Governments’ Responses to the Coronavirus Outbreak and FUTURE SCENARIOS

Where will we be six months, one year or ten years from now? Will our lives be as they were before? Under the current outbreak conditions, some of us are more fortunate, while others are losing their jobs. Coronavirus is hitting the entire economy hard. Will people who lose their jobs be able to regain their former positions when the dust settles?

There are a number of possible future scenarios depending on how governments and society respond to the novel coronavirus and its economic consequences. The hopeful and reassuring possibility that we should always keep in mind is that we will use this crisis to create a more humane future. But perhaps something worse awaits us in some areas.

Looking at past crises and their political consequences can help us understand our situation and what may lie ahead

But first, to focus on the foundations of the modern economy, we need to consider global supply chains, labor costs and the dynamics of productivity. We are also confronted with the fact that economic changes create challenges such as climate change and deteriorating workers’ health. We face the reality that a very different economic approach is needed to build a socially just and ecologically sound future.

All these realities had never been so clear until these days when we are facing COVID-19

Responses to this pandemic amplify the dynamic that drives other social and ecological crises: prioritizing one kind of value over others. This dynamic has played a major role in global responses to COVID-19. As responses to the virus develop, how might our economic futures evolve? We can discuss 4 possible economic futures:

1. A descent into barbarism,
2. A robust state capitalism,
3. A radical state socialism, and
4. A transformation into a broad society built on mutual aid.

The Scope of Changes and Measures

Like climate change, coronavirus is partly a problem of economic structure. Because of social conditioning, both appear more like “environmental” or “natural” disasters.

Yes, climate change is caused by certain heat-absorbing gases. But this is not a sufficiently deep explanation. To truly understand climate change, we must understand the social causes behind increasing greenhouse gas emissions. The same perspective is needed for COVID-19. Yes, viewed directly, the cause of this natural disaster is the virus. However, we need to broaden our perspective so that we can understand the human behavior and wider economic context that lead to the disaster, and cope with the effects of the outbreak.

It is much easier to tackle both COVID-19 and climate change if unnecessary economic activity is reduced

Climate change can be addressed when fewer materials are produced, less energy is used and fewer greenhouse gases are emitted.

Our most important weapon in fighting COVID-19 is taking measures to prevent the spread of the virus. This means restricting people’s movements. However, the other side of this approach is economic collapse. As with the approach to climate change, producing less—or rather, only as much as is needed—and consuming accordingly is equivalent to less spread of the virus. We saw the effectiveness of these measures, namely strict quarantine, in Wuhan. But the initial approach of American and European states to the reality of the outbreak provided a clear example of steps taken in line with economic policies. Fortunately, although some steps were reversed a little late, a somewhat deeper look reveals efforts to protect economic interests and existing balances.

Sensitivity to a Fragile Economy

Quarantine is placing serious pressure on the global economy. This pressure is causing some world leaders to implement inadequate quarantine measures, or even not to implement them.

While 19 countries were under quarantine, US President Donald Trump and Brazilian President Jair Bolsonaro proposed measures that would do less to mitigate the spread instead of quarantine. Trump made statements such as “the American economy returning to normal within 3 weeks”. Later, he accepted the reality that social distancing needed to continue for longer. Bolsonaro said, “Our lives must go on. Jobs must be preserved… Yes, we must return to normal.”

Meanwhile, in the UK, four days before calling on people to “stay at home,” Prime Minister Boris Johnson tempered his optimistic stance and said "the UK would get things on track within 12 weeks”. But even if Johnson were right, could there be an economic system threatened with collapse during the next wave of the pandemic?

Economic Collapse Is a Very Obvious Reality

Businesses exist to make a profit. If they cannot produce, they cannot sell anything. This means they will not make a profit, and employment will of course also fall. Businesses may temporarily suspend workers because they want to be able to meet demand when the economy returns. However, if things really start to go badly, the picture changes. More people lose their jobs or become increasingly worried about losing them. Purchasing power declines. As this cycle continues, it brings economic depression.

In an ordinary crisis, solving this is simpler. The government spends, and keeps spending until people start consuming and working again (the famous prescription of economist John Maynard Keynes).

However, normal interventions will not work here, because there is a reality that becomes a dilemma at this point: we do not want the economy to recover (at least not immediately). The whole purpose of the quarantine that causes economic depression is to stop people going to places where they can spread the disease. Very recent research showed that a new outbreak peak could readily occur when quarantine measures were lifted in Wuhan. In other words, lifting quarantine measures and allowing society, and therefore the economy, to become active is equivalent to the outbreak reappearing.

As economist James Meadway wrote, "Increasing production as in wartime is not the right economic tactic for the COVID-19 period. On the contrary, we need the opposite of wartime economic tactics.

To be affected as little as possible by the epidemic crisis (and also to avoid climate change), we need a system that can bring production down to reasonable levels without a loss of livelihoods." Ecological economists have long been concerned with the question "How can we produce less while ensuring a socially just distribution?". Producing less is central to tackling climate change. All else remaining equal, we cause more production and consumption, and with them more greenhouse gases. There must be an economic model in which production and consumption can fall without people losing their jobs.

Suggestions are emerging such as reducing working hours, or a system that allows people to work at a more reasonable pace and under less pressure. For COVID-19, the aim is to reduce contact rather than production, so viewed this way, the objectives do not seem directly the same. But their essence is the same; this becomes apparent only when we look a little more deeply at the issue. At the heart of the matter is the reality that people need to become less dependent on wages in order to live.

Current Economic Dynamics

Understanding the logic of economic dynamics is key to understanding responses to COVID-19. At present, the main purpose of the global economy is to facilitate the exchange of money. Economists call this “exchange value” (in its simplest illustration in Turkey: Çokomel-money/money-Çokomel).

The dominant logic of the system in which we live is that “exchange value” is the same as “use value.” People spend money on things they want or need, and this act of spending money says a great deal about the value placed on “use.” This is why markets are seen as the best way to govern society.

Around the world, governments fear that critical systems will break down or become overloaded: supply chains, social care and, most importantly, healthcare. Many factors contribute to this situation. But let us consider 2 of them.

• First, it is very difficult to make money from many of the most important social services. This is because the most important part of profit depends on the worker’s productivity. Especially in sectors based on personal interaction, such as healthcare, “people” are a major cost factor. As a result, while productivity growth in healthcare is not easy, its costs can readily increase and its profit may be low. It may even make a loss.
• Second, jobs in many critical services are not those most highly valued in society. Many of the best-paid jobs are simply those that can affect movements on the stock exchange. In other words, money-making jobs. These do not serve society’s basic and broad purposes. This is what anthropologist David Graeber calls “bullshit jobs”. Nevertheless, there is a huge advertising industry and a huge financial sector because they make a great deal of money. Alongside this, however, we face a crisis in healthcare and social care. There is an economic dynamic in which people are forced to leave useful jobs that they generally enjoy. This system does not allow someone doing truly useful work to receive enough money to live well.

Meaningless Jobs

The fact that so many people work in meaningless jobs—in other words, nonessential, meaningless sectors—is why we were caught so unprepared for COVID-19. When things go wrong, as they are now, there are not enough key workers to respond to the situation.

In a society where keeping markets going is essential, you need to buy consumer goods, whether essential to life or not, and you need income from a job to buy them. The system needs society to buy and consume at every level, and people have been forced to do meaningless jobs.

In tackling the COVID-19 outbreak, decisions that run counter to the current state of markets are the most radical (most effective) actions. Around the world, governments are taking actions that seemed impossible three months ago. In Spain, private hospitals were nationalized. In the UK, the prospect of nationalizing some forms of transport became a reality. France stated that it was ready to nationalize large businesses.

Developments That Could Reverse the Dominant Trends of the Last 40 Years May Become Increasingly Common

During this period, markets and exchange values have been seen as the best way to manage an economy. As a result, public systems have come under increasing pressure to orient themselves toward markets, like businesses obliged to make money.

COVID-19 is reversing this trend. It appears to be taking healthcare and the products of labor out of the free market and into the hands of the state. States produce for many reasons. Some are good, some bad. But unlike what markets require, they are not obliged to produce solely for exchange value.

Economic measures in states’ responses to COVID-19 are promising. But why did it take so long to get here? Why were so many countries so unprepared to slow markets down? The answer lies in a recent World Health Organization (WHO) report: “The right mindset was not there” (Report of the WHO-China Joint Mission on Coronavirus Disease 2019).

Our Economic Imaginations

There has been an economic consensus for 40 years. This has limited the ability of politicians and their advisers to see cracks in the system or imagine alternatives. This mindset is driven by 2 interconnected beliefs:

•  The market is what delivers a good quality of life, so it must be protected
• After short periods of crisis, the market will always return to normal

These views are common in many Western countries. The UK and the US, where these views are most dominant, proved ill-prepared to respond to COVID-19.

In the United Kingdom, participants in a private meeting reported the Prime Minister’s most senior aide’s approach to COVID-19 as “there will be herd immunity, protect the economy” (see A dangerous path in tackling coronavirus: Herd immunity).

The view favoring herd immunity is widespread among a certain elite who can protect themselves better or have no doubt about accessing good healthcare An official from Texas argued that many elderly people would gladly die rather than see the US fall into an economic depression. This view poses a threat to many vulnerable people. Moreover, not all vulnerable people are elderly.

One thing the COVID-19 crisis may do is expand the economic imagination. As governments and citizens take steps that seemed impossible three months ago, our ideas about how the world works may change rapidly. Let us look at where our imagination could take us under these circumstances.

4 Possible Future Scenarios

To help us envision the future, let us use a technique from the field of futures studies. You take two factors that you think will be important in shaping the future and imagine what happens under different combinations of these factors.

Let these factors be “value” and “centralization”.

Value refers to the guiding principle of our economy. Do we use our resources to maximize stock exchanges and money, or to maximize life?

Centralization refers to the ways in which things are organized by many small units or by a large commanding force. By combining the content of these factors, we can construct scenarios in 4 different models.

1. State Capitalism: A combination of centralization and prioritizing exchange value (that is, the priority of economic policies)
2. Barbarism: A combination of prioritizing exchange value and a noncentralized response
3. State Socialism: A combination of prioritizing the protection of life (replacing exchange value) and centralization
4. Mutual Aid: A combination of prioritizing the protection of life and a lack of centralization.

1. The State Capitalism Model

State capitalism is the dominant model we currently see in the world. Typical examples are the UK, Spain and Denmark.

A state capitalist society continues to maintain exchange value as the guiding light of the economy. However, it recognizes that markets in crisis need support from the state. Given that many workers cannot work when they are ill or in a life-threatening situation, the state steps in with expanded welfare. At the same time, it creates a huge stimulus by extending credit and making direct payments to businesses (the Keynesian prescription).

The expectation here is that this will be for a short period. The primary function of the steps taken is to allow as many businesses as possible to continue trading. For example, in the United Kingdom, food is still distributed through supermarkets (even though the government has relaxed competition laws). Where workers are supported directly, this is done to minimize disruption to normal labor-market operations. For example, as in the UK, payments to workers must be applied for by employers and distributed by employers. The size of payments is related to dependence on the presence of exchange value in markets rather than the usefulness of a worker’s job.

Could state capitalism be a successful scenario? It could probably succeed if the coronavirus outbreak can be brought under control within a short time. Since full quarantine is avoided to keep markets functioning, continued transmission of infection is highly likely. For example, in the UK, nonessential construction work continues and workers live on construction sites. If deaths increase alongside the outbreak, it will become increasingly difficult to maintain the state’s policy of limited measures. Rising illness and death will cause unrest and deepen the economic effects, forcing the state to take more radical action to preserve market functioning.

2. The Model in Which This Ends in Barbarism

This is the darkest scenario. Barbarism will come if we continue to rely on exchange value as our guiding principle, yet fail to support those left outside markets because of illness or unemployment. It describes a situation we have not yet seen.

If things go wrong, workers go hungry because there are no mechanisms to protect them from the harsh realities of the market. Hospitals are not supported by extraordinary measures and become overwhelmed. People die. Barbarism is ultimately an unstable situation that, after a period of political and social devastation, ends in destruction or a transition to one of the other scenarios.

Barbarism? It is concerning that it could emerge unintentionally during the pandemic or deliberately after the pandemic peaks. The mistake is a government’s failure to make sufficiently substantial progress during the worst phase of the outbreak. Support may be offered to businesses and households, but if this is insufficient to prevent market collapse in the face of widespread illness, chaos will result. Extra funding and manpower may be provided to hospitals, but if they are insufficient, sick people will be left without support.

A potential outcome is an attempt to return to normal with severe austerity after the pandemic peaks. This has been threatened in Germany. It is quite disastrous for critical services to be left unsupported during austerity and for countries’ capacity to respond to the pandemic to be affected.

Under this scenario, the picture of economic and social failure will trigger political and social unrest. A failed state causes the country’s welfare systems to collapse.

3. The State Socialism Model

State socialism describes a future scenario in which a different kind of value is placed at the heart of the economy and a cultural change takes place. Such a future could arise through an extension of the measures we currently see in the UK, Spain and Denmark.

Measures such as nationalizing hospitals and making payments to workers come to the fore. These and similar approaches are implemented as a way to protect life itself, rather than as a means of protecting markets. In such a scenario, the state begins to protect the parts of the economy necessary for life, such as food, energy and shelter. Basic necessities are therefore no longer at the whim of markets. The state nationalizes hospitals and creates a policy of freedom in the use of housing. It ensures that all citizens can access essential consumer goods requiring a reduced labor force.

In this way, citizens’ access to basic necessities is not mediated by their relationship with employers. Payments are the same for everyone (based on the premise that we deserve to live simply because we are alive), or are based on the usefulness of the work. Supermarket workers, delivery drivers, warehouse stackers, nurses, teachers and doctors become the new CEOs.

State socialism could emerge as a solution to state capitalism as a result of the effects of a prolonged outbreak. If deep recessions occur and there are serious disruptions in supply chains in meeting demand through the standard Keynesiann policies we currently see (printing money, making credit easier, etc.), the state may take over production.

This approach has risks. A transformation into an authoritarian regime must be avoided. But if done well, it could be our best hope against the COVID-19 outbreak that has changed the course of my life. A strong state able to concentrate resources to protect the basic functions of the economy and society.

4. The Mutual Aid Model

Mutual aid is the second possible future in which we adopt “protecting life” as the guiding principle of the economy. In this scenario, however, the state does not play a defining role. Instead, individuals and small groups begin to organize systems of support and care within their own communities.

The risks of this future are that small groups cannot rapidly mobilize the resources needed to scale up services such as healthcare effectively. However, an aid model may prevent the spread of the outbreak more effectively by creating clusters of support structures that protect vulnerable people and uphold police isolation rules. This most ambitious model of the future could pave the way for new democratic structures to emerge. It can also be defined as a system based on organizing communities that can mobilize substantial resources at an appropriate speed. The communities that form plan local practices to stop the spread of the disease and treat sick people.

Such a scenario could emerge from the others. It could be a way out of barbarism or state capitalism, or it could support state socialism. We saw this kind of local grouping model play a key role in the West African Ebola outbreak and how it was addressed in this way. We can say that local care and support organizations, examples of which exist today, form the origins of this kind of future. This possible outcome could be seen as a failure of state responses, or as a pragmatic, compassionate social response to an emerging crisis.

Hopes

These views are extreme scenarios, and they are all likely to blend into one another. But a descent from state capitalism into barbarism is a deeply frightening possibility. It may be reasonable to put forward a mixture of state socialism and mutual aid: a strong, democratic model of the state that mobilizes resources to build a stronger healthcare system, prioritizes protecting vulnerable people from the whims of markets, and enables citizens to form mutual-aid groups.

COVID-19 highlights serious shortcomings in our current system. An effective response to this requires radical change in radical social habits, and this may be somewhat painful. But the better we meet this challenge, the more we will build a more humane system that makes us more resilient in the face of future epidemics and approaching crises such as climate change.

Social change can come from many places and have many effects. A key task for all of us is to demand that emerging social forms come from an ethic that values care, life and democracy. The central political task in this time of crisis is to live and to organize (almost) around these values.

Source: What will the world be like after coronavirus? Four possible futures. theconversation.com - 30 March 2020.

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