Get ready for the $4.5tn takeover

One of the most moving responses to the coronavirus came from Italians quarantined at home singing together from their balconies. They were running Il Canto della Verbena or Volare. The subtext was that interdependence is the only defense humans have against their own frailty. For postwar individualist philosophers like Ayn Rand – cheerleader for the primacy of private capital – the template is well and truly in place.

Witness the extraordinary efforts of governments to stabilize their economies and prevent business collapse. The United States approved a $ 2 billion aid package in the early hours of Wednesday morning and the global bailout – including central bank liquidity support – will cost more than $ 4.5 billion.

That’s a large number, even by recommended buyout standards. And do not doubt that it is a takeover. Bringing in the state to help ward off the virus is like a tactic in which target companies recruit “white knight” bidders to thwart hostile offers from strippers. It’s an ironic term for the worst option.

Many businesses are now in the same place in need. Entire sectors – including airlines, hotels and cruise lines – will be out of business for months. For many businesses, revenues will be lower than overhead. But state support and the quid pro quos that accompany it are preferable to bankruptcy.

“It’s analogous to a war that we have to fight for,” says Jesse Fried, economist and law professor at Harvard. “This is not part of the normal boom and bust cycle.”

The UK is ahead of the U.S. on infection levels per capita. Britain therefore provides transatlantic guidance on how the coronavirus can extend state boundaries. Recently, the government has pledged loans and grants to businesses worth £ 330 billion and a basic salary for company employees who are out of work. Echoing the economy of command in wartime, ministers coordinate supermarkets to distribute food and manufacturers to manufacture fans.

“If the government said it was nationalizing all shoe stores in the UK, people would think it was entirely plausible,” jokes Howard Davies, president of the Royal Bank of Scotland.

For outright traders, the only pity is that Mr. Johnson is a manager in conflict. Conservatives are qualified for interventionism because they generally pursue it out of necessity, not out of choice. The irony of the Conservatives’ decision to adopt the Labor opposition agendas is weaker than the experts claim.

However, the government will have to go further, in particular by easing loan conditions. Travel companies like airlines need bailouts. If the state also takes equity, it will end up with a stock portfolio again. All this after 40 years of privatization interrupted only by a brief detour through bank bailouts.

These timely interventions will create a legacy that will take years to relax. “The danger is that free market economies will end up looking like collective Soviet tractors,” warns Simon French, chief economist of broker Panmure Gordon. In the long term, the loans must be recovered or amortized and the holdings must be sold.

Almost everything that economic libertarians disapprove of happens all at once. “If your house burns down, you have to put up with the firefighters who flood it with water,” sighs Matt Kilcoyne of the Adam Smith Libertarian Institute.

Unfortunately for Mr. Kilcoyne, the works of libertarian philosophers like Ayn Rand are among the goods that go up in smoke. Traumatized by the evils of communism, this Russian emigrant invented an equally ruthless materialist philosophy. It glorified entrepreneurs rather than workers and improved financial relationships, not community ties. It fueled the neoliberal vision of the 1990s on corporate globalization as a power base parallel to nation states.

The September 11, 2001 terrorist attacks and the 2008 financial crisis damaged ideology. The emergence of tech giants has kept her alive in the more individualistic society of the United States. But the coronavirus dispels any doubt that the state, not businesses, is in charge. This can create money or a pencil in future tax increases. Businesses cannot.

What they can do now is help. Impending bankruptcy prevents this for many. But many companies are creditworthy and can show that they are part of society more significantly than printing a pretty brochure once a year.

The French luxury group LVMH manufactures a hand sanitizer. British grocer Morrisons has set up a call center for the elderly who cannot order food online. Amazon would distribute Covid-19 test kits.

Aside from homework, it makes sense to build up goodwill now. This may be necessary in the years to come, when each buyout and payment of executives is faced with a difficult public sniff test. Companies in developed and democratic countries need to get out of the coronavirus particularly well to maintain their competitive advantages.

Lucy Neville-Rolfe, a conservative and great peer of the city, puts it this way: “When the plague broke out in ancient Athens, it allowed Sparta, more disciplined, to become dominant.” No price to guess, as China is looking to break out of its own coronavirus lockdown, which could be Sparta this time.

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