Lessons gleaned from the pandemic


Sept 5, 2021
By Jim Larson

For economist Pat Barkey, the pandemic affirmed the role of government in the economy.

From an economic standpoint, the virus taught us the advantages of “to use President Biden’s phrase, going in big,” he said. 

Conversely, he argued that the viral onslaught dealt a blow to those who were against government intervention in the economy. “If you embrace the philosophy of limited government. If you really think that government should stay out of the way of x, y and z, whatever is on that list, the pandemic has been very tough on you, because the essence of a pandemic is that what we do affects everyone else,” he said during an online interview in April.

“So one of the lessons of this, if you will, is that there has to be, and no matter how you feel philosophically, and many people fight this tooth and nail, there has to be some government involvement in public health planning,” he said.

Barkey said that the government “fumbled the ball this time.” The economist called the handling of the pandemic a public health failure and a private sector drug company success.

Barkey argued that the public needs to demand better performance from the government, but he said that it was unclear how that would happen. “I mean, I don’t know if you can embarrass these people more than they have been embarrassed.”

The pandemic, Barkey noted, changed the way economists looked at the economy. Traditionally, they look at unemployment rates, and other government statistics, but those, while still useful, moved slowly. The pandemic caused analysts to adopt, more rapidly, private sector sources.

One of those, Barkey said, was called a mobility index. As Americans move around with their cell phones, cell phone towers track where they go. You can pick a city, he noted, and tell how many people were moving on any given day. The pandemic taught economists more about data about new sources of data, “and we’re not going to unlearn that,” he said.

The economist added that “What I just said about economics has happened in almost every industry.” Restaurants learned about takeout. Retail learned about ecommerce. Real estate learned about showing houses via Zoom. “...that toothpaste is not going back into the tube,” Barkey noted.

Turning to Montana, Barkey noted that the state experienced a jobs recession rather than an income recession, and that was the case in every urban area in the state. For Montanans, the low point came in March and April last year, “whether they were in high flying Bozeman or not quite as high flying Lewistown or you name it.” 

He observed that before the pandemic, different areas of the state followed different economic trajectories, but “this was one big storm cloud that settled over the entire state, and it didn’t miss anywhere.”

Barkey said that one of the reasons that job loss outstripped income loss was that some of the hardest hit industries didn’t pay well to begin with. Accommodations and restaurants were “disproportionately hit,” he noted. He added that in certain fields, jobs were actually added. In industries such as healthcare and grocery, jobs were added or workers worked longer hours and some received bonuses.

The Missoula-based economist sees growth in Montana’s near-term future. The fall in the economy was catastrophic, he said, but he predicted the “...a pretty big explosion of job growth..” 

Barkey predicts growth in the “high single digits,” a term generally only used by newscasters describing Montana’s weather. He noted that economic prognosticators are revising their expectations and are predicting “a really big surge back this year as the economy opens back up and government spending really hits.” 

Barkey warned that the state might be in for a “hangover” next year as the “sugar” (government spending) wore off. He noted that growth was being measured against the low bar of last year and was being spurred by government spending.

On a positive note, Barkey said that the pandemic might be the type of event that shakes up the economy and gets the permanent rate of growth restarted. There are many talented people who have “been shaken from their jobs.” That talent could plug itself into new business opportunities, he added.

He mused that the pandemic might add a new dynamic to the economy.  He said that unknown to most, the number of new business startups has been in decline since the early eighties. There is evidence he said, that that trend is beginning to reverse. Describing the process, Barkey referred to economist James Schumpeter’s term, “creative destruction, and what he meant by that is that the economy, the market economy, is a brutal place.”