A strong state for a strong economy

2020 has been a disastrous year. Yet, as we proceed in our fight against Covid-19, and begin to envisage a post-pandemic world, there are two positive trends that give us hope.

One is that capitalism has exposed its inherent fragility, in ways that most people can see and appreciate with an immediacy that expert debates and activist messages rarely achieve. The risk of system collapse was real during the 2008 financial crisis as well, but the negative impact of that crisis and its aftermath paled in comparison to the dramatic signs of economic instability that we saw in March this year when Covid-19 was declared a pandemic.

Global supply chains of medicines, food basics and other essentials came to a halt within days. Some of the richest countries in the world experienced shortages of personal protective equipment for months, after decades of relying on cheap manufacturing from Asia. The hospitality and leisure sectors came to a standstill, with restaurants, cinemas and international holiday destinations emptied out due to coronavirus restrictions and people’s fears of catching the virus. Millions of jobs were shed overnight across the world.

What 2020 has shown is that capitalism is not only highly unequal and exploitative, it is also utterly inefficient. In a capitalist economy, many businesses simply will not survive if they lose a substantial part of their clients and markets. The restraint and moderation required by social distancing guidelines have little place in an economic system based on greed and excess.

Shareholders, investors and entrepreneurs see no motivation in serving society when there is no money to be made. Talks of social value and public service last until profits do. The pandemic has given the world a real taste of textbook neoliberal orthodoxy: the only goods and services that a free market will produce are those that bring profits and drive ever increasing revenues.

When a sudden external shock such as Covid-19 occurs, free markets end up in massive failure.

To make things worse, many business interests and market advocates pushed for a light touch on Covid-19, in the belief that downplaying the severity of the virus to get people to go out and spend was going to be better for the economy, regardless of the human cost.

They were wrong on both ethical and economic grounds: people are dying in great numbers and, after a modest recovery in the summer, the economy is back in lockdown mode.

Despite this social and economic disaster, or perhaps because of it, another positive trend marked this otherwise miserable 2020.

Following decades of free market propaganda across the political spectrum telling us that the state, its public institutions and its public services needed to be curbed, downsized, vilified, and, most importantly, privatised, if the world is still on its feet after several months of chaos and crisis, it is thanks to the state. Public health systems and responses, and state intervention in the economy averted outright collapse.

Stimulus packages with food aid and cash relief have been approved even by cash-strapped governments in the global South, while European governments provided support to avoid mass unemployment, and offered widespread, albeit often modest, welfare relief to their citizens.

True, more could have been done in strengthening and expanding health services after the first wave, and the relief is just not enough for those who have been hardest hit by the economic impact of the restrictions. Southern European countries continue to be strangled by exorbitant interests on public debt, and the ever looming risk of default makes bold state intervention all the more difficult.

The good news is that the provisional agreement for the EU recovery fund marks a significant reversal from recent bailouts, as a significant part of money will be given to European states in grants, rather than loans. For these grants, it is the EU as a whole that carries the burden of debt, an important sign of economic solidarity that will hopefully open the way for phasing out the exploitative debtor-creditor relations that have shaped European affairs up to now.

Going into 2021, we need more, not less, state intervention in the economy and a much bigger investment in public health. We need to put more curbs on big business and profits.

We need a democratic and publicly controlled economy that values frontline and essential work, increases national self-sufficiency in key strategic sectors such as food production and health equipment, and sticks to the principle of free movement of people and ideas, rather than of capital and business interests. An economy that benefits humanity as a whole, rather than corporations, billionaires and their political cronies.

Vito Laterza is an anthropologist and political analyst based at the University of Agder, Norway. He is the chief editor of the blog Corona Times and writes regularly for international media such as Al Jazeera English, Boston Review and Foreign Affairs. His twitter handle is @vitolaterza09

The article was originally published by the Greek newspaper To Kouti Tis Pandoras here