There will be no socialism borne automatically out of capitalism’s inability to cope with a pandemic. A new world will have to be fought for, tooth and nail.
Ben Wray is a freelance journalist leading BRAVE NEW EUROPE’S Gig Economy Project. He also produces a morning newsletter called Source Direct on Scottish politics, which you can sign-up to here: https://sourcenews.scot/mailing-list/
Cross-posted from Bella Caledonia
Iain Macwhirter’s Herald column on Sunday [Coronavirus: this crisis could bring a Great Depression, not socialism] makes a number of well considered points about the vulnerability of the Scottish economy in lockdown. Iain rightly points out that all aspects of the economy – including the public sector – are a financial house of cards: once some start falling over, you have real trouble all the way down the line. None of that is in question here.
Neither do I disagree with his assessment that there is no easy, quick-fix solutions either. Iain rightly points out that government injecting cash into the economy can only achieve so much if production grinds to a halt, as more cash chasing less goods can lead to dangerous price bubbles.
Where I fundamentally disagree with Iain is the conclusion he draws from all this. Stating that “we simply cannot lock down indefinitely” as “economic depressions also lead to significant loss of life”, Macwhirter goes on: “The Government cannot replace the economy. Attempts by communist countries to abolish the market and replace it with central control, as in Soviet Russia, were a disaster. That led to rule by oppressive and corrupt bureaucrats, gross inefficiency, widespread shortages, and the degradation of the environment.”
After taking aim at some “crass” comments from outgoing Labour leader Jeremy Corbyn, Macwhirter concludes that many socialists on social media are “revelling in the collapse of capitalism in the naïve belief that socialism is being constructed in the wreckage. It isn’t. Mass unemployment, poverty and insecurity is not socialism.”
We can break this down to three points, which we’ll examine in turn:
1) That the choice is between lockdown or a Great Depression
2) That socialists think Tory big state intervention is socialism
3) That the economic options are Soviet-Union style central planning or the economy we have
(The points above are expressed in terms which are probably blunter than Iain would, but I’m sure he will forgive a little rhetorical lee-way.)
That the choice is between lockdown or a Great Depression
Let’s say for the sake of argument that Scotland and the UK bucked the global trend and went full ‘herd immunity’, going back to original plans for allowing 60-80 per cent of the population to contract the virus. The lockdown is ended now. To be clear, I’m not saying this is what Iain is arguing for (he’s not), but as a thought experiment lets think through its economic impact.
A few things would happen. First of all you would have a lot more deaths. 260,000 in the UK, if the Imperial College London paper is correct. You would also have millions of workers sick for weeks, and thus off work at times that are unpredictable to plan for. The overwhelming of health services would mean much more sickness and death than otherwise. Other countries would take extra measures to lockdown their economy from the UK because it would be a plague island. Even if other parts of the world began moving to an end-the-lockdown-early model (which is perfectly possible, politicians from the centre-left Matteo Renzi in Italy to Donald Trump in the US are pushing for this), it is very difficult to see how an economy of widespread illness would not also suffer the sort of breakdown in global supply chains and in consumption patterns that is currently taking place and which is leading us rapidly to a Great Depression.
The point is, there is no common sense economic choice in this situation which can operate without widespread dysfunction: both a lockdown economy and a plague economy will lead to fundamental breakdowns in the capitalist economy. Indeed, such a breakdown has already happened.
To explain this, let’s look at the example of the New Meadowbank Sports Centre in Edinburgh, a case cited in Macwhirter’s piece as it’s construction has currently been put on hold.
It’s interesting to look at the details of the New Meadowbank. Alongside the sports centre, the project includes 2.2 hectares of “mixed use” properties, including hotels and student housing. This is typical of Edinburgh’s post-crash property boom, built around a Services economy of studentification, hospitality and mass tourism. Indeed, on the day of the first death from COVID-19 in Scotland, Edinburgh planners approved a new £350 million hotel which included a “hotel school”. As well as hotels galore, the city has boasted the highest rate of Airbnb’s per resident anywhere in Europe. Locals have complained of feeling like they are in a Disneyland film. But the property developer Prince has been turned into a frog by the kiss of Covid. The excesses of Edinburgh over-tourism has of this moment become a major economic vulnerability for the city. To put it simply: the tourists aren’t coming, and won’t be for a long time.
On the same day as the hotel school, the World Tourism Council warned 50 million jobs were up for the chop globally in tourism. Edinburgh is seeing landlords switch on mass from AirBNB to residential lets. The point is, the economy that Edinburgh and its construction workers have been busy building as of this moment does not exist. The fiscal crisis that Macwhirter speaks of for Edinburgh City Council from the collapse in its Services economy has been recklessly cultivated by successive councils which refused to listen to those who said it had to put the breaks on the property developers for its own sake and those of its residents. Coronavirus has merely exposed, not caused, these severe economic vulnerabilities in the Scottish economy, especially that of its hyper-commodified capital city. If you have any doubt about that, record that it was not COVID-19 that caused the devastation one can witness in Princess St Gardens at the moment. That was all the work of Underbelly.
A number of industries – most of all aviation, tourism and hospitality – are not in the current circumstances salvageable. Even with a plague economy model to resolve this crisis, capitalist markets will still collapse if left to their own devises. Either we let that happen and an awful chaos ensue, or we re-organise the economy in such a way that it allows us to contain the virus and stave off the worst effects of the crisis. As the economist Jonathan Portes has put it in making the case against sacrificing lives for the economy: “If we allow Covid-19 to permanently damage our economic and social fabric, it will be our own fault, not that of the virus.”
That socialists think Tory big state intervention is socialism
If anyone thinks that Boris Johnson and Rishi Sunak are ‘constructing socialism in the wreckage’, they need to stop dreaming. This idea that ‘big state equals socialist’ is not and has never been remotely correct. In Margaret Thatcher’s blitzkrieg years from 1984-1988 the state grew in size on average by 4.7 per cent per year. The question is not the size of the state, it is what it does, who it is accountable to and in who’s interests it works in.
The neoliberal era has not been one of small state – it’s been a different state. A state of bank bailouts, PFI, help-to-buy, business subsidies and housing benefit. Housing is exemplar: In the 1970s, over 80 per cent of the housing budget went on bricks and mortar, today 85 per cent is spent on demand-side subsidies to developers, landlords, buyers and renters. In other words, we have a state that acts to manage the capitalist economy in the interests of capital.
The actions in recent weeks of the Conservative Government needs to be looked at through this frame. Far from investing in public services, the business and self-employed bailout (while necessary) is actually about plugging gaping holes in the private sector.
As economics commentator Laurie Macfarlane has argued: “Even in countries with the most generous employee compensation schemes, workers are only being compensated for 80 per cent of their wages. But most of this will be required to pay for essential expenses, meaning that overall most workers will be left worse off.
“The flipside of this is that the income streams for the ownership class – rents, interest and corporate income – are protected. But crucially, because the discretionary spending of the rich has collapsed, their net incomes (i.e. their income after expenses have been paid) have increased dramatically. This is the key to understanding who ultimately benefits from all the new money that is being injected into the economy.”
Indeed, while everyone is talking about big state Tories, there is a growing crisis in public services, as Scottish local authorities have moved to slash homecare services to save cash to fight this emergency.
So there is no naivety from this social media socialist about what is happening, and when the government’s measures inevitably fail because they are wholly insufficient to resolve this crisis, the “mass unemployment, poverty and insecurity” which Macwhirter speaks of will be capitalism’s failure, not socialism’s. The question isn’t ‘state or no state’, it is what form of economic organisation do we want across the whole of society and ultimately who holds the power.
That the economic options are Soviet-Union style central planning or the economy we have
I confess to being a little sad that Iain threw up the Soviet Union to dismiss arguments for an economic model based on social planning. Is that really where we are? That it’s either a plague economy or a Stalinist economy? Do we really have to pass through tired Cold War debates from more than 30 years ago to be able to discuss how a crisis could be resolved with new ways of organising the economy?
To counter this, I will try a novel approach. That is, that the capitalist economy we have has some of the worst centralised, command and control features of planning, only with the aim being in pursuit of profit, rather than social good. The enormous corporations which dominate the global economy meticulously plan everything they do, using big data to constantly upgrade their efficiency by responding in real-time to shifting patterns of demand. Many of these companies also have a monopoly over whole industry sectors, especially the new digital platform companies, which essentially control the infrastructure in which much of our active lives now take place on (especially under lockdown).
And then there is the banks, which operate a form of “central control” identified by Macwhirter at the moment, through their monopoly on credit creation. In the United States, the Federal Reserve just last week handed these banks unlimited guarantees that they will guard against all and any losses. They call it “QE infinity”. The rest of the world is about to follow suit. Again, in what sense is this state-finance nexus not a form of monopoly capitalist planning?
The economy of social planning – where the bottom line of economic activity would be about meeting social and ecological needs – that I am talking about would see neither a dictatorship of the state or of capital, but a system of economic democracy, where long-term calculations about social and ecological need are built into the system’s DNA. It’s that fundamental short-termism of the present system which is why the world was so unprepared for COVID-19. If Big Pharma was not constantly thinking about shareholder value (which company’s are legally obliged to prioritise, remember), it would have continued the funding which had started after the SARS outbreak in 2003. Creating vaccines “requires decades of serious investment, even when demand is low,” James Hamblin, lecturer at Yale School of Public Health, writes.
“Market-based economies often struggle to develop a product for which there is no immediate demand and to distribute products to the places they’re needed,” he explains.
This does not mean the alternative to corporate suits is a bunch of bureaucrats running things from Holyrood. Planning could mean companies operate within a framework where a social floor and ecological ceiling are clearly defined, not that they have to be micro-managed from on high. Imagine, for instance, if Scotland’s businesses were currently owned and controlled by their workers in a system of cooperatives. There wouldn’t be a debate about whether to put workers at risk of illness through forcing them back early, or about whether to lay off large chunks of staff. The question would be: ‘How do we manage our way through this together?’
The example of the Mondragon co-operative in the Basque Country is flawed (what isn’t?) but it does show how a company can ride successive waves of crisis through re-organising working hours and pay in such a way as mass redundancies are always avoided if the general worker interest is put first. And it’s pay ratio of the top paid member earning a maximum of six times that of the bottom paid member shows how equality can be a useful tool for crisis adaptability, making business more agile and flexible.
Social planning isn’t an anti-business agenda, it’s an anti-corporate power agenda. The small business owners which are currently being asked to put up their personal property as collateral to get state-guaranteed loans out of the banks have little to gain from socialism for the City of London and capitalism for the rest of us.
Macwhirter is right to say that “government cannot replace the economy”, but it can control the economy. Fundamentally this is a debate about whether citizens are masters of the economy, or the economy’s performance metrics – GDP growth and profit – are the masters of us, to the point that we’d be willing to sacrifice public health rather than re-order the system. Let’s remember that before Covid-19 came along, we were all drifting along towards climate catastrophe, because we couldn’t break free of capitalism’s bottom-lines.
Now that we’ve been knocked off that course, we don’t have to put the train back on to the tracks, start the engine again and suffer the consequences. Apart from anything else, that plague train will be very wobbly indeed. It’s in moments of disruption – not serenity – that it’s possible for a new world to be built, fit for the challenges of the 21st century. The alternative is to allow an awful chaos to ensue, where the orthodoxies of the past impose themselves dysfunctionally on the present.
Macwhirter is right that there will be no socialism borne automatically out of capitalism’s inability to cope with a pandemic. A new world will have to be fought for, tooth and nail. As Ben Gummer, a former Cabinet office minister who has studied the Black Death of the 14th century, writes, pandemic’s in and of themselves change nothing, they merely exacerbate pre-existing tensions and conflicts.
“Change is evidence of life, not the dead hand of pandemic death,” Gummer concludes.
Very true. So let’s bring it to life.
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