The way we live now

Covid-19 is here to stay. People will have to adapt

The world is not experiencing a second wave: it never got over the first

IT IS ASTONISHING how rapidly the pandemic has spread, despite all the efforts to stop it.

On February 1st, the day covid-19 first appeared on our front cover, the World Health Organisation counted 2,115 new cases.

On June 28th its daily tally reached 190,000. That day as many new cases were notched up every 90 minutes as had been recorded in total by February 1st.

The world is not experiencing a second wave: it never got over the first. Some 10m people are known to have been infected. Pretty much everywhere has registered cases (Turkmenistan and North Korea have not, though, like Antarctica).

For every country such as China, Taiwan and Vietnam, which seems to be able to contain the virus, there are more, in Latin America and South Asia, where it is raging.

Others, including the United States, are at risk of losing control or, in much of Africa, in the early phase of their epidemic. Europe is somewhere in between.

The worst is to come. Based on research in 84 countries, a team at the Massachusetts Institute of Technology reckons that, for each recorded case, 12 go unrecorded and that for every two covid-19 deaths counted, a third is misattributed to other causes.

Without a medical breakthrough, it says, the total number of cases will climb to 200m-600m by spring 2021.

At that point, between 1.4m and 3.7m people will have died. Even then, well over 90% of the world’s population will still be vulnerable to infection—more if immunity turns out to be transient.

The actual outcome depends on how societies manage the disease. Here the news is better. Epidemiologists understand how to stop covid-19. You catch it indoors, in crowds, when people raise their voices. The poor are vulnerable, as are the elderly and those with other conditions.

You can contain the virus with three tactics: changes in behaviour; testing, tracing and isolation; and, if they fail, lockdowns. The worse a country is at testing—and many governments have failed to build enough capacity—the more it has to fall back on the other two.

Good public health need not be expensive. Dharavi, a slum of 850,000 people in Mumbai, tamed an outbreak.

Treatments have improved, thanks to research and dealing with patients. Although mass vaccination is still months away at best, the first therapies are available. More is known about how to manage the disease—don’t rush to put people on respirators, do give them oxygen early.

Better treatment helps explain why the share of hospital patients who went on to be admitted to intensive care fell in Britain from 12% at the end of March to 4% in mid to late May.

And economies have adapted. They are still suffering, of course. J.P. Morgan, a bank, predicts that the peak-to-trough decline in the first half of the year in the 39 economies it follows will be around 10% of GDP. But workers stuck in Zoom hell have discovered that they can get a surprising amount done from home.

In China Starbucks designed “contactless” ordering, cutting the time customers spend in its coffee shops. Supply chains that struggled now run smoothly. Factories have found ways to stagger shifts, shield staff behind plastic and change work patterns so that personal contact is minimised.

Now that nationwide lockdowns are done, governments can make sensible trade-offs—banning large indoor gatherings, say and allowing the reopening of schools and shops. Sometimes, as in some American states, they will loosen too much and have to reverse course. Others will learn from their mistakes.

The problem is that, without a cure or a vaccine, containment depends on people learning to change their behaviour. After the initial covid-19 panic, many are becoming disenchanted and resistant. Masks help stop the disease, but in Europe and America some refuse to wear one because they see them as emasculating or, worse, Democratic.

Thorough handwashing kills the virus, but who has not relapsed into bad old habits? Parties are dangerous but young people cooped up for months have developed a devil-may-care attitude.

Most important, as the months drag on, people just need to earn some money. In the autumn, as life moves indoors, infections could soar.

Changing social norms is hard. Just look at AIDS, known for decades to be prevented by safe sex and clean needles. Yet in 2018, 1.7m people were newly infected with HIV, the virus that causes it. Covid-19 is easier to talk about than AIDS, but harder to avoid.

Wearing a mask is chiefly about protecting others; the young, fit and asymptomatic are being asked to follow tedious rules to shield the old and infirm.

Changing behaviour requires clear communication from trusted figures, national and local. But many people do not believe their politicians.

In countries such as America, Iran, Britain, Russia and Brazil, which have the highest caseloads, presidents and prime ministers minimised the threat, vacillated, issued bad advice or seemed more interested in their own political fortunes than in their country—sometimes all at once.

Covid-19 is here for a while at least. The vulnerable will be afraid to go out and innovation will slow, creating a 90% economy that consistently fails to reach its potential.

Many people will fall ill and some of them will die.

You may have lost interest in the pandemic.

It has not lost interest in you.

The genius of Amazon

The pandemic has shown that Amazon is essential—but vulnerable

Jeff Bezos's vision of a world shopping online is coming true faster than ever. But the job of running Amazon hasn’t got any easier

In the summer of 1995 Jeff Bezos was a skinny obsessive working in a basement alongside his wife, packing paperbacks into boxes. Today, 25 years on, he is perhaps the 21st century’s most important tycoon: a muscle-ripped divorcé who finances space missions and newspapers for fun, and who receives adulation from Warren Buffett and abuse from Donald Trump.

Amazon, his firm, is no longer just a bookseller but a digital conglomerate worth $1.3trn that consumers love, politicians love to hate, and investors and rivals have learned never to bet against. Now the pandemic has fuelled a digital surge that shows how important Amazon is to ordinary life in America and Europe, because of its crucial role in e-commerce, logistics and cloud computing.

In response to the crisis, Mr Bezos has put aside his side-hustles and returned to day-to-day management. Superficially it could not be a better time, but the world’s fourth-most-valuable firm faces problems: a fraying social contract, financial bloating and re-energised competition.

The digital surge began with online “pantry-loading” as consumers bulk-ordered toilet rolls and pasta. Amazon’s first-quarter sales rose by 26% year on year. When stimulus cheques arrived in mid-April Americans let rip on a broader range of goods. Two rivals, eBay and Costco, say online activity accelerated in May. There has been a scramble to meet demand, with Mr Bezos doing daily inventory checks once again.

Amazon has hired 175,000 staff, equipped its people with 34m gloves, and leased 12 new cargo aircraft, bringing its fleet to 82. Undergirding the e-commerce surge is an infrastructure of cloud computing and payments systems. Amazon owns a chunk of that, too, through aws, its cloud arm, which saw first-quarter sales rise by 33%.

One question is whether the digital surge will subside. Shops are reopening, even if customers have to pay at tills shielded by Perspex. Yet the signs are that some of the boom will last, because it has involved not just the same people doing more of the same. A new cohort has taken to shopping online. In America “silver” customers in their 60s have set up digital-payment accounts.

Many physical retailers have suffered fatal damage. Dozens have defaulted or are on the brink, including J Crew and Neiman Marcus. In the past year the shares of warehousing firms, which thrive on e-commerce, have outperformed those of shopping-mall landlords by 48 percentage points.

All this might appear to fit the script Mr Bezos has written over the years in his letters to shareholders, which are now pored over by investors as meticulously as those of Mr Buffett. He argues that Amazon is in a perpetual virtuous circle in which it spends money to win market share and expands into adjacent industries.

From books it leapt to e-commerce, then opened its cloud and logistics arms to third-party retailers, making them vast new businesses in their own right. Customers are kept loyal by perks such as Prime, a subscription service, and Alexa, a voice-assistant.

By this account, the new digital surge confirms Amazon’s inexorable rise. That is the view on Wall Street, where Amazon’s shares reached an all-time high on June 17th.

Yet from his ranch in west Texas, Mr Bezos has to wrestle with those tricky problems. Start with the fraying social contract. Some common criticisms of Amazon are simply misguided.

Unlike, say, Google in search, it is not a monopoly. Last year Amazon had a 40% share of American e-commerce and 6% of all retail sales. There is little evidence that it kills jobs.

Studies of the “Amazon effect” suggest that new warehouse and delivery jobs offset the decline in shop assistants, and the firm’s minimum hourly wage of $15 in America is above the median for the retail trade.

But Amazon’s strategy does imply huge creative disruption in the jobs market even as the economy reels. In addition, viral outbreaks at its warehouses have reignited fears about working conditions: 13 American state attorneys-general have voiced concern. And Amazon’s role as a digital jack-of-all-trades creates conflicts of interest.

Does its platform, for example, treat third-party sellers on equal terms with its own products? Congress and the eu are investigating this. And how comfortable should other firms be about giving their sensitive data to aws given that it is part of a larger conglomerate which competes with them?

Amazon’s second problem is bloating. As Mr Bezos has expanded into industry after industry, his firm has gone from being asset-light to having a balance-sheet heavier than a Soviet tractor factory. Today it has $104bn of plant, including leased assets, not far off the $119bn of its old-economy rival, Walmart. As a result, returns excluding aws are puny and the pandemic is squeezing margins in e-commerce further.

Mr Bezos says the firm can become more than the sum of its parts by harvesting data and selling ads and subscriptions. So far investors have taken this on trust. But the weak e-commerce margins make it harder for Amazon to spin off aws. This would get regulators off its back and liberate aws, but would deprive Amazon of the money-machine that funds everything else.

Mr Bezos’s last worry is competition. He has long said that he watches customers, not competitors, but he must have noticed how his rivals have been energised by the pandemic. Digital sales at Walmart, Target and Costco probably doubled or more in April, year on year. Independent digital firms are thriving.

If you create a stockmarket clone of Amazon lookalikes, including Shopify, Netflix and ups, it has outperformed Amazon this year. In much of the world regional competitors rule, not Amazon; among them are MercadoLibre in Latin America, Jio in India and Shopee in South-East Asia. China is dominated by Alibaba, and brash new contenders like Pinduoduo.

Imitation is the sincerest form of capitalism

The world’s most admired business is thus left having to solve several puzzles. If Amazon raises wages to placate politicians in a populist era, it will lose its low-cost edge. If it spins off aws to please regulators, the rump will be financially fragile. And if it raises prices to satisfy shareholders its new competitors will win market share.

Twenty-five years on, Mr Bezos’s vision of a world that shops, watches and reads online is coming true faster than ever. But the job of running Amazon has become no easier, even if it no longer involves packing boxes.

The pandemic and state finances

The state-budget train crash

Why this could cost lives and set back economic recovery

THE START of the fiscal year—July 1st in most states—is usually about as exciting as a 501(a) tax filing and as unpredictable as a Saudi weather forecast (sunny again!). Not this time. State tax revenues collapsed in April, falling on average by half, according to the Urban Institute, a think-tank. Demands on spending soared because the states are responsible for much of America’s spending on public health, unemployment and policing.

By some calculations, state-budget deficits will reach a quarter of revenues in the coming fiscal year—or would do, if most states had not bound themselves by law to run balanced budgets. So instead of vast deficits, the states will have to make savage cuts to public services in the midst of a recession and pandemic. Through no fault of their own, their budgets are out of control and are about to hit the buffers.

Two-thirds of state revenues come from income taxes or sales taxes. Sales taxes have been devastated by the closure of shops and restaurants and income taxes by the rise in unemployment. The jobless rate was 13.3% in May, according to the Bureau of Labour Statistics, up from 3.5% in February. Each percentage-point rise in the unemployment rate cuts state tax revenues by over $40bn, or 4.5%.
Revenues have fallen so fast that some states do not even know by how much. Of those that have reported estimates, Louisiana saw tax revenues drop by 43% in April compared with April 2019 (“surreal”, the state treasurer called that).

New York’s were down by two-thirds and California’s income-tax receipts plunged 85%. Revenues in April were doubly depressed because the federal government, with states following suit, moved tax-filing day from April to July, causing uncertainty about when income tax will be paid. Revenues may recover somewhat.

But Ronald Alt of the Federation of Tax Administrators, which advises state governments, reckons that, collectively, state tax revenues will fall by $150bn between the start of April and the end of June. He expects income taxes to fall by half and sales taxes to fall by 44%. This decline is larger in nominal terms than during the Great Recession, when state tax revenues fell by $100bn from peak to trough in three years.

State and local governments spend slightly less than the federal government, about 17% of GDP, compared with a federal share of 20%. But they are disproportionately important to the coronavirus response because unemployment insurance, public health and Medicaid (which provides health insurance for the poor) are largely organised by states. Connecticut usually gets 3,000-3,500 new unemployment claims a week. In April it got 30,000 in a week. In New Jersey, enrolment in Medicaid was nine times higher in April than it had been a year earlier.

For the past nine years, states have cautiously increased spending. At the start of 2020, before the pandemic hit, states were expecting increases in both revenues and spending of about 2%. Instead, the virus has driven a wedge between the two.

Lucy Dadayan of the Urban Institute estimates that the gap will be around $75bn in fiscal 2020 and $125bn in fiscal 2021. The Centre on Budget and Policy Priorities (CBPP), another think-tank, reckons it will be even higher: $120bn in the current fiscal year, $315bn in fiscal 2021 and $180bn in 2022, a grand total of $615bn, which is six months of current spending. (These forecasts show the difference between what was expected before the pandemic and what is expected now.)
The range in estimates reflects the difficulty of forecasting the impact of the pandemic and expectations of spending cuts. The exact amounts, however, matter less than the fact that, first, the figures are large and, second, that most states cannot run deficits anyway, so the numbers indicate the extent of future spending cuts, rather than deficit-financing needs.

These cuts will be mitigated by states’ financial reserves and by federal help. The rule that states must balance budgets has made them fiscally conservative. Most used the 2010s to build up reserves. According to the Pew Charitable Trusts, a nonpartisan think-tank, these reached $75bn in 2019, the highest ever, equal to 8% of spending (or 28 days’ worth).

But that is just an eighth of CBPP’s forecast of the shortfall in 2020-22. The costs of the pandemic have swept away the benefits of caution.

The federal government has also offered help, but not enough. It is financing new unemployment insurance introduced during the pandemic and in March gave states an extra $110bn. But the money may not be used to compensate for revenue shortfalls. And anyway, the (bipartisan) National Governors Association reckons states need $500bn.

Glenn Hubbard, the former head of George W. Bush’s Council of Economic Advisers, calls the extra help “about as close to a possible”. In mid-May the House of Representatives promised $500bn. But the bill stalled in the Senate, where the majority leader, Mitch McConnell, has said states should be allowed to declare bankruptcy instead (which may not be constitutional).

This leaves states struggling to balance budgets largely on their own.

Prepare for pain

With tax increases politically unfeasible at the moment, states will have little choice but to impose big spending cuts.

Ohio’s governor has instructed state agencies to chop their budgets by 20% in the coming fiscal year. In Washington state, the reduction is 15%.

California’s governor and legislators are deadlocked over plans for $14bn of spending cuts, but even these would not be enough to close the expected $54bn deficit.

Spending cuts imply lay-offs. The states have already furloughed or sacked 1.5m workers in March, April and May, twice as many as in 2009-11.

Such cuts will be a drag on growth when recovery starts. As Pew’s Josh Goodman points out, states were reining back spending years after the Great Recession, resulting, as late as 2018, in shortages of teachers, and infrastructure spending at 50-year lows as a share of GDP.

The budget squeeze now will be greater than it was then. And remember what programmes are provided by states: Medicaid at a time of covid; unemployment insurance at a time of recession; policing at a time of protest.

In the absence of proper presidential leadership, governors such as Maryland’s Larry Hogan and Michigan’s Gretchen Whitmer have provided much of what useful guidance America has had during the pandemic.

But they, and other governors, must now brace themselves for the coming crash.

A Tidal Wave of Bankruptcies Is Coming

Experts foresee so many filings in the coming months that the courts could struggle to salvage the businesses that are worth saving.

By Mary Williams Walsh

Already, companies large and small are succumbing to the effects of the coronavirus. They include household names like Hertz and J. Crew and comparatively anonymous energy companies like Diamond Offshore Drilling and Whiting Petroleum.

And the wave of bankruptcies is going to get bigger.

Edward I. Altman, the creator of the Z score, a widely used method of predicting business failures, estimated that this year will easily set a record for so-called mega bankruptcies — filings by companies with $1 billion or more in debt. And he expects the number of merely large bankruptcies — at least $100 million — to challenge the record set the year after the 2008 economic crisis.

Even a meaningful rebound in economic activity over the coming months won’t stop it, said Mr. Altman, the Max L. Heine professor of finance, emeritus, at New York University’s Stern School of Business. “The really hurting companies are too far gone to be saved,” he said.

Many are teetering on the edge. Chesapeake Energy, once the second-largest natural gas company in the country, is wrestling with about $9 billion in debt. Tailored Brands — the parent of Men’s Wearhouse, Jos. A. Bank and K&G — recently disclosed that it, too, might have to file for bankruptcy protection. So did Weatherford International, an oil field services company that emerged from bankruptcy only in December.
More than 6,800 companies filed for Chapter 11 bankruptcy protection last year, and this year will almost certainly have more. The flood of petitions from the worst economic downturn since the Great Depression could swamp the system, making it harder to save the companies that can be rescued, bankruptcy experts said.

Most good-size companies that go into bankruptcy try to restructure themselves, working out payment agreements for their debts so they can stay open. But if a plan can’t be worked out — or isn’t successful — they can be liquidated instead. Equipment and property are sold off to pay debts, and the company disappears.

Without reform in the system, “we anticipate that a significant fraction of viable small businesses will be forced to liquidate, causing high and irreversible economic losses,” a group of academics said in a letter to Congress in May. “Workers will lose jobs even in otherwise viable businesses.”
Among their suggestions: increasing budgets to recall retired judges and hire more clerks, and giving companies more time to come up with workable plans to prevent them from being sold off for parts.

“Tight deadlines may lead to overly optimistic restructuring plans and subsequent refilings that will congest courts and delay future recoveries,” they wrote.

The pandemic — with its lockdowns, which have just started to ease — was enough on its own to put some businesses under. The gym chain 24 Hour Fitness, for example, declared bankruptcy this week, saying it would close 100 locations because of financial problems that its chief executive attributed entirely to the coronavirus.

But in many cases, the coronavirus crisis exposed deeper problems, like staggering debts run up by companies whose business models were already struggling to deal with changes in consumer behavior.

Hertz has been weighed down by debt created in a leveraged buyout more than a decade ago, and added to it with the acquisition of Dollar Thrifty in 2012. As it was battling direct competitors, the ascent of Uber and Lyft further upended the rental-car industry.

J. Crew and Neiman Marcus were carrying heavy debt loads from leveraged buyouts by private equity firms while struggling to deal with the changing preferences of shoppers who increasingly buy online.

Neiman Marcus declared bankruptcy the same week as J.Crew, for many of the same reasons.Credit...Mandel Ngan/Agence France-Presse — Getty Images

Oil and gas companies like Diamond and Whiting borrowed heavily to expand when commodities prices were much higher. Those prices started to fall as production increased, and plunged further still when Russia and Saudi Arabia got into a price war shortly before the economic shutdowns began.

(And then there are cases that have nothing to do with the pandemic but nonetheless take up time and energy in the courts. Borden Dairy, a Dallas company with a history that goes back to 1857, declared bankruptcy in January, a victim of declining prices, rising costs and changing tastes.)

A run of defaults looks almost inevitable. At the end of the first quarter of this year, U.S. companies had amassed nearly $10.5 trillion in debt — by far the most since the Federal Reserve Bank of St. Louis began tracking the figure at the end of World War II.

“An explosion in corporate debt,” Mr. Altman said.

Having a lot more debt to deal with is likely to make the coming bankruptcies a bruising experience for unsecured creditors, who may include retirees with pensions or health benefits, vendors waiting to be paid, tort plaintiffs whose lawsuits are cut short and sometimes even current workers. If a company goes into bankruptcy with more secured debts than the value of its assets, the secured creditors — including vulture investors who bought up the debt for a song — can walk away with virtually everything.

The sums at play in some of these cases will be enormous. Mr. Altman expects at least 66 cases with more than $1 billion in debt this year, eclipsing 2009’s mark of 49. He also predicted 192 bankruptcies involving at least $100 million in debt, which would trail only 2009’s record of 242.
Hertz had problems even before the pandemic, including an acquisition eight years ago and the rise of ride-hailing services.
Hertz had problems even before the pandemic, including an acquisition eight years ago and the rise of ride-hailing services.Credit...Cindy Ord/Getty Images

Robert J. Keach, a director of the American College of Bankruptcy, said many companies had so far managed to put off bankruptcy by amassing cash and conserving it as best they can: drawing down existing credit lines, furloughing workers, delaying projects and taking advantage of federal and state pandemic-relief programs.

But when those programs expire, the companies will start burning through their cash. That’s when bankruptcy filings are likely to soar and stay elevated, Mr. Keach said.

Expect “a Covid-19 cliff” in the next 30 to 60 days, he said.

Companies that received loans under the federal Paycheck Protection Program may be waiting to file, said Mr. Keach, who practices bankruptcy law with the firm of Bernstein Shur in Portland, Maine. The loans can be converted to grants if the companies meet certain requirements, and if the borrowers can put off bankruptcy until they’re sure they won’t have to pay the money back, they will have more cash when they file.

That’s an important consideration, because Chapter 11 is expensive. A bankrupt company must pay the fees of the lawyers and other professionals that help it reorganize, as well as the fees of those who advise the official creditors’ committees.

Borden Dairy didn’t need the pandemic to push it into bankruptcy, but its cases and others will only add to the courts’ to-do list.
Borden Dairy didn’t need the pandemic to push it into bankruptcy, but its cases and others will only add to the courts’ to-do list.Credit...Tony Dejak/Associated Press

The experts’ recommendations to Congress walk a fine line. They suggest allowing companies more time to come up with reorganization plans, even though Chapter 11 cases are supposed to move quickly so bankrupt companies don’t burn through their cash before they reorganize.

Generally, the longer a company stays in bankruptcy, the greater the chances of a liquidation. And that increases the likelihood that the company’s troubles will spread: Suppliers of raw materials could fold if a manufacturer languishes in bankruptcy, and smaller stores in entirely differently lines of business can suffer if a shopping-mall anchor can’t stay open.

These risks are real, said Robert E. Gerber, who retired in 2016 as a bankruptcy judge in the Southern District of New York. One of his cases was the 2009 bankruptcy of General Motors, which moved at lightning speed to keep the automaker from going under for good.

“If G.M. had failed, God knows how many companies in the supply chain would have failed, and this would have snowballed terribly,” said Mr. Gerber, who is now of counsel with the Joseph Hage Aaronson firm. The cascade would have wiped out paychecks to workers throughout the supply chain, threatening other businesses and even the finances of the local governments that count on them for tax revenue.

That, Mr. Gerber said, makes it imperative that the bankruptcy system have the resources to deal with the coming rush of cases.

“Bankruptcy can’t print money for those companies,” he said, “but it can give a good number of them a chance of survival.”

Wealth Inequality Doesn’t Show Up in Broad Economic Metrics, Masking the Fragility of Our Current System

By Reshma Kapadia

Justin Tallis/Getty Images

Economic inequality is not a story that can be told in the aggregate. Most economic data are averages, which means that greater inequality—more wealth in the hands of the few—mathematically masks the real economic data that reveal the fragility of our system.

Take this data point from the Federal Reserve’s 2017 report: The average net worth for U.S. households is $692,100. Not bad. Dig just one level deeper into that same data and the average net worth of white households is $933,700.

For black households, it is $138,200. Go just a little bit deeper to see that part of this wealth disparity is due to homeownership: 74% of white families own a home; only 44% of black families do. And black families’ homes are less likely to appreciate in value, according to a McKinsey report released in mid-June that examined the wealth gap.

That discrepancy in homeownership is rooted in the not-too-distant past: From 1934 to 1962, more than 98% of federally backed mortgages went to white borrowers.

The wealth gap has an obvious racial tilt, but there’s great economic disparity no matter how you look at it. “Upper income” families—which had a median net worth of $810,800, according to a 2017 Pew study—were the only tier able to build wealth from 2007 to 2016, adding 10% to their median net worth.

Middle-income families—$110,100 in median net worth—lost 33% of their wealth. Access to retirement savings plays a role; high-income families are seven times more likely to have retirement account savings as low-income families, according to the Economic Policy Institute.

There’s also a broader economic implication: These gaps make Federal Reserve policy less effective. For example, the low interest rates and flood of liquidity that the Fed unleashed to get the economy out of the global financial crisis fueled the last bull market.

But the biggest beneficiaries were higher-income families that tend to hold much of their wealth in financial assets, while most middle-class families’ wealth is tied to their homes.

“The big criticism of the government stimulus in 2008 and 2009 was that it directly stabilized financial markets and let the market get back but didn’t prevent home foreclosures that affected ordinary people,” says Robert Gordon, professor of economics at Northwestern University.

With the Fed unleashing another wave of liquidity and keeping rates low for the foreseeable future, it again has boosted stocks and allowed those with high credit scores to borrow cheaply.

But lower-income borrowers already saddled with debt can’t typically access the ultralow rates—and tend to have trouble accessing funding from banks entirely, exacerbating the inequality, says Karen Petrou, co-founder of regulatory advisory firm Federal Financial Analytics.

Though aggregate Fed data suggest that most households were not highly leveraged last year, the bottom half of households held nonmortgage liabilities that were 170% of the value of the durable goods they owned—a precarious position if anything were to go wrong, Petrou says.

Other stimulus measures also tend to help those that are already in better shape. Much of the Fed’s firepower helped stabilize funding and other markets, and while it set up a Main Street lending facility, its minimum-size loan is too big for most tiny businesses. And larger businesses with long-established relationships with banks nabbed the first rounds of the Paycheck Protection Program.

“When you work within confines of inequality, you are essentially just going to reproduce what you already have,” says Andre Perry, a fellow at the Brookings Institution. “When they said the loans were going through traditional big banks—that is where traditional discrimination happens—no one was surprised by roughly 95% of black-owned businesses not getting any of the loans.”

Wealth offers a safety net in bad times, such as during broad economic or health shocks. But it’s equally important in good times, as it allows individuals to take risks in their careers and businesses.