Economist James Meadway warns that cuts will be only one form of capitalist response to the economic chaos triggered by the pandemic and lockdown. The system will change in complex and contradictory ways, and socialists will require a sophisticated response. This article was first published at Novara Media.
It is tempting, in these circumstances, to cling on to old certainties: to assume that the battles fought in the last decade around austerity spending cuts will continue to be the battles fought in the next. Unfortunately, tempting as it is, doing so will leave us disarmed against the new arguments that are already starting to appear.
It is worth underlining both the novelty and severity of what is happening now.
This is not a recession. It is not a financial crisis. It is not even something like the Great Depression of the 1930s. If you are trying to frame current events only by reference to conventional economics or previous historical crises, you will misunderstand them.
Covid-19 is bigger than these previous episodes because it begins with a crisis of the fundamental relationship under capitalism, which is the relationship between capital and labour. Once capital and labour can no longer directly and freely contract, because of the need to enforce social distancing measures, the normal operations of the labour market itself start to break down. And when the labour market no longer functions properly, every other market starts to shake, from high streets to high finance.
We have never, in peacetime, seen a crisis like this before: one that begins in the core institution of capitalism, and then spreads everywhere.
The situation is new, but that does not mean it is completely open. The line of march for the global economy, in place since at least the Great Financial Crisis of 2008-9, will continue at an accelerated pace: more state intervention, an expanding digital sphere, more state-to-state conflicts and a partial reversal of globalisation. But the really novel elements that Covid-19 has introduced centre on the need to suppress the virus by monitoring and regulating human interactions. This both politicises the question of labour, and how it is performed – witness, for instance, the British government now paying 80% of wages for furloughed employees, a huge and direct political intervention – and imposes significant new costs on businesses.
We can already see some of the changes happening. More remote working and fewer business trips are likely to be neutral in their overall economic impact, shifting the balance of economic activity as airlines suffer whilst videoconferencing booms: at the end of March, shares in Zoom were worth 50% more than every US airline put together. But this says little about US growth overall; more significant will be the retrenchment in supply chains, bringing production back towards domestic markets, and the shift away from just-in-time working, as the Financial Times is now calling for.
Warnings have been made for years about the risks of a global pandemic, but until those risks manifested themselves, there was no real incentive for anything to be done about it. It took the Great Financial Crisis of 2008-9 to force through changes in the regulation of banks and financial institutions to try to reduce the risk of a future global meltdown; in the same way, Covid-19 will force changes in behaviour to reduce the risk of future pandemics.
Critically, this will lead to greater spending on the control and monitoring of labour. Surveillance will remain more intensive, and more focused on the biological facts of our existence, from the infra-red cameras now being placed in Amazon warehouses to the ‘pandemic drones’ now operating in New York to detect coronavirus symptoms and monitor social distancing. Once this ‘pandemic risk’ is known, it will be acted upon – and is being acted upon – because the costs of failure are catastrophically high.
All of these changes, however, impose costs on business, and costs they will seek – as far as possible – to socialise, dumping them on wider society. The likely outcome is a tussle over not so much the size of the state, but the nature of its functions and the distribution of its costs. If austerity plays a part in this, it will be in a row over that final point – the distribution of costs – as much as it is in a simple demand for cuts.
So economic questions will become more complex. Austerity had the great merit of simplicity: one side wanted to make cuts, the other thought this was wrong. It meant, for the left, that most big questions on the economy could be folded into the question of opposition to spending cuts. For the other side, too, the austerity programme had the same virtue: it offered a clear, simple answer behind which other economic questions could be parked. There was a mass base of support for spending cuts, and there was an elite argument to apply them. The fact that austerity never ‘worked’ was a secondary issue.
But the situation now is more complicated. Covid-19 has imposed a restructuring on capitalism, made hidden risks visible and created new costs. There are certainly prominent voices out there lining up a return to austerity, George Osborne noisiest amongst them.
But with the Tories elected on a platform of ending austerity, a prime minister with a keen eye to his own political base, and with moderate, technocratic figures like Paul Johnson of the Institute for Fiscal Studies noting the grave difficulties in applying spending cuts, the way forward for British capitalism is no longer as clear. More likely than the attempt to argue that “we are all in it together”, as in 2010 (nonsense, but used rhetorically), will be a 2020 divide-and-rule edition of austerity rhetoric: reduced in scale, but explicitly playing the young off against the old, perhaps, or becoming more overtly racist or sexist.
We should be alert to the risk of austerity – since we should be ready to counter those arguments when they reappear. But we also need to be aware that we will soon be confronting other, harder arguments.
Some of those will be around spreading the burden of the new costs of pandemic capitalism, for example the demand for tax rises across the board. A whole set of them, however – and, I suspect, the dominant political discussions – will appear in areas the left has not had to think too hard about for the past decade.
The state will be bigger in size, but this will not simply be a good thing – as, for instance, in the mooted introduction of government-backed ‘immunity passports’ that the Ada Lovelace Institute has already said create “extremely high risks in terms of social cohesion, discrimination, exclusion and vulnerability.” We will find major corporations and the government working ever more closely, often in ways that are opaque and poorly-understood, such as in moves to introduce contact tracing via apps. A state that intervenes more in the economy, but which does so hand-in-glove with opaque digital corporations for basically discriminatory goals is (clearly) not something any socialist should aspire to. If we are not sharper in our arguments about distinguishing between good and bad government interventions, we will lose this argument.
There is a path through this to a better future. But it will require those on the left and the progressive end of the political spectrum to present a much clearer, much sharper argument about the role of government, the rights of individuals, and the need for a human-centred economy.