This is the last of my three-part posts on neoliberalism, poverty and COVID. I want to look at some of the already emerging secondary and downstream effects of COVID on the global poor, and will do so towards the back end of today’s long post. The secondary impacts of COVID on poverty will mainly be from the economic fallout of the pandemic, and indeed a swathe of adverse economic impacts have already become very apparent as the global economy has rapidly entered into a period of profound recession, involving collapsing demand and investments and substantial unemployment and capital flight.
The economic crisis triggered by the pandemic is widely being predicted to place many hundreds of millions into further poverty and precarity in the near future, all with consequences for livelihoods and wellbeing that will be greater long-term threats to human health than the virus itself. Greater global and societal inequalities are sure to be attendant. The IMF and World Bank are each week offering new and ever higher predictions of the number of millions that will shortly face either extreme poverty or new poverty. For example, the most recent World Bank projection for people expected to enter into extreme poverty is 60 million, and these new acutely poor are already visibly present in the news feeds coming from many countries. This process of impoverishment is happening now, and this is only predicted to get much worse. New and COVID-catalysed poverty could be on a massive scale and embedded generationally, further negatively impacting on a global economic recovery. The global economy was also in deep structural trouble post the global financial crisis, plagued with massive problems of faltering global demand, stalled wages and unemployment. COVID has interacted with a long cyclical crisis to produce a deeper systemic economic crisis.
Other immediate secondary effects widely cited concern the real threat of food insecurities and mass starvation, with estimates that acute shortages of food may afflict some 250 million people in the coming year. The food system has been stretched and is breaking, with problems of supply and lack of money to buy both now present in many countries. We have seen thousands in South Africa queuing at food distribution lines and fights over food aid in Indian and Kenyan slums. The Indian media last week offered the grisly image of an obviously starving returning migrant worker eating from the carcass of a dead dog in the road, this all too graphically highlighting that some are now already chronically hungry and too poor to feed themselves because of economic dislocation.
This piece is therefore really about whether anything can change the course from what is presently signalled by the dismal projections for poverty, hunger, and years of recession. Unsurprisingly, the answer to this is closely tied with the question of what happens to neoliberalism. This question is presently very real and already lurking in current political deliberations surrounding how to deal with escalating national debts and economic contraction once the pandemic is over. Some OECD governments are already seeding the need for a return to the same old policy templates of the past once the primary effects of COVID recede, as is presently the case in Australia, for example. Yet other national leaders and parties speak to the need for the creation of new values for people, the economy and wealth creation. Things are presently in the balance.
The future of neoliberalism is clearly imperative to consideration of the effects of the pandemic on poverty and inequality in the immediate and longer-term future. Poverty and inequality have been so inextricably linked to the ideology and policy paradigm in the last forty years as to be treated as interdependent variables, and the persistence or demise of neoliberalism will determine the direction and formula of national and global responses to the new virally induced global economic crisis. So please forgive the present focus on neoliberalism yet again.
From multiple conversations with colleagues and friends, as is also apparent on social media and in the press, there is obviously a great deal of speculation about the future of neoliberalism as a dominant four-decades old ideology and political economic policy template. We should all now be conscious of a palpable and widespread feeling that neoliberalism as an ideology simply cannot continue to govern societies and life chances as it has done for so long. Where such sentiment was not present previously, COVID is crystallising that opinion for many people. Some commentators are suggesting that COVID has effectively killed neoliberalism off for good, and we at a juncture where the task at hand is how we move on. Much of my own contributions to this site have been exactly about the degree to which its legacy have multiplied the effects of the COVID crisis, and the very visible extent to which it has been exposed as bankrupt and disastrous as an guiding ideology, not least in producing the societal vulnerabilities, poverty and inequalities that the virus has opportunistically thrived upon. Make no mistake, we are in a major crisis of neoliberal capitalism and governmentality, and it could at long-last be gone.
For now, at least, there are clearly hopeful signs of huge changes present the politics and political economy of response to the economic crisis created by the virus. In the West, the neoliberal regulatory state is very quickly being cannibalised to provide new Keynsian interventionism and command economics, involving massive bailouts of firms and income earners by wage guarantees. There are also state interventions in systems of transport, production and supply. Multilateral actors such as the EU and IMF have been dragged kicking and screaming into committing to huge financial injections into struggling economies. States and institutions long bound by debt and market mantras have been forced to intervene, to underwrite wages, bankroll national borrowing, and correct the market. The market has failed in so many areas touched by the crisis that even faith in this fundamental institutional pillar of neoliberal capitalism has been deeply shaken. The stage seems set for real structural and institutional change.
We have also seen a more equitable distribution of emergency funds through affected OECD countries and society than was present in the quantitative easing that followed the GFC, this having largely flowed to banks and investment firms for initial stability, then being used to infiltrate new areas of global life to financialize and speculate in. In the COVID crisis welfare payments have increased in a number of countries with huge funding and wage subsidies. New wage settlements for public sector employees are either already being enacted or have been promised. Many OECD countries are now simply printing money and building up debt with little thought to the mantras of fiscal prudence and debt to GDP ratios. Money is available, new values are present, and something has clearly shifted.
However, there is also concern for whether these changes will persist after the crisis ends, and as to the longer-term fortunes of neoliberalism. In simple terms, for me at least, this is a question of what the medium to long-term macro-political global response will be to the global economic recession and systemic crisis of capitalism, and not what is occurring in the present viral and economic emergency. What is happening presently is clearly exceptional by any measure, the question is whether it produces significant and lasting change in the world system. Is COVID the beginning of a real longer-term transformation, a point of real transition that previous cyclical crises such as the GFC have failed to produce? If so, the many millions who will be further marginalised and impoverished by this the secondary effects of COVID in the short-term, might in the longer-term be offered something more progressive and caring in terms of global national policy responses, perhaps the necessary new settlements for growth, the environment, inequalities, jobs and public services. If not and nothing changes, then we can expect a bleak, default future that previous neoliberal answers to recent economic and financial crises would signal. After COVID, or indeed during a prolonged pandemic, will we get austerity, tax breaks for the wealthy and businesses, and further privatisation and erosion of public goods and services? Or do we get something new?
Despite a lot of present virtue signalling on the ‘lessons learnt’ and ‘the need for real change’, the choices boil down to whether a new settlement and political economy will favour reconstruction and recovery predicated on new models of growth, built on the environment, education, social welfare and redressing inequalities, or will we be back to faith in growth and recovery by means of markets and trickle-down economics. The former route requires a new form of state to the neoliberal regulatory state, with necessary transition to greater wealth redistribution, coupled with more demand side, pro-poor and environmentally-grounded command economics. The neoliberal route has been followed before, and only requires a following familiar policy template. If we slide back into the old normal then presently projected poverty will be entrenched and inequality extended.
Caution should be expressed, the admittedly simplistic binary of present choices is now more critical than ever before. Far darker alternatives are also present. Populism threatens to combine with anti-democratic, hyper-conservative forces present in the polities of many countries, such as the USA, Brazil, Turkey and the UK. Neoliberalism is no stranger to this terrain, and has co-existed quite comfortably with autocracies in the past. Of course, there is also a middle ground, where we might see revitalised national public services embedded in the same structural dynamics of a wider globalised system of neoliberal capitalism. However, as past experiments with the middle ground have proven, for example in the 1990s in countries such as the UK, what we end up with is neoliberalism in some new variant or packaging, oven ready to be revitalised in the inevitable crisis that unfettered capitalism produces cyclically. And the price of this middle ground is that centrist, and centre-left states, lost the basis of their support systems, which had historically been organised labour. Mobilisation has largely evaporated, leaving us with a rag tag of ad hoc issues around which movements pop up, such as Occupy and GetUp. We need something radically new. Indeed, the scale of the transformations required to deal with the unfolding recession, when combined with climate change, indicate the need for changes that are truly fundamental and much longer term.
One of the many pieces in recent months to ask these questions about the fate of neoliberalism, including amazing anti-neoliberal editorials that have been carried in the Financial Times and The Economist, is found in a long article by Rutger Bregman in The Correspondent, on the 15th May. It is a very good piece that captures the present ‘moment of transition in the balance’ zeitgeist. One quote from the article reflects the sense of the liminal for the neoliberal order:
‘The ideology that was dominant these last 40 years is dying. What will replace it? Nobody knows for sure. It’s not hard to imagine this crisis might send us down an even darker path. That rulers will use it to seize more power, restrict their populations’ freedom, and stoke the flames of racism and hatred.’
It is obvious that there has been a duality present in all the major cyclical crises of the last four decades. These have been windows of opportunity for real change that, nontheless, have also been historical junctures through which neoliberalism has advanced reinvigorated. It has been extremely opportunistic in the crises it has created, and as an ideology and policy platform has been able to mutate and reinfect new sites. In our present viral crisis the conditions for real transformation are compelling, yet the same dangerous duality is also present.
At this point in time, on the ideological front neoliberalism has clearly been weakened, having been under sustained attack in the decade before COVID emerged. From the GFC onwards many of the key economic assumptions that underpin neoliberalism having been ruthlessly dismantled by economists. Like Brugman, I think this is significant. Key features or structural externalities of the neoliberal capitalist that have interacted so aggressively with COVID – inequality, concentrated wealth and growing marginalisation, the rolled back state, assumptions about growth and trickle down, and the dangers of public debt – have all already been widely critiqued and exposed as functional products of the global economic system that has been recreated since the 1980s. COVID is being held as the final act in this ideological implosion, the coup de grace in which any lasting legitimacy has finally been stripped away from neoliberalism and the massive structural harms on societies and governance it has caused being so brutally exposed. This has not been an instant process of ideological collapse by pandemic, therefore, but is the consequence of sustained and effective undermining of the core assumptions and foundations of an ideology and economic system.
Brugman, for one, seems convinced that many of the critical ideas for required transformation from neoliberalism have sufficiently sedimented in the last decade to allow the pandemic simply to give the last push to a teetering ideology off its historical cliff. He presents a very compelling story of how economists have been the voices offering some of the most potent opposition to neoliberalism in recent years, a revolt from within the camp as it were.
Massive concentrations in wealth and attendant inequalities within and across nations have preoccupied a range of radical heterodox economic critiques since the global financial crisis. The consequences of austerity and privatisation on services, welfare and wellbeing have been documented, as have the scale of tax avoidance and financialization. Indeed, the aetiology of COVID and the pathways of its co-pathogenesis with neoliberalism have all been mapped out in some wonderful and boundary pushing economic work. We should know why the pandemic has had such a disproportionate effect on the poor, and why states were not equipped to deal with it in so many cases. States had been emasculated by elites and governments having placed all faith in the market, removing many of the safety nets and services that could have better mitigated the crisis.
We knew all this before COVID. We have had Thomas Piketty detailing in huge tomes the extent of inequality and the concentration of global wealth in the one per cent (2013 and 2020), he coming on the back of incisive (epidemiological) studies of inequality and health outcomes by Wilkinson and Pickett (2009) and Michael Marmott (2008, 2015); the blistering book on the massive scale of tax avoidance by transnational corporations and the super-rich at the heart of Zucman’s The Hidden Wealth of Nations (2015); and there is Stephanie Kelton’s soon to be published exploration of the artificial construction of national debt as dangerous deficit that required automatic policy redress by austerity and cuts (The Deficit Myth, 2020). Kelton points out that, invariably, the opposite logic and policy responses to debt operates when it is private sector bailout and financial crisis (or war) that has been required, with money suddenly appearing and debt absorbed by wider society, or written off with a pen stroke. Her soon to be published book could not be more timely as the ‘what shall we do about this debt’ discourse cranks up once more.
While the critique of neoliberalism’s pathologies have been more widespread and persistent than that coming from economics in the last decade, it is significant that alternate pathways for social and economic organisation have been also been laid out in that discipline post-GFC.
Economists are not only exposing structural and social problems produced by the system, but have also critically examined the features of capitalist growth in order to suggest new settlements are possible. We have climate change and massive inequalities, now we have deep recession, so this is worth considering in the context of how we emerge from COVID. While new pathways for more sustainable growth have been championed for the future, such as with the Green New Deal, De-growth and Blue Economy, the key conditions for previous waves of growth are also being re-examined. They point to other myths of neoliberal capitalism, but also to ways forward.
The centrality of markets and the private sector in producing innovation that has led to globalisation and economic growth has also been dismantled and discredited as a hoax. Many outside economics, in science and technology studies and political economy, have been banging this drum for decades. Either way, the myth has conveniently masked the instrumental and financing role of the state in providing the basis for a lot of the technology-led accumulation that has characterised the globalised economy and dominant sectors and firms. The economist Mariana Mazzucato’s recent work unpicks how much of advanced capitalism’s dynamism is actually predicated on massive and long-term public investment in areas like R&D, with further public subsidy of basic services and public goods such as education and research adding to the pyramid of human capital and knowledge production necessary for technology-based growth.
While the process of wealth creation has often started with sustained public funding and state entrepreneurialism, the process of bringing products to market and the profits made have been effectively highjacked. Public investments by means of our tax dollars have been routinely commodified for profit by the big tech firms, and they have done so with the willing consent of core Western states. Further extraction is made by those able to invest heavily in the state subsidised system, and there is wider economy of growth that has become financialized and subject to rents based on what Polanyi described as fictitious commodities, such as patents and derivatives. Profits are not being returned to the investing society in the form of taxation on profits, nor has there been fair distribution of resulting wealth. Trickle-down prosperity has not occurred, or not occurred to the level that initial public investments would warrant, as wealth has concentrated in the hands of corporations, asset holders and big investors.
As stated above, this facilitating role of the permissive entrepreneurial state is not a new story for anyone familiar with STS or IPE, nor is it new for those concerned with the history of the pharmaceutical sector, the post-genomic life sciences, the internet, or the substantial spin-offs that have arisen from technological advances made in space and military programmes. The pattern of wider publicly funded infrastructures, such as education and research, forming the basis of corporate profit could be traced across any number of juggernaut global economic sectors. Regulation to allow further commodification and rent extraction has been captured on both the national and transnational levels. The game is rigged, yet the assumption that the private sector is where wealth is created has been a pillar of neoliberal capitalism and capitalism more widely. This signals another need for change, and from asking where has our money gone we now need to be more assertive and careful about where it goes in the future. We can create our own new model of growth as our money is already bankrolling the old model.
One of the most pressing pathways out of neoliberal capitalism is therefore to realise our collective investment in social infrastructures and productive capital in a new and fairer way. Indeed, the wider roadmap for change is something that many didn’t need economics to point out, although the work has provided ammunition and further exposure of myths. In order to finally end neoliberalism, then we need to operationalise a plan from what we now already know about its pathologies and plot a more sustainable and publicly driven future.
The roadmap out of the COVID crisis should involve new regimes for progressive tax and wealth redistribution on a massive scale. Tax needs to be geared collectively by states to prevent races to the bottom in tax levels and the continued off-shoring of wealth and profits. More tax needs to be paid in progressive systems. The case for guaranteed universal basic income is that it can lift people out of welfare dependency and poverty, boosts life chances and opportunities, and creates new demand. Indeed, this measure is now supported in a great deal of Western countries at least.
The transition from the neoliberal economy requires an equally substantial investment in public goods for public benefit, with free riding capital made to properly pay for the infrastructures that support and permit it to exist. Returns from publicly funded science should be secured for the public, and the investment of the past recognised, especially if they are still subject to intellectual property rights or other forms of concentrated commercial ownership. Until only very recently a great deal of research was in the public domain, in universities or national institutes, with areas of publicly funded knowledge production covering diverse areas such as plant breeding, communications, life sciences, medicines, virology, space and transport sciences, geology and minerals. The idea of research in the public domain is clearly not new or radical, but is badly needed once more. It would prevent much of the market failure we have seen in this pandemic with regard to an historic withdrawal of Pharma from vaccine R&D, for example, and it might provide the long-term and potentially high sunk cost investments in sciences required to combat climate change. We do not have to live with a system of knowledge production that is skewed by commercial imperatives and commodified. Answering the call of money does not often equate to responding to the call of real needs.
More widely, public goods and public investments need to be considered as good ideas rather than inconvenient inefficiencies. Health, education, sustainable energy and communications all form into a group of essential sectors that the market has no real place within. Together with the global food system, these are public goods and vital sectors that need to be off limits to financialization and speculative capitalism - they don’t belong together and we cannot risk again the volatility of recent decades and the mass market failures that presently plague us.
New values are also required, for what is essential to society, such as key workers and producers, educators and carers. The elevation of fictitious commodities and financial instruments has been a disaster for ascribing real values to people, essential processes and goods. While so much of neoliberal wealth creation and commodification has rested upon these commodities, and the creation of intangible wealth and assets, the process has grossly distorted what is of real value. Furthermore, we also need to be long term in how we invest and grow, and not be bound by short-term imperatives of corporate reporting or political cycles. The form of growth is also vital, it cannot be blind or governed by one step removed financialzation, and rather should be determined by longer-term responses to peoples’ real needs for food, energy, health and shelter, all guided by a pressing requirement to counter climate change and future system shocks collectively. Growth should not further undermine sustainability, or there will be no viable longer term.
We also need to remove the shackles of public fiscal discipline and reconstruct national debt as tool not as a burden, by using public money for the public good in a manner that is progressive and accountable. We should not continue to transfer it almost unconditionally to firms, unless returns are guaranteed by new legal and regulatory settlement between the state and the private sector. A more fiscally disciplined transnational finance is required, circumscribed in how and where it operates, and not permitted to generate routine crisis with risks socialised by society more and more frequently, having already added many more trillions to a global debt burden with such scant public gain.
Finally, there is the necessary reconfiguration of the role and authority of state to secure transition and more sustainable and equitable conditions for progress and economic wellbeing. New forms of representation and accountability are needed, and more people should have tools and access in order to speak to power of their contexts and needs and vulnerabilities. COVID has further highlighted the urgency of far more equality and representation in state institutions and decision making. There should be more opportunities for people to play a role in governance and decisions that affect them, correcting current exclusions by deliberately incorporating women, ethnic minorities and the working class into governance and the polity. The party system and state institutions are clearly broken in countries such as the USA and UK, and need more genuine and progressive systems of representation, particularly for groups that neoliberalism has marginalised. This is doubly pressing as organised labour has been so circumscribed and eroded in much of the world. While this too needs revitalisation, people should also be at the heart of government.
A reformulated state is needed to steer where we invest collectively and publicly, who profits from those investments, and the basic conditions of wealth creation and its distribution. We have lost sight of what the state is for, and to which interests this powerful institution should ultimately represent. All this and much more needs to change if we do not want to follow the old default pathways.
This is a difficult and challenging agenda to say the least, at part of my caution or pessimism about the scale of possibilities for transformation lies in two major obstacles we face as we emerge from the COVID crisis – the political and the economic. Things hang in the balance because we are prisoners of history with regard to what is in place politically and economically. Despite a widespread desire for the death of neoliberalism, the COVID crisis is also cementing what were already some substantial obstacles to transformation.
As far as political obstacles to transformation are concerned, Lee Jones recently commented in The Tribune that the COVID emergency has been accompanied by some profoundly worrying anti-democratic and authoritarian powers being invested in states and elites, as in Hungary, Serbia, the UK, USA and Australia, all to varying degrees. It is not a given that the death of present neoliberalism will entail something progressive, and rather may serve to create a much bleaker and far more undemocratic variant of hyper-neoliberal populism. Let us hope and not, but approach with caution what Trump, Bolsonaro, Erdogan, Johnson and others may feel they have to do in coming months. Even if the present and unstable future does not lead to more authoritarianism, then we still face entrenched interests that have colonised the political system. for a very long time. Alternatives are not present in the political systems of most countries, and there is little left of the left. Added to this, social mobilisation and organised labour are in tatters after four decades of neoliberalism and the desertion of tripartism by the centre-left. The question then becomes what agents can carry out these transitions? The scale of the present crisis and the vaunted death of neoliberalism do not indicate that change will take hold in the long term automatically, this still requiring powerful agency, as it will not happen without it. Much of what I have suggested for transformation above requires a reconfigured state, something that is beyond a financing regulatory shell. But as Anton Jaeger has argued, we have been the state route before in the 1990s and it produced nothing but ephemeral investments in the public sector and new injections into development assistance. So, at the heart of any transformation of lasting political significance there has to be a new form of social and global organisation. This alone is a huge project.
Then we have the economic obstacles, and these have become more considerable with the ensuing global recession. This where this post began. I am conscious that I am breaking all the rules of this website now and my allocated 800 words has long past. To sew this up I’ll add a part 4 next week and try and do it justice and wrap it up. It is getting cold out here as well, and the baby will be awake soon.