With the rapid spread of COVID-19, it’s natural to be worried or scared. However, we’ve all seen examples of people overreacting, and that includes images of empty grocery store shelves on Instagram due to people hoarding food.
We haven’t seen a pandemic on this scale in over a century, but we’ve seen hysteria like this before. The hysteria of the Great Depression led to the bank run in the early 1930s, and that’s something we don’t want to repeat with food. However, our free-market system will make it easier for stores to restock their goods.
What Was the Bank Run?
The stock market crash of 1929 was one of the factors that led to the Great Depression in the 1930s. After the stock market crash and in the years leading up to the worst part of the Depression, many Americans panicked due to the severity of the economic crisis. Many took the majority, if not all, of their money out of banks. This forced many banks to liquidate their funds and lead to their failure, which made the Depression even worse in the long run.
Many Americans took the majority, if not all, of their money out of banks. This forced many banks to liquidate their funds and lead to their failure.
Some banks tried to act by shortening their hours and limiting the number of bills they could give to each customer, which resulted in long lines and angry customers. These actions would have in fact worked, as they had in the past. Banks had a standard practice of how to slow the drawing of money out of the bank during a run, and they had been successfully using that system for decades. What made the Great Depression different was a series of bad actions by the Federal Reserve several months later that flooded the economy with cash long after the run had ended, causing massive inflation and worsening the Depression.
It’s important to remember that when experts recommend a self-quarantine period that it’s for 14 days. That’s only two weeks. Yet, we see videos on social media of people buying enough food for a doomsday bomb shelter. You can easily buy enough food to feed a family for two weeks without clearing the shelves. In short, like the run on the banks, people aren’t thinking rationally and are buying way more food than they need, making the problem much worse than it needs to be.
You can easily buy enough food to feed a family for two weeks without clearing the shelves.
Grocery stores today are taking similar actions that the banks did in the 1930s, like rationing supplies, making people wait in lines to go inside, or funneling people to fewer locations and therefore expend fewer resources restocking many different locations. However, some of the differences between this food panic and the run on banks are positive.
In socialist countries like Venezuela, food rations are a daily occurrence. They don’t operate under a free market system, leaving grocery stores unprepared for these types of crisis because they have no control over what they sell. In the United States, we don’t have this problem because our free market system lets companies restock due to supply and demand to make sure no Americans starve during this crisis.
With the free market and supply and demand, it’s easier for food companies to prepare for a crisis like this. This is something that those who are critical of capitalism fail to recognize.
With the free market and supply and demand, it’s easier for food companies to prepare for a crisis like this.
Helping Those in Need
The crisis has, unfortunately, hit those who can’t afford food the hardest. This is why it’s important to check in on our family, friends, and neighbors who aren’t doing well in this crisis. Go on a grocery store run for an elderly neighbor, or donate to or volunteer at your local food bank or homeless shelter to help those in need.
It’s completely normal to be nervous or worried during the COVID-19 crisis. It’s important to be as safe as possible to stop the spread of the virus, but also remain calm and not repeat mistakes we have made in history. Thanks to our free market system, grocery stores will restock, and we will all get through this together.