From financialisation to structural oppression, Covid-19 is highlighting how dysfunctional our economic system really is.
Fran Boait is Director of Positive Money
Cross-posted from Positive Money
Covid-19 has sent the world into turmoil. And in its wake the pandemic isn’t just threatening lives, but exposing a highly dysfunctional economic system and intensifying pre-existing inequalities. Just as we can only comprehend some natural phenomena by watching accelerated time-lapse videos, the unprecedented rapid pace of this unfolding crisis is showing us some of the deep structural problems within our society.
In the UK we have just passed 16,000 deaths, and worldwide over 166,000. These numbers are devastating. But at the same time it feels like now is an opportunity for some real conversation and debate about how our society should function. This period of rapid change and uncertainty represents a chance to push for the radical systems change we need to address vast inequalities, fix our dysfunctioning economy and combat the looming climate crisis. Phrases like ‘build back better’ or ‘recover better’ are becoming more and more common as awareness of this opportunity starts to rise.
Positive Money’s mission is to reform money and banking to enable a fair, sustainable and democratic economy. But that system which we seek to reform, does not sit in isolation from other societal issues, rather it must be considered within a wider context of systemic failures. Specifically, there are five deep rooted issues which have contributed to our dysfunctional economy: the money and banking system, neoliberalism, structural oppression, neoclassical economics, and financialisation. This crisis is exposing the weaknesses and falsehoods at the heart of every single one of them and making it clearer than ever before, what alternatives we must fight for.
The money and banking system
What we’ve been told: the government’s budget is like a household, it can’t spend money it doesn’t have. We must therefore depend on too-big-to-fail banks for the functioning of our economy.
What the crisis is highlighting: Government’s can spend when they choose, since the Bank of England can fund their spending via monetary financing. Banks cannot be relied upon, even when they are being funded by the government, as shown in their failure to provide emergency loans to small businesses.
What we must fight for: Austerity is not necessary, it is only ideological. We must ensure monetary financing is permanent and not get caught up again in the deficit delusion. We need a banking system that serves households and small and medium sized businesses.
Neoliberalism: the dominant political-economic ideology for the last 40 years
What we’ve been told: Society is made up of isolated individuals who always act in their own interest. The more you earn the more valuable you are to society.
What the crisis is highlighting: We are all interconnected, our health relies on our neighbours’ health. In a national emergency millions of people want to help each other, their neighbours, and the NHS. We are collaborative and cooperative.
What we must fight for: We must reject the narrative of individualism, that seeks to blame individuals for contracting Covid-19. When we work collectively, then we can achieve better outcomes for all.
Structural oppression: the ways in which culture, ideology, public policy and institutional practices interact to maintain a hierarchy – based on race, class, gender, sexuality, and/or other group identities – that allows the privileges associated with the dominant group and the disadvantages associated with the oppressed or marginalised group to endure over time.
What we’ve been told: There is no such thing as structural oppression, we have equality of opportunity, and some form of inequality is normal and even beneficial.
What the crisis is highlighting: You are more likely to die from Covid-19 if you are BAME because you are more likely to be from a poorer background, and due to racial bias when receiving healthcare you are less likely to be prioritised for treatment when in care. You are also more likely to be exposed to coronavirus if you are a low-paid woman, disabled, a migrant or refugee, or a prisoner.
What we must fight for: The unequal impact of Covid-19 has brought harsh inequalities into even sharper relief. We are all different and we are treated differently. Not only does structural oppression exist, but there is far more work needed to counter and remove it.
Neoclassical economics: the dominant school of economic thought. Challenged slightly in the aftermath of the 2008 financial crash, but its main ideas are still influential.
What we’ve been told: The market knows best and the state should only intervene in isolated cases of ‘market failure’. The environment is external to the economy and the pursuit of efficiency and growth should be prioritized above all else.
What the crisis is highlighting: We need the state to provide basic public services that we all rely on including healthcare, waste removal services, and a minimum standard of living for all. The protection of public health trumps the quest for continued GDP growth.
What we must fight for: A new economics that puts people’s health and wellbeing at its centre, alongside flourishing ecosystems. Amsterdam has recently adopted Kate Raworth’s innovative doughnut model, and next month we’ll be publishing our latest report exploring various approaches we could take to escape our dependence on growth once and for all.
Financialisation: the increase in the size and importance of a country’s financial sector relative to its overall economy, and the increasing influence of finance in the operations of big corporations.
What we’ve been told: An oversized financial sector is a good thing for the economy. It’s not a problem if the wealth of shareholders continues to increase whilst workers’ wages stagnate or decline, because the 1% are vital to our economy as the creators of wealth and jobs.
What the crisis is highlighting: Key workers are the people our economy really needs. Waste collectors, hospital porters, and supermarket workers are some of the lowest paid in society, but these are the people we simply cannot function without. Hedge fund managers or big bank shareholders? Not so much. But while corporates are getting loans from the Bank of England in secret, most SMEs are having their applications rejected.
What we must fight for: Financialisation has failed to deliver anything other than increases in financial assets and wealth for the very top – this must end now. The financial sector should be our servant, not our master. Covid-19 company bailouts must come with conditionalities. Workers need a pay rise and access to universal basic services to meet their needs.
This crisis presents an opportunity to change our economy’s direction of travel, even our entire status quo. ’Business as usual’ was built on shaky and problematic foundations and when this crisis is over, most of us don’t want to go back. Whether we’ll emerge from this pandemic with a fairer, more sustainable, or democratic economy is yet to be seen, but one thing that is for sure: things will not be the same again. New opportunities will arise to push forward transformational ideas and Positive Money will be ready and waiting.