Grace Blakeley has two books in her career: ‘Stolen: How to Save the World from Financialisation’ and ‘The Corona Crash: How the Pandemic Will Change Capitalism’. In her interview with Good News Agency, she reflects on the world before humanity after the COVID-19 pandemic.
The Corona pandemic has once again sparked debate over the current global system, fiscal policies and democratic systems. Can we expect to see new definitions of these concepts following this viral event?
My latest book, The Corona Crash, challenges the idea that, because the pandemic is being associated with an increase in state spending, it heralds the end of neoliberalism. I argue that neoliberalism was never really about shrinking the state, it represented a reorientation of state power away from a corporatist model, in which the interests of workers were balanced with those of capital, towards a financialised model, in which the interests of capital – and financial capital in particular – are placed at the center of economic policy.
The reason we’re now seeing higher levels of state intervention isn’t because Conservative politicians have suddenly become a socialists; it’s that the needs of capital have changed. We’re living through an acute crisis, which comes after a decade of deep stagnation. Individual firms are becoming much more reliant on states to support their activities in this context – and capitalist states are only too happy to oblige. The result of the pandemic is therefore going to be a much more centralized economy – one in which a small number of firms, financial institutions and states survive from the carnage created by this pandemic, giving them a great deal more power over society. Rather than a free market economy, we’re living in a system of ‘planned capitalism’, in which a small number of very powerful institutions control who gets what.
Many believe that the current pandemic could lead to some sort of reform of the global capitalist structure. However, past experience has shown that capitalism not only has no problem with crises but also welcomes them and rises stronger each time. Is it possible to change the existing mechanisms in the midst of such crises?
Pandemics tend to increase inequality. Historical evidence, and more recent economic research, suggests that the gap between rich and poor has widened during and after many recent pandemics – from SARS, to Swine flu and Ebola. This one is no different. It is becoming increasingly obvious that Covid-19 is a pandemic that is being lived in two halves. Wealthy professionals are disproportionately likely to have kept their jobs, own their own homes and have private pensions. Their wages have remained relatively high, they’ve been given a break on their mortgages, and they’ve been forced to reduce their spending down to essentials. For others, the experience has been completely different. Those who were on low incomes before the pandemic are disproportionately likely either to have lost their jobs or seen a fall in pay. Most of their spending already went towards essentials, meaning they’ve been less able to save.
The response to the financial crisis was to give support to the banks through bailouts, and to the wealthy through loose monetary policy that pushed up asset prices. As things stand, it doesn’t look like the response to this crisis will be that different. Thanks to the weak and unequal recovery from the financial crisis, most economies weren’t doing very well when the pandemic hit. Individual firms have become much more reliant on states to support their activities in this context – and the pandemic has deepened this trend. States are providing huge sums of money to private businesses to help them through this recession – just like they did with the banks after the crisis – and leaving everyone else to fend for themselves. The result of the pandemic is therefore going to be a much more centralized economy – one in which a small number of firms, financial institutions and states survive from the carnage created by this pandemic, giving them a great deal more power over society – and also a more unequal economy.
In the global South, as UNCTAD’s most recent Trade and Development report outlined, more than 500 million jobs across the globe are at risk during the crisis, and at least 100 million won’t be coming back. And this is only half the story. Much of the world’s population never had formal employment to begin with; for them, the future looks particularly bleak. Between 90 to 120 million people are likely to be pushed into extreme poverty by the pandemic. The report points to precarious work conditions, high debt levels and pressure from international financial markets as the main constraints on Global South states seeking to respond to the crisis. The report claims that the Global South is facing a $2-3 trillion financing gap as a result of the pandemic. If this gap is not bridged, many of these states will simply be unable to implement the public health and employment support measures needed to tackle the crisis.
What the pandemic has made abundantly clear is that we are sleepwalking into a world without a future – one facing climate breakdown, structural unemployment and falling living standards, and in which the burden of each of these issues will fall most heavily on the poorest. The recovery from the pandemic may be our last chance to change course; we must use it to demand a global Green New Deal. The only way to deliver a robust recovery will be to invest in decarbonization, creating new jobs, and boosting productivity over the long run. Governments should invest in job creation in areas like research and development, engineering and construction, and health and social care, which will both support the recovery and help their economies deal with long-term issues of climate breakdown and demographic aging.
As you argued in “The Corona Crash: How the Pandemic Will Change Capitalism”, the ongoing crisis will tip us into a new era of monopoly capitalism. Accordingly, the corporate economy collapses into the arms of the state, and the tech giants grow to unprecedented proportions, as we have seen in cases like Amazon. From a pessimist standpoint, one of the epoch-making changes that the coronavirus brings in its wake is the elimination of improvements and efforts to make the capitalist system fairer. Can it be argued that the current crisis has fundamentally demonstrated the incorrigibility of the capitalist domination mechanism?
Aside from rising inequality, the consequences of the pandemic will be significant. In the global North, research from McKinsey suggests that many of the jobs most at risk of automation are also those most at risk from the economic impact of the pandemic. Meanwhile, the growth of the digital economy seen during the pandemic will only bolster ‘gig’ employers and consolidate the power of the big tech monopolies. Even as the crisis deepens, stock markets are likely to continue to tear away from the real economy. Providing an almost unlimited amount of cheap money during a recession while failing to use fiscal policy to create viable new investment opportunities (e.g., through public funding of research into and development of green technologies), is simply driving wealth inequality, volatility and market concentration. Newly created central bank money has joined other sources of capital (like savings and bank lending) to form a “wall of money” that is increasingly divorced from the real economy.
Rising market concentration is a particularly worrying trend in an era already marked by extraordinary levels of monopoly power. Cheap money has allowed large companies to increase share prices through buybacks and mergers and acquisitions – rather than by undertaking risky, productivity-boosting and jobs-creating investments. The result has been the toxic combination of rising inequality and stagnant productivity that has been characteristic of the post-2008 period.
Crises – like the one we’re going through now – exacerbate these processes. Large firms with the resources (and political connections) necessary to survive downturns gain huge amounts of investment, while small firms go under. Meanwhile, lower-income households often remain stuck with very high-interest rates on their unsecured borrowing.
We can’t rely on big business to save us from these challenges. The central logic of capitalism is endless accumulation – even if a business wanted to prioritize goals like reducing inequality and solving climate breakdown, if either of these aims compromised the business’ capacity to generate profits, it would lose investment and could ultimately collapse. Even if solving climate breakdown would ultimately promote the interests of the capitalist class as a whole, any intervention large enough to solve the problem (which doesn’t include ‘solutions’ that allow half the planet to be submerged by rising sea levels or desertified by rising temperatures) would disrupt accumulation too deeply to be entertained.
The capitalist state is supposed to solve this challenge by encouraging—or forcing—firms to take difficult actions in the short-term that will nevertheless promote their interests over the long term. But the state is also structurally constrained by the nature of the capitalist system: governments rely on capital accumulation to sustain both their legitimacy among the general public, and their valuable links with private interests.
Finding our way out of this cul-de-sac requires building power outside of these institutions in order to shape what happens within them. The only real counterweight to the power of the owners of capital is the power of organized labor; and the only real counterweight to the power of the capitalist state is the organized power of the majority of people. We can’t rely on Bill Gates to solve the climate crisis, but nor can we rely on Joe Biden. The majority of people on the planet—the ones who will be harmed most by climate breakdown—have to mobilize to demand a different way of organizing society: one based on meeting the needs of the many, rather than the greed of the few.
The World Health Organization (WHO) on March 11, 2020, declared the novel coronavirus (COVID-19) outbreak a global pandemic. In April of the same year, Keir Starmer won the Labour Party leadership and ended the Corbyn era. This been viewed by some as the death of the left-wing of the Party for a generation. What is the image we have to keep in mind in the new era of socialism and the parties that emerged from it? Can existing socialism provide a way out of the current stalemate?
It’s no secret that I’m not one of Starmer’s biggest fans – I campaigned for Rebecca Long-Bailey in the 2020 leadership election, and I was adamant that, despite Starmer’s positive gestures towards the left during the campaign, his leadership would be about reversing any of the gains that were made by the left during the Corbyn years. This prediction wasn’t based primarily on an assessment of Starmer’s character but on the nature of political power. One of the first things any new leader will do is work to consolidate their position by undermining the power of their opponents: for Starmer, the right of the Party supported whose campaign, that was always going to be the left.
But socialists within the Labour Party left themselves completely open to this reversal by failing to democratize the Party machinery. Socialists will never have any real influence in the Labour Party until its structures are democratized. This requires us to build power within and outside the Labour Party – we have to invest our time and energy into political movements that can hold our leaders to account. If we are able to put pressure on Starmer to, for example, make the Green New Deal Labour Party policy, that will be a significant victory for activists. Policies like the Green New Deal are incredibly popular, and I’m confident that, if we can campaign hard enough, we can force our leaders to listen to the voice of the people.
This wouldn’t have to be a radical socialist agenda. A green stimulus package is likely to create three times as many jobs as a ‘brown’ one and creating jobs in the care economy is disproportionately likely to support working-class women — one of the groups worst hit by austerity. This investment should be paired with an expansion in public ownership, a transformation of the finance sector, and support for the labor movement to ensure that private firms do not reap most of the gains from state largesse. But even a more limited, Keynesian package of green spending would do a significant amount both to support those worst hit by this crisis and to decarbonize the economy. Crucially, it would also help to build the power and confidence of working people so that they can go on to demand even bigger changes.