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Covid-19 and the global economic crisis. Graphic: Pixabay/Gerd Altmann

Covid-19 and the global economic crisis. Graphic: Pixabay/Gerd Altmann

The global economic crisis rendered by the Covid-19 pandemic considered by Susan Newman

A global economic contraction on the scale of 1929 in the wake of the current pandemic seems certain, but beyond that when making comparisons with the Great Depression, and in particular the conditions that precipitated World War II, a lot remains to be determined.

In the words of Arundhati Roy, ‘the pandemic is a portal’. It brings the underlying tensions of the global capitalist system into sharp focus, as evidenced by mounting inter-imperialist rivalry between the US and China. This rivalry, of concern to US neoconservatives since the late 1990s has been sharply exacerbated by Trump’s response to the pandemic.  

Covid 19 has also led to intensified inequality between capital and labour.  Essential workers’ low pay, unsafe labour conditions, and lack of access to PPE belies the critical role they play in society. Fortunately, this has catalysed significant outbreaks of collective action and resistance. One notable example, being that of workers in Amazon warehouses across in the US, France, Italy, Spain and Poland who have held work stoppages, walk-outs, sick-outs and protests, another that of cleaners in the NHS.

What these actions show is that as the inevitable economic collapse ensues, its outcome will depend critically on workers’ organisation and the success of social movements to shape, energise, invigorate and sustain resistance against government responses to the crisis that are led by the interests of the billionaire class.  Critically, this requires both a powerful socialist critique of capitalism and official responses to the economic fallout of the pandemic and proposal for radical reorganisation of the economy that serves humanity and our natural world.

Coroneconomics – shifting parameters of economic policy and debate

The pandemic, and ensuing economic crisis lay bare the deep-rooted failures of the ‘recovery’ from the 2007-09 financial crisis. The effect of the global financial crisis was to stretch the narrow terrain of neoliberal orthodoxy slightly, placing the options of capital controls and economic stimulus back on the table. However, this was extremely limited. In the UK, quantitative easing to increase the money supply for banks and businesses raised asset prices and the wealth of the owners of these assets. This operated alongside harsh and inhumane austerity measures. The overall effect of these measures was rapidly intensifying inequality.

The system of financialised capitalism ‘recovered’, keeping in place the crisis prone economic structures.

We are still at the very beginning of the current crisis, but already the terrain of economic possibility has been stretched further than in 2007-9. In the US, trillions of dollars of emergency government spending have been triggered by the pandemic. Sunak’s emergency budget was interpreted in the Financial Times as signalling an end to Austerity in the UK.  The spectre of inflation no longer haunts the global economy as governments turn towards monetary financing of deficits – drawing on overdrafts at central banks in addition to selling government bonds. High debts, mass unemployment and damaged economies are inescapable. Even right-wing ideologues have to accept that any recovery of the economy will involve higher rates of corporate taxation and wealth redistribution and massive government borrowing and expenditures. This has certainly widened the distance between the poles of the debate.

Access to government support and its impact has been highly uneven. Large companies have accessed the government furlough scheme whilst continuing to pay high salaries and bonuses to CEOs as well as dividends to shareholders. Trump’s stimulus package is mostly another corporate bailout. A recent report from the Institute of Policy Studies found that America’s super-rich saw a rise in wealth by $282 Billion in 23 days of pandemic. The NHS continues to face acute shortages in PPE 6 weeks into lockdown.

As socialists we should be mobilising to force the direction of government intervention towards social welfare. We must oppose the bail-out of airlines and call to account corporations and wealth owners who have evaded taxation and, in some cases, profited from the pandemic. We have to push for conditions attached to government financial support of large corporations to include, socialisation of benefits as well as risks, direct workers’ participation and a more equitable distribution of income as well as serious conditions to minimise emissions and waste. We must resist any attempt for further austerity as a means to repay an enormous national debt.

Beyond the pandemic

As socialists, we must push for more than the restoration of capitalism with more humane features.  A reliance on economic growth shaped by billionaires cannot be the solution to the crisis. We have to fight for an alternative that has a radically different system of production and distribution at its heart.

The disruption to global supply chains, in particularly for food, has shone a light on both the fragility of the globalised capitalist model of production as well as what can be considered essential. A handful of multinational food retailers control the bulk of global food supply chains globally. They have been notable in their ability to squeeze suppliers in the Global South as well as in the West. UK agriculture has been commercially viable in recent decades only by employing seasonal gang labour from the EU periphery. Threatened with collapse, the industry has resorted to flying workers from Romania into the epicentre of the pandemic. While food sector workers are now considered essential and key, the capitalist system will not recognise this through improved wages and labour conditions.

The food industry is notoriously wasteful; an estimated 30-40 percent of food supply is wasted each year in the United States. Still 12.3 percent of US households were food insecure in 2016 and food poverty in the UK has been on the rise since 2010 and has intensified since lockdown. It is falling upon mutual aid groups to feed communities in England. Food price increases hit poorer households much harder where larger shares of household incomes are spent on food.

The only viable answer is the social reorganisation of production and the radical reprioritisation of production to meet the needs of society and averts climate catastrophe. This would involve democratic workers’ participation and the replacement of global supply chains in favour of international cooperation and equitable exchange. The system of food provisioning would be an obvious start, along with medical supplies and housing. Any interventions for dirty industries – oil, automotive, airlines - on the brink must be focused on their rapid closure and redeployment of workers and productive capacity towards new priorities and not their bail out.

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