Coronavirus, crisis and the end of neoliberalism

Carmela Gross, SEA LION, BANDO series, 2016


While the COVID-19 pandemic may have occurred by chance, it was not unexpected. Its consequences are far more than scandalous: they are criminal, and the left must say this loud and clear.

Suddenly, we find ourselves in a transformed world. Empty streets, closed stores, sky as clear as ever and a galloping number of deaths: something unheard of unfolds before our eyes. Almost everywhere, news about the economy is alarming. The COVID-19 pandemic triggered the sharpest and deepest contraction economy in the history of capitalism.

Paraphrasing the Communist Manifesto, all that was solid melted into thin air. “Globalization” has gone into reverse; long supply chains, which until then were the only “rational” way to organize production, have collapsed and hard borders are back; trade declined sharply and international travel was sharply restricted.

Em matter of days, tens of millions of workers were out of work, and millions of businesses lost their employees, customers, suppliers and lines of credit. Several economies predict GDP contraction will be measured in double digits and a long range of economic sectors are begging governments for bailouts.

In the UK alone, banks, railways, airlines, airports, the tourism sector, charities, the entertainment sector and universities are on the brink of bankruptcy, not to mention displaced workers.[I] and the (so-called) self-employed, who lost everything because of a economic shock whose effects have not yet been fully felt.

Unguarded Neoliberalism

The policy implications are uncertain. Ideologically, neoliberal discourses about the imperative of “fiscal austerity” and about the limitations of public policies disappeared. Adherents of the Austrian school and neoliberals of all stripes quickly retreated into half-assed Keynesianism, as they often do when economies slump.

In times of famine, the first to grab the generous tits of the treasury wins the grand prize and state intervention is questioned only for what it has not yet done. The private sector and the media plead for government spending, and lavish “free market” preachers rush to TV screens to plead for unlimited public spending to save private enterprise.

No doubt they will return to normal when circumstances change and memories fade. At that point, the state will be “bad” again and public services will be ready for another round of cuts. Meanwhile, neoliberalism finds itself bereft of ideologues.

The angry portion of anti-vaccinationists, flat earthers and religious fanatics was reduced à denial da own pandemic — at immense personal risk — selling miracle cures based on unproven remedies, or praying and fasting together with the President of Brazil, Jair Bolsonaro. May the Lord save us from them.

Astonishingly, the epidemic itself was not unexpected. For decades, civilian and military strategists have considered a wide variety of scenarios similar experiences, especially since the experiences with HIV in the 1980s, SARS in 2003 and, more recently, Ebola and other “new” diseases. The likelihood of a flu-like virus emerging in animal markets in southern China was well known.

It follows that the public health and economic crises were not caused by planning failures. Rather, they reflect policy choices, the dismantling of state capabilities, appalling implementation failures and a shocking underestimation of the threat – for which, surely, reputations must be destroyed and heads must roll, as part of a reckoning systemic.

western mess

For several weeks in early 2020, China assured the world of time to prepare for the epidemic, and provided an example of how to tackle it. Other East Asian governments have formulated (more or less aggressive) policy alternatives, notably Singapore, South Korea, Taiwan and Vietnam, and have been quite successful.

However, the West was baffled: faced with a problem that could not be solved by sanctioning, blockading or bombing a distant land, the governments of the richest countries in the world did not know what to do. As expected, the UK and US governments fared especially poorly, while the EU, once again, disappointed on a time of need.

While the magnitude of the implosion of several economies – centered on advanced Western countries – is unprecedented and destined to have long-term consequences for the functioning of capitalism, COVID-19 has not hit a thriving global economy. At the beginning of 2020, the world was already involved in a “great stagnation” that followed the global financial crisis of 2007. Even the most poignant Western economy and with the best results, the USA, was visibly slowing down.

This is not to downplay the magnitude of the hurricane, as any economy would have been swept away; however, since COVID-19 hit fragile countries, it immediately exposed their vulnerabilities.

hollow states

The pandemic comes after four decades of neoliberalism, which exhausted state capacities in the name of the “superior efficiency” of the market, fostered deindustrialization through the “globalization” of production, and built fragile financial structures guaranteed only by the state, all in the name of profitability. short term.

The disintegration of the global economy has exposed the most uncompromisingly neoliberal economies, especially the UK and US, as being unable to produce enough face masks and personal protective equipment for their healthcare workers, let alone ventilators to keep their hospitalized population alive. .

At the same time, service delivery has transformed beyond recognition, with online working becoming the norm in countless regions in a matter of days, which normally would have taken years. Meanwhile, the neoliberal adoration of consumption has dissolved into undignified scrambles over hand sanitizer, pasta and sardines, as well as fistfights over toilet paper.

It quickly became clear that neoliberalism had emptied, fragmented and partially privatized health systems in several countries. It also created a precarious and impoverished working class, highly vulnerable both to interruptions in their incomes and to health problems due to lack of savings, poor housing, inadequate nutrition and work patterns incompatible with a healthy life. In the meantime, the destruction of the social democratic left left the working class politically unprotected.

These processes culminated in an indecent agitation for (state-run) Chinese production, with the US increasingly behaving like a hysterical bully, stealing masks and respirators it could neither produce nor afford, vilifying the most vulnerable countries.

uselessness of herd

Human encroachment on nature may have created the problem originally, but there is no doubt that the destruction of the collectivity under neoliberalism has exacerbated the impact of the pandemic. Emblematically, neoliberalism has devalued human lives to such an extent that valuable time has been wasted in several countries – notably those with more intransigent right-wing neoliberal administrations: the US, UK and Brazil – with government efforts to impose a strategy of “ herd immunity”.

Such an approach would inevitably have eliminated the old, the weak, and those in poor health (which could ease their “burden” on the budget), as an alternative to imposing a lockdown that, while proven effective in reducing human losses, would harm profits. , as well as – shock, horror! — would show that states can play a constructive role in social life.

Finally, massive pressure and evidence of success in China and elsewhere has forced even the most reluctant governments to impose lockdowns, often only partially and hesitantly, with such decisions at risk of being marred by mixed messages and incompetent implementation. In these countries, testing has also been restricted, and health service workers are often forced to deal with unbearable workloads without adequate protection. This approach to the pandemic will lead to thousands of unnecessary deaths for no purpose.

In the UK, the bumbling administration led by the ever-unreliable Boris Johnson found itself facing two evils: on the one hand, galloping estimates of deaths and, on the other hand, ever-worsening estimates of the potential drop in GDP. Pressured at first by the Conservative Party and some of the loudest business advocates for Brexit, the British government used its “medical experts” to justify the protection of profits and the idea of ​​a “small state” in the name of science.

In the face of an increasingly angry public opinion, the government changed its attitude dramatically in mid-March. It was already too late. Due to the government's earlier choice to delay action, its lack of preparedness and extraordinary ineptitude, the UK would inevitably end up with the worst of both worlds: countless dead (literally countless, as there was a deliberate effort to underreport loss of life). , and economic losses in the hundreds of billions of pounds.

Essential but vulnerable

The social implications of the pandemic quickly manifested themselves, for example, through the differential ability of social groups to protect themselves. In short, the super rich moved to their yachts, the just rich fled to their second homes, while the middle class struggled to work from home in the company of super excited kids.

But the poor, who on average already have worse health than the privileged, have either lost their income entirely or have had to risk their lives daily to perform much-praised but (needless to say) low-paying “essential work” like bus drivers, healthcare workers, doormen, salespeople, bricklayers, garbage men, couriers, and so on. While their families remained locked in tight spaces. It is not surprising that poor and black people[ii] are dramatically over-represented in death statistics.

In response to the shock, many governments dusted off economic policies implemented after the 2008 crisis, but these quickly proved insufficient: the current economic meltdown is much broader, the crisis will be much bigger, and bailouts will be more expensive than expected. Never. First of all, central banks have started to provide direct financing to large companies: essentially, they are delivering “helicopter money” to selected capitalists (money that, in some cases, was immediately transferred to shareholders as dividends).

To disguise the unseemly spectacle of billionaires – often tax exiles – begging for subsidies from the same treasury they had previously fled, some governments have promised to guarantee income to workers, but usually through employers rather than directly.

In the US, the federal government will send a single check (signed by Donald Trump himself) to every household in order to disguise the amazing charity being offered to capital. An unprecedented $2 trillion bailout is set to increase as the shutdown continues to hurt profits and the presidential election approaches.

Thatcher's Nemesis

If the economic implications of the pandemic are certainly catastrophic, the political implications cannot be accurately predicted. In the UK, the pandemic has exposed the Conservative Party (as well as the ill-fated coalition government and its predecessor, New Labour) for attacking social resilience and systematically undermining the NHS.

even when the money was  spending on the health service - as was the case during the New Labor years - the aim was to disrupt and slice up the NHS, introduce competition regardless of cost, hollow out the service and privatize what could be sold, in order to increase reliance on the health service. health system on financial profitability.

With the pandemic, the Conservatives’ exhortation about the imperative of “fiscal austerity” was obliterated by the State’s evident ability to create money out of thin air and deliver salvation to selected sectors, as long as they are declared “essential” (which, consequently, was not the case of housing, health, employment, etc.). At the same time, the ideology of individualism has been shown to be a fraud because while there may be opportunities for individual escape from the virus, there can be no individual solutions to catastrophe.

A single person can never be safe from an epidemic, or be cared for when he or she becomes ill, and who besides the state is going to contain economic collapse, guarantee income streams when the economy stalls, enforce isolation and guarantee resources for the health service?

As the left has always known, and the Prime Minister of the United Kingdom has been forced to recognize, there is such a thing as society after all. And the inhumanity of capitalism's profit imperative was unmasked by the mass rejection of the “herd immunity” policy, with its consequent decimation of non-workers.

Learning the right lessons

Now we can focus on what the left should push for. The first priority is to learn the lessons. The health crisis and economic collapse in the West, compared to much more effective responses in the East, have demonstrated that radically neoliberal administrations are incapable of performing the most basic functions of governance: protecting lives and ensuring livelihoods.

It is likely that the pandemic will also be a watershed in the transfer of hegemony from the West to the East. It is evident – ​​and cannot be forgotten – that centralized and capable states, and a sophisticated manufacturing base, matter to people's lives. This is true regardless of whether these states are more or less democratic, as experience shows that the nature of a political regime has little to do with the competence of its policies. China (and, to some extent, Singapore) has quelled COVID-19 through a comprehensive system of population controls; South Korea did this through mass screening and screening; Taiwan promptly implemented a sophisticated plan for pandemic control, and Vietnam used the state's capillarity to detect and isolate suspected cases. At the other extreme, Germany was much more successful than the UK, Italy or Spain. The message of these differential results is exactly the opposite of the well-known opening words of Tolstoy's Anna Karenina: in this pandemic, successful countries succeeded in their own way and regardless of their political regime, while failed countries failed in the same way: they had previously dismantled state capacities, superbly deindustrialized, fragmented supply chains in the name of “globalization”, introduced “competition” into their health systems, acted late and without determination, failed to carry out tests, reluctantly imposed isolations and had emergency stockpiles, beds of ICUs and insufficient ventilators: a litany specifically neoliberal of dereliction of duty that will kill tens of thousands, which must never be forgotten, and never forgiven.

The second priority is the imperative of guaranteeing life itself. States must guarantee employment, income and basic services, including the rapid expansion of the health system. Not merely for economic policy reasons, but as part of efficient health policies: guaranteed employment and income will make it possible for more people to stay at home, which will ease the burden on the health system, speed up the end of the pandemic and accelerate recovery .

For this, the banking system must be nationalized to guarantee the flow of credit and avoid speculation, and central banks must ensure that there is enough liquidity to keep the economy in balance. Essential services must be taken over by the State to ensure that basic needs are met. If central authorities can give tens of billions to airlines, railroads and supermarket chains, the public might as well own them.

The third priority is to consolidate the rediscovery of collectivity and the irreducible sociability of the human species that emerged through the tensions of the crisis. The left must stress that the economy is a collective system (“we as the economy!”), that we are united as human beings, and that public services are essential. This could pave the way for a progressive alternative to neoliberalism, which has now clearly taken on zombie form.

The fourth priority is cost allocation. The economic burden of the present crisis will be far greater than that of the financial crisis, and there is no way public services can shoulder that burden. The only way out is through progressive taxation, nationalization, default where necessary, and a new “green” growth strategy.

out of the crisis

I am cautiously optimistic that capitalism cannot wash away this stain. Now it's time to imagine what kind of society can serve the majority, and avoid a repeat of the disgraceful results we are experiencing. Instead of the crimes and inefficiencies of neoliberalism, we need progressive taxation, the expansion of public services with spare capacity for emergencies, and a society based on solidarity, human values ​​and respect for nature.

That's easy to say, and it's unquestionably correct, but the left has been on the defensive almost everywhere, in some situations for decades, and the pandemic may well lead to authoritarian, racist, and reactionary responses.

In short, while the COVID-19 pandemic may have occurred by chance, it was not unexpected. Its consequences are far more than scandalous: they are criminal, and the left must say this loud and clear.

Neoliberal capitalism was exposed for its inhumanity and criminality, and COVID-19 demonstrated that there can be no health policy without solidarity, industrial policy and state capacity. This is a desperate fight. We have to come out of this crisis with a better society. The left is needed as never before and must rise to the challenge.

*Alfredo Saad Filho is a professor of economics at King's College London. Author, among other books, of Marx's value (Unicamp).

Translation: Fernando Marineli.

Translator's notes

[i] In the original, “displaced workers“, unemployed workers coming from obsolete functions or sectors.

[ii] In the original “BAME people” (blacks, Asians and ethnic minorities) in reference to non-whites.

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