I wrote yesterday about the changes that I thought necessary within our economy to ensure that as many people as possible might make it safely, both economically as well as physically, to the other side of the coronavirus crisis.
My logic was simple, and not motivated by some deep anti-capital logic, as some seemed to think. It was instead a straightforward accounting-informed economic logic that sought to preserve the well-being of people whose cash flows will be vulnerable as a result of illness or threats to their employment, and of employers, on whose survival we are dependent if long-term damage to the economy is to be avoided. That logic did, therefore, suggest that the immediate impacts of the coronavirus epidemic should, in economic terms, fall upon landlords, whose assets will by definition survive this crisis, and banks, where asset values can be preserved if there is a consistent approach to loan repayment deferral that maintains asset values and incomes albeit at cost to cash flow, which in the case of banks can be assisted by coronavirus quantitative easing.
My proposal has given rise to the suggestion that I was writing as an anti-capitalist, when in practice what I was seeking to preserve was the value of capital, which has no value at all if a customer cannot pay for it. Self-interested commentators could not, apparently, see that point.
Let me, however, now continue this theme of considering what the post-coronavirus economy might look like, because I have a very real sense that this epidemic, even if it has a relatively modest health impact (which will still be uncomfortable, and tragic, for some) will have enormous economic consequences.
The first coronaviruses induced corporate failure has been seen today. No one will be particularly surprised that Flybe has been the first to fall: as will be the case for many who might die as a result of this virus, they were already vulnerable. This does not, however, make things any easier for those who are directly, and indirectly, impacted, and there will be many thousands of those. It is precisely these types of impact that my proposal with regards to loan repayment deferments and rental holidays is intended to address. Until such arrangements as I propose are put in place there will be more failures. That is why my ideas are critical to the economic survival of many companies, and landlords who want their assets used in the future.
It is, however, important to recognise two further issues. One is that we are already moving, very rapidly, towards a command economy being put in place. It has already been announced that supermarkets and the government are working together on a plan to ensure that critical food supplies survive, largely at the cost of reducing the range of products available. This is de facto rationing. And it is the suspension of the availability of that supposedly critical element of the market, which is choice. That choice is, of course, largely created artificially by advertising for the purpose of product differentiation in the interests of profit maximisation. In practical terms, we might, within weeks at most, see the suspension of the market dogma this has underpinned our society for decades, and this will be necessitated by the simple requirement that we survive. Profits will be trumped by necessity. That imperative will close down choice, and transfer decision making to a bureaucratic system, whether we like it or not. And, I stress, this will be done by a Conservative government.
The long term implications are not clear. It might be that this imposition will only last for a matter of weeks, in which case it will be seen as an aberration. I suspect, however, that this is a decidedly optimistic view: the return to normality once what have been thought of as normal conditions have been suspended might take quite a while to manage. Rationing after 1945 lasted for longer than it did during war conditions. Once established, a command economy may take some time to reverse.
And there are good reasons for thinking that might be the case. If this epidemic is anything like as bad as some suspect it might be then the social and psychological impacts will last a great deal longer than the physical threat will. There are already signs that some patterns of behaviour will alter. I rather strongly suspect, for example, that there will be much less business travel after this epidemic than there was before: people will realise that videoconferencing is, now, pretty good. We are already seeing large-scale business events cancelled: I suspect business shows and conferences will be consigned to history, and not many people will mourn that. And people are, apparently already booking more UK holidays: I suspect that this might the start of a significant change in travel patterns. Together, it so happens that these changes contributes to a green theme.
So too, though, does the enforced reduction in choice. A command economy does, as one of its objectives, place priority upon the elimination of waste. People might get used to this, and even welcome it. They might even accept the need for coordinated economic planning to counter the much greater threat that we face from the climate crisis much more readily after this epidemic than they would ever have done before it.
My point is that there are always tipping points. Their arrival is always unpredictable, and for that reason I fully admit that what I am suggesting here may not come to pass, but it is at least possible that the coronavirus academic might bring to an end the economic paradigm of the last forty or more years. Instead it might create a demand for something quite different, which is the economy that can address the greater threats that we face. If (and, I admit that it is a big if) the government, or rather the civil service, can manage this crisis well, then we may well see a change in the relationship of trust in society. The presumption that the market knows best may fall away: the desire for something better in the interests of the common good may replace it, matched with a determination that coordination to achieve a common interest must replace some of the very obvious waste the market has created, which will have been shown to be superfluous to need by this crisis. And amongst the new priorities will be much stronger public services.
Of course, I cannot be sure that this will happen, but considering possibilities is absolutely vital at present. The one thing that we can be sure of is that if this epidemic does develop, as seems likely, nothing will be the same after it. Imagining what those changes might be is vital to the process of learning the lessons from the problems that it will impose upon us.
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Fully agree with this.
What you are advancing is totally in line with the thesis advanced by Walter Scheidel in “The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century”. And this is that deep and long-lasting levelling of both the absolute and relative degree of income and wealth inequality has found its place primarily in conjunction with the ‘Four Horsemen’ of levelling: namely, mass mobilisation warfare; transformative revolutions (such as communism); state collapse; and plague and pandemic episodes.
It is tragic that we humans can’t sustain the levelling that occurs in the aftermath of these history-defining events, but we probably wouldn’t be human if we did.
And the notice of the death of neo-liberalism won’t be published. Those exercising power and influence will claim ignorance of such a damaging dogma. And if they were to concede its existence they would claim they were practising sound economics and will continue to do so. And so every effort will be made to effect an apparently seamless transition to the new dispensation.
And so it goes.
So Corona is an OPPORTUNITY to level!
…and the last blog was controversial
Peter Dawe says:
“So Corona is an OPPORTUNITY to level!”
Rest assured that there will be those who are using the opportunity to do exactly the opposite. ‘Never let a good crisis go to waste’ they say. And they mean it. Knee jerk legislation goes through with limited scrutiny in a febrile atmosphere caused by any sort of perceived crisis.
Government has already indicated it is looking at relaxation of health and safety measures. Changes like these if they come to pass will not be temporary as advertised. This is how ‘the ratchet’ works. Public protections have a way of vanishing, never to return.
I hope this is the case.
But as soon as the credit crunch was over, things sort of went back to normal (except for ordinary people whose incomes have not really recovered). I’m not so sure about the lasting effects of this virus, but we’ll see.
Whilst I agree with much of your thoughtful analysis, the ‘command economy’s’ role seems to be that it is only whisked out at certain critical times when markets have caused problems, or external shocks abound. It’s too late. What we really need is that presence more firmly entwined in the economy because maybe it would help forestall such crisis in the first place.
For example, is China going to learn how to manage its livestock markets to avoid this sort of thing instead of keeping things as they are in the name of cheap food?
My point is, we have a bigger and longer-term crisis to face as well and so the command economy may survive
Interesting……….
You know, I do not know if the 2008 crisis was ever actually over because it’s effects have dragged on for me and many others for years (austerity etc.,) and the Government response has been poor.
However, this emerging crisis is different to 2008 in many ways – it is not just about the money supply. I thought in 2008 that the crash was going to be what path dependency theory called a ‘punctuation’ – an event that brings about change to the established paradigms. It could be argued that 2008 at least did challenge the view that Governments and central banks had very little power and the Coronavirus will take that idea further.
I think that your dream is a good dream. But it could be that we are actually witnessing a wake up call out of the neo-lib dream we have been forced to live through all these wasteful years.
I hope so
It certainly has no answers this time
Well a command economy is your dream..and some of what you say I agree with. But to hope that the coronavirus forces people into the hands of the State for dependency over the long term is misplaced. First and foremost people always strive and work hard for a better life for themselves and their family. Call it selfish but it is human instinct. This will be the same when the Coronavirus has passed and it will be long forgotten about very quickly.
You really do not understand my dreams, do you?
How can you be so persistently deluded?
I am profoundly pro-market
I am profoundly anti-market abuse in all its forms
“I am profoundly pro-market”..i don’t think you really know what you want. You could get into an argument with yourself most of the time..
I know exactly what I want
That may be why I get it, quite often
Agree with “Never let a good crisis go to waste”. The vast Homeland Security Act came in after 9/11, DORA, Official Secrets during WWI. Let us consider some items high on BIG list:
Controls over broadcasting – excuse that fake news causes panics
Controls on health and safety – excuse that country must make do with what it has
Controls on parliamentary government – excuse that Westminster could breed germs
Controls on judicial review – excuse that government must be allowed to govern in a crisis
Controls on devolved governments – excuse that central control is vital in a crisis
Controls on movements – excuse that movement spreads disease.
I am sure that others can come up with their own wish list, but the statement that the price of liberty is eternal vigilance is especially true during periods of FUD (fear, uncertainty, doubt)
Looks like the government is going to have to give the “magic money tree” a good old shake. When they do, the cat will be out the bag. Will they be able to stuff it back in? The MSM will spin the policy and hope that people don’t join up the dots.
I agree Richard, we are about to find out what is really important/ vital and what is just fluff in our lives. We need to learn the lessons now if we are to survive climate change.
On the specifics of workers in the gig economy being paid when off sick with the virus. It’s not just those that are sick and self isolating. The hospitality sector is going to take a big hit and lots of people will be temporarily out of work whether they have contacted the virus or not. They too will need financial support or they will need to fake symptoms just to get help.
Agreed…
What’s going to exacerbate the situation is the Tory government’s decade of austerity cuts has reduced the number of Intensive Care beds available to a developed world low and local authority budgets have been reduced to a shoe-string. The UK is accordingly ill-prepared to deal with this pandemic if it spreads rapidly in the country. Sadly there are now so many ignorant voters in the country they’ll continue to shoot themselves in the foot by voting Tory even after the pandemic ends. Sooner or later a political party is going to have to grasp the nettle and engage in a mass campaign to educate the electorate in economic and monetary matters.