At the beginning of the pandemic, unemployment rose sharply, and panicked shoppers emptied store shelves of durable goods. But over the following months, the economy proved remarkably resilient. Civil order held. Neither the water supply nor the electricity grid was seriously imperiled because of the pandemic. Toilet paper quickly returned to supermarkets near you. Lifesaving vaccines were invented, and are now being distributed, in record time.
Although many companies went out of business, and many continue to struggle, others succeeded at adapting their services to the terms of the pandemic—restaurants went all in on takeout, fashion designers made masks. Commercial activity and demand for labor picked up at breakneck speed. Technology companies that figured out how best to connect loved ones and co-workers virtually knew they stood to make astounding profits. That helped unleash an awe-inspiring wave of creativity that made a terrible year a little more bearable. The U.S. unemployment rate now hovers around 6.2 percent—not great by American standards, but lower than the levels many countries record in boom times.
The much-maligned welfare state played a large role in this success story. A purely free-market economy would have left millions to their own devices as a virus destroyed their livelihoods. Thankfully, the mixed economy of the United States—and, to an even greater extent, those of most other developed democracies—recognizes that many people end up in dire situations through no fault of their own. Existing entitlement programs, coupled with generous relief payments for individuals and small businesses affected by the pandemic, ensured that millions of people had access to food and were able to pay their rent. America’s poverty rate actually fell in 2020.