By Michael F. Duggan
We cannot go on living like this. The little crash of 2008 was a reminder that unregulated capitalism is its own worst enemy: sooner or later it must fall prey to its own excesses and turn again to the state for rescue. But if we do no more than pick up the pieces and carry on as before, we can look forward for greater upheavals in the years to come.
-Tony Judy, Ill Fares the Land
How do you like economic globalization now?
The last time a worldview was so thoroughly exploded was probably when the Aristotelian model of the solar system met the telescope. The neoliberal status quo is not responsible for the COVID-19 virus, but it is a primary enabler of the ineffective responses to it and for the severity of the economic crises that will follow.
With the contagion having fanned out along trade and transportation routes to become a pandemic—a global epidemic—the failure of much of the globalized West to respond to it quickly and effectively is virtually a metaphor for itself: free trade policies also make it easier for viruses conduct their international business, and harder for nations to respond to it. What we are witnessing is not only the fact that neoliberal globalization is undesirable in terms of long term economics, but that it is literally bad for the health of the world. Now that it is self-evident that economic globalization makes nations more vulnerable to rapidly-developing crises, the question is whether the powers that be in government, big business, and Wall Street will abandon this bankrupt worldview.
The current visitation is obviously not the first pandemic. The Black Death also traveled along trade routes and made it to the Mediterranean from the Black Sea and then into Europe through Italian ports.1 Variola major—smallpox—came to the New World with the Europeans probably in 1519-1520 (Caribbean islands slightly earlier) at the beginning the first phase of modern global economic interconnectedness. With little or no immunity to the illness, as many as 20 million Native Americans died from it in Mexico alone.2 The H1N1 Spanish Flu emerged and spread during a global conflict and was particularly devastating onboard crowded U.S. troopships. The H2N2 and H3N2 flu strains of 1956-58 and 1968 were the first pandemic pathogens of the jet age. But the present scourge, which spread so quickly because of ease of travel, permeable boarders, and slow initial responses, now threatens the world economy because of frozen global supply lines and a dearth of vital resources, much of whose production was off-shored over the previous quarter-century to low cost production zones.
The crisis is therefore a “perfect storm” made possible by the trade winds of neoliberal economic meteorology—a tempest not only of disease and economics, but also of economic recovery. Consider the sequence of events:
- A rapidly-spreading disease arrives at a nation that is not prepared to cope with it.
- In order to effectively respond to the disease, the nation needs massive amounts of medical equipment, much of which is produced in other nations with outbreaks of their own and is now in short supply.
- The disease spreads rapidly, and its highly contagious nature prevents a significant portion of the domestic workforce from working.
- If the situation persists, it could lead to a Great Depression-like economic crisis that destroys U.S. global economic predominance, undermines the Dollar as the world reserve currency, and puts the national economy in a steep and permanent decline.
- If people return to work prematurely, both the virus and the proximate cause of the economic crisis (i.e. people not working) could return and the overall crisis may persist.
- Because the U.S. has come to rely on foreign-produced durable goods over the past 30-50 years—to say nothing of important medical equipment and pharmaceuticals—it also relies on long oversea trade routs and remote foreign supply networks. The pandemic has shut down many of these complex arteries and webs and nobody knows how long it will take to start them up again. If it takes too long, the United States could experience inflation, perhaps hyperinflation by the end of the year. If this happens, the United States could experience an economic collapse that would make the Great Depression look like a hiccup.
Those of us who have followed the progress of an increasingly globalized world have long noticed the resulting imbalances and disparities both at home and abroad. Even a quarter-century ago it was apparent to many of us that this was an unsustainable ideology, an equal and opposite utopian program to the artificial economies of Marxist-Leninism. The United States took the wrong lessons from the end of the Cold War. Rather than seeing the dangers and pitfalls of rigid ideology, its leaders simply embraced their own orthodoxy. They did not—and might still not—realize that the idea of a completely unregulated economy is just as an extreme of an outlook as one advocating a completely managed one and just as problematic.
Then came the economic crisis of 2008, and, as the late Tony Judt observed, “[t]o avert national bankruptcies and wholesale banking collapse, governments and central bankers have performed remarkable policy reversals, liberally disbursing public money in pursuit of economic stability… A striking number of free market economists, worshippers at the feet of Milton Friedman and his Chicago colleagues, have lined up to don sackcloth and ashes and swear allegiance to the memory of John Maynard Keynes.” Alas, he concludes “the reversion to Keynesian economics [was] but a tactical retreat.”3
But if the 2008 shot-across-the-bow and the corporate socialism that followed did not jar the acolytes of neoliberalism out of their fool’s paradise, what will? Perhaps dark imaginings of themselves or a loved one dying alone in a chaotic, underequipped hospital ward—drowning in their own lungs over a period of a week or two—will open their eyes. On a side note, the term “Great Recession” a misnomer for a structural depression that still lingers throughout much of the country.
With a $2 trillion stimulus package in the mail and more on the way, everybody seems to have become a stopgap Keynesian or New Dealer again. But will it last? The danger is that the lockstep ideology of Wall Street and the Washington Consensus is so ingrained that the true believers of the establishment will not—cannot—change their ways. Metaphors and analogies for the situation abound and it is difficult not to mix them. Like a smoker who goes back to his cigarettes after being told that he has emphysema, will policymakers and advisors not learn from a global catastrophe? With the egos of high-level careerists and credentialists so deeply invested in the post-Cold War mindset, can they admit error without a neurotic split (and will they risk a public loss of face even if they can admit it to themselves?)? Like politburo toadies afraid to be the first to stop clapping after an address by Stalin, will any public figure break ranks from the economic religion of the past 30 years to admit error? Rationalization and denial are the twin pillars of human psychology—dealing with cognitive dissonance is our lot as a creature—and it is yet to be seen whether or not the United States will succumb to a terminal case of The Emperor’s New Clothes.
When we return to “normalcy” the question will be whether the United States will continue to be hogtied to an economy based on efficiency, multilateral trade agreements, comparative advantages, low cost production zones, corporate internationalism, and an overreliance on Big Finance, or if will it adopt a more sensible and nuanced outlook based on national interests and situational dictates. Economic realism is simple in its central tenet: countries free trade when it is in their interest to do so and protect when it is in their interest to do so, and each situation must be judged case by case. Free trade between nations with large GNPs often makes sense, but free trade between rich nations and poor nations results in quasi-imperialistic relationships in which one nation gets fat, lazy, and uncompetitive as it exploits the other for cheap labor, raw products, and low cost production venues with a convenient lack of labor and environmental laws. As for multilateral trade agreements, suffice it to say that one size does not fit all. Each trade relationship should be negotiated with an eye to the individualized needs and interests of the parties entering into it. Above all, a nation should hire its own people at a living wage in order to produce the durable goods it uses and the vital supplies it may someday need. The N95 respirator and ICU ventilators might serve as examples of the kind of medical equipment that the United States should consider producing entirely at home.
Karl Popper famously observed that “all life is problem solving” and that we learn by abandoning mistaken beliefs when they are demonstrated to be untrue. To not learn and adapt because of an ideological adherence to a discredited position is not only irrational, but risks a kind of self-inflicted natural selection. When a national puts ideological considerations above realistic considerations of vital interests, it puts its long term survival in jeopardy. This is what happened in the decades leading up to the pandemic.
If the country does respond effectively to the economic crisis that will follow the pandemic, could there be an up side to all of this? Yes, but only if we are able to apply the lessons learned to other emerging crises. Some of us who write about climate change and related issues speak of a “Pearl Harbor of the Environment” as a motivation to spur people and governments to an effective global response the way that the attack on Pearl Harbor threw the U.S. war mobilization into overdrive. The pandemic is a comparatively minor environmental Pearl Harbor, and yet it is a world-historical event. As a friend of mine observed, how the United States and the West react to the economic aftermath of the pandemic will likely be a major turning point in history. Will we go back to policies that have worked, or those that enabled and exacerbated the present crisis?
The pandemic is what some people call a “Black Swan” or a high-impact, low-probability event.5 Those of us who have been predicting a pandemic since the early 1990s do not see it as a “low-probability” phenomenon, much less the last global epidemic. Human beings are walking, traveling, socially-interacting Petri dishes, and there are now about 7.8 billion of us. Perhaps climate skeptics will finally realize what nature can dish out and that humans are by far a junior partner on this planet, a small if overpopulated subset, a global plague in ourselves. The crises of the environment are not low-probability speculations either, but virtual certainties and their impact will dwarf that of the Corona virus.
Now that everybody appears to believe in science again, perhaps we can prepare for the much greater crises on the near horizon: the crisis of atmospheric carbon and climate change, the shocking loss of habitat and biodiversity, and the overarching problem of human overpopulation (to say nothing of the plastics crisis, soil depletion, and water issues). Regardless of whether or not you subscribe to the Gaia hypothesis, as far as pushback from nature goes, we got lucky this time. If the recovery is just about reopening without changing how we do things, the period of the lockdown will have been lost time, a lost opportunity. With no disrespect intended to the tens of thousands of people who have died and will die from this terrible disease and the millions who have been infected and/or put out of work by it, relative to what is coming, the COVID-19 pandemic might one day look like a bad cold.
Notes
- See J.M.W. Bean, “The Black Death: the Crisis and Its Social and Economic Consequences,” in The Black Death, the Impact of the Fourteenth-Century Plague (Binghampton, NY: Center for Medieval and Renaissance Studies, 1982), 25.
- Jared Diamond, Guns, Germs, and Steel (New York: W. W. Norton & Company, 1997), 310. Regarding the smallpox epidemic of 1775-1782, see Elizabeth A. Fenn, Pox Americana (New York: Farrar, Strauss and Giroux, 2001.
- Tony Judt, Ill Fares the Land, (New York: Penguin, 2010), 7.
- See generally, Nassim Nicholas Taleb, The Black Swan (New York: Random House: 2007).