are going to be significantly better – 2021 is going to be gangbusters,” Siegel said last week on the Wharton Business Daily show on SiriusXM.

Other positive signals include a record jump in home-buyer confidence and savings that people have built during the recent lockdowns, he said. “The stars are aligned for continuing upward movement in this market,” said Siegel. “The vaccine development and the outcome of the election take out the uncertainty going forward.”

No Tax Increases or Radical Reforms

In more than one way, “it has been a really good election for the market,” Siegel observed. He pointed out that in a Republican-dominated Senate, the Joe Biden administration will be unable to implement its proposals to increase taxes. 

“If the Senate stays Republican, which looks very likely, the [proposed] tax increases of [President-elect Joe] Biden, which would be quite negative for the market, are not going to be implemented. As a result, the corporate tax cuts are going to stay.”

Siegel also wasn’t hopeful of “radical reforms” from the Biden administration. According to him, its latitude will be limited largely to easing trade policy and reversing some Trump-era regulatory relaxations. “The Republicans did very well in Congress [in the recent elections], so the possibility of radical reforms going through are greatly reduced.”

“We’re not going to have the crazy trade policy of Trump, which was very negative,” Siegel continued.” I thought [Trump] misunderstood the role of the trade deficit in the economic cycle.” 

Under Biden, “we will have a more rational approach on trade. Without any extra taxes, [he would bring] a rational approach on trade, and a little bit more regulation.”

Hopes for a Vaccine

Siegel based most of his hopes for continued strength of the stock market on the COVID-19 vaccines. However, “we’ve got to get through a really difficult period over the next six to eight weeks.” 

The Federal Reserve has also provided much liquidity through programs in response to the pandemic, he added. “All this is percolating under the surface.”

Meanwhile, uncertainty has reduced over how much more damage the pandemic could unleash, Siegel continued. “The development of the vaccine has been far better than expected.” He noted that the progress with the vaccine development is “a huge move forward” in terms of health measures in the U.S.

He acknowledged that the increases in COVID-19 cases and deaths in the U.S. and in Europe are bad news. He hoped that the fresh round of lockdowns across Europe will let up in a week or so. 

“The third wave of the virus has caught me. Fortunately, the high number of deaths are still only half the rate of March, when we had a tiny fraction of the reported cases that we have now. We definitely know how to treat it better.”

Those short-term trends do not dampen investment sentiment, Siegel noted. “Stocks are assets that last decades and decades,” he said. “After another three or four months of people hunkering down and looking forward to the future, [stocks] can still rally despite the grim virus news that we see right now.”

He pointed to other reasons why the stock market outlook is positive. “The good news is that there’s a lot of savings that people have built up … to get through these months,” he said. “Starting in January, things are going to look a whole lot better. 

We’ll get through two or three months, if we’ve got a stimulus package to give people more hope and a little bit of liquidity, and keep some of those businesses open.”

In the bigger picture, “looking towards 2021, the vaccines are the dominant positive force,” he said. “I’m not going to say the virus [will be] gone– but by the middle of next year, it’s going to be background noise.”

Home Buyers on a High

Investment sentiment is running strong also in home-buying, another key benchmark. 

The National Association of Homebuilders index of home-buying sentiment soared to a record 90 in November, Siegel pointed out. Launched in 1985, the NAHB/Wells Fargo Housing Market Index is based on a monthly survey of NAHB members and is designed to take the pulse of the single-family housing market. 

“We’ve never had anything like that before in 45 years,” he said. “This is greater than the housing boom before the [2008] financial crisis, which was supposed to have sparked the overpricing. 

Home equity is now strong, portfolios are strong, liquidity is strong, and 2021 looks strong. I definitely see next year as being a good year.”

In terms of providing liquidity, the Federal Reserve has done “just about as much as it can do,” said Siegel. “The Fed got [interest] rates down to zero. Their lending facilities are there. They’ve done everything.”

Had Congress known there was going to be a third wave, “they would have gotten together and bit the bullet and done it,” said Siegel of the much-anticipated fourth round of coronavirus stimulus. 

Now, the outcome of runoff elections on January 5 for two Senate seats in Georgia will determine whether the Democrats or the Republicans control the U.S. Senate. “By then, I expect we will be on a downward slope of the virus.”

Siegel saw a need for Congress to act now. “[We need] stimulus checks, and PPP, or payroll protection programs, for those businesses that are still closed,” he said. “[But] it just may not happen. We’re going to just grit our teeth and say, ‘ugh.’ But we will get through it.”

The Geopolitics of Vaccine Distribution

Inoculations are a welcome development, but the public should temper its excitement. 

By: Alex Berezow


The American pharmaceutical firm Pfizer, in collaboration with German firm BioNTech, surprised the world when it announced that its coronavirus vaccine showed 90 percent efficacy in preventing COVID-19. 

Days later, another American firm called Moderna announced that its vaccine was nearly 95 percent effective. And shortly after that, AstraZeneca announced that its vaccine was 62 percent to 90 percent effective. 

The U.S. Food and Drug Administration dictates that vaccines be at least 50 percent effective to earn emergency use authorization, and most observers weren’t expecting vaccine candidates to perform much better than that. 

The reported results, therefore, were a pleasant surprise that excited governments and markets alike.

The magnitude of this accomplishment cannot be overstated. 

Typically, the timeline from inception to regulatory approval of a new drug is about 10 years. After receiving approval, pharmaceutical firms then prepare for mass manufacturing, which itself could take another decade. 

However, thanks to a combination of factors – government programs like Operation Warp Speed, expedited regulatory approval and unprecedented global cooperation – the first batches of a COVID-19 vaccine from a trustworthy source will be delivered in less than a year. (China and Russia also claim to have created vaccines, but insufficient data and transparency make most Western scientists skeptical of their efficacy and safety.)

Even so, public excitement is premature. There are months to go before the vast majority of people, including Americans, can expect to receive the jab in their arms. 

The immediate hurdle is obtaining FDA approval. Though approval should take roughly three weeks as government experts pore over the data, the process could take longer. According to Dr. Henry Miller, a fellow at the Pacific Research Institute and the founding director of the FDA’s Office of Biotechnology, the FDA has concerns about consistency in the production of the vaccine. 

In other words, the FDA wants to know if companies can manufacture batch after batch that meets certain quality control measures, such as potency and purity. By the end of December, Moderna plans to have 20 million doses, Pfizer 50 million doses, and AstraZeneca 200 million doses. So, some people should be receiving jabs before the end of 2020. 

(The regimen requires two shots one month apart, which means the number of people immunized is half the number of doses.) By the end of 2021, there should be billions of doses available from all companies combined. 

The Race to a Coronavirus Vaccine


But manufacturing is just one headache. Another is distribution, which is actually a two-fold problem: (1) Moderna’s vaccine must be kept frozen during long-term storage and shipment, but Pfizer’s vaccine must be kept at a whopping -94 degrees Fahrenheit (-70 degrees Celsius) during shipment; and (2) It’s neither ethically nor strategically clear who should receive the vaccines first.

The Distribution Dilemma

The reason your local grocery store contains relatively fresh food from the other side of the planet is because of something known as the “cold chain,” a series of refrigerated containers that allow perishable food to be shipped without spoiling. Many drugs and especially vaccines require the same thing. 

However, Pfizer’s vaccine, which consists of an unstable information-containing molecule called RNA encased within an equally unstable bubble of fat, requires storage at -94 F (-70 C). 

Generally, only research laboratories possess deep freezers that cold; pharmacies and hospitals do not. Pfizer’s solution is to provide special containers that can be packed with dry ice to maintain the requisite temperature, but once the vaccine has been removed and placed inside a regular refrigerator, the shelf life is five days. 

The Moderna vaccine can be stored and shipped at -4 F and has a shelf-life of 30 days in regulator refrigerators, so it poses a much smaller logistical challenge. 

AstraZeneca’s vaccine is the easiest to distribute, since it can be shipped at the regular refrigeration temperature of 36-46 F and kept on the shelf for six months.

Coronavirus | Prospective Vaccine Comparison


The question of who gets the vaccine first will play out initially at the international level Countries that have made purchase orders will be the first to receive them. 

For example, according to Mint, the European Union has secured 200 million doses (with an option for 100 million more) for Pfizer’s vaccine, Japan 120 million doses, the United States 100 million doses (with an option for 500 million more), and the U.K. 30 million doses. 

If all options are exercised, Pfizer simply cannot meet that demand even by the end of 2021, which could mean that rich countries will fight among themselves over who gets what batch when. 

The U.S. already has a tense relationship with Europe, and a fight over vaccine batches would put more stress on a fragile trans-Atlantic relationship, especially since the country that receives the most vaccine doses has a likelier chance of improving its economy the quickest. 

Because Moderna, AstraZeneca and other companies will also produce vaccines, these tensions can be eased somewhat, though whichever country serves as a company’s “home” likely will be under substantial pressure to deliver vaccines to compatriots first. This latter point is complicated by the fact that some of these companies are multinational entities and have “homes” in several countries around the globe.

While rich countries duke it out, the rest of the world will have to wait. Money doesn’t solve everything. The logistical challenges posed by the cold chain make it nearly impossible to deliver a vaccine to a region with poor infrastructure and unreliable electricity. 

Gaps in the cold chain – that is, periods in which the vaccine is not stored at the proper temperature – would destroy the vaccine. (This is to say nothing of criminal activity. 

Everyone is a potential target of criminal enterprises that offer fake vaccines, of course, but poorer countries are most susceptible since delivery of legitimate vaccines may be months if not years away.)

Internally, countries will be faced with domestic political concerns over vaccine allocation. In the United States, there is tension between federal agencies such as the Centers for Disease Control and Prevention and state governments over the number of doses each state will receive. 

The incoming Biden administration will be under tremendous pressure to deliver vaccines to Americans first, regardless of any contractual obligations that companies may have. If necessary, the president and Congress may get involved, overriding pharmaceutical companies’ contracts in the name of national security.

After that, there are ethical and strategic decisions to be made over who receives the vaccine first. The state of Washington, for example, has proposed three phases of distribution: First, frontline health care providers, first responders, and vulnerable populations (such as those with underlying health conditions or residents of long-term care facilities); second, the general community; and third, filling any “gaps” in vaccine access (such as in poorer communities). It is likely that many other states will employ a similar strategy.

There’s also the matter of vaccine efficacy. Simply put, some vaccines are better than others. Remember that the vaccines made by Pfizer and Moderna are 95 percent effective, but AstraZeneca’s is merely 62 percent to 90 percent effective. Who gets the less effective vaccine? And who makes that decision?

The Amazing Race

The poorest nations are likeliest to get a coronavirus vaccine last. But there’s room for optimism as many other companies will continue developing coronavirus vaccines. 

Most, like the one made by AstraZeneca, will not require the extreme cold chain that Pfizer’s vaccine needs. 

In addition, AstraZeneca has pledged to forgo profits until the pandemic is over. The company is also working with nongovernmental organizations like the Bill & Melinda Gates Foundation to provide vaccines to developing countries.

The question about global vaccine distribution has therefore shifted from if to when. 

But will the vaccine(s) come in time to prevent further economic damage and social unrest? Vaccine delays could create or aggravate default risks in poorer countries, with financial contagion spreading to richer countries. 

Many people are no longer willing to tolerate lockdowns. All across Europe citizens are protesting additional safety measures, with demonstrations in Italy turning violent last week.

Ancillary effects of lockdowns have created other grievances against governments too. 

In many places, families and spouses have been separated because of border closures and arbitrary immigration policies. In Indonesia, for example, binational unmarried couples are not allowed to reunite, but elderly foreigners are allowed in as tourists despite the fact that elderly people are the likeliest to die from coronavirus. 

These policies have resulted in the Indonesian government being inundated with complaints by angry citizens. They reveal the tension between concerns over public health, the economy and the social fabric, and it’s not clear that they can be improved until a vaccine is fully deployed.

Indeed, few societies are willing to control the virus at the cost of ripping the social fabric. The coronavirus has revealed an immense tension between the economic and social pillars of our society. Governments have no good options. Some will be tempted to reimpose lockdowns, justifying them with the claim that they will be eased as soon as a vaccine is available. 

But this is a false reassurance. For citizens of rich countries, widespread vaccination is still months away. For citizens of poor countries, widespread vaccination may be years away. 

A restless public is not going to tolerate indefinite lockdowns through 2021, and governments that try to impose them should be prepared for civil unrest.