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The signs point towards a sustained crisis after the pandemic, not an equitable recovery, argues John Clarke

Global capitalism’s political leaders are very anxious to assure us that the years that follow the pandemic will be significantly kinder and gentler than the previous decades of neoliberal austerity. The prevailing discourse suggests that COVID-19 was a nasty shock that caused unavoidable economic dislocation but, as Joe Biden has framed it, we shall ‘Build Back Better.’ Without any doubt, as was made clear at this year’s gathering of the G7 in Cornwall, this approach is firmly linked to the pursuit of global rivalry with China. Still, a promise of class compromise, social peace and growing prosperity is being put forward by ‘world leaders’ and it is one gift horse that should get a very careful look in the mouth.

There is no doubt that the spread of the virus has forced unprecedented responses from capitalist states. These have included measures to preserve public health, temporarily elevated levels of social provision and very substantial outlays devoted to economic stimulation. These have been necessary to prevent social breakdown and stave off a wave of business failures that would have been catastrophic. In the fragile economic situation that presently exists, more of such initiatives are entirely possible. However, there is another mechanism at work that can’t be overlooked. Global capitalism is experiencing a very sharp crisis and the question of who will pay for it is decisive.

The Trudeau government in Canada, always anxious to present itself in a progressive light, has embraced this notion of a just recovery. Last autumn, a carefully crafted throne speech, brimming with fine sentiments and nebulous promises, offered ‘a stronger and more resilient Canada.’ However, a few months later, Trudeau wrote a ‘mandate letter’ to his finance minister that instructed her to employ ‘fiscal firepower’ to deal with the immediate impacts of the pandemic but to ‘avoid creating permanent new spending.’ This rather suggests that, emergency pump priming notwithstanding, the Trudeau Liberals are not really considering a major upgrade for Canada’s seriously degraded social infrastructure.

Enhanced measures of income support for those who have been displaced by the crisis are now being wound down. This is happening even though ‘many of the jobs wiped out by the pandemic aren’t coming back at the same rate of pay.’ The Liberals are ‘preparing Canadian workers for lower wages and a far more precarious future’ by implementing ‘a post-pandemic austerity regime in which employers will impose a new regressive standard on working people across Canada, leading to widening inequality and rising precarity in the labour market.’

The stealthy austerity measures that the Canadian government is adopting, in order to tilt the balance in favour of employers and against workers, are by no means the only indication of the shape of things to come. One particularly horrible clue is to be found in the treatment of homeless people in the country’s largest city. Toronto City Hall has been unleashing massive and brutal police operations to drive out homeless camps that have been set up in public parks during the pandemic. Though the mayor and his key allies present these harsh tactics as necessary to ensure public safety, the reality of what is unfolding is quite clear. With shelter options severely limited, homeless people had set up camps to try and stay safe as COVID spread throughout the city. Now, the interests of upscale redevelopment and business profits demand that the homeless disaster be driven from view. That such an ugly attack on destitute people is being undertaken in a city that drips with wealth, says much about the recovery that is being prepared and who will benefit from it.

New Deal?

Joe Biden has certainly advanced plans for major measures of economic stimulation and infrastructure spending. It becomes clear, however, that the political horse trading and ‘bipartisan’ negotiations that this latter day New Deal must pass through are going to ensure that the final result falls far short of initial promises. In the meantime, the precarious situation facing millions of hard pressed tenants suggests that very severe post-pandemic impacts lay ahead. By the end of May, 6.4 million US households were behind on their rent and, by July, it was estimated that 3.6 million of them faced eviction within two months. The Biden administration allowed the country wide moratorium on evictions to expire and, only on the very brink of a catastrophe, has a temporary measure been taken to avert it. However, unless the impossible rental arrears that millions of people face are addressed, such measures are only delaying a huge wave of evictions and a vast increase in homelessness.

In the UK, Claudia Webbe recently drew attention to a report from the Institute for Fiscal Studies that considers ‘the economic context for Rishi Sunak’s rumoured upcoming spending review in the Autumn.’ It concludes that ‘the Tory government will spend up to £17 billion less on a range of public services than they were planning to before the Coronavirus pandemic.’ That there are so many indications of a post-pandemic reckoning calls into question the official story of an equitable recovery.

Though the present crisis has forced major stimulatory spending, the idea of breaking decisively with the austerity approach of the last several decades and returning to the Keynesian past is fraught with complications. The limits on debt ratios and budget deficits in the EU’s Stability and Growth Pact will be suspended into next year but a debate rages between those who want to rapidly return to aggressive debt consolidation and those who feel that stimulatory measures can create an economic upturn that will make this unnecessary. The IMF blog has, similarly, argued that it will be possible to ‘allow growth to bring down debt-to-GDP ratios organically.’  The question, however, is whether any such sustained economic upturn is at all likely because stimulatory spending that fails to stimulate is obviously not a viable option.

Michael Roberts has been among those who have pointed out that the global economy was already moving into a recession before the coronavirus struck. He argues that capitalism faces severe problems based on low profitability and concludes that we are not in a situation comparable to the immediate post-war period when, following the large-scale destruction of capital, sustained economic upturn, robust profit making and relative class compromise was possible. Without such ‘creative destruction,’ even with the kind of measures the Biden administration is taking, it is more likely that a ‘sugar rush recovery’ is the best that will result.

The warning signs of employer and state offensives that we are seeing reflect the fact that the pandemic only triggered and intensified an already existing crisis within capitalism. As we move towards a post-pandemic situation, though further waves of the virus are far from precluded, the ‘economic scarring’ and huge debt obligations that have been taken on during the public health crisis, will lead to escalating attacks. Employers will seek to restore their profits through the increased exploitation of workers. Governments will want to impose the debt burden they have taken on with new rounds of social cutbacks and austerity. We are not moving into a period of social peace but of heightened conflict  and there is an urgent need to be ready to act accordingly.

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John Clarke

John Clarke became an organiser with the Ontario Coalition Against Poverty when it was formed in 1990 and has been involved in mobilising poor communities under attack ever since.

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