It is time to drop all those lovely neo-liberal illusions. The coronavirus has returned us to reality. Let’s remain there. It’s a good place to be.
Robin McAlpine is the director of the Scottish think tank Common Weal.
Cross-posted from Source
My columns on the virus so far have not been filled with joy and happiness. This one – looking at the impact this will have on the world economy and geopolitics – may be the least joyful so far.
But bear with me and I promise from here-on out they will get much more positive.
Because what policy-makers are really scared about isn’t so much domestic mitigation now, but the global order to come. They have more than a few reasons to be scared – if they don’t wake up to the fact that what they say is actually true this time. Everything has changed, and will change further; pretending there is a fast route back to ‘normal’ is futile.
How bad is this?
To understand why everything is changing it is important to get a sense of how bad things are or are not. So how bad is this?
So when I write that no-one really knows, I only mean ‘quite how bad’ – because those pretending this might be like a summer holiday are in pure, neoclassical economic wish-fulfilment mode.
Let me give you a few indicators of the size and shape of what is happening. First, we are undoubtedly going to lose months of the vast majority of economic activity. The ‘summer holiday’ school of thought thinks that this is an aberration, and things go back to normal afterwards. But that’s not going to happen.
Forget government-imposed restrictions; anyone think the tourism industry is going to be anywhere close to normal this year? Are you planning to go to a foreign country and pack cheek-by-jowl with people from all over the world? Similar conclusions apply to the entertainment industry and much of hospitality. We’re not looking at normal recession-type drops of five or ten per cent of activity in these sectors.
Furthermore, you cannot forget government-imposed restrictions. I’ve been unable to find anyone with serious knowledge who thinks the medical response ends in mere weeks. As far as I can tell, the best guess is some kind of restrictive measures remaining in place for the rest of this year at least.
Any business that was touch-and-go before the crisis will not reopen (like these). All of these businesses have supply chains, and all of their workers were spending in shops and now won’t. Contractors and the self-employed may also be in real trouble. I doubt businesses will all hire as fast as they are firing right now.
There are hundreds of thousands of households, if not more, which were already on the verge of mortgage defaulting. It is hard to see how people will avoid losing their homes, which in turn is likely to depress the housing market considerably.
And then the real sting in the tail – there’s likely to be a horrible aftershock. For ten years, every serious economist has been warning that all the conditions which brought down the banks in 2008 are still in place.
The 2008 crisis happened because banks had been gambling on assets they knew were worth much less than what they were betting on them. The response after that crisis was to throw money at banks to help them artificially reinflate their asset prices. Afterwards, once again, they kept gambling on assets in terms vastly disproportionate to their actual worth.
Even cautious central bankers took the view that one more shock and it might not be possible to stop this house of cards falling for good – and they were talking about a normal shock, an ‘everyday’ shock. This is not normal.
In my opinion, even if we somehow stabilise the economy faster than I suspect is possible, an inevitably reappraisal of financial asset values will follow – and that means insolvent banks. It’s hard to see how they could be rescued this time.
So how bad is this? Definitely not good. And there is one thing to add to this – those of you who are thinking ‘but this isn’t that bad a virus’ are misunderstanding. This isn’t about how bad the virus is; this is about how bad the underlying economy is.
Many warned that a wildly speculative economy with low levels of manufacturing, high levels of deskilling and casualisation, low pay, high household debt, low productivity and over-priced housing was a ticking time bomb.
And here’s the scariest thing – if you know how to stop this ticking time bomb from going off then (a) you’re the only person I know of who does, and (b) you’ve got about three or four weeks to persuade governments around the world.
Why does the severity matter to the global picture?
Globalisation is just a way of saying ‘a system of supra-national economic laws to maintain global stability’. The idea that this has created stability is hard to credit, but then the whole system is itself based on a myth (pure free markets being maximally efficient). Unless important people believed both these tall tales the system wouldn’t work. But they did. Until now.
I once had a heated discussion with someone in the field of food when we were developing the Common Home Plan. I was expressing the need to take domestic food security and self-sufficiency much more seriously because of vulnerable global supply chains. The other person scoffed, arguing that global supply chains are remarkably resilient.
Well, yes they are – so long as there are no droughts, no extreme weather conditions and no wars… oh, and so long as everyone plays ball. As it stands, we’ve already seen how a pretty small drop in production sets off a chain reaction which is kind of like a global version of panic buying.
It’s human nature – I’ll lend you my wheelbarrow if I think I’ll get it back unharmed. If you believe you can sell your produce because you can always buy it back if you need it, the system keeps moving.
One wobble, however, and that all changes. You keep your food for your population first – and then this spirals. The WHO is so worried about this they’re begging people to stick to neoliberalism.
Then again, what they’re really saying – specifically to the poor Global South – is: ‘keep the rich North fed or else’. I would be amazed if it works.
Neoliberals call it ‘protectionism’, but that’s just a pejorative they use for ‘looking after your own citizens rather than global corporations’. (Call it resilience or localism or shortened supply chains if you’re uncomfortable with ‘protectionism’.)
With food, so with everything else. I do not give a monkey’s what world leaders say in public about their remaining commitment to global free markets; every single one of them will now see the world through a protectionist lens (they’d be mad not to). The knock-on is potentially enormous.
Where’s your post-national world now, eh?
An unholy alliance of free-market evangelists and centrist liberals created a philosophy they could all sign up to – one which argued that the nation-state was over. In a globalised world, only globalised cooperation mattered.
This reached fever pitch with the Remainists (not people who voted Remain, but the real ideological hard core); pulling out of the EU would be the end of any nation, because only big blocks like the EU can save us in a crisis.
I’ve argued over and over that this is fundamentally wrong. Global crises have local causes and local effects. Soil degradation happens somewhere, pollution happens somewhere, poverty happens somewhere. The causes and solutions exist in the real world, not in globalised legal abstractions.
Certainly the WHO has had an important role in this crisis as a kind of research and advice service (though much of that advice has been ignored). Otherwise, where is the EU? Where is the UN? With the best will in the world, no-one gives a fuck. This is way, way too important for Brussels to be left in charge.
Globalisation is looking awfully like a little man sitting behind a curtain pulling levers, not the Great and Powerful Oz. I doubt anyone will grant international institutions the mythic status they did before.
Borders will get harder
Another barking mad idea that took root was that borders were a bad thing. Borders are the place where democracy lives – they outline the edge of a jurisdiction and so enable a populace to make decisions about its future. Every other version of a world order I have ever heard imagined sounds horrifically dystopian.
There are two things about borders people don’t like. One group doesn’t like them because they prevent the flow of people, while another doesn’t like them because they enable democracy. The first group are well-meaning (in their support for both immigration and immigrants themselves) and the second are utterly cynical (the ‘don’t let democracy get in the way of my corporation’ people).
Nevertheless, there are two factors that care not a jot for borders. One is the environment and the other is a virus. And yet it is those borders which enable us to manage both – no border, no firebreak from pandemic, and no government to mitigate climate change.
There is another point which is hard for me to admit – tourism has gone far to far. I hate to concede this, because travel (along with music and food and my garden) was once the only thing I really enjoyed spending my money on. Travel has enriched my life enormously.
But then I spent three days in Venice for their festival of politics with local people who invited me to talk about political autonomy. I heard in detail the story of a civilisation centuries old, with its own language and culture (I didn’t know lots of people still spoke Venetian) – but no longer with its own city. No-one can live in old Venice. It’s all AirBnB.
But does someone, somewhere at least have a clue?
If this is sending shockwaves round the world, then is there a damned good idea which can absorb the shock and protect people? Right now, don’t cross your fingers.
We’re at least at the stage where people really do accept the reality of the problem, but there’s not yet much in the way of good ideas for what to do. At present, there is the denial squad (‘it can all go back to normal if we do what we always do’) and the hopers (‘it could all be really great if we can get to this destination… somehow.’).
I doubt denialists will remain so for long; they’re going to become the disaster scavengers – if it’s global carnage then let rip, and what’s in it for me? A Trumpian perspective on a world in chaos.
What’s worrying me more immediately are the hopers. Frankly, I am alarmed at how feeble they are. I’ve been involved in some discussions already, and I’m afraid it sounds to me much like 2009. “This could be a great opportunity to change the world by the power of me putting on a slogan-bearing t-shirt”.
Still, I’m a hoper. I really, really believe that this can result in a much better world – I just can’t see it being delivered internationally or even multinationally. Multinational institutions outsource all of their thinking to their corporations; I fear it’s down to each nation to plot its way through this.
That may be a good thing – so long as it becomes an upwards race, not a downwards one.
So what do we do?
This is where I leave the gloom behind and move onwards to some optimism. If I’m right about the above, then we don’t need to believe in myths any more. I know really intelligent people who think the EU was the best bet for fighting climate change. Nevertheless, it was an article of faith rather than an opinion based on any measurable reality.
Like I say, the causes and effects are largely place-based and the response needs to be place-based. It’s not just enough to cope with economic crisis (don’t kid yourself on that this is the last one – this is just a dry run for climate breakdown) – it can create real security for people.
Put simply, if we own less and share more we can have more with less. It’s the magical power of a library. When you don’t need or want something any more, there is a better model than binning it.
And if we make more and speculate less, we can all be much more nationally self-sufficient. In the year on which I worked on the Common Home Plan I became utterly convinced that there’s no version of beating the climate emergency with long supply chains. Every nation should steward its own resources really well and if it can make what it needs, make it.
This isn’t isolationism. We will still trade. Hell, humans were trading goods originating in what is now Cornwall in what is now Turkey during the Bronze Age. It’s just that some more sanity will – hopefully – return. We’re not all going to make our own iPhones, but we won’t import bread from factories hundreds of miles away from us either.
Rebuilding a global economy based on more resilient national and local economies takes a second to get your head round if you’ve been deep down the neoliberal rabbit hole. But when you do, the sense of it becomes apparent with remarkable ease.
Henceforth, this series of columns shall now mostly focus on getting from here to there.