a singular crisis

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By ROBERTO REGENSTEINER*

We are now in the midst of a new period of inflection, the results of which are not predetermined and will be shaped by human action on the existing situation.

COVID-19 has already entered history. Your mark will be deeper than the “1929 Crisis” and this is noticeable in many ways. The synchronicity and scope of this crisis in relation to the previous ones, by itself, already make it unique. Announced to the world in Wuhan, on January 3, in a few weeks its impacts were felt all over the world.

On 14/4, the IMF revised its projections for the “Advanced Economies”, and estimated a drop in GDPs, in 2020, to negative 6%, And, this, based on optimistic hypotheses of resumption of a certain “normality” from the next quarters[I].

The COVID-19 crisis has taken a toll on a world economy already burdened with malfunctions[ii] that emerged with force in the 2008 crisis[iii] and they dragged on with no solution in sight. the adoption of lockdowns, as the main measure to contain the contagion and the consequent interruption of productive activities, they would already have a great impact on international productive processes, in view of China's relevant role in numerous supply chains[iv].

The subsequent spread of the disease around the world and the successive adoption of confinement in other countries produced a domino effect that caused interruption and disorganization in the production processes of most countries.

The economic aspects of the COVID-19 crisis, evidenced in falling GDPs, rising unemployment, volatility in financial markets, and other indicators, can already be considered the greatest of all economic crises of all time.

Despite the evidence, the first reaction of authorities and societies to the problem, everywhere, was marked by an initial reaction of denial of the seriousness of the health problem and its economic impacts.

In China, where it first manifested itself, it took 30 days for a health problem to be successively ignored, minimized, treated as a localized issue that affected the political and social order until, finally, it was understood more widely and gave rise to a resolute stance. A pandemic notice was then sent to the WHO, the sequencing of the SAR-CO-2 genome, the creation of organizational structures to deal with the problem at the national level[v], adoption of a successful contagion containment plan that allowed, about 100 days later, the reopening of public transport in the center of Wuhan, the gradual resumption of productive activities within the framework of a “new normality” in which sanitary control plays a leading role. Additionally, China participates in an internationally coordinated effort for the transfer of learning, development of vaccines, medicines, technologies and so on. At the same time, it plans new initiatives within the scope of the strategic Belt and Road Initiative, the world's largest investment program with a horizon of several decades, covering dozens of countries.

Compare the above with other denialisms. In Europe, especially in Italy and Spain, the hesitation of the authorities exacted a high price in lethality, as can be seen in the indicators related to the numbers of infected and dead, as well as in the tragedies in which the burial and mourning rituals were trampled.

The same occurs in the United States, where the behavior of its president must be closely monitored in view of future events and the importance of that country.

The focus on the presidential elections of November 2020, made Trump successively deny the problem, then minimize it, until, on March 12, he awkwardly changed his position, as the governors of the States gained popularity by facing the pandemic that was spreading. it was getting harder and harder to ignore. Then, Trump unilaterally imposed severe restrictions on flights with Europe and, with this, unintentionally, caused a record drop in the stock market to levels equivalent to 1938[vi]. A few days later (18/3) he supported Congress in granting aid, which included US$ 1.200 to the totally unassisted, a subsidy to pay for COVID-19 testing, among other measures that were left for later[vii]. On 23/3, the FED, the main monetary authority of the United States, with operational and administrative autonomy in relation to the other powers, used its freedom to, in the style of Hollywood films in which the good guy is saved thanks to the arrival of the cavalry, announce the commitment to use all you have[viii]: made immense amounts of dollars available to the financial markets which, from then on, began an upward movement towards new volatility records, until stock prices returned to levels close to the previous ones.

The monetary injection promoted by the FED continued to attract to the financial sector a larger piece of the value pie disputed with other producing sectors (industrial, commercial, services, agriculture) and appropriators (taxes, rents) of surplus value, from the US and other countries.

It is astonishing the maintenance of high levels of prices and profits in the financial markets at the same time that in a few weeks the USA surpassed the record number of 30 million unemployed people that continues to increase there and in the whole world. In this case, denialism presents itself as a psychosocial pathology.

In the midst of the economic crisis in which supply and demand fall sharply and simultaneously, disputes for markets increase and oligopolies advance. The case of Amazon is iconic, but it is not the only one. The classic processes of centralization and concentration of capital that, in this crisis, already started from a very high level of world concentration of wealth and power[ix] reach new heights. Numerous companies suffer major losses. The economic crisis destabilizes societies and threatens everyone.

The growing needs for health services and other social services, demonstrate in the interior of the countries their under-dimensioning and inadequacy to deal with the new problems superimposed on the old ones. Multiple social tensions affect National States and governments, in their political, representative, operational, administrative, judicial, fiscal, economic instances at all levels, despite the fact that gestures and expressions of solidarity and awareness of the need also grow of collaboration.

The mythology of the “free market” proves to be empty: there is no National State without a market, nor vice versa. The bulk of world trade is carried out by corporations supported by nation states.

In the field of economic analysis, denialism remains present in the 2nd quarter of 2020, when discussing which letter would best represent the longed-for post-COVID-19 economic recovery. At the beginning of the first quarter, it was taken for granted that the crisis would be just a small valley in a large curve. The letters V, U, and L were used successively to indicate how fast or slow the resumption would be. As the seriousness of the facts dropped indices that had already been indicating problems in previous years, the letter I, the free fall, the bottomless pit and the shallow limit with which the dominant economic theory explains the problems, was imposed.

Along with the injection of money into the financial markets and in meeting sectoral demands, the discussion on a Modern Monetary Theory (MMT, Modern Monetary Theory) comes to the forefront, in which under a scientific, technical and academic veneer, theses are defended that favor financing of fiscal deficits by printing paper money against longstanding orthodoxy. In this controversy intervene the interests served (or contradicted) by the action of the governments and their monetary authorities with actions that have great impact in the short, medium and long term.

In terms of the global political economy, a behavior by the USA that attacks international institutions, built under the hegemony of the Bretton Woods Agreements, in the twilight of the war that ended in 1945, is becoming clear. It seems that the old eagle is no longer served by multilateral institutions in which his selfish posture ("America First") eroded a soft power, which was once more respected, and a dollar that is losing value (despite appearances to the contrary).

Trump, with an eye on the elections, imposes an aggressive tone on his speech, exacerbating trade conflicts, especially with China, whom he blames for the virus, criminalizes its technology and, in particular, Huawei[X]. It tramples on good manners in dealing with nations. It makes the World Trade Organization unviable by not appointing arbitrators for disputes. A large part of world trade circulates through the seas and the USA makes provocative movements of its naval fleet in the South China Sea, in the Strait of Hormuz (in front of Iran, where 30% of the oil traded internationally circulates), in the Baltic, in the Caribbean , reminiscent of an earlier period in the history of imperialism, when England imposed the Queen of England's law on the oceans. Bellicosity increases very quickly[xi]. Trump attacks the WHO and suggests a parallel WHO. And so on, he tries to deflect responsibility for the problems facing the electorate and seeks simplistic and bogus scapegoats for the problems that escalate. Yesterday it was the immigrants who were contained by walls. Today, chloroquine and the fight against China.

Threats to the living conditions of large human contingents and the need to restructure society to face them are expressed in political struggle that has a great tradition in the USA. It is significant that in the presidential primaries the flag of socialism raised by the old Bernie Sanders reappeared with force and had a strong resonance among the youth, among immigrants and in other sectors.

Whoever wins, there will be no “return to normality”, in the sense of the society we knew before COVID-19 and the economic crisis it intensified. A “new normal” is emerging.

Serious consequences will come from the denialism of the political and economic authorities, although it is not possible to predict exactly when, how, or which ones.

- * -

From the perspective of Political Economy, this is a classic capitalist crisis, in which the characteristics identified by Marx & Engels, more than 150 years ago, are present and scientifically evident.

The realization of the downward trend of the average rate of profit presented in “Capital” – based on observations made up to the XNUMXth century – is the essence of the capitalist crisis, the inevitable result of a society divided into classes, in which the objective of production economics is to meet the need for profits of the owners of the means of production. Capitalism is a system that, due to its intrinsic characteristics, regardless of ethical and moral considerations, repeatedly suffers from crises that capitalist states cannot avoid, as has been abundantly demonstrated throughout history and is being demonstrated, again, now.

Eric Hobsbawm, prolific Marxist author, periodized the stages of capitalism in his works Age of Revolutions (1789-1848), Age of Capital (1848-1875), Age of Empires (1875-1914) and Age of Extremes, which concluded with the dissolution of the Union of Soviet Socialist Republics (1991). Thirty years after this event, we are now in the midst of a new period of inflection, the results of which are not predetermined and will be shaped by human action on the existing situation.

The COVID-19 crisis was the last straw that caused the world's problems to overflow, in which the limitations of the current structures to deal with health, climate, environmental problems and the misery in which the majority of humanity lives, among others, are evident. We may be living the epilogue of a chapter that some historian of the future may call: "The end of human prehistory"[xii] after which a stage will begin in which the common good and conscious processes will take precedence.

In the words of the old Marx: “Bourgeois relations of production are the last antagonistic form of the social process of production, antagonistic not in the sense of individual antagonism, but of an antagonism that stems from the social conditions of the lives of individuals; but the productive forces that develop within bourgeois society create, at the same time, the material conditions for the resolution of this antagonism. With this social formation, therefore, the prehistory of human society ends.

*Roberto Regensteiner is a professor and consultant in Management & Information Technology.

  1. S. Thanks to Prof. doctor (and friend) Paulo Capel Narvai for suggestions and comments that improved the text

Notes

[I] https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020, “In a baseline scenario, which assumes that the pandemic fades in the second half of 2020”.

[ii] “The volatility in quotations between currencies and commodity prices will increase, impacting the financial markets, causing other exchange rate crises, large shifts in economic values, an increase in commercial aggressiveness and political and military frictions” cf Regensteiner,R. https://aterraeredonda.com.br/a-geopolitica-do-dolar/. 21/2/2020.

[iii] “Growth was weak but stabilizing until the coronavirus Covid-19 hit … The impact on the rest of the world through business travel and tourism, supply chains, commodities and lower confidence is growing.” in https://www.oecd.org/economic-outlook/  on 2/3/2020:

[iv] “As China accounts for 17% of global GDP, 11% of world trade, 9% of global tourism and over 40% of global demand for some commodities, negative spillovers to the rest of the world are sizeable” in https://oecdecoscope.blog/2020/03/02/tackling-the-fallout-from-the-coronavirus/

[v] V. https://jornalggn.com.br/artigos/a-china-ea-pandemia-do-covid-19-das-medidas-de-contencao-a-estrategia-global-por-valeria-lopes-ribeiro/

[vi] https://www.bbc.com/news/world-us-canada-51846923 e https://www.theguardian.com/business/live/2020/mar/12/stock-markets-tumble-trump-europe-travel-ban-ecb-christine-lagarde-business-live?page=with:block-5e6a60c08f085f0b8d9474fc#block-5e6a60c08f085f0b8d9474fc

[vii] It should be noted that in the USA the process was much more erratic and less organized than what was seen in China, where the federal entities, coordinated by the PCC, showed solidarity in the fight against the pandemic. The comparative results in number of infected, dead, pandemic control speak for themselves, to this add that the time that China took to plan should be added to the time that other countries had to prepare before the virus hit them.

[viii] The statement begins with “The Federal Reserve is committed to using its full range of tools to support households, businesses, and the US economy overall in this challenging time.” And added all the available values ​​result in at least US$ 1,3 trillion of ammunition, a new record in the modality. in https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm

[ix] As Professor Dowbor well showed, in A-ERA-DO-CAPITAL-UNPRODUTIVO, 2017, with reference to a study by ETH-Zurich, from 2011, there is a core of international corporate power in which less than a thousand people controlled about 147 transnational companies. These, in turn, controlled 40% of the entire network of the 43 most important international corporations.

[X] https://www.washingtonpost.com/national-security/trump-administration-moves-against-chinese-telecom-firms-citing-national-security/2020/04/10/33532492-7b24-11ea-9bee-c5bf9d2e3288_story.html

[xi] “…the recent announcement of an “operational change” promoted simultaneously by the US and Russian Armed Forces. Firstly, the US government announced that it had already made operational the use of a “low intensity” nuclear bomb, with a power equivalent to one third of the Hiroshima bomb (5 kilotons)…, the new weapon, W76-2 , would be installed in the Trident missiles used by the 14 USS Tennesse submarines of the US fleet, and could be used by the US Armed Forces in the case of conflicts or “limited” or “regional” wars. Then the US announced a military exercise simulating a limited nuclear war against Russia. And it was in response to that announcement, and in particular to this American military exercise, that the spokeswoman for the Russian Department of Foreign Affairs, Maria Zakharova, declared that Russia would respond with a massive nuclear strike against the United States if any submarine American would launch any type of missile launch, regardless of whether it carried atomic warheads or not. From that moment on, the practice of “military bullying” against countries considered adversarial or strategic by the United States became an extremely dangerous game. It is not difficult to calculate the consequences of this simple “operational change” in a world in full transformation caused by its “systemic saturation” and “ethical fragmentation” without having any type of institution, authority or power capable of arbitrating divergences, and without any type of of leadership with universal legitimacy. In a world like this, when diplomacy is exhausted, only weapons remain and from now on any involuntary failure or miscalculation can turn a regional conflict into a catastrophe of major proportions. This is true for the Persian Gulf, as well as for the South China Sea, and also for the Caribbean, given the dispute between the United States and Venezuela that still involves China’s economic interests and Russia’s military protection.” In Fiori and Nozaki, https://aterraeredonda.com.br/escalada-militar-na-pandemia/, 15 / 5 / 2020

[xii] Marx, For the Critique of Political Economy.

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