Coronavirus: State may have to play God on which businesses survive the pandemic
Is it sustainable for taxpayers to bail out sectors that are unviable due to social distancing?
A view of a practically deserted Grafton Street due to Covid-19 restrictions. Photograph: Bryan O’Brien
Imagine for a moment that the Government announced a precipitous reduction in coronavirus cases. Infection rates fell off a cliff and the financially exhausted State suddenly lifted most lockdown measures. How would you celebrate?
Would you head straight to the usual venue for most Irish celebrations: the pub? Perhaps, if it was your local watering hole, you might meet friends there with whom had not been in touch for weeks. Your instinct would be to shake hands or at least to greet them warmly.
You might manage to suppress the urge, at least while you stay sober. But how likely is that when you’re celebrating?
The pub would probably be busy, so you might have to squeeze your way through other patrons to get to the bar or bathrooms. Anyone who has frequented a busy pub knows how to do that peculiar sidewards shuffle while pressed between the bodies of other people. It’s like a delicate, vertical limbo dance.
As more drinks were consumed and inhibitions and social distances reduced, would people really be prepared to hang out again in packed pubs? Would smokers go back to huddling, flirting and coughing together in sheds and gazebos. Would drinkers be prepared once to again wade into deep queues at the bar?
Of course not. The pub scenes described above, while typical in every town and village in the country until six weeks ago, are now a total fantasy in a Covid-19 world. No matter how joyous people would feel when the lockdown is lifted, they would be simply too afraid to go back to how things were. Not for a long time.
The realisation is slowly dawning on people that our social and leisure behaviour, and thus our consumer spending patterns, may fundamentally and permanently change because of this infernal pandemic. That will fundamentally change consumer businesses.
Simon Harris, the Minister for Health, this week stated the obvious: that social distancing measures will remain a part of life until a vaccine is found. Experts say that could take up to two years, or even longer, by the time it is widely deployed.
That has profound implications for the business models and the basic viability of vast chunks of the hospitality, retail and leisure sectors.
How can pubs, for example, possibly operate in any sustainable fashion alongside long-term social distancing? It looks nigh on impossible, so therefore their long-term future is in question in the absence of a vaccine. Restaurants and hotels still have a chance with social distancing, but not pubs or nightclubs.
The hospitality and tourism sector employs 260,000 people and is in dire need of ongoing State assistance. But if the basic operation and long-term viability of whole sections of it are in doubt, it raises questions as to what extent, and even if, the State should risk public money helping them out.
That goes not just for any businesses that rely on people being content to interact in close quarters. What about hairdressers? Cosmetic parlours? Teeth whiteners? These questions will become increasingly urgent as more and more sectors of the economy line up for State support.
The Government has demonstrated an unprecedented willingness in recent weeks to support those in difficulty with public money. But as keen as Ministers are to help everybody who asks, the State’s finances are not unlimited.
Finite bailout cash will have to be rationed. Not because of a lack of empathy or care but because of a lack of resources.
The State will have to borrow to fund industry bailouts. Ireland went into the last economic collapse, in 2008, with public debt at less than 24 per cent of the size of the economy, as measured by GDP. This time, our starting debt position is proportionally over 2½ times bigger at about 65 per cent.
But everyone knows Irish GDP is a fantasy leprechaun economics figure, distorted by the impact of multinationals. Debt as a percentage of the domestic economy is, in truth, somewhere close to 106 per cent. That puts a different spin on the Government’s promises to do whatever it takes to support the economy.
Whatever it takes and whatever is possible may yet form an unbridgeable gap.
The State is already bailing out workers with subsidies of up to 85 per cent of their wages and inflated unemployment payments. Overall, the State has already committed to extra spending of about €9 billion this year.
That is only the beginning. Retail Excellence yesterday called for extra industry supports of almost €2 billion. All commercial tenants may eventually seek some sort of State help. Airlines, childcare facilities, rates-starved local authorities, and bank borrowers. All could need State support.
If the Covid-19 crisis persists long term and a vaccine proves elusive, could the banks themselves even require more help?
The next Government, no matter what hue it is, may have to make tough decisions on which businesses to prop up with public money, and which to let go. Ministers may have to play God, as they distribute rationed bailout cash.
That raises interesting and fundamental ethical questions about the morality of committing taxpayers’ money to support parts of the economy that may no longer have a viable future.
Retailers, hospitality operators and other consumer businesses don’t just need State support.They need scientists to find a vaccine.
People will be in no mood to celebrate anywhere until that happens.