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12ВНУТРЕННИЕ КОРНИ ПАНДЕМИЧЕСКОГО УСКОРЕНИЯ ГЛОБАЛЬНОГО РАЗЛОМА1
DOMESTIC ROOTS
OF THE PANDEMIC ACCELERATION
OF GLOBAL RIFT
DOI: 10.38197/2072-2060-2020-223-3-557-564 ДЕСАИ Радика
Профессор, директор Центра геополитэкономических исследований Университета Манитобы Radhika DESAI
Professor, Director, Geopolitical Economy Study Group, University of Manitoba
Пандемия не только ускорила крах неолиберализма как политической парадигмы во всем мире, но и ускорила разрыв созданного ею мирового порядка. В этом тексте утверждается, что противоположные результаты неолиберальных экономик (в частности, США) и Китая в борьбе с пандемией дают ключевые подсказки о том, почему и как рухнет мировой порядок неолиберализма.
The pandemic has not only accelerated the collapse of neoliberalism as a policy paradigm around the world, it has also accelerated the rupture of the world order it created. This essay argues that the contrasting performance of the neoliberal economies, the US in particular, and China in handling the pandemic offers critical clues as to why and how the world order of neoliberalism will crumble.
Пандемия, геополитэкономия, США, Китай, неолиберализм, кризис.
Pandemic, Geopolitical Economy, United States, China, Neoliberalism, Crisis.
The novel coronavirus pandemic that hit the world outside China in spring 2020 has proved a 'great accelerator' of developments on many fronts. Domestically, the economic, social and political failings of the neoliberal paths trodden by
1 «Статья публикуется по материалам доклада, представленного на Международном научном онлайн-семинаре «Глобальный кризис 2020: вызовы будущему (политико-экономический дискурс)», который состоялся 21 мая 2020 г. в рамках МАЭФ».
Аннотация
Abstract
Ключевые слова Keywords
2 [2] discusses the deep historical roots of this development.
3 Just how it did so, exhausting the tried and tested policy instrument of monetary policy, I discuss
in [3]
most countries, despite mounting problems and rising concern, were exposed and accelerated in undeniable intensity and detail [1]. The international plane is no different. In the twenty-first century and especially since 2008, the decline of the US and the West generally and the rise of the BRICs, with China in the vanguard were already transforming the global landscape2 and the 2008 crisis had already accelerated this transformation3 Already before the pandemic, the discussion and opinion pages of all major newspapers and magazines were speaking of the crisis of multilateralism and the demise of the liberal world order that the US had so long struggled to create and maintain.
Though many blamed it on Trump and his America First' policies, it was clear to discerning observers that Trump represented merely a change of style, not substance. Indeed, his actions were in good part prompted by the underlying decline of US power. US policy has always put US interests first, 'The difference is that today President Trump, as the head of the waning superpower, is no longer as interested in supporting the neoliberal order that allowed the US to retain global supremacy for so long, and is happy to declare it as being against US interests. Of course, he will still promote US capital as aggressively as was done before, but the apparently "neutral" rules of the game that were pushed by previous US Presidents are now seen as providing too many opportunities to pretenders, and therefore are sought to be overturned [4] '.
Clearly, it was not Trump but the challenge to US and Western power that motivated the 'America First' agenda.
However, before the pandemic, laments for the decline of US power and the liberal international order, more or less the same thing, were matched by other voices who could still pretend that US power was intact, or nearly so, or would be as soon as Trump left the White House. Once the pandemic hit the West in March 2020, the situation was quite different. Within weeks, the establishment media in the west became an echo-chamber of announcements of a changing world order that would displace US primacy. 'The Coronavirus Pandemic Will Forever Alter the World Order' announced the Wall Street Journal. 'The corrosive damage runs deep:' How the coronavirus is shattering the world order' cried Fortune magazine. Forbes asked Are We Ready To Embrace A New World Order?' while Foreign Affairs feigned a certain tentativeness in conjecturing that 'The Coronavirus Could Reshape Global Order'.
Early in the pandemic such discussion of the fracturing of the world order were dominated by a concern that the lack of a coordinated global response to the public health crisis, on the model of the G20's actions after in the wake of the 2008 financial crisis. The absence of such a response was going to prolong the crisis, endanger economies around the world, and cost more lives. However, despite all the fanfare, the response to the 2008 crisis was never as globally coordinated as the myth implies. This was probably because the crisis itself, though usually termed the 'global financial crisis' was not a 'global' one at all. It was largely confined to the US, where it originated, the UK, the Eurozone and certain other European countries whose financial institutions had gorged themselves on the toxic securities the US banks generated. Only they suffered the financial contagion. The rest of the world suffered a very sharp but also short trade shock from which, however, it recovered rather smartly and continued growing, not least because of the enormous Chinese stimulus. It would have been more accurate to call the 2008 crisis the North Atlantic Financial Crisis. Certainly, by slowing growth in the advanced economies
4 This logic is discussed most fully in my Geopolitical Economy. It is summarized in [5]. It is translated as Геополитическая экономия - предмет для изучения многополярного мира, https:// ru.valdaiclub. com/a/ valdai-papers/ valdayskaya-zapiska-24/?sphrase_ id=182812
while the emerging economies and China continued their relatively robust growth, it only widened the rift in the world economy between the advanced economies and the BRICs that Goldman Sachs economist, Lord O'Neill, and predicted at the turn of the century.
It was soon clear to commentators that the lack of international coordination was hardly the main issue, the reason why the rift in the world economy was deepening at an accelerated rate was deeper and most commentaters had at least an inkling. Nearly all the stories announcing more and less profound shifts in the world order relied, to a greater or lesser extent, on the contrasting performance of the US and China on confronting the pandemic. China's success had made models of its public health system as well as its economic and political system. It was also enabling the country to project itself internationally far more effectively, cooperating with international organizations, particularly the WHO, sending expertise, drugs, medical equipment and other forms of aid to over 100 countries, including the US and European countries. And all this while Western leaders were waging trade and propaganda wars against China. No wonder most western sources found it difficult to take full account of the breadth and depth of this contras between China and the US. Even if they approached its gravity, they could only acknowledge it grudgingly.
This paper argues that the contrasting performance of the US and China provides the best possible prism through which to understand the drivers of the change in the world order and provides clues as to why this change will endure. We consider it here. The roots of this contrast in the international history of capitalism - effectively the evolution of its geopolitical economy in the dialectic of uneven and combined development between its dominant nations and their challengers4 - we leave for another time and place.
The Contrast
Faced with the novel coronavirus, the People's Republic of China responded energetically, quarantining Wuhan city and Hubei province, building new hospitals, isolating and treating the infected and ill, sequencing the genome, and launching an efficient Test, Trace, Isolate and Support operation to deal with smaller and future outbreaks. Notwithstanding initial problems in recognizing the seriousness of the danger - understandable given the novelty of the virus - the Chinese party-state also demonstrated a remarkable degree of openness, transparency and cooperation with the World Health Organization. Moreover, Chinese officials sought to warn the rest of the world to use the time they had thanks to the outbreak originating in China to prepare.
Although its per capita income remains less than a fifth that of the US, China's party-state had the political, governance, infrastructural and resource capacities to do all this and ready China for a cautious but sure reopening of its economy within two months of the initial lockdown, minimizing the economic damage. That this approach is effective is clear in the quelling of a new outbreak in the capital, Beijing, in June 2020. Given the efficiency of the Chinese response to the pandemic, it also suffered the least economic damage of major economies. IN its June 2020 World Economic Outlook, the International Monetary Fund was projecting that, by the end of 2021, China would exhibit the strongest recovery by far, growing by 15% over the two years from the beginning of 2020. Other major economies - both the emerging and the advanced economies - were expected to fare far worse. The former were expected to grow by
about 2 percent while the latter would remain 1% short of the early 2020 level of GDP. Going forward, China could be expected to be the engine of world growth [6].
The US response could not have contrasted more sharply. The government remained in denial for weeks, wasting precious time. After the seriousness of the situation could no longer be denied, it responded in a most peculiar fashion. Even though the oncoming crisis was an economic one, not the financial sort that had punctuated neoliberal economies the world over since the 1980s, its greatest public effort went into responding to it in the same fashion it had responded to the long string of financial crisis of recent decades, only with many times the force. The preferred solution was the easing of credit and the issuance of liquidity. In early and mid-March, in response to the expected and then to the real fall in asset markets in March - inter alia those for stocks, bonds and derivatives - the Federal Reserve lowered interest rates back down to near zero and engaged in an almost diarrheal issuance of liquidity in the form of buying bonds, government and corporate. In doing so, the Fed managed to use up, in a few weeks, all the 'ammunition' it had managed to save over the previous many years in the form of interest rate rises that had to be made gingerly, so as not to inflict pain on the coddled financial sector. It also managed to add massively to its already bloated balance sheet whose unwinding was a far greater problem than that which had been agonized over the previous decade.
The liquidity injection was so great that, over the next two months, it wiped out nearly all the losses incurred in March. Needless today, this liquidity-fueled market recovery had no basis in the actually rapidly deteriorating economy. All that monetary policy was not designed to aid the economy and could not. So the market recovery could not be expected to last [7]. However, at least the reckoning had been postponed and the assets of the financial sector and the elite preserved and even increased while the productive economy, on which the jobs, (small) business, contracts and gigs of the vast majority of the population - the 90 percent if into the 99 percent - depend, was left unaided. As far as it, and the pandemic itself, which also threatened the lives of those who must work for a living the most, were concerned, the US response has been anything but fulsome.
It did not have to be that way. The pandemic was no bolt out of the blue. Warnings had been coming thick and fast in the form, inter alia, of SARS, Swine Flu, Avian Flu, Ebola and Zika, not to mention scientists' warnings. Nevertheless, the pandemic found the US woefully unprepared. Things only went downhill from here. President Trump failed to coordinate any national response or any countrywide lockdown. With decades of neoliberalism having destroyed any public health and administrative ability US governments may have had in dealing with the pandemic the way the Chinese party-state had, that was the only viable option [8]. Not declaring a nation-wide lockdown, in good part because the President did not wish to assume the necessary responsibility, had the tragicomic effect that he could not call a nation-wide end to the patchwork of restrictions the states ended up imposing when his white, racist, middle class, right wing, social base clamored for it [9]. He also failed to invoke the Cold War era Defense Production Act to require private firms to produce urgently needed medical equipment. Rescue packages aimed largesse chiefly at corporations and the wealthy while giving, other than an electorally motivated one-time payment, little income support for who either lost jobs or should have stayed home to stay safe. Now the US was facing the danger workers being forced to work and spreading the disease.
The results have been the chaos that is the US response to the coronavirus. Presidential tweets outrageously spread disinformation about the virus, the illness and its treatment. Extreme right-wing groups organize demonstrations against the lockdowns. Public health facilities in major urban centers, preeminently New York, break down despite the US's astronomical spending per capita on health. Unemployment mounts skyward with no end in sight. Bankruptcies ditto. If this were not bad enough, US infections started their skyward rise by July amid the patchwork of restrictions and easing of its 50 states, with many having to reverse earlier easing.
The denizens of the hapless disunited states thought they had already seen the worst when brutal policing, intensified during the lockdown, took one more black life, George Floyd's. It would have only added to the statistics of the number of black and racialized people routinely killed in police custody had it not led to unprecedented resurgence of Black Lives Matter campaigns against racial discrimination, rocking US cities from sea to angry sea. The cleavages in US society were already deep before the pandemic. They now plumb the deepest fault-line of US society, the unresolved legacy of slavery which is kept open and bleeding by the systematic impoverishment, incarceration and mistreatment of this substantial minority. Worse, this depth was matched by breadth. Black people were joined by other racialized groups, whose numbers have been growing, and by white people, members of the precariat that has been growing since 2008 [10].
This, it would seem, is only the beginning. Many argue that the end of the ban on evictions at the end of July, which will leave millions of already impoverished Americans homeless, mean that the demonstrations of recent weeks are only a tame trailer of what may yet come, and how it may be policed. At the start of the pandemic, many hoped for a quick end to the lockdowns followed by a sharp 'V' shaped recovery. However, that seems unlikely. On the one hand, the shambolic pandemic response of the US and its sister neoliberal economies unlikely to work, leaving open the path to 'herd immunity'. It will involve thousands, if not millions, of preventable deaths. They will stress social cohesion, political legitimacy and economic viability, as will the economic disorder that the pandemic response has entailed.
The US and most other neoliberal economies were already debilitated by forty years of neoliberal policies. They were already heading for a disastrous reckoning before the pandemic abruptly brought it forward [11]. Their tightly precarious supply chains girdled the world, hollowing out domestic manufacturing and leaving these countries, fabulously rich by world standards, without the means to manufacture much needed drugs and equipment and causing them to suffer many multiples of the death rates of those of better organized societies able to practice social medicine and shoe-leather epidemiology. Wages were stagnant or declining over the neoliberal decades and the overwhelming majority of the jobs they were capable of creating were part-time, precarious and insufficient, pushing many into the 'gig' economy. The 'sharing economy' only seemed to enable the ability of the wealthy to monetize their assets while generating largely illusory benefits for the rest. Nor was small business a viable option for people. Giant monopoly corporations, favored by decades of neoliberal legislation and tax policies, have mowed them down to near-extinction. Such growth as this sort of economy could create was stimulated by the 'wealth effects' of the asset bubbles that the Federal Reserve connived in producing [12], as even mainstream economists had to admit after 2008 [13]. It worked by feeding the demand of the richest. To the extent
it served demand further down the social scale, it was for inessential luxuries - mass travel and tourism, hospitality, sports and mass entertainment events, restaurants, personal care, domestic services and the like. While these sectors were growing, essential, typically publicly-provided services such as healthcare, education, transport, community services culture, were shrinking. The frills, meanwhile, were produced by low-wage, female, black and otherwise racialized and immigrant labor and they were precisely the sectors that have been hardest hit by the 'lockdown', which affected 'non-essential' production hardest.
Outside the narrowest elites, the consumption of these 'frills' could not, moreover, by funded by incomes. They could only be financed, for the most part, through debt, adding to public and private debt that has piled up over the past four decades.
Neoliberal policies were applied with great pomp and fanfare allegedly to revive the productive economy by removing the 'dead hand' of the state and reviving the 'animal spirits' of entrepreneurs. They failed to do this simply because the diagnosis was wrong: the problem was not the state but an entirely capitalist stagnation that could not be resolved by markets or corporations alone but by the state and by states acting in collaboration and in the interests of an economy wider than mere capital accumulation. So neoliberal policies - lower taxes on the rich, roll back of social spending, deregulation and privatization, 'free trade' (actually free overseas investment) and capital flows only benefitted the financial sector, the chief means through which ever tinyer elites enriched themselves while starving productive economies. The size of the financial sector naturally grew even as the productive economy on which it para-sitically fed, shriveled. The increase the proportion of financial activity in the economy, at the expense of productive activity, generally known as 'financialization', has affected all leading neoliberal economies and none more so than the leading ones - the US and the UK. Though the pile-up of debt, its chief symptom, had abated somewhat since 2008, it was now poised to surpass those previously intolerable levels.
The lasting economic damage the pandemic promises to do far surpasses anything imagined by fashionable talk of 'scarring'. It promises to shrink all but the most basic parts of the neoliberal economy as a distrustful population stays home. Given how much it had proliferated inessential frills even has it had shrunk essential, typically publicly provided services, the damage can only be imagined. Unless rectified through a radical reorientation of the economy, which is farther from the political horizon than all the articles about instituting basic incomes and strengthening health care let on, this will lead to an self-feeding economic debacle as demand fails to expand, reducing incomes, and demand, further while supply of essentials fails to revive as governments continue to the practice of shoveling money at corporations unable to produce what is really needed. Moreover, as governments do this, they are and will continue to build up even more massive, laying the groundwork for an even more massive debt crisis and a breakdown of the structures of financialization, without replacing them with more attractive alternatives. That prospect is chief among the reasons why, for the first time, the usual boosters of the US dollar's world role - the hallmark of the world leadership it has claimed for decades and which resumed after the crisis of the early 1970s forced Nixon the 'close the gold window' and cease exchanging it for gold entirely on the basis of financialization - are finally admitting that its day may be done [14]. With China's tactile, socially grounded ability to respond to the pandemic and its far more resilient economy, it is likely to lead
world growth going forward, while the US and other neoliberal economies like it will constitute a drag on growth.
The US is, thus, emerging from the real-world stress test for public health systems, economies and polities that the pandemic has been with the equivalent of an F grade and China with a B+ if not an A. US infections and deaths will continue soaring while the Chinese have been contained and can be expected to remain so. Moreover, amid all this, it is increasingly clear that China will emerge as a rival pole of economic attraction and a rival economic model, marking a geopolitical shift of historic proportions. These outcomes may appear to have been caused by the pandemic but it has only been the great accelerator of trends already in train and a stress test that has produced revealing report cards. Much was already being said before the pandemic about the contrast between the US's and China's differing economic, political and international performance in recent decades, the ascendency of the 'China model' over the US one and a 'Beijing consensus' over the 'Washington consensus'.
Public discourse has registered these historic shifts only in a jarred and disjointed fashion as in the shards of a broken mirror each reflecting a tiny bit of the larger scene. There is talk of trade and technology wars in which US victory is no longer widely considered inevitable. There is grudging recognition of the superiority of China's response underneath talk of 'Chinese viruses' and 'Kung Flus', accusations of delay and disinformation and dismissals of 'draconian lockdowns'. And China's more cooperative stance amid the pandemic, aiding over a hundred countries, including the US, and giving the World Health Organization its full cooperation has had to be recognized. There is now even talk of a New Cold War against China - a term reserved until very recently to describe deteriorating relations between the US and a resurgent Russia - with the script lifted straight out of the New Cold War against Russia [15]. Finally, those recognizing some of the gravity of the situation for the US have been apt to lay the blame for the dismal US performance at the door of its repugnant incumbent president. They fail to see that the problem goes deeper and is connected with the reasons such a person could be elected to the presidency of such a powerful and rich country in the first place.
In reality, the contrast between the US and China demonstrates that economic models can be a matter of life and death. While China has prioritized lives and, at the same time, minimized damage to the economy, i.e. livelihoods, the US has prioritized the wealth of a few, while endangering lives and livelihoods of the many. The virus is far from done with the world. The coming weeks and months can only be expected to deepen the contrast outlined here. Its roots go too deep into the geopolitical economy of capitalism and lie in the contrast between its dominant and its challenger economies. The latter have historically been, because they have had to be, more productive, more equal and more legitimate than those of the enervated dominant economies. If, going forward, they become the new model for the world, the novel coronavirus will have made, despite the heavy death toll it has inflected on humanity, a positive contribution to its future.
References
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URL: https://canadiandimension.com/articles/view/the-unexpected-reckoning-coronavirus-and-capitalism
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15. Singh A. (2020). 'US elites use Russiagate playbook to blame China and promote hostility, interview by Aaron Maté, The Gray Zone, 25 April. URL: https://thegrayzone.com/2020/04/25/us-elites-use-russiagate-playbook-to-blame-china-and-promote-hostility/
Contact information
Geopolitical Economy Study Group, University of Manitoba
66 Chancellors Cir, Winnipeg, MB R3T 2N2, Canada
Radhika Desai
+1 800-432-19-60, [email protected]
