Opinion piece by Dr. Steven Schofield
Like millions of people in May 2020, I am at home adjusting to the new reality of lockdown as this terrible Covid-19 crisis unfolds. Despite repeated scientific warnings and evidence from previous epidemics like Ebola and SARS that a pandemic was inevitable, government preparations to contain Covid-19 have been woefully inadequate, some might say, criminally negligent.
With it has come an economic crisis, the implications of which are as serious, if not more so, than the pandemic itself. The world faces a perfect storm of both international and domestic dislocation on a scale not seen since the Great Depression of the 1930s. Optimistic forecasts that the economy will make a full recovery by the middle of 2021 are delusional. Millions of people, especially the most vulnerable in society, such as agency workers, those on zero-hour contracts and the self-employed precariat in the gig economy, face unemployment and destitution.
Either we accept the reassertion of a neo-liberal agenda, with its massive inequalities of wealth and power, and the threat of environmental destruction, or we radically restructure the economy in favour of working people, building economic and environmental resilience against the inevitable, future shocks to globalised capitalism. Only sustained, public investment in a post-carbon and post-military economy can provide the resources for such a transformation.
Debt and depression
Lockdown has led to a rapid collapse in output and to emergency, government interventions such as income support (furloughing), with 6.3 million people on the job-retention scheme. Government borrowing will grow to unprecedented levels – £225 billion in the four-month period from April to July, compared to £227.6 billion in twelve months, during the bail-out of the banks in 2009-2010.
This is seen as a necessary but short-term cost, with the expectation of economic recovery under the same mix of monetary policies that maintained liquidity (the circulation of money through the economy) and prevented a financial meltdown. Essentially, this would be a turbo-charged version of quantitative easing, with interest rates also pushed further down towards zero.
But the Covid-19 crisis is one of solvency (the inability to meet fixed-costs of rents, wages, materials, etc, against reduced income) not financial liquidity, and far more serious. Some sectors will never recover and others will operate at levels well below their present capacity. For example, British Airways has already laid off 12,000 of its 42,000 workforce, and Rolls Royce is cutting 8000 jobs in engine manufacture because of steep falls in passenger numbers and reduced orders for new aircraft.
The effects of reduced demand will cascade through whole swathes of manufacturing and service industries. If the solvency crisis combines with an international financial crisis then we will be in uncharted territory. There could be an economic collapse greater than the depression, mass unemployment, and shortages of food and other basic essentials, as the capitalist, global production and distribution networks break down.
Prior to Covid-19, the main economic alternatives to neo-liberalism had coalesced around the Green New Deal. Its focus is on the climate emergency and the need for public investment to rapidly decarbonise the economy by transferring from carbon to renewable energy options. Recognising that jobs will be lost in the oil, gas and coal industries, emphasis is placed on a ‘Just Transition’ and the guarantee of employment for displaced workers.
New capacity for renewables and the retro-fitting of homes to high environmental standards would generate millions of jobs and more than compensate for those lost in the carbon industries. Public investment would be funded by a form of ‘people’s quantitative easing’, with the expectation that the new employment generated raises overall income levels, and provides increased direct and indirect tax revenues through which to repay long-term, low-interest debt.
The Green New Deal represents a significant alternative to neo-liberalism, with its recognition of the scale of the climate emergency facing us and of how sustained public investment can achieve both environmental and economic benefits. But the Covid-19 crisis has brought into sharp focus the chronic instabilities at the heart of globalised capitalism and the need for deep, structural reform.
A public investment programme, overseen by local authorities acting as strategic, economic agencies, would provide local capacity through democratically-owned and accountable industries. Key investments would be, not only in energy, but social housing, public transport, food production and medical equipment. Over a ten-year period, the objective would be to create viable public sector alternatives to globalised supply networks, achieve agreed targets for the elimination of carbon emissions, and provide good wages and conditions for a unionised workforce.
Rather than dependent on quantitative easing, the local economic and environmental resilience programme could be self-financing through progressive taxation and the reallocation of government funding from military to civil investment. The richest in society have enjoyed an asset boom since 2010, while austerity policies have decimated public services. They would pay higher income and property taxes, as well as a land tax for the richest rentiers. Corporations that manipulate their finances through overseas tax havens would pay taxes that accurately reflect their turnover and profit in the country.
Demilitarisation and democratisation
Military spending also increased while public services were being cut. At present, the world spends over $1,900 billion on armaments, led by the United States. Not only is this a moral outrage in a world of poverty and basic social need, it is a gross diversion of scarce resources, including research and development, manufacturing capacity and skilled workers, all required for building resilience in the civil economy. The UK’s contribution to global disarmament should be the cancellation of Trident and its blue-water, carrier-fleet programme of ships, submarines and fighter aircraft, while retaining a small army corps for logistical, engineering and medical support in the event of emergencies like an epidemic or flood. I estimate that the combined funding from progressive taxation and the reallocation of military spending would be between £60-80 billion a year over a ten year period.
As with the Just Transition for workers in the carbon industries, there would be an arms conversion programme to provide alternative employment in the small number of localities with concentrations of arms production. Democratic participation in the arms conversion process is best illustrated by the Lucas Aerospace Plan in the mid-1970s. Here, shop stewards from all the Lucas plants drew up detailed, civil alternatives when faced with cutbacks to military contracts and threatened redundancies. These included medical equipment, public transport, and environmental technologies to maintain employment and provide socially-useful work. This model can be broadened out into a Citizens Economic Assembly, with particpatory budgeting by workers and representatives of the community on the allocation of resilience funds.
These are critical times. Already the debt issue is being weaponised by neo-liberal ideologues to advocate further, deep cuts to public spending, privatisation of remaining public services and deregulation, where environmental targets become voluntary options. But the Covid-19 crisis has also witnessed inspirational acts of solidarity and mutuality, including the distribution of food and medical supplies to vulnerable people, and the sharing of designs for the production of vital equipment like face-masks. A resilient, post-Covid-19 economy can be constructed in the spirit of that solidarity and in recognition that working people are the real source of wealth in society.