onepound capitalism

How people behave when the Covid-19 lockdown measures are lifted will vary. There are horses and mules among us. When the rider falls off the horse, the horse usually waits for her to get back on. The mule on the other hand, might kick, stomp or bite the rider.

Twelve years have passed since the 2008 financial meltdown. Millions of people around the world experienced the long, painful and disappointing struggle against harsh austerity measures. It is reasonable to expect that the French, Greeks, Spaniards and Italians will respond differently to the new “normal” than the average Dane or Swede.

Conspiracy theorists insist on secret Orwellian schemes by a cabal of fabulously wealthy individuals. Apparently, people like Bill Gates want to kill off millions and turn the rest of us into micro chipped serfs in a debt-ridden, neo-feudal world order. Yet if the “Illuminati” have unleashed this virus on the world, they must be a sorry crew of dunces. Even assuming the pandemic kills a lot more people than projected, what do modern-day Johann Adam Weishaupts have to gain from this? History provides no clues. With one third of the population of Europe depleted by the Black Death, the price of labor soared in the 14th and 15th centuries and the value of land and capital plummeted. Workers ate and dressed better, and lords complained the humble turned up their noses at work. Clearly, this state of affairs cannot benefit the world’s puppet masters.

The good news is that things could be a lot worse. Modern medicine and the intrusive modern state (a result of WWI) will never permit another Great Plague. The world is much safer than we think. Before WWI most wartime fatalities were the result of disease and illness. Nowadays neither disease nor war kill the way they used to. If in 1950s there were 250 war deaths per million people, now there are less than 10. Indeed, despite the astronomical budgets of the world’s military-industrial complexes, dying in a war is not something most people worry about.

The dominos are falling predictably. Europe and America will continue to consume less, and China will not be able to produce as much. This means countries like Brazil, Argentina, Australia and Canada will not export raw materials to China. In an effort to export unemployment to other lands, governments will encourage protectionism. More jobs for Americans means fewer jobs for Europeans, Asians and Africans, and vice versa. It is easy to see how travel bans could lead to trade barriers and trade wars between the US, Europe and China. This of course spells Great Depression 2.0.

The Great Depression shrank the world’s economy and destroyed international trade and travel. The Covid-19 pandemic is doing the same, only with a colossal difference with the 1930s. Again, it appears we are lucky in our misfortune. A tremendous blow to the global economy will not lead to world war because the atomic bombs dropped on Japan in 1945 made total war impossible.

Well before December 2019, the dramatic drop in the price of oil seriously weakened many states. Saudi Arabia, for example, was forced to introduce austerity measures. Estimates are that the kingdom’s reserve funds will run out in 2-4 years. And in China, the GDP growth rate dropped below the 6 percentage points experts say leads to social unrest. China holds over $3 trillion in foreign currency reserves, and has some room for maneuver. But what happens when the country’s huge real estate housing market bubble bursts?

Just before the pandemic broke, Europe’s establishment economists were celebrating over a measly one percent growth rate in the EU. Now look at them. The state of banks in Europe is alarming. The ECB (read Germany) has ploughed in billions, but this may not prevent the collapse of the euro, even the disintegration of the European Union. Complicating matters is the refugee crisis, the result of Russian and US meddling in the Middle East and North Africa. It has divided the Old World. The problem will be further exacerbated (despite greater tightening of border controls) by continued internal migration from poorer EU countries to richer ones.

Are we perhaps witnessing a sinister plan to concentrate capital even further? This concentration is happening right now; it always does when companies go bankrupt. Are the world’s “overlords” trying to grab an even greater share of cheap labor? Obviously, the situation created by the pandemic is a great opportunity for companies to cut wages. However, any advantage gained from lowering wages is offset by the tremendous decline in world trade. Despite policies of austerity, quantitative easing, buying securities and keeping interest rates near zero, the volume of world trade was falling long before the Covid-19 crisis appeared.

The tremendous growth of post-WWII production glutted the global market and profit margins tanked. Beginning in the 1980s, investors sought far greater profits in the financial sector, which swelled beyond the extent justified by the value created in the productive economy. Neoliberal, “financialized” capitalists also invested surplus capital in real estate bubbles, commodity and shares markets, and unicorns that rode the wave of smart technology, including Uber, AirBnB, Instacart, Snapchat, Pinterest and Dropbox, among others.

But the big grab is over. Can we expect neoliberal capitalists to take advantage of the falling cost of labor in order to funnel money into production? Will they surprise us by reinventing themselves as new Henry Fords, John Rockefellers and Andrew Carnegies? Or will someone else step into the breach and steer economies towards the production of essential items?

Some pundits say that we are in the antechamber of a neoliberal new world order, one informed by Chinese methods of control. At first blush, the totalitarian measures imposed by Beijing on Wuhan province appear to have speedily contained the virus. The fly in the ointment however is that Chinese ways are not the sort the Americas, Western Europe and Africa will easily accept for very long. The Chinese openly copy many of things from other countries, but the reverse is not true.

The crisis is an accident that reveals a necessity. Not all problems have solutions, but all solutions lie at the heart of each problem. The loop of doom of commodities and financial markets cannot be handled the way the financial meltdown was handled in 2008. Back then enormous holes in private banks were transformed into a gigantic hole in public finances. Such “solutions” will no longer fly because people will simply not accept them.

Governments may try to use Keynesian strategies to deal with the problem, and throw money at it. Their chances of success will depend on whether or not they invest in production – and this at a very difficult time when demand is not matched by the ability to pay.

If the crisis teaches anything, it is to remind us of the importance of people engaged in the real economy. Workers in production and essential services will rise to the occasion. They will defend their jobs against ownership, and will do this for their own benefit and that of the rest of society.

It remains to be seen how long the moribund system will continue to hang in limbo, half-dead and choking on its money, but still very much around. Most people are interested in shortening the length of this process. How different countries respond will be interesting. Is it unrealistic to imagine that in the United States right now a new Weather Underground is being formed? Or that in France, Italy and other countries, similar groups will appear—groups dedicated to moving the system’s decaying body out of the way?

Evel Economakis teachs IB history at Ionios Lyceum in Athens, Greece


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