If all country pandemics were the same, then the figure below would be how this pandemic will come to an end. The start-to-peak ratio of Covid-19 infections for all countries would be 40-50 days. Many countries are not yet near the peak point and there is no guarantee that the peak will be at the same time point, if mitigation and suppression methods (testing, self-isolation, quarantine and lockdowns) are not working similarly. But ultimately, there will be a peak everywhere and the pandemic will wane – if only to come back next year, maybe.
What is clear is that the lockdowns in so many major economies have and will deliver a humungous slump in production, investment, employment and incomes in most economies. The OECD sums up the picture best. The impact effect of business closures could result in reductions of 15% or more in the level of output throughout the advanced economies and major emerging-market economies. In the median economy, output would decline by 25%…. “For each month of containment, there will be a loss of 2 percentage points in annual GDP growth”.
Looking back in my book, The Long Depression, I found that the loss of GDP from the beginning of Great Recession in 2008 through the 18 months to the trough in mid-2009 was over 6% of GDP in the major economies. Global real GDP fell about 3.5% over that period, while the so-called emerging market economies did not contract (because China continued to expand).
In this pandemic, if the major economies are locked down for two months and maybe more (China’s Wuhan lockdown will not be relieved until next week; so that’s more than two months), then global GDP is likely to contract in 2020 by more than in the Great Recession.
Of course, the hope is that the lockdowns will be short-lived. As OECD general secretary Gurria said, “we don’t know how long it’s going to take to fix unemployment and the closures of millions of small businesses: but it’s wishful thinking to talk about a quick recovery.” Clearly the idea of President Trump that America can get back to business by Easter Sunday is not realistic.
Nevertheless, on that hope that lockdowns will be short-lived and because they have no other choice if the pandemic is to be suppressed, pro-capitalist governments have thrown the kitchen sink at their economies in order to avoid the worst. The first priority has been to save capitalist businesses, especially the large companies. So central banks have cut their policy interest rates to zero or below; and they have announced a myriad of credit facilities and bond purchasing programmes that dwarf the bailouts and quantitative easing measures of the last ten years. Governments have announced loan guarantees and grants for businesses at amounts never seen before.
Globally, I calculate that governments have announced fiscal ‘stimulus’ packages of around 4% of GDP and another 5% of GDP in credit and loan guarantees to the capitalist sector. In the Great Recession, fiscal bailouts totalled only 2% of world GDP.
If we take the $2trn package agreed by the US Congress, way more than during the global financial meltdown in 2008-9, two-thirds of it will go in outright cash and loans that may not be repaid to big business (travel companies etc) and to smaller businesses, but just one-third to helping the millions of workers and self-employed to survive with cash handouts and tax deferrals.
It’s the same in the UK and Europe with the pandemic packages: first, save capitalist business; and second, tide over working people. The payments for workers laid off and the self-employed are only expected to be in place for two months and often people won’t receive any cash for weeks, if not months. So these measures are way short of providing sufficient support for the millions that have already been locked down or have seen their companies lay them off.
It really is naïve, if not ignorant, of Nobel prize winning economists like Joseph Stiglitz, Chris Pissarides or Adam Posen to praise such schemes as the UK’s governments, just because it is “more generous” than the one in the US. “The U.K. deserves credit for really reversing its austerity and being very ambitious and coherent,” said Posen, who was a financial crisis-era policy maker at the BOE. “The wish-list in terms of design, size, content and coordination — all is terrific.” British arch-Keynesian Will Hutton summed up the mood: “a Rubicon has been crossed. Keynesianism has been restored to its proper place in British public life.” Even the erstwhile Austerians joined the chorus of praise, including former austerity UK Chancellor, George Osborne.
The British and American public also seem to be convinced that the packages are generous, as the latest polls suggest a pick-up in support for the mendacious President Trump and ‘Operation Last Gasp’ Prime Minister Johnson. It seems everywhere incumbent rulers have gained support during the crisis. That may not last, however, if the lockdowns continue and slump begins to bite deep.
The reality is that the money being shifted towards working people compared to big business is minimal. For example, the UK package offers an 80% of wages payout for employees and self-employed. But that is actually no more than the usual unemployment benefits ratio offered by many governments in Europe. The UK had a very low benefit ratio that is now being raised to the European average and then only for a few months. And even then there are millions who will not qualify.
Moreover, none of these measures will avoid the slump and they are way insufficient to restore growth and employment in most capitalist economies over the next year. There is every possibility that this pandemic slump will not have a V-shaped recovery as most mainstream forecasts hope for. A U shaped recovery (ie a slump lasting a year or more) is more likely. And there is a risk of a very slow recovery, more like a bent L-shape, as is appearing in China, so far.
Indeed, mainstream economics is not sure what to do. The Keynesian view is presented to us by Lord Skidelsky, Keynes’ biographer. Skidelsky pointed out that the lockdowns were the opposite of the typical Keynesian problem of ‘deficient demand’. Indeed, it is a problem of deficient supply as most productive workers have stopped work. But Skidelsky does not see it that way. You see, he reckons that it is not a ‘supply shock’ but a problem of ‘excess demand’. But ‘excess demand’ is the mirror of ‘scarce supply’. The question is where do we start: surely it starts with the loss of output and value creation, not with ‘excess demand’?
Skidelsky tells us that “a recession is normally triggered by a banking failure or a collapse in business confidence. Output is cut, workers are laid off, spending power falls and the slump spreads through a multiplied reduction in spending. Supply and demand fall together until the economy is stabilised at a lower level. In these circumstances, Keynes said, government spending should rise to offset the fall in private spending.”
Readers of my blog know well that I consider, that while a recession may be “triggered” by a banking failure or “a collapse in business confidence”, these triggers are not the underlying cause of recurring crises in capitalism. Why do banking failures sometimes not cause a slump and why do businesses suddenly have a collapse in confidence? Keynesian theory cannot tell us.
Skidelsky goes on that if the crisis is one of “excess demand”, then we need to reduce demand to meet supply! I would have thought it would be better to get out of this slump by raising output to meet demand, but there we go. Skidelsky points out that “It is not that business wants to produce less. It is forced to produce less because a section of its workforce is being prevented from working. The economic effect is similar to wartime conscription, when a fraction of the workforce is extracted from civilian production. Production of civilian goods falls, but aggregate demand remains the same: it is merely redistributed from workers producing civilian goods to workers conscripted into the army or reallocated to producing munitions. What happens today will be determined by what happens to the spending power of those made compulsorily idle.”
Really? In the war economy, everybody is still working – indeed during the second world war, there was in effect full employment as the war machine was pumped up. Currently we are heading for the biggest rise in unemployment in a few quarters in economic history. This is no war economy.
Skidelsky reminds us that Keynes’s solution in the war economy of ‘excess demand’ was to propose an increase in taxation. “In his pamphlet How to Pay for the War (1940). civilian consumption, he said, had to be reduced to release resources for military consumption. Without an increase in voluntary saving, there were only two ways to reduce civilian consumption: inflation or higher taxes.” “The solution he and the Treasury jointly hit on was to raise the standard rate of income tax to 50 per cent, with a top marginal rate of 97.5 per cent, and lower the threshold for paying taxes. The latter would bring 3.25m extra taxpayers into the income tax net. Everyone would pay the increased taxes which the war effort demanded, but the tax payments of the three million would be repayable after the war in the form of tax credits. There would also be rationing of essential goods.”
Wow! So Skidelsky’s answer to the current slump is to raise taxation, even for those at the bottom of the income scale in order to stop them spending too much and causing inflation! He finishes by saying that the pandemic “should deepen our understanding of what it is to be a Keynesian.” Indeed.
The current situation is not a war economy, as James Meadway says. When the so-called Spanish flu pandemic hit, it was right at the end of the first world war. That pandemic claimed 675,000 lives in the US and at least 50 million worldwide. The flu did not destroy the US economy. In 1918, the year in which influenza deaths peaked in the US, business failures were at less than half their pre-war level, and they were lower still in 1919 (see chart). Driven by the wartime production effort, US real GDP rose by 9% in 1918, and by around 1% the following year even as the flu raged.
Of course, then there were no lockdowns and people were just left to die or live. But the point is that, once the current pandemic lockdowns end, what is needed to revive output, investment and employment is something like a war economy; not bailing out big business with grants and loans so that they can return to business as usual. This slump can only be reversed with war time-like measures, namely massive government investment, public ownership of strategic sectors and state direction of the productive sectors of the economy.
Remember, even before the virus hit the global economy, many capitalist economies were slowing fast or already in outright recession. In the US, one of the better performing economies, real GDP growth in Q4 had fallen to under 2% a year with forecasts of further slowdown this year. Business investment was stagnating and non-financial corporate profits had been on downward trend for five years. The capitalist sector was and is in no shape to lead an economic recovery that can lead back to full employment and rising real incomes. It will require the public sector to lead.
Andrew Bossie and J.W. Mason have just published a perceptive paper on the experience of that public sector role in the war-time US economy. They show that all sorts of loan guarantees, tax incentives etc were offered by the Roosevelt administration to the capitalist sector to begin with. But it soon became clear that the capitalist sector could not do the job of delivering on the war effort as they would not invest or boost capacity without profit guarantees. Direct public investment took over and government-ordered direction was imposed.
Bossie and Mason found that from 8 to 10 percent of GDP during the 1930s, federal spending rose to an average of around 40 percent of GDP from 1942 to 1945. And most significant, contract spending on goods and services accounted for 23 percent on average during the war. Currently in most capitalist economies public sector investment is about 3% of GDP, while capitalist sector investment is 15%-plus. In the war that ratio was reversed.
I had shown the same result in a post of mine back in 2012. I quote: “What happened was a massive rise in government investment and spending. In 1940, private sector investment was still below the level of 1929 and actually fell further during the war. So the state sector took over nearly all investment, as resources (value) were diverted to the production of arms and other security measures in a war economy.” Keynes himself said that the war economy demonstrated that “It is, it seems, politically impossible for a capitalistic democracy to organize expenditure on the scale necessary to make the grand experiments which would prove my case — except in war conditions.”
The war economy did not stimulate the private sector, it replaced the ‘free market’ and capitalist investment for profit. To organize the war economy and to ensure that it produced the goods needed for war, the Roosevelt government spawned an array of mobilization agencies which not only often purchased goods but closely directed those goods’ manufacture and heavily influenced the operation of private companies and whole industries.
Bossie and Mason conclude that: “the more—and faster—the economy needs to change, the more planning it needs. More than at any other period in US history, the wartime economy was a planned economy. The massive, rapid shift from civilian to military production required far more conscious direction than the normal process of economic growth. The national response to the coronavirus and the transition away from carbon will also require higher than normal degrees of economic planning by government.”
What the story of the Great Depression and the war showed was that, once capitalism is in the depth of a long depression, there must be a grinding and deep destruction of all that capitalism had accumulated in previous decades before a new era of expansion becomes possible. There is no policy that can avoid that and preserve the capitalist sector. If that does not happen this time, then the Long Depression that the world capitalist economy has suffered since the Great Recession could enter another decade.
The major economies (let alone the so-called emerging economies) will struggle to come out of this huge slump unless the law of market and value is replaced by public ownership, investment and planning, utilising all the skills and resources of working people. This pandemic has shown that.
Michael Roberts Blog 
Excellent analysis
Michael. Thank you. Have you estimated the net cost of the Covid crisis in the UK (to the public and private sector)? And what policy suggestions do you have to pay for it?
Great post!
I think that when the state in this lockdown situation spends money on rescuing capital and not on the needs of proletarians, the ending of the lockdown and the beginning of the time after will probably function as a general lockout. That is not to say that it is in the interest of the population in general to shorten the lockdown, that depends on the development of the epidemy.
But capital will be in a position to re-negotiate the “social contract” and might be able to establish even hasher austerity for a time. The Swedish (and Finnish) crisis 1990-94 was used in that way. Swedish capital used that crisis to change the capital gains in the Swedish system from European to Anglo-American. (see http://www.ifn.se/wfiles/wp/wp801.pdf )
“This slump can only be reversed with war time-like measures, namely massive government investment, public ownership of strategic sectors and state direction of the productive sectors of the economy.”
Michael I agree with your assessment about the requirement being to raise supply not curtail demand. However, you solution above seems to suffer from the same problem as that of Rebecca Long-Bailey, which is that if the economy and production is shut down for a long time, its output ceases to be sufficient even to physically reproduce itself. It sees a physical destruction of capital, as physical capital is where possible consumed unproductively, i.e. farmers eat their own seed corn, or else is liquidated, so that the resultant money can be converted into consumable products.
This physical destruction of capital is described by Marx in TOSV, and leads necessarily, therefore, to social reproduction being contracted. Instead of extended reproduction there is contracted reproduction. So, if this lockdown continues, capital is then physically destroyed. Society cannot reproduce itself, its then not just a matter that GDP or even total output contracts, but that capital itself is shrunk, and so the long term production capacity of the economy is permanently shrunk along with it.
When eventually you did get a removal of the lockdown, and “growth” restarts, you may get a higher percentage figure for growth, but, because the social capital is shrunk, it represents a smaller amount of actual growth, because a smaller mass of surplus value is produced by the smaller mass of physical capital. You may not even get a higher percentage rate of growth, as less developed economies k now, because a large proportion of any produced surplus product/value necessarily goes to finance unproductive consumption by the state, by the ruling class, to fund social security and so on. The smaller the absolute mass of surplus value, the greater the proportion of it this unproductive consumption forms, leaving a smaller proportion of profit of enterprise available for capital accumulation. But, in any case, a large part of social production under such conditions will have to go simply to physically replace the consumed means of production and means of consumption.
So, its is simply not credible to propose large scale government led investment programmes in such conditions, because the surplus product does not exist to make them possible. What is more, companies profits are being shredded as a result of their revenues disappearing. Instead they are now borrowing on a huge scale to stay afloat. Ford has drawn down $15.4 billion from its credit lines, airlines are also drawing down billions in credit. The government is proposing to spend, and thereby borrow trillions of dollars, so that interest rates are set to go through the roof.
Look at a poor country that has experienced a famine and the destuction of its productive capacity, and you will see where the idiotic policy of closing down all global economies by diktat is headed, and just like those famine struck economies, they can no more be turned around by government led programmes of investment by diktat either, because you can’t get blood from a stone. Irrespective of mode of production and subjective desires, Marx’s scientific, objective historical materialism tells us that first you need the surplus product, then you can accumulate it as capital.. Governments are destroying the former, and thereby making the latter impossible.
‘ But capital will be in a position to re-negotiate the “social contract” and might be able to establish even hasher austerity for a time ”
The ” social contract ” had already been renegotiated in the 1980s and not only for Sweden, but for the entire World-System. This crisis and the previous ones (2008, Sweden, etc.) occur in the regressive phase and setback of a cycle of class struggle started in 1917. Yes, right, as happened in the 2008 crisis and in Sweden, etc., if the private capitalist comes out “alive” from this crisis, that is, if we join the private capitalists – it will have to be by force and without good manners, because they do not want to do it-in a single account of productive capital, in a single property in a cooperative and in common-A Cooperative State, a Socialist State), they will continue to cause the reduction of the current State to your benefit. State-Crisis Reduction-State-Crisis Reduction ….. Yes, Capitalism is coming to an end, but we must give it a boost ….
I think that “State-Crisis Reduction-State-Crisis Reduction …” will be extra complicated by wars – even wars between great-powers – and climate changes. And also of cause by viruses. In the rear view mirror it looks to me as the great strides taken by the socialistic block was what saved capitalism through the 20th century by giving the capitalists a common enemy, scaring them that they might become declassed. Which is the only thing that can make them act together.
But to win a proletarian revolution there must also be a vanguard party and a revolutionary situation when the oppressed don’ accept being oppressed any more.
I doubt that even an economic recession like in 1880-ies together with an epidemi like the Spanish flu will create that. At least not in Sweden. But of cause we try and prepare!
Not sure Lord Skidelsky is genuinely influential in policy rather than opinion management of middling SES educated people, but this demolishes the man very efficiently.
It appears that a large part of the plan for the US is for Mnuchin to allow (selectively) use of public money for stock buybacks. Is this really plausible as a way of recapitalizing any significant number of large firms? The rationalization appears to be that a plunging stock market will break pension funds (a notion already floated online at the left site Lawyers Guns and Money.) But does this make any sense even for the rich? Or, is it a political bribery by Trump, like tax deferrals? Or is it just taking another chance to defund Social Security, create a fiscal crisis to justify cutting social spending/regressive taxation? (I have nightmares about Trump replacing income taxes with a VAT.)
Economists’ problem with acknowledging that central planning is the most efficient way of using resources to achieve the goals in war is that once they acknowledge that, they have the problem they are committed to the proposition that central planning by principle simply doesn’t work. Currently as far as I can tell the vast majority of socialists agree, especially academically trained socialists. Personally I think the issues with central planning are the environmental issues common to all economic growth and the issues common to any (abstract) democracy.
The war-economy hypothesis is wrong.
It’s not that war in itself triggers temporary socialism in capitalist nations.
It was the fact that, in a specific war (WWII), what was at the table was the survival of the capitalist system itself.
If there wasn’t a socialist alternative disputing for world hegemony at WWII (that is, the Soviet Union), then that war would be a repetition of WWI. It was the Soviet threat – and, with it, the threat of a world revolution – that impelled the major capitalist nations to resort to sandboxed socialism and to ally with the USSR itself against the huge capitalist PR disaster which was the Third Reich.
There’s ample documentation proving there was a huge fear by the British and French governments that another world war would trigger a world communist revolution, and that Chamberlain only insisted – until the end – on appeasement with Hitler because of that fear.
It’s not a ready formula that total war = war economy in a capitalist system. There must be a total war where the existence of the capitalist system is at risk. And this risk has to be a very specific risk: of a communist revolution. Any other kind of risk bar self-extinction of humanity (nuclear winter) the capitalist class can take – indeed, even the national risk (which could be invoked in WWII) doesn’t exist anymore, since the capitalist class is de facto international already.
Exactly what was socialist about the US economy in WW2? Was private ownership of the means of production prohibited? No. Was private property expropriated without compensation? Were workers councils or committees determining the pace, the items produced based on use values? No.
What was happening? Every new factory built for Ford or GM to expand war production was……..PAID FOR by the government, i.e. the taxpayers.
That’s socialism?
Rationing? that’s socialism; with its attendant black market?
Segregation and the exclusion from African-Americans from specific jobs with specifically greater compensation? That’s socialism?
There was no “temporary socialism” in the capitalist countries. The “logic” that claims there was, is the same illogic that proclaims that the Nazis introduced a “national socialism” in Germany. No such animal ever existed.
Have to hand it to vk, though, in one matter: Originality. Never heard of the Third Reich referred to as “pr disaster” before. That’s got to win an award somewhere for something.
Herr Hitler, Ihr tausendjähriges Reich ist eine PR-Katastrophe!
Okay, I agree that the war economy was not socialism, but as Michael points out, ”The war economy did not stimulate the private sector, it replaced the ‘free market’ and capitalist investment for profit. To organize the war economy and to ensure that it produced the goods needed for war, the Roosevelt government spawned an array of mobilization agencies which not only often purchased goods but closely directed those goods’ manufacture and heavily influenced the operation of private companies and whole industries.” i.e it did not depend on ‘market forces’!
In the U.K the Government : 1)conscripted labour into key trades essential to the war effort.
2) rationed the supply of key materials, fuels and foodstuffs.
3) companies were subject to negotiated direction to produce a restricted range of products
4) taxation was raised reaching 97% for the most highly paid.
5) After the War key industries were nationalised, e.g transport, steel, utilities.
The point is that the demand for a war economy is a demand for inroads into the rights of private property and at the same time exposes the inadequacies and failures of ‘market forces’ to address social problems. It is thus a transitional demand on the way to socialism. With the onset of global warming and the likelihood that the corona virus is just the start, what alternatives do you offer that will gain the assent of the populace?
You say, ” Rationing? that’s socialism; with its attendant black market?” I have already made the point to you that all societies practise rationing; only the mode of its application varies. Of course black markets may spread further, but if we had socialism, as Cockshott explains, it would with modern IT be much easier to record and keep track of all goods and products.
Currently here in the UK the supermarkets are operating their own rationing. Now it seems to me that prices are set to soar. Would it not be wise of socialists to be advocating coupon rationing?I do not believe that people starved to death during the war here in the U.K. I fear countless numbers will starve to death with the suppression of worldwide production. Imagine in India tens of millions poor people are locked down and told to wash their hands. Is this before ‘food’? Even bourgeois economists are predicting the worst economic situation since 1929. I fear it will be worse. I cannot see how supply chains will readily be restored when the virus is ‘over.”
This is why we socialists need to demand a War Economy, starting with the nationalisation of the banks. What I am reading of British leftists here are demands for more funds for the NHS and bigger packages for laid off workers. Since they are locked down, how is the supply side to be addressed? It is a recipe for chaos! But typical of the left, pinko-liberal reforms! We need bold policies and the demands for a war economy are a sound point of departure. To say that this is not socialism is of course very true, but neither is it particularly enlightening!
Talk of war economy is directly about the value of central planning. The emergence of central planning is a symptom of the degenerating value of market economy and an objective anticipation of an essential tool for a socialized economy.
To put it another way, part of socialism is production for use. A war economy is production of use too. That’s all they have in common, but it’s a notable commonality.
Okay, I agree that the war economy was not socialism, but as Michael points out, ”The war economy did not stimulate the private sector, it replaced the ‘free market’ and capitalist investment for profit. To organize the war economy and to ensure that it produced the goods needed for war, the Roosevelt government spawned an array of mobilization agencies which not only often purchased goods but closely directed those goods’ manufacture and heavily influenced the operation of private companies and whole industries.” i.e it did not depend on ‘market forces’!
In the U.K the Government : 1)conscripted labour into key trades essential to the war effort.
2) rationed the supply of key materials, fuels and foodstuffs.
3) companies were subject to negotiated direction to produce a restricted range of products
4) taxation was raised reaching 97% for the most highly paid.
5) After the War key industries were nationalised, e.g transport, steel, utilities.
The point is that the demand for a war economy is a demand for inroads into the rights of private property and at the same time exposes the inadequacies and failures of ‘market forces’ to address social problems. It is thus a transitional demand on the way to socialism. With the onset of global warming and the likelihood that the corona virus is just the start, what alternatives do you offer that will gain the assent of the populace?
You say, ” Rationing? that’s socialism; with its attendant black market?” I have already made the point to you that all societies practise rationing; only the mode of its application varies. Of course black markets may spread further, but if we had socialism, as Cockshott explains, it would with modern IT be much easier to record and keep track of all goods and products.
Currently here in the UK the supermarkets are operating their own rationing. Now it seems to me that prices are set to soar. Would it not be wise of socialists to be advocating coupon rationing?I do not believe that people starved to death during the war here in the U.K. I fear countless numbers will starve to death with the suppression of worldwide production. Imagine in India tens of millions poor people are locked down and told to wash their hands. Is this before ‘food’? Even bourgeois economists are predicting the worst economic situation since 1929. I fear it will be worse. I cannot see how supply chains will readily be restored when the virus is ‘over.”
This is why we socialists need to demand a War Economy, starting with the nationalisation of the banks. What I am reading of British leftists here are demands for more funds for the NHS and bigger packages for laid off workers. Since they are locked down, how is the supply side to be addressed? It is a recipe for chaos! But typical of the left, pinko-liberal reforms! We need bold policies and the demands for a war economy are a sound point of departure. To say that this is not socialism is of course very true, but neither is it particularly enlightening!
“War economy” that’s what socialists should be demanding?
Does that include prohibitions on strikes? Does it mean wage freezes?
You don’t get a war economy without trundling off hundreds of thousands or millions to die, which the bourgeoisie are only too eager to do.
And yes, it sure did amount to profit for Ford, GM, Boeing, GE, Standard Oil, etc.
This advocacy pardon my bluntness, is not “economics,” but rather crackpot nostalgia.
You’re demanding that the same government that can’t organize a testing regimen to identify those infected now organize a “war economy”?
Back in day there was a “prayer” among US soldiers in Vietnam (speaking of war and economy): “Dear Lord, save us from our officers, and we’ll handle Charlie.”
Now the prayer would read: “Dear Lord, save us from our “socialists,” so we might have a chance at handling the bourgeoisie.
This conversation has taken a strange, unreal turn. For example, many of us responded very favorably to a previous post’s link (appearing in “Chuang”) and written by a self-styled “communist” who argued that China’s government’s authoritarian response to Cov19 virus was a staged operation intended as a police exercise in suppressing popular (presumably socialist) resistance to its the ruling capitalist elite. Strangely enough in this latest post, Roosevelt’s War is being proposed as an almost socialistic alternative to the West’s pathetic responses to the dual crises of depression and pandemic. Ironically, the enthusiastic reception by respondents makes it sound very much like the previously condemned China’s model of state intervention–except Roosevelt’s War capitalism was literally that; whereas Chinese state capitalism (that would be Lenin’s term) is neither imperialist (quite the contrary) nor based on war, and, in its “authoritarian” response to the CO19 virus, might have turned state socialist enough to respond effectively to social need.
VK points out repeatedly that China is at war with the US. It’s really the other way around.
I think we have to be very wary of the Roosevelt liberal style war capitalism as an “alternative” to neoliberalism in crisis. Since 9/11 the neoliberal elite has been very busy preparing it’s neofascist version: the creation of surveillance states (pioneered by the US under Bush), the surrounding of Russia with color revolution neofascist regimes with which to practice war games (which continues apace), the nuclear naval maneuvers in the South China seas.
The pandemic, however it came about, is an all too real and convenient screen behind which to start a major war on labor at home and on humanity itself. We socialists and communists at the imperial centers seem totally clueless about that. Is there no alternative
More for those who think “war economy” has something to offer in this instance:
US now predicting up to 240,000 fatalities. Given the current fatality rates and infection rates, the US will achieve that number of fatalities in 26 days, yeah that’s right 26 days.
In the 3 years and 9 months of combat in WW2, US military forces sustained 416,000 fatalities.
vs. 26 days and 240,000 fatalities
This ain’t war; this is a massacre; a war crime. I would suggest that socialists, communists dispense with the calls for a war economy and focus on the perpetrators of these war crimes.
‘I would suggest that socialists, communists dispense with the calls for a war economy and focus on the perpetrators of these war crimes.” Okay tell us the concrete measures we should be advocating against these perpetrators?
In the meantime what concrete economic policies do you advocate to address what might be the greatest peacetime economic chaos ever? Certainly it would be wiser to express this as a planned economy as was partially introduced during the War. Who said anything about prohibiting strikes? Quite the contrary, health workers and others engaged in necessary work should be promising (NB not ‘threatening’) a strike unless health provision is completely nationalised and directives issued to companies to produce the requisite equipment and materials.
I have for years been advocating the demand, as transitional to democracy, that all major decisions be put to referenda. Paul Cockshott and others have devised a method whereby voting could be done on one’s mobile phone. You can read about this on his Blog. But as one ‘Marxist’ argued against me,”We can’t have that . The people have to be educated first.” And this 150 years after Marx himself.
”Does it mean wage freezes?” I cannot believe somebody of your intellect could write this. Have you not read Keynes’ essay ”How to Pay for The War”? Okay, under current supply circumstances just increase wages; then wait for inflation to soar, and as there will be no rationing the poor will suffer endlessly. No , rather a demand for severely increased taxes on the rich. Nice if we could put that one to a referendum! Even the ECB and the Bank of England have ordered the suspension of dividend payouts.
As for the the worries about fascism, if the left does not come up with a persuasive social and economic policy, the state already has in place all the measures necessary for that ( cf the rightwing author Whitehead’s “Battlefield America” 2015). Thus the demands by Cockshott and other Marxists that all major measures be subject to a referendum. Of course the bourgeoisie could just ignore the result, but at least that would expose them, and provide avenues for further agitation.
What concerns me , is that your contributions always seem to be so negative and devoid of concrete proposals. What exactly do you think we on the left should be proposing?
“What concerns me , is that your contributions always seem to be so negative and devoid of concrete proposals.”
I fully expected that sort of response. It is somewhat hilarious, isn’t it, to be concerned about “negative” contributions, given Marx’s own adherence to “merciless criticism of everything in existence” and the importance of negation in Marx’s analysis of capitalism?
I understand your concern, but in my dotage it reminds me a bit of Mayor Richard Daley’s concern after the Democratic Convention in 1968, questioning “What trees do they plant?” when his cops tried to beat the snot out of us everywhere from Lincoln Park to the Palmer House and all places in between. Ah yes, those were the days of my positive contribution.
“In the meantime what concrete economic policies do you advocate [What trees do you plant?]to address what might be the greatest peacetime economic chaos ever? Certainly it would be wiser to express this as a planned economy as was partially introduced during the War. Who said anything about prohibiting strikes? Quite the contrary, health workers and others engaged in necessary work should be promising (NB not ‘threatening’) a strike unless health provision is completely nationalised and directives issued to companies to produce the requisite equipment and materials.”
Who said anything about strikes? Just those who ran the “planned” nationalized economy during that so called golden age of the war economy. While representatives from the Labor Party sat on war production committees with Tories, the British government itself was busy arresting the leaders of striking oil workers in Trinidad and Tobago. I think those who were around there back then might have a feeling somewhat different than the nostalgia you evince for the “planned economy.”
Have I read Keynes on how to pay for war? I know how the bourgeoisie pay for war, with the lives of workers. You don’t get your planned economy, with the bourgeois order still intact– and nothing you advocate says anything about excluding, pushing out, eliminating the bourgeoisie, which leads me to suggest your “positive” suggestions are mere liberalism, a philosophy of the abstract that only serves to preserve the existing concrete circumstance– without sacrificing the lives of workers, without maintaining the class relations that have spawned the war, or the pandemic.
Just for the historical record, I and others have made plenty of concrete suggestions– from mobilization against voter suppression in the US, to linking that to mobilization against right to work laws, to linking that to protection and defense of all workers, documented or undocumented over on the Anti-Capital website. There’s even some concrete suggestions for mobilizing against the gross incompetence, the malign neglect, of the bourgeoisie in the response to the pandemic.
Now it doesn’t speculate on “what we’ll do once we’re in power”– like rationing, and labor coupons, etc.– but let’s be honest, that’s a lot further down the road, and really just that, a speculation, given where we are in the class struggle today, which is basically, less than zero. Personally, I think it’s if not pretentious, pretty damn close to an academic exercise to propose these systems when we don’t even know what the level of destruction is going to be from a civil war, if the bourgeoisie are ever threatened by a class struggle level more than zero. But if you’re interested, you can check out the entire archive at https://anticapital0.wordpress.com/. Comments most welcome, and we promise not to be concerned about anyone’s negativity.
It is contradictory to say that an economy of war (like in WWII), guide by the state (like china?), is needed to avoid a huge destruction of capital, when precisely that economic of war, applied by the states that went to war, produced that destruction of capital and “devaluation” of work needed to restore capitalism as usual. It will produce an increased of nationalism and more authoritarian regimes. That is not a left alternative, i think.
Word. JG hits the nail on the proverbial head
Very interesting post. It is surprisingly rare that the matter of what really happened in World War II-the massive direct public investment as the only way to get the quick result needed-is actually discussed. It was about $17 billion in 1940-1944 as I recall, equal to about 40 percent of existing plant in 1939 by value. (The facilities were government-owned, then largely privatized after the war-almost no one talks about this, though I would guess this was one of the biggest privatizations in history, in relative terms.)
Anyone interested in a primary source on the issue can check out the Wartime Production Board’s official report at the end of the war (October 1945), Wartime Production Achievements and the Reconversion Outlook, which discusses the effort in detail, and is freely available.
“The payments for workers laid off and the self-employed are only expected to be in place for two months and often people won’t receive any cash for weeks, if not months. So these measures are way short of providing sufficient support for the millions that have already been locked down or have seen their companies lay them off.” In the U.S. the $600 per week payment will last until July 31st I believe, and UI is about $360 per week. It would be nice to get these numbers accurately, I mean the mainline press. In Sept. 2017 the Consumer Financial Protection Bureau published a Financial Well-Being report and asked adults “How much money do you have in savings today (in cash,checking, and savings account balances)?” This is called “Liquid savings.”
less than $250 — 24%
less than $1,000 — 35%
less than $5,000 — 54%
less than $20,000 — 73% American adults answered.
Meaning the majority are not prepared for an extended loss of income. (see page 80 of this report). It’s unclear how accurate that is, other surveys are a bit more hopeful. But non-essential industries pay their workers very low wages. The Brookings Institute published a report “Meet the Low Wage Workforce”, and found that the lower half, about 83 million U.S. workers were in this group, and the Social Security Administration annual report on wage income places the median, worker #83 million, with an income of $32,835, in 2018.
The Brookings report drops out 27 million at the bottom, they are housewives, summer-working students, disabled, and so on making less than $7,500 annually, the next 53 million have an average income of about $19,000. But no savings, you might say. A certain portion are married to a full-time well-paid worker. My contribution: millions of very low paid individuals and families are facing ruin, or next to ruin, unless the aid gets to them quickly, and we do something about minimum wage, labor union power, etc. Education about this is pretty important now.
“Governments are destroying the former, and thereby making the latter impossible”
Governments do act in vacuums. The government is acting as an agent of the destruction that capital accumulation itself facilitates and makes real.
The physical destruction of production is inseparable from the devaluation of capital.
The pandemic is just one more example.
Michael I think your figures under-estimate the economic effects of the plague. Total monetary and financial injection into the USA is $6.7 trillion comprising $4.5 trillion on the part of the FED and $2.2 trillion on the part of the Government. (Trump does not miss a trick signing the letter going to every US family as though this support was his own inspiration when two months ago he criticised the $8 billion for being too much. Shades of November. Anyway) This amounts to about 30% of GDP, no wonder the stock market is lapping this up. Given that the St Louis FED estimates unemployment peaking at 32.1% by the end of the second quarter, I suspect that a 2% reduction in GDP per month is wildly optimistic. https://www.stlouisfed.org/on-the-economy/2020/march/back-envelope-estimates-next-quarters-unemployment-rate Of course, this credit and monetary injection is not to be confused with actual production, it does not produce value and surplus value, merely debt, which is a claim on future value production unless written off by the FED. Also Boffy’s point about the gaps in reproduction due to the loss of capacity is pertinent. Finally it is by no means certain that China will not have a second round of the plague, evidence is emerging.
My assessment is that in the absence of a cure, within two months, lock down will be lifted with only the vulnerable and elderly remaining in isolation. Capitalism cannot survive a six month lockdown as some are suggesting, even if the government took over the economy.
Excellent Keynisian solutions coupled with state hegemonic action needed for overcoming Covid-19 pandemic.
Another important observation: war economy was only possible in the USA because, at the time, it already was an industrial superpower, so it already had the industrial capacity to make FDR’s imagination gain form.
That’s also why the Marshall Plan was successful: it gave West Europe USDs to buy American manufactures.
Those conditions certainly don’t exist anymore. And it’s easy to demonstrate that: why isn’t the USA nation-building its allies right now with Marshall Plan 2.0? Why is it resorting to militarism (compelling by force) in order to topple enemy nations, instead of wooing them with another Marshall Plan?
The answer is obvious: the USA doesn’t have the resources to do so anymore.
That’s why there’s no substitute for History in analyzing the real world.
“why isn’t the USA nation-building its allies right now with Marshall Plan 2.0? Why is it resorting to militarism (compelling by force) in order to topple enemy nations, instead of wooing them with another Marshall Plan?”
1) because the US it never “wooed enemy nations.” The Marshall Plan was for Allied nations, and defeated nations.
2) because the US has ALWAYS used military force to topple “enemy” nations.
3) because the level of destruction has not been great enough to make a Marshall plan attractive. The US bourgeoisie don’t need Iraq to buy its commodities; and the US doesn’t need any commodities from Iraq (particularly oil); so “nation building” just introduces more overproduction into the markets.
Great post Michael. Technofascism or cybersocialism, that is the question in the post-Corona world. I share my text on Cybersocialism and the socialist calculation debate https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3117890
(Apologies for posting off-topic but there is no contact email address on the webpage.)
Dear Michael,
I was wondering if you have considered doing these blog posts also as a regular podcast, possibly even with a c-host/discussant – you might find you reach new and expanded audiences that way?
I would certainly find it extremely useful.
Best wishes,
Rowland
Rowland yes I must look into that. Right now I am trying to set up a few recorded Zoom interviews to post on my You Tube site.
Thank you for all your informative posts. I learn a lot from them and look forward to receiving them. I am a retired metal worker and have been a socialist since the 1960’s. I am currently living in “exile” in Down East Maine. I haven’t gotten a post from you in months. I hope you are well and getting by in these crazy times.
Thanks and good luck,
Ken Simpson
Ken I’ve been posting like crazy why don’t you resubscribe to ensure you an email