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The Corona Crash

In ‘The Corona Crash: how the pandemic will change capitalism‘, British economist and journalist, Grace Blakeley, argues that COVID-19 has heralded a new age of “state monopoly capitalism”. But while massive state intervention in the economy is completely justified, instead of propping up the owners of the old polluting economy, our money should be directed into a huge programme of investment in a green and just recovery. Along the way, in a highly readable and concise pamphlet, Blakeley dissects the reality of globalisation, the legacy of financialisation, and the arguments for a Green New Deal. Indeed, her writing is so quotable that what follows is more of a ‘Corona Crash’ pass notes than a review..

Blakeley’s core argument is that “what has happened as a result of 2008 [financial crash] and 2020 is that both financial and now also non-financial institutions, in other words the entirety of the monopoly-finance hybrid – have collapsed into the arms of the state, and appear set to become wholly and permanently reliant upon it.” Through the manner and scale of public funding funnelled into western economies, “[t]he state is signalling to the corporate world that no matter how much debt it accrues during the upswing – and no matter what purposes it uses this debt for – when the crisis comes, it will be bailed out.”

The COVID crash, Blakeley attests, has conclusively disproved the conceit that markets can solve all problems. Capitalism is experiencing a second major crisis in less than a decade, the root cause of which, Blakeley explains, “does not result from a purely economic shift, but a deep-seated and long-standing transformation of political economy, the institutional foundations of which were laid in the 1980s, when the financialisation of the economy began in earnest”.

‘State monopoly capitalism’, however, is not to be confused with socialism. Neo-liberals still control most major western economies and inequality is even more visible as a result of the pandemic. Indeed, Blakeley quotes Robert Brenner explaining that the legacy “will be the [greater] concentration of economic power in the hands of a tiny oligarchy”.


To explain how we got here, Blakeley goes back to the 1980s and the start of ‘financialisation’, which was exemplified by the huge expansion of the service sector, hand in hand with deindustrialisation, and “represents a mode of accumulation distinct from other modes such as industry or commerce.. based on the extraction of economic rent, rather productive economic activity that creates new value.”

Margaret Thatcher led the charge, abandoning the post-war Keynesian consensus that favoured state investment in pursuit of full employment, and instead commenced four decades of privatisation in the UK. This process, in particular the widespread sale of council housing, created a new class of property-owning mini-capitalists and a boom in consumerism financed by increasing household debt, rather than a rise in real wages. As a result, the previous orthodoxy of household savings being used by banks to finance capital investment was turned on its head, with rising household debt alongside major companies accumulating massive cash reserves.

The speculative bubble that followed finally popped with the crash of 2008. Gargantuan ‘quantitative easing’ by state banks prevented the correction in asset prices that should have ensued and, since then, with the rate of profit so low that businesses lack incentive to invest, corporations have instead splurged on dividends and share buy-backs to keep their market price high and ensure continuing big bonuses for executives. ‘The economy’ started growing again, but the material benefits trickled down to only a privileged few. As a result, “we were still living in the shadow of the last crisis – and the response to it – when the pandemic hit.. Real average wages in the US in 2018 had the same purchasing power as 40 years earlier.” As well as massively increasing unemployment, the COVID crisis has also greatly exacerbated indebtedness, with total global debt rising by $14 trillion between just January and mid-May 2020.

Globalisation is the new imperialism

Moving to another pillar of modern capitalism, Blakeley peers under globalisation’s curtain and declares it to be another example of how the more things change, the more they stay the same. Former colonies achieved political independence from individual imperial rulers, but their economies are now instead in thrall to an agglomeration of western masters, exercising dominance through an array of economic levers rather than primarily through violence.

Despite its universal sounding name, ‘globalisation’, largely benefits the west: “The international division of labour under contemporary globalisation continues to be structured by imperialistic relationships between states. For ‘tech’ firms like Apple, which derive most of their profits from ordinary commodity production, these relationships are very obvious: hyper-exploited Foxconn workers in China manufacture iPhones while largely unproductive workers in the ‘head office’ located in the US benefit from inflated wages”.

This is a state of affairs that multi-lateral institutions have assiduously created and continue to police. “Mainstream economists claimed that low income countries should focus on their ‘comparative advantage’ by exporting commodities to the rest of the world – which meant ending subsidies to domestic industry, ‘freeing’ the private sector from regulation and state intervention, and removing constraints on capital mobility. In fact these measures simply made it easier for multi-national corporations to enter the economies of the Global South and displace domestic capitalists before re-shoring their profits to the Global North.”

More recently, Global South governments have been encouraged to take on unprecedented levels of debt through issuing government bonds, bought up by western investors. The shutdown of economies, collapse in demand for natural resources during the pandemic, leading to sovereign debt downgrades and sharp currency depreciations across the developing world, has simultaneously increased the costs of borrowing while depriving many Global South governments of revenues upon which they depended to repay these debts. Creditors have the first call on the remaining revenues – and with much debt now being privately held and so excluded from western government COVID debt moratoriums – Global South governments are unable to provide the kind of stimulus packages to protect their citizens from the impact of the pandemic. The result is both a looming humanitarian crisis and further debt, meaning that “[t]he coronavirus pandemic will only deepen these relationships of imperial extraction.”

At the same time, Global South countries face a third major crisis in the form of climate breakdown, which they did little to cause but face a large share of the most immediate and severe consequences.

We need a global Green New Deal

While this sounds like the horrifying, converging combination of global crises that it is, Blakeley’s thesis is that there is also a unifying set of solutions, in the form of a kind of global Green New Deal, and that there is now greater space to advocate for such measures.

In particular, the neo-liberal protest that government support is almost always a bad thing and that markets can solve all problems rings increasingly hollow “in an era when state intervention is necessary to ensure the continued functioning of markets. When states are targeting asset prices, providing wholesale bailouts to private corporations and buying up substantial portions of their own debt, it becomes harder to argue that interventions to promote the public good are undesirable because they might disrupt the operation of the market mechanism.”

The current COVID stimulus programmes are, however, a continuation of the “reality of state monopoly capitalism”, whereby “[a]ny number of companies that provide useless or actively harmful goods and services have survived through state largesse when otherwise they would have failed.” Blakeley also casts a cynical eye over furlough schemes, noting that consumer spending makes up 65% of UK GDP and quoting Gary Stevenson as saying “the government has created new money.. so that working people continue to pay their bills to the rich”.

Instead we need mission-driven, collaborative policy-making working in the public interest. Most immediately, that means governments using stimulus funding as leverage to decisively shift markets, introducing “conditionality” to loans and bail-outs (which has started to happen after the publication of ‘The Corona Crash’, particularly in the European Union). Moreover, Blakeley wants to see a more fundamental shift in the balance of economic power, so that “[i]f the government does embark on a programme of mass bailouts, the corporations it saves should be run by the people, not just a tiny elite”, rather than at present where “financial, corporate and political elites work together to plan economic activity.. in their own interests”.

Blakeley is sanguine about the likelihood of the rapid implementation of Green New Deal policies. While public opinion, in the UK at least, has presently moved more strongly in favour of state intervention, a universal basic income, rent controls and other green new deal compatible measures, she fears that “There is no guarantee that instead of a Green New Deal, public opinion in the Global North will not endorse a return to austerity when the pandemic is over. To assume that after a period of largesse – a spending spree, a heavy drinking session, comes a period of atonement – a payback, a hangover, is embedded deep within our common-sense understanding of the world”.

Moreover, “[g]iven the Left’s failure to take advantage of the crisis of 2008, which on the surface, appeared to confirm all the socialist suppositions about the inherent unsustainability of financialised capitalism, what hope do we have that our response to the coronavirus will be any better?”.

She concludes that every step towards a green and just future will take struggle: “The challenge we will face when this crisis subsides will be to wrest control back from those who have taken advantage of this moment to increase their power and wealth. The only way to do so will be through a radical demonstration of national and international economic and political institutions, giving workers, consumers and communities a say in decision making within publicly owned companies, central banks and throughout local government and the central state – and giving the poorest states in the world a voice in international governance. The alternative is to watch as democracy is finally consumed by capitalism.”

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