Throughout the past 40 years or so, the world’s rich nations have moved to deregulate their economies and free up global trading rules. Developing countries such as China, India and Brazil were brought into a global system; economic growth thrived, and hundreds of millions were lifted out of poverty.
First-world consumers got used to buying things on the internet at prices that would have been impossible a decade ago. Shiny shrink-wrapped packages would arrive within days, all the way from central China.
But something else also arrived from central China in the early weeks of January 2020. With no vaccine available for the rapidly spreading novel coronavirus, policy responses turned to extreme and unprecedented measures, including social distancing and lockdowns. The result was the shut down of the entire global economy.
While the dangers to public health are clear, the COVID-19 pandemic has also presented an unprecedented threat to the economic ideology driving neoliberal governments.
The scale and the depth of this economic slump is shocking. Nearly half the world’s nations have applied to the IMF for a fiscal bail-out. Globally, the final toll in unemployment will surely be in the hundreds of millions.
While the 2008 crisis primarily affected banks and financial institutions, COVID-19 called for the cessation of all economic activity involving the close contact of people. The job-rich services sector – the largest and most important part of the modern economy – has been the chief victim. In Australia, nearly every restaurant, café, cinema, gym, bar, museum and gallery has had to close its doors to the public. Unemployment levels look to be heading towards and likely beyond 10 per cent.
As the distinguished economic historian Adam Tooze has noted, global economic growth will contract this year. This has never happened before in the modern economy. Far from the metaphor of a “war economy”, advanced by leaders such as Scott Morrison, social distancing demands precisely the opposite: the shutting down of production and consumption, a demand and supply shock all at once.
Coronavirus has shone an unflattering light on the gaping inequalities evident in contemporary economies.
The peculiar nature of the COVID-19 challenge – an instantaneous cessation of vast swathes of economic activity – offers a special glimpse into the inner workings of the contemporary economy. And it’s not a pretty sight. Huge areas of our modern economy depend on finely honed supply chains, with precious little slack in the system should things go wrong.
Coronavirus has also shone an unflattering light on the gaping inequalities evident in contemporary economies. While a robber-baron billionaire class hoards vast troves of wealth, a huge precariat of exploited labour delivers flexible inputs to production, with little in the way of job security, or even proper wages and conditions.
Over the past 40 years, we’ve seen a neoliberal assault on organised labour, combined with a boom in industries such as hospitality, tourism and culture, which has created an unstable workforce that flits from role to role. In the best case, this brings both freedom and productivity, but all too often it also means the absence of ethical employment standards. Wage theft appears so common in the contemporary hospitality industry that it could justly be said that the entire sector depends on labour exploitation for its business model. COVID-19 has brought the misery of the modern service worker to the fore.
We are seeing a neoliberal government realise that the survival of its populace requires it to act against its own ideological instincts.
In the short-term, the Morrison government has responded with emergency policies that would have been inconceivable a few months ago. Federal stimulus already exceeds $200 billion, including the historic JobKeeper wage subsidy, originally projected to cost $130bn. Unemployment benefits have been doubled. Childcare is suddenly free. We are seeing a neoliberal government realise – in real time – that the survival of its populace requires it to act against its own ideological instincts.
Of course, no-one thinks Scott Morrison and Josh Frydenberg welcome, or plan to sustain, this COVID-enabled welfare state. The deficit hawks were quick to crank out the old arguments about doom and destruction. Right-wing media has ratcheted up calls to lift the lockdown, even if it means a few thousand senior citizens laying down their life for the good of the economy. No doubt the calls to pay back the debt and slash public spending will be honed to a fine pitch.
But the coronavirus is also giving us a taste of a different society, at least for those lucky enough to retain an income and a safe place to wait out the pandemic. As British sociologist Wil Davies has pointed out, the lockdown has shut off most of the consumption opportunities for ordinary citizens.
“It remains worth reflecting on how the world looks once market-based exchange is no longer the primary yardstick of value, as many people have been doing from across the political spectrum,” Davies points out.
Could COVID-19 permanently dismantle the global economy as we’ve known it, with all its flaws and inequalities? If so, would anyone mourn it, other than business commentators and billionaires?
What we create next may not be utopia, or even a Green New Deal. But it could look very different to the hyper-globalised and calculatedly unequal economy of the first decades of the 21st century.