The Economics of Coronavirus

Rory Scothorne looks at how economic measures which were recently thought of as radical outliers, are now at the heart of responses to the crisis.

The effect of coronavirus on the British political system has been so drastic that it is somewhat surprising to be reminded that the British political system still exists. In place of the partisan divisions which until just weeks ago seemed as wide as ever, we now have an all-consuming sprint towards administrative consensus. The paradigm-making shock of the virus itself – compared, endlessly, to a world war – is only part of the problem; the global economy is now facing the kind of collapse not seen since the Great Depression, and poses perhaps an even greater threat to the basic conditions of social reproduction.

This apparent de-politicisation of government is, in a strange and self-contained way, precisely the kind of ‘return to normal’ hoped for by many of the UK’s ‘moderates’ over the past few years, albeit in the most bizarre and abnormal conditions. The ornate economic sandcastles which are now being engulfed were built through decades of policy consensus between neoliberal politicians of left and right, whose continued dominance of the political scene after 2008 – and whose collective efforts to destroy the greatest challenge to their dominance, Jeremy Corbyn’s Labour Party – has left Britain spectacularly ill-equipped to react. Yet the threat is so severe that it has seen moderate and right-wing politicians considering policies which, as Larry Elliot notes in the Guardian, were deemed too radical even for Corbyn in 2015, such as the freshly-printed cash handouts of ‘People’s QE’.

The virus has not caused so much as exposed profound underlying flaws in the world economy, chiefly an eye-watering build-up of corporate debt in the aftermath of the financial crisis. Discussing America, Ruchir Sharma writes in the New York Times that this is particularly bad in more traditional sectors of the economy – “zombie” companies, kept alive by unsustainable debt, are particularly prominent around mining, oil and coal, suggesting that the fossil fuel sector has been busy polluting our financial future as well as our environmental one. Debt is also “precariously high” in sectors like hospitality, where precarious workers are being forced to break with social distancing guidance in the absence of support from their governments or their bosses.

The failure of governments across the world to recognise the last crisis as a systemic failure has left them dangerously over-exposed to the new one. In the absence of a deep and radical restructuring of the economy – redirecting production towards social need rather than private profit – capitalism has continued its wretched crawl towards a grave with room enough for everyone, feasting on cheap credit and insecure labour as governments slashed interest rates and garrotted trade union rights to keep the profits flowing. Any protests against this were sneered at as utopian fantasy, old-fashioned dogma or ‘cultist’ unreason.

The virus has arrived as a new grammar of reality, in which the inadmissible can be quietly admitted: it turns out the benefits system is unworkable and inhumane, now that middle-class people may need it too; it turns out that the NHS has been systematically underfunded, social care callously understaffed, now that the sick are too numerous to ignore; teachers and cleaners, it turns out, are considerably more socially necessary than entrepreneurs and hedge fund managers, even as their health is risked to try and salvage some market confidence. Nobody ever asks the teachers and cleaners if they have any confidence in the market.

The virus and its effects are being treated as a drastic one-off, a thunderbolt from heaven that makes us wonder at the mysteries of life and fate; soon it will be mythologised as the sole cause of a crash that was, in reality, always going to come. We would do better to treat it as an asteroid which, in its fatal descent, puts beyond doubt the economic laws of gravity which everybody has spent the past decade trying to ignore. ‘National effort,’ and putting our differences aside, may well be credited for any recovery – but it will be through the immense efforts of the working class, meeting real social needs rather than the demands of profit, that capitalism may yet survive coronavirus. It does not deserve to.

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  1. Russell Taylor says:

    This is a stunningly good article– so clear and insighful.

  2. Alasdair Macdonald says:

    I agree with this analysis, even though the author’s British nationalism shows.

  3. Coinneach says:

    Excellent and succinct piece. In particular one passage stands out as well worth remembering as a counter to the inevitable bleating of neoliberals about the virus causing financial collapse: “The virus has not caused so much as exposed profound underlying flaws in the world economy…” Absolutely spot on.

  4. SleepingDog says:

    Indeed, there may be a resulting rise in interest in (and prestige of) systems thinking: possibly something not sufficiently taught in the classical educations of many of our political masters, who never had to write and debug a software program or design a computer game. While the faithful British Imperialist might have been expected to compare which of ancient Rome or Greece contributed most to British greatness, and converse confidently on how much corporal and capital punishment should feature in colonial legal systems, they must never entertain the idea that there might be alternative political and economic systems worth considering.

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