To lead Britain through a crisis, you have to be able to see beyond it: Gordon Brown abandons Neoliberal Economics

When the economy collapsed in 2008, I had to think ahead. I fear too little thought has been given to our recovery after Coronavirus writes Gordon Brown

‘Our young people now face the worst labour market for 50 years.’ Photograph: Hollie Adams/Getty Images


Our country’s Covid-19 crisis, together with the economic crisis the pandemic brought with it, is not over. In fact, it is entering a dangerous new phase.

With the UK economy collapsing by 25% in March and April – a fall twice as bad as those in Europe and the US and now only halfway back to pre-crisis level – a recovery plan is needed: closer to France’s £90bn, Germany’s £115bn and the US’s £1tn is required, not the £30bn announced by the chancellor in July.

Millions of people – not 200,000 as now – must be tested every day if the mass return to the workplace is not to result in a second wave of the disease.

And, if the end of the furlough scheme on 31 October is not to bring the highest number of redundancies in living memory, new job-protection measures – based on the Office for Budget Responsibility’s assessment that unemployment could reach 3m – will have to be implemented in the next few days.

Already I see the Conservative economic doves of the spring reverting to type, emerging as the grasping fiscal hawks of autumn, unable to see that every economic orthodoxy has been turned on its head.

Having led the country through one big crisis after 2008 – I had to learn quickly, and learn from my own mistakes – I can feel some sympathy for Boris Johnson, even though mea culpa is the one Latin phrase that will never cross his lips. But I found back then that it was not enough just to do day-to-day crisis management, or even to be one step ahead of events; the real challenge is to anticipate the next problem but one.

More than that, to solve each problem I had to get to the root of it, often by overriding conventional thinking, and following that up with a relentless determination to mobilise all the weapons at one’s disposal. In 2008 the banks were running capitalism without capital, so we nationalised strategically important financial institutions.

Now, in 2020 and still in the absence of a vaccine or a cure, we should have been clear from the outset that regular mass testing was – and still is – the effective way to detect the spread of the disease and then to respond with prompt local public health interventions.

But I fear that those responsible – having misspent millions on contracts for serially ineffective initiatives – have given too little thought to what also matters in the days ahead: engineering the long-term recovery.

Investing now – to save good companies and prevent the destruction of capacity and the loss of key jobs and skills for good – means following Germany and France by maintaining furlough payments in key sectors, preferably with a wage subsidy for part-time work, and with the backstop offer of retraining during absence from the workplace.

And, where workers have to stay at home to avoid the spread of infections during the inevitable increase of pandemic-related local lockdowns, the support available to them has to feed their families, which today’s miserly £90 a week does not.

Our young people now face the worst labour market for 50 years – yet today’s youth employment programme will assist only 350,000, and only for six months, when there are 3.5 million under-25s who are not in full-time education. So to guarantee a job, training or education requires a far more rapid expansion of new apprenticeship, college and university places, along with the re-introduction of the more generous future jobs programme that we had in 2009.

Tory austerity was never a good idea and is now an admitted failure. But it is frankly an economic absurdity when government borrowing costs are so small – 10-year gilt yields are around one-20th of those of 2008 – and unmet needs so extensive.

Indeed inflation – once seen as the justification for austerity economics – is so low in the US today that the Federal Reserve has deemed that maximising employment will now be its main priority. Again, the UK is behind the curve. In 1998, serving as chancellor, I was responsible for the Bank of England Act, which required the Bank to pursue high levels of employment. Now I am the first to say that the Bank needs a more demanding constitution, one that imposes a dual mandate: to take unemployment as seriously as inflation. This should be matched by an operational target stating that interest rates will not rise or stimulus end until unemployment falls to pre-crisis levels.

The current crisis is of course global as much as it is domestic. From 2008 to 2010, I spent much of my time persuading my fellow leaders to act as one, and to agree a synchronised stimulus alongside aid for developing countries. But I am shocked that now – with the world’s economies simultaneously damaged by the pandemic and an economic shock far worse than back then – the world’s leaders have done so little work together in response.

In short, all countries should be agreeing to call time on 50 years of neoliberal economics. They should break not only with their exclusive focus on controlling inflation, but with the pursuit of deregulation, liberalisation and privatisation at the expense of fairness, employment and sustainability. That project, once called the Washington consensus, is out of favour even in Washington. A new paradigm would give priority to fair trade, not just free trade; better control of the management of destabilising capital flows to replace the current free-for-all; a competition regime that can robustly address monopolistic behaviour from rent-seeking digital platforms; an industrial policy that would include generous support for science and innovation – with all that wrapped in a commitment to action on climate change and action on unacceptable levels of inequality.

Could it happen here? I believe so. While the government may feel able to steamroller its policies through the House of Commons thanks to an 80-seat majority, our multinational and increasingly regionally diverse country can no longer be straitjacketed, as now, by a remote and failing centralised state.

In contrast to the tiny and fallible cabal in No 10, democracy is rising again elsewhere: no longer just MPs and local councillors, but directly elected metro mayors and elected decision-making bodies in Scotland, Wales and Northern Ireland. And, as with the outrage against the government’s breach of international law, a rebellion of the regions and nations could force the prime minister to listen.

A challenge no doubt, especially with this prime minister. But he is already worried about the fragility of his recently acquired strength in the north of England; and as a unionist, he knows he must also take heed of voices in Scotland and Wales, where his popularity is waning fast. Politically – and despite his formidable record in the genre – he knows he cannot afford a U-turn on the union.

A strong alliance encompassing trades unions and businesses too can thus not only press for a recovery plan but also revive the spirit of cooperation and unity across our country – and, through a newfound solidarity, give the British people what we need most: hope.

Hysteresis means we will have scars after Covid-19

Tim Harford in The Financial Times 

In the middle of a crisis, it is not always easy to work out what has changed forever, and what will soon fade into history. Has the coronavirus pandemic ushered in the end of the office, the end of the city, the end of air travel, the end of retail and the end of theatre? Or has it merely ruined a lovely spring? 

Stretch a rubber band, and you can expect it to snap back when released. Stretch a sheet of plastic wrapping and it will stay stretched. In economics, we borrow the term “hysteresis” to refer to systems that, like the plastic wrap, do not automatically return to the status quo. 

The effects can be grim. A recession can leave scars that last, even once growth resumes. Good businesses disappear; people who lose jobs can then lose skills, contacts and confidence. But it is surprising how often, for better or worse, things snap back to normal, like the rubber band. 

The murderous destruction of the World Trade Center in 2001, for example, had a lasting impact on airport security screening, but Manhattan is widely regarded to have bounced back quickly. There was a fear, at the time, that people would shun dense cities and tall buildings, but little evidence that they really did. 

What, then, will the virus change permanently? Start with the most obvious impact: the people who have died will not be coming back. Most were elderly but not necessarily at death’s door, and some were young. More than one study has estimated that, on average, victims of Covid-19 could have expected to live for more than a decade. 

But some of the economic damage will also be irreversible. The safest prediction is that activities which were already marginal will struggle to return. 

After the devastating Kobe earthquake in Japan in 1995, economic recovery was impressive but partial. For a cluster of businesses making plastic shoes, already under pressure from Chinese competition, the earthquake turned a slow decline into an abrupt one. 

Ask, “If we were starting from scratch, would we do it like this again?” If the answer is No, do not expect a post-coronavirus rebound. Drab high streets are in trouble. 

But there is not necessarily a correlation between the hardest blow and the most lingering bruise. 

Consider live music: it is devastated right now — it is hard to conceive of a packed concert hall or dance floor any time soon. 

Yet live music is much loved and hard to replace. When Covid-19 has been tamed — whether by a vaccine, better treatments or familiarity breeding indifference — the demand will be back. Musicians and music businesses will have suffered hardship, but many of the venues will be untouched. The live experience has survived decades of competition from vinyl to Spotify. It will return. 

Air travel is another example. We’ve had phone calls for a very long time, and they have always been much easier than getting on an aeroplane. They can replace face-to-face meetings, but they can also spark demand for further meetings. Alas for the planet, much of the travel that felt indispensable before the pandemic will feel indispensable again. 

And for all the costs and indignities of a modern aeroplane, tourism depends on travel. It is hard to imagine people submitting to a swab test in order to go to the cinema, but if that becomes part of the rigmarole of flying, many people will comply. 

No, the lingering changes may be more subtle. Richard Baldwin, author of The Globotics Upheaval, argues that the world has just run a massive set of experiments in telecommuting. Some have been failures, but the landscape of possibilities has changed. 

If people can successfully work from home in the suburbs, how long before companies decide they can work from low-wage economies in another timezone? 

The crisis will also spur automation. Robots do not catch coronavirus and are unlikely to spread it; the pandemic will not conjure robot barbers from thin air, but it has pushed companies into automating where they can. Once automated, those jobs will not be coming back. 

Some changes will be welcome — a shock can jolt us out of a rut. I hope that we will strive to retain the pleasures of quiet streets, clean air and communities looking out for each other. 

But there will be scars that last, especially for the young. People who graduate during a recession are at a measurable disadvantage relative to those who are slightly older or younger. The harm is larger for those in disadvantaged groups, such as racial minorities, and it persists for many years. 

And children can suffer long-term harm when they miss school. Those who lack computers, books, quiet space and parents with the time and confidence to help them study are most vulnerable. Good-quality schooling is supposed to last a lifetime; its absence may be felt for a lifetime, too. 

This crisis will not last for decades, but some of its effects will.

Privatisation is at the heart of the UK's disastrous coronavirus response

George Monbiot in The Guardian

Amid the smog of lies and contradictions, there is one question we should never stop asking: why has the government of the United Kingdom so spectacularly failed to defend people’s lives? Why has “this fortress built by Nature for herself against infection”, as Shakespeare described our islands, succumbed to a greater extent than any other European nation to a foreseeable and containable pandemic?

Part of the answer is that the government knowingly and deliberately stood down crucial parts of its emergency response system. Another part is that, when it did at last seek to mobilise the system, crucial bits of the machine immediately fell off. There is a consistent reason for the multiple, systemic failures the pandemic has exposed: the intrusion of corporate power into public policy. Privatisation, commercialisation, outsourcing and offshoring have severely compromised the UK’s ability to respond to a crisis.

Take, for example, the lethal failures to provide protective clothing, masks and other equipment (PPE) to health workers. A report by the campaigning group We Own It seeks to explain why so many doctors, nurses and other hospital workers have died unnecessarily of Covid-19. It describes a system built around the needs not of health workers or patients, but of corporations and commercial contracts: a system that could scarcely be better designed for failure.

Four layers of commercial contractors, each rich with opportunities for profit-making, stand between doctors and nurses and the equipment they need. These layers are then fragmented into 11 tottering, uncoordinated supply chains, creating an almost perfect formula for chaos. Among the many weak links in these chains are consultancy companies like Deloitte, whose farcical attempts to procure emergency supplies of PPE have been fiercely criticised by both manufacturers and health workers.

At the end of the chains are manufacturing companies, some of which have mysteriously been granted monopolies on the supply of essential equipment. These private monopolies have either failed to meet their contracts, or provided defective gear to the entire NHS, like the 15m protective goggles and the planeload of useless surgical gowns that had to be recalled.

Instead of stockpiling supplies, as emergency preparedness demands, companies in these chains have been using just-in-time production systems, whose purpose is to cut their costs by minimising stocks. Their minimised systems could not be scaled up fast enough to meet the shortfall. Where there should be a smooth, coordinated, accountable programme, there’s opacity, byzantine complexity and total chaos. So much for the efficiencies of privatisation.

The pandemic has also exposed the privatised care system as catastrophically unfit and ill-prepared. In 1993, 95% of care at home was provided publicly by local authorities. Now, almost all of it – and almost all residential care – is provided by private companies. Even before the pandemic, the system was falling apart, as many care companies, unable to balance the needs of their patients with the demands of their shareholders, collapsed, often with disastrous consequences.

Now we discover just how dangerous their commercial imperatives have become, as the drive to make care profitable has created a fragmented, incoherent system, answerable sometimes to offshore owners, that fails to meet basic standards, and employs harassed workers on zero-hour contracts. If there is one thing we have learnt from this pandemic, it’s the need for a publicly owned, publicly run National Care Service – the care equivalent of the NHS.
It could all become much worse, due to another effect of corporate power. A report by the Corporate Europe Observatory shows how law firms are exploring the possibility of suing governments for the measures they have taken to stop the pandemic. Many trade treaties contain a provision called “investor state dispute settlement”. This enables corporations to sue governments in opaque offshore tribunals, for any policies that might affect their “future anticipated profits”.

So when governments, in response to coronavirus, have imposed travel restrictions, or requisitioned hotels, or instructed companies to produce medical equipment or limit the price of drugs, the companies could sue them for the loss of the money they might otherwise have made. When the UK government commandeers private hospitals or the Spanish government prevents evictions by landlords, and stops water and electricity companies from cutting off destitute customers, they could be open to international legal challenge. These measures, which override democracy, have already hampered attempts by many governments, particularly of poorer nations, to protect their people from disasters. They urgently need to be rescinded.

The effectiveness of our health system is also threatened by the trade treaty the UK government hopes to sign with the US. The Conservatives promised in their manifesto that “the NHS is not on the table” in the trade talks. But they have already broken their accompanying promise, “we will not compromise on our high environmental protection, animal welfare and food standards”. Earlier this month, they voted that measure out of the agriculture bill. US companies are aggressively demanding access to the NHS. The talks will be extremely complex and incomprehensible to almost everyone. There will be plenty of opportunities to give them what they want while fooling voters.

Boris Johnson’s central mission, overseen by Dominic Cummings, is to break down all barriers between government and the power of money. It is to allow private interests to intrude into the very heart of government, while marginalising the civil service. This helps to explain why Johnson is so reluctant to let Cummings go. The disasters of the past few weeks hint at the likely results.

Under cover of coronavirus, the world's bad guys are wreaking havoc

The pandemic has allowed strongmen and tyrants to get away with murder and mayhem while we look the other way writes Jonathan Freedland in The Guardian 

 

‘Viktor Orbán has long sought to rule Hungary as an autocrat, but the pandemic gave him his chance, allowing him to brand anyone standing in his way as unwilling to help the leader fight a mortal threat.’ Photograph: Tamás Kovács/AFP via Getty Images


Under the cover of coronavirus, all kinds of wickedness are happening. Where you and I see a global health crisis, the world’s leading authoritarians, fearmongers and populist strongmen have spotted an opportunity – and they are seizing it.

Of course, neither left nor right has a monopoly on the truism that one should never let a good crisis go to waste. Plenty of progressives share that conviction, firm that the pandemic offers a rare chance to reset the way we organise our unequal societies, our clogged cities, our warped relationship to the natural world. But there are others – and they tend to be in power – who see this opening very differently. For them, the virus suddenly makes possible action that in normal times would exact a heavy cost. Now they can strike while the world looks the other way.

For some, Covid-19 itself is the weapon of choice. Witness the emerging evidence that Bashar al-Assad in Damascus and Xi Jinping in Beijing are allowing the disease to wreak havoc among those groups whom the rulers have deemed to be unpersons, their lives unworthy of basic protection. Assad is deliberately leaving Syrians in opposition-held areas more vulnerable to the pandemic, according to Will Todman of the Center for Strategic and International Studies. As he puts it: “Covid-19 has provided Assad a new opportunity to instrumentalize suffering.”

Meanwhile, China continues to hold 1 million Uighur Muslims in internment camps, where they contend now not only with inhuman conditions but also a coronavirus outbreak. Those camps are cramped, lack adequate sanitation and have poor medical facilities: the virus couldn’t ask for a better breeding ground. What’s more, Uighur Muslims are reportedly being forced to work as labourers, filling in for non-Muslims who are allowed to stay home and protect themselves. That, according to one observer, “is reflective of how the Republic of China views [Uighur Muslims] as nothing but disposable commodities”.

Elsewhere, the pandemic has allowed would-be dictators an excuse to seize yet more power. Enter Viktor Orbán of Hungary, whose response to coronavirus was immediate: he persuaded his pliant parliament to grant him the right to rule by decree. Orbán said he needed emergency powers to fight the dreaded disease, but there is no time limit on them; they will remain his even once the threat has passed. They include the power to jail those who “spread false information”. Naturally, that’s already led to a crackdown on individuals guilty of nothing more than posting criticism of the government on Facebook. Orbán has long sought to rule Hungary as an autocrat, but the pandemic gave him his chance, allowing him to brand anyone standing in his way as unwilling to help the leader fight a mortal threat.

Xi has not missed that same trick, using coronavirus to intensify his imposition of China’s Orwellian “social credit” system, whereby citizens are tracked, monitored and rated for their compliance. Now that system can include health and, thanks to the virus, much of the public ambivalence that previously existed towards it is likely to melt away. After all, runs the logic, good citizens are surely obliged to give up even more of their autonomy if it helps save lives.

For many of the world’s strongmen, though, coronavirus doesn’t even need to be an excuse. Its chief value is the global distraction it has created, allowing unprincipled rulers to make mischief when natural critics at home and abroad are preoccupied with the urgent business of life and death.

Donald Trump gets plenty of criticism for his botched handling of the virus, but while everyone is staring at the mayhem he’s creating with one hand, the other is free to commit acts of vandalism that go all but undetected. This week the Guardian reported how the pandemic has not slowed the Trump administration’s steady and deliberate erosion of environmental protections. During the lockdown, Trump has eased fuel-efficiency standards for new cars, frozen rules for soot air pollution, continued to lease public property to oil and gas companies, and advanced a proposal on mercury pollution from power plants that could make that easier too. Oh, and he’s also relaxed reporting rules for polluters.
Trump’s Brazilian mini-me, Jair Bolsonaro, has outstripped his mentor. Not content with mere changes to the rulebook, he’s pushed aside the expert environmental agencies and sent in the military to “protect” the Amazon rainforest. I say “protect” because, as NBC News reported this week, satellite imagery shows “deforestation of the Amazon has soared under cover of the coronavirus”. Destruction in April was up by 64% from the same month a year ago. The images reveal an area of land equivalent to 448 football fields, stripped bare of trees – this in the place that serves as the lungs of the earth. If the world were not consumed with fighting coronavirus, there would have been an outcry. Instead, and in our distraction, those trees have fallen without making a sound.

Another Trump admirer, India’s Narendra Modi, has seen the same opportunity identified by his fellow ultra-nationalists. Indian police have been using the lockdown to crack down on Muslim citizens and their leaders “indiscriminately”, according to activists. Those arrested or detained struggle to get access to a lawyer, given the restrictions on movement. Modi calculates that majority opinion will back him, as rightist Hindu politicians brand the virus a “Muslim disease” and pro-Modi TV stations declare the nation to be facing a “corona jihad”.

In Israel, Benjamin Netanyahu – who can claim to have been Trumpist before Trump – has been handed a political lifeline by the virus, luring part of the main opposition party into a government of national unity that will keep him in power and, he hopes, out of the dock on corruption charges. His new coalition is committed to a programme that would see Israel annex major parts of the West Bank, permanently absorbing into itself territory that should belong to a future Palestinian state, with the process starting in early July. Now, the smart money suggests we should be cautious: that it suits Netanyahu to promise/threaten annexation more than it does for him to actually do it. Even so, in normal times the mere prospect of such an indefensible move would represent an epochal shift, high on the global diplomatic agenda. In these abnormal times, it barely makes the news.

Robin Niblett, director of Chatham House, argues that many of the global bad guys are, in fact, “demonstrating their weakness rather than strength” – that they are all too aware that if they fail to keep their citizens alive, their authority will be shot. He notes Vladimir Putin’s forced postponement of the referendum that would have kept him in power in Russia at least until 2036. When that vote eventually comes, says Niblett, Putin will go into it diminished by his failure to smother the virus.

Still, for now, the pandemic has been a boon to the world’s authoritarians, tyrants and bigots. It has given them what they crave most: fear and the cover of darkness.

Rahul Gandhi is back. Now with two economists, a migrant aid pack and an ethical hacker

Zainab Sikandar in The Print






It takes a lot to be defeated twice over, ridiculed for years and still care enough to show up for your country, the majority of which has rejected you for a national leadership role. Rahul Gandhi continues to surprise us. He simply won’t give up. He just doesn’t turn cynical and walk away.

He keeps coming back with his empathy as well as his willingness to find viable solutions to pressing issues induced by the pandemic: an economy in doldrums, a huge migrant workers’ problem that’s slowly turned into a humanitarian crisis as well as transparency of the government’s Arogya Setu app being used to map Covid positive patients. Rahul Gandhi’s comeback is all the more conspicuous against the backdrop of Prime Minister Narendra Modi’s unwillingness to have a press conference

Rahul is ready to talk

Rahul Gandhi is the eternal unputdownable comeback kid. He has managed to hold the attention of the media by continuously participating in the process of finding answers to the problems that Covid has thrown at India. He has had two conversations with two economists par excellence, former RBI governor Raghuram Rajan and Nobel laureate Abhijit Banerjee. Add to this, the migrant aid pack that Sonia Gandhi offered, where the Congress party would have paid the train fare for every migrant labourer who wants to go home. This “masterstroke” has made the fiercest of critics of the Congress party applaud the Gandhis. The Gandhis are consciously and conspicuously placing themselves polar opposite to Narendra Modi. Whatever Modi is avoiding, the Gandhis are accepting and dealing squarely.

Right-wing editorials are claiming that Rahul Gandhi is trying to come off as an “intellectual”. This, for a man who till recently they caustically made fun of. But this perception is cracking because for the first time, the entire BJP PR machinery is being used to not make fun of Rahul Gandhi, but to discredit his interactions with the two economists by either calling the interaction a “repackaged Socialist snake oil” or by spinning fake news related to the guests. MoneyControl.com and News18 misquoted Abhijit Bannerjee as criticising UPA’s schemes, which the BJP had embraced. Banerjee had said no such thing.

Ending obsession with Modi

Then there’s Rahul Gandhi’s two press conferences (via Zoom). We got to see a visibly more calmer and zen Rahul Gandhi who is neither shaken nor stirred by the six-year-long vicious slander by the BJP or the media, which has more often than not dealt rather unfairly with him. He has significantly altered his behaviour from the Rahul of yore, who would either attack Modi with his ‘Chowkidar Chor hai’ jibe or give him a hug in Parliament and say that he loves the prime minister.

Rahul’s detachment from Modi is palpable when he urges the government to transfer direct cash to the poor, as envisaged in Congress’s NYAY scheme, by saying “Call it ‘nyay’ (justice) or call it by any other name but do it.”


Rahul, it appears, has specifically distanced himself from acts of political pettiness and his statements reflect a sense of political maturity: “We can defeat the virus if we fight it together, we lose if we fight with each other”. Even though he also unapologetically added that he does not agree with Prime Minister Narendra Modi on most things but wanted to offer “constructive suggestions”.

Gandhi’s well-directed tweets with suggestions to the government are now also being affirmed by experts.

Turning Aarogya to his advantage

While the BJP is in pathological denial of anything substantive that Rahul Gandhi or the two economists had to say, an ethical hacker had the government promptly take notice and admit to its mistake. French hacker Elliot Alderson on Twitter looked into the Aarogya Setu app and confirmed Rahul’s fear that it was nothing more than a “sophisticated surveillance system”. The app’s user agreement states that the data can be used in the future for purposes other than epidemic control if there is a legal requirement. The privacy policy of the app states that the data on the app may be shared with as many agencies as the government sees fit.

Alderson went on to confirm and tweeted to the government that “A security issue has been found in your app. The privacy of 90 million Indians is at stake.” He ended the tweet with a post script that read; “@Rahul Gandhi was right.”

Although the Modi government confirmed that there could be no security breach in the app, they thanked the ethical hacker on engaging with them. Alderson on the other hand has confirmed that some of the issues he reported were fixed in the app and that he did receive calls from the National Informatics Centre (NIC) and the Indian Computer Emergency Response Team (ICERT), both government bodies.

In fact the press note of Aarogya Setu thanked Alderson for engaging with them. “We thank the ethical hacker on engaging with us. We encourage any users who identify a vulnerability to inform us immediately.” Anderson, however, maintained that the app should “stop lying, stop denying”.

Rahul’s initial warning, as early as 12 February, foreboding the government of ignoring the contagion almost seems prophetic today. The BJP can go on to dismiss him but it’s getting harder for the party and the government to ignore Rahul in these Covid times.

Can governments afford the debts they are piling up to stabilise economies?

Two experts debate the long-term impact on inflation of the Covid-19 rescue packages 

Stephanie Kelton and Edward Chancellor in The FT

YES - It poses no inherent danger to states that issue their own currency 

The Covid-19 pandemic has forced governments around the world to spend large sums in an effort to stabilise their economies, writes Stephanie Kelton. Gone, for now, are concerns about how to “pay for” it all. Instead we are seeing wartime levels of spending, driving deficits — and public debt — to new highs. 

France, Spain, the US, and the UK are all projected to end the year with public debt levels of more than 100 per cent of gross domestic product, while Goldman Sachs predicts that Italy’s debt-to-GDP ratio will soar above 160 per cent. In Japan, Prime Minister Shinzo Abe has committed to nearly $1tn in new deficit spending to protect a $5tn economy, a move that will push Japan’s debt ratio well above its record of 237 per cent. With GDP collapsing on a global scale, few countries will escape. In advanced economies, the IMF expects average debt-to-GDP ratios to be above 120 per cent in 2021. 

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While most see big deficits as a price worth paying to combat the crisis, many worry about a debt overhang in a post-pandemic world. Some fear that investors will grow weary of lending to cash-strapped governments, forcing countries to borrow at higher interest rates. Others worry governments will need to impose painful austerity in the years ahead, requiring the private sector to tighten its belt to pay down public debt. They should not. 

While public debt can create problems in certain circumstances, it poses no inherent danger to currency-issuing governments, such as the US, Japan, or the UK. This is not, as some argue, because these countries can currently borrow at very low cost, or because a strong recovery will allow them to grow their way out of debt. 

There are three real reasons. First, a currency-issuing government never needs to borrow its own currency. Second, it can always determine the interest rate on bonds it chooses to sell. Third, government bonds help to shore up the private sector’s finances. 

The first point should be obvious, but it is often obscured by the way governments manage their fiscal operations. Take Japan, a country with its own sovereign currency. To spend more, Tokyo simply authorises payments and the Bank of Japan uses the computer to increase the quantity of Yen in the bank account. Being the issuer of a sovereign currency means never having to worry about how you are going to pay your bills. The Japanese government can afford to buy whatever is available for sale in its own currency. True, it can spend too much, fuelling inflationary pressure, but it never needs to borrow Yen. 

If that is true, why do governments sell bonds whenever they run deficits? Why not just spend without adding to the national debt? It is an important question. Part of the reason is habit. Under a gold standard, governments sold bonds so deficits would not leave too much currency in people’s hands. Borrowing replaced currency (which was convertible into gold) with government bonds which were not. In other words, countries sold bonds to reduce pressure on their gold reserves. But that’s not why they borrow in the modern era. 

Today, borrowing is voluntary, at least for countries with sovereign currencies. Sovereign bonds are just an interest-bearing form of government money. The UK, for example, is under no obligation to offer an interest-bearing alternative to its zero-interest currency, nor must it pay market rates when it borrows. As Japan has demonstrated with yield curve control, the interest rate on government bonds is a policy choice. 

So today, governments sell bonds to protect something more valuable than gold: a well-guarded secret about the true nature of their fiscal capacities, which, if widely understood, might lead to calls for “overt monetary financing” to pay for public goods. By selling bonds, they maintain the illusion of being financially constrained. 

In truth, currency-issuing governments can safely spend without borrowing. The debt overhang that many are worried about can be avoided. That is not to say that there is anything wrong with offering people an interest-bearing alternative to government currency. Bonds are a gift to investors, not a sign of dependency on them. The question we should be debating, then, is how much “interest income” should governments be paying out, and to whom? 

 The writer is a professor of economics and public policy at Stony Brook University and author of the forthcoming book “The Deficit Myth” 

 No — This dangerous monetary practice ensures inflation is around the corner 

How to pay for the fathomless costs of fighting a pandemic? All the state’s expenses, whether a Green New Deal, jobs-for-all or the economic lockdowns, can be met simply by printing money. That is what modern monetary theory claims, writes Edward Chancellor. 

Adherents of this unorthodox school of economics would have us believe, like Alice in Wonderland, six impossible things before breakfast. Governments can never go bust. They don’t need to raise taxes or issue bonds to finance themselves. Borrowing creates savings. Fiscal deficits are not the problem, they are the cure. We could even pay off the national debt tomorrow. 

As theory, MMT has been rejected by mainstream economists. But as a matter of practical policy, it is already being deployed. Ever since Ben Bernanke, as governor of the US Federal Reserve, delivered his “helicopter money” speech in November 2002, the world has been moving in this direction. As president of the European Central Bank, Mario Draghi proved that even the most indebted countries need not default. Last year, the US federal deficit exceeded $1tn at a time when the Fed was acquiring Treasuries with newly printed dollars — that’s pure MMT. 

This crisis has accelerated the process. Fiscal and monetary policy are now being openly co-ordinated, just as MMT recommends. The US budget deficit is set to reach nearly $4tn this year. But tax rises are not on the agenda. Instead, the Fed will write the cheques. Across the Atlantic, the Bank of England is directly financing the largest peacetime deficit in its history. MMT claims that money is a creature of the state. The Fed’s share of an expanding US money supply is close to 40 per cent and rising. Again, we are seeing MMT in practice. 

The lockdown is a propitious moment to implement MMT. During crises, the public has an abnormally high demand to hold cash; debt monetisation appears less of a problem. But governments can print money to cover their costs for only as long as the public retains confidence in a currency. When the crisis passes, the excess money must be mopped up. 

Proponents of MMT claim this shouldn’t be a problem. But then they admit that nobody has a good inflation model. We cannot accurately measure the economy’s spare capacity, either. This means that politicians are unlikely to raise taxes in time to nip inflation in the bud. Bonds can always be issued to withdraw money from circulation. But once inflation is under way, bondholders demand higher coupons. From a fiscal perspective, it makes more sense to issue government debt when rates are low — as they are today — than to print money now and pay higher rates later. 

Great historic inflations have been caused not by monetary excesses but by supply shocks, say MMT exponents. It’s likely that coronavirus will turn out to be one of those shocks. Besides, history casts doubt on attempts to explain inflation by non-monetary factors. The closest example of MMT in implementation comes from France’s experiment with paper money. In 1720, the Scottish adventurer John Law served as French finance minister and head of the central bank. The bank printed lots of paper money, the national debt was repaid and France enjoyed brief prosperity. But inflation soon took off and crisis ensued. 

The truth is that governments have an inherent bias towards inflation, especially under adverse conditions such as wars and revolutions. The Covid-19 lockdown is another such condition. Tomorrow’s inflation will alleviate some of today’s financial problems: debt levels will come down and inequalities of wealth will be mitigated. Once excessive debt has been inflated away, interest rates can return to normal. When that happens, homes should be more affordable and returns on savings will rise. 

But the evils of inflation should not be overlooked. Economies do not function well when everyone is scrambling to keep pace with soaring prices. Inflations produce their own distributional pain. Workers whose incomes rise with inflation do better than retirees. Debtors will thrive at the expense of creditors. Profiteers arise, along with populists who feed on social discontents. 

Modern monetary practices ensure another inflation is around the corner. MMT provides the intellectual gloss. It promises a free lunch. Even Alice shouldn’t believe that.

The writer, a financial historian, is author of a forthcoming history of interest

Don't be fooled: Britain's coronavirus bailout will make the rich richer still

The government schemes protect asset owners, while the bulk of the costs will eventually be borne by ordinary people writes Christine Berry in The Guardian


Posters for a rent strike during the coronavirus lockdown, Bristol, 31 March 2020. Photograph: Ben Birchall/PA


Recent weeks have been profoundly disorienting, as we all adjust to life in lockdown during a pandemic. For the left, they have also been politically disorienting, as a Conservative government borrows hundreds of billions of pounds to underwrite wages.

Some have been mesmerised by this spectacle, convinced that a socialist utopia is just around the corner. We need to snap out of this, and fast. Instead, we must ask the same questions we always should: who benefits from these interventions, and who pays? Who will be empowered and who disempowered?

The crisis itself is already exacerbating economic inequalities. At first sight, the government’s income support schemes might look as though they will help to redress this. In reality, they will achieve almost exactly the opposite. It’s been widely noted that many people remain excluded from the safety net, but the problem goes deeper than this. Where is all this money coming from – and where is it ultimately going? 

The answer lies principally in a massive expansion of debt. Wage support is being funded by large-scale public borrowing of the kind we were told was unaffordable just a few months ago (although this is now being supplemented by direct financing with newly created money from the Bank of England). Yes, this could usher in a new era of state intervention – but it could just as easily herald a new era of austerity.

Conservatives such as Sajid Javid – who tweeted that “the whole point of fiscal conservatism in normal times is to be able to act decisively if there is a genuine economic emergency” – are already trying to reconcile the crisis response with austerity politics. Fiscal hawks will be keen to draw a line under the crisis period and insist that we now need to tighten our belts again to pay for it.

Meanwhile, mortgage and rent “holidays” and guaranteed loans for small businesses require people to take on private debts that they will have to pay back when the crisis is over. One way or another, then, the bulk of the costs will still eventually be borne by ordinary people.

On the other hand, virtually no sacrifices have been demanded of banks, landlords or profitable corporations, such as utility companies. The only people in society not being asked to share the burden are “rentiers”: those who make money by owning assets they can charge others to use.

Landlords have access to mortgage holidays but are not required to pass these on to their tenants. If they do, they can recoup any missed rent when the crisis is over. Since the same cannot be said for tenants’ lost income, many will be pushed further into debt or face eviction.

Banks are enjoying government loan guarantees with few strings attached. This means that they are not shouldering the risk of extending credit to struggling businesses during a downturn – that is being borne by the state. Meanwhile, mortgages and credit card debt will still be repaid in full – or with added interest if holidays are granted.

Given all this, wage support acts primarily to protect rentiers’ income streams by enabling working people to keep paying rent and bills, and debtors to keep making loan repayments to their creditors.

The government moved swiftly to protect the interests of rentier capital but has consistently dragged its feet in protecting the interests of workers. Indeed, most support has been channelled through banks, landlords, employers and utility firms – with government simply trusting them to benignly pass it on. This is at best naive and at worst irresponsible.

Guidance innocently declares that mortgage holidays for landlords “will mean no unnecessary pressure is put on their tenants”. Unsurprisingly, emerging anecdotal evidence suggests precisely the opposite. The business interruption loan scheme has already had to be overhauled after banks failed to extend low-cost credit to struggling businesses, while the Financial Conduct Authority was forced to stop them hiking overdraft charges. Meanwhile, some large companies are still laying off workers, or at best, pocketing government support and refusing to top it up from their own coffers.

The government has built an economic bunker from which rentiers will emerge unscathed into the scene of devastation wreaked on the rest of the population. Many will find their bank balances considerably enhanced, since they have been unable to spend money in theatres, bars and restaurants. As economist Gary Stevenson points out, if some of this windfall is spent on property, the result will be to push house prices up – adding insult to injury for the low-paid renters who will have borne the brunt of the crisis. All of this is simply indefensible. 

Crises always create winners as well as losers. The bank bailouts of 2008 should have taught us that state intervention is not necessarily progressive. Back then, the state assumed the liabilities of finance capital and ordinary citizens ultimately footed the bill. Now, we are seeing a very similar story play out again – but the mechanisms at work are more subtle, the implicit subsidies for rentier interests passing under the radar.

The left must ruthlessly follow the money and ask in whose pockets it will end up. It must stand alongside those demanding that the big winners in our economic system pay their share: groups such as London Renters’ Union, demanding a true rent freeze. Wetherspoons workers, still fighting to be paid in full. The Jubilee Debt Campaign, calling for personal debt repayments to be frozen and ultimately written off.

Perhaps, as Stevenson suggests, we should also be demanding an emergency wealth tax to redress this huge tilting of the scales towards the asset-owning rich. Without such measures, we should be under no illusions: this crisis will leave our economy even more unequal and unstable than it was before.

Britain and Covid-19

by Giffenman

This is an unusual time for the whole world as it deals with the Corona pandemic. In my opinion when the crisis ends our world will be an entirely different place from what it was in early 2020. Every one’s consciousness would have been affected by coping with the disease and I hope it will result in a different and more egalitarian politics.

The Corona pandemic has laid bare the unpreparedness of the UK government to the crisis. Its much touted public health system, the NHS, has been found short of equipment, manpower and ideas to cope with the disease. The NHS had warned the government in 2016 about its inability to cope in the case of such a breakout but the report was suppressed. This is not surprising since governments since the 1980s have been privatising the NHS by stealth.

Boris Johnson, the British Prime Minister, did not want the UK to respond like China, Korea or Germany did to Covid-19. He wanted to use Darwinian principles of ‘survival of the fittest’ and get Britons to develop herd immunity. It could be that he was aware that the NHS was in no position to cope with the pandemic and did not want the facts exposed. His ultimate ignominy was that he was afflicted by Corona and has spent the last few nights in a NHS hospital.

The biggest surprise in this period has been the behaviour of the chancellor Rishi Sunak. He has, in the past few days, made unlimited funds available for the nation to cope with the health and economic impact of the pandemic. This is in sharp contrast to the austerity agenda in vogue since 2010. Sunak’s popularity has shot up among the public and he is being touted as a replacement for the currently invalid Prime Minister.

Even more surprising is the behaviour of the czars of the independent Bank of England (BOE). In synchronised operations with Rishi Sunak they slashed interest rates to 0.1% and agreed to borrow large amounts to kick-start the economy. Then a couple of days ago, they even abandoned their orthodox ideology on borrowings via gilts and decided to create money out of thin air to help the government deal with the crisis. The BOE even surprised itself when it stopped commercial banks from paying dividends to their shareholders.

If the financial and economic arm of the government is taking such unorthodox and knee-jerk measures in a concerted manner one does not need much imagination to imagine what might be their prognoses for the UK economy in the immediate future.

Information can make you sick

Trader turned neuroscientist John Coates in The FT on why economic crises are also medical ones.

As coronavirus infection rates peak in many countries, the markets rally. There is a nagging worry that a second wave of infections might occur once lockdowns are lifted or summer passes. But for anyone immersed in the financial markets there should be a further concern. Volatility created by the pandemic could itself cause a second wave of health problems. Volatility can make you sick, just as a virus can. 

To get an inkling of what this other second wave might look like, it helps to recall what happened after the credit crisis. That event was both a financial and medical disaster. Various epidemiological studies suggest it may be responsible for 260,000 cancer deaths in OECD countries; a 17.8 per cent increase in the Greek mortality rate between 2010-16; and a spike in cardiovascular disease in London for the years 2008-09, with an additional 2,000 deaths due to heart attacks. The current economic crisis may be far worse than 2008-09, so the medical fallout could be as well. 

Why do financial and medical crises go hand in hand? Many of the above studies focused on unemployment and reduced access to healthcare as causes of the adverse health outcomes. But research my colleagues and I have conducted on trading floors for the past 12 years suggest to me that uncertainty itself, regardless of outcome, can have independent and profound effects on physiology and health. 

Our studies were designed initially to test a hunch I had while running a trading desk for Deutsche Bank, that the rollercoaster of physical sensations a person experiences while immersed in the markets alters their risk-taking. After retraining in neuroscience and physiology at Cambridge University, I set up shop on various hedge fund and asset manager trading floors, along with colleagues, mostly medical researchers. Using wearable tech and sampling biochemistry, we tracked the traders’ cardiovascular, endocrine and immune systems.

My goal was to demonstrate how these physiological changes altered trader performance. Increasingly, though, I came to see that a trading floor provides an elegant model for studying occupational health. 

One remarkable thing we found was that traders’ bodies calibrated sensitively to market volatility. For humans, apparently, information is physical. You do not process information dispassionately, as a computer does; rather your brain quietly figures out what movement might ensue from the information, and prepares your body, altering heart rate, adrenaline levels, immune activation and so on. 

Your brain did not evolve to support Platonic thought; it evolved to process movement. Our larger brain controls a more sophisticated set of muscles, giving us an ability to learn new movements unmatched by any other animal — or robot — on the planet. If you want to understand yourself, fellow humans, even the markets, put movement at the very core of what we are. 

Essential to our exquisite motor control is an equally advanced system of fuel injection, one that has been misleadingly termed “the stress response”. Stress connotes something nasty but the stress response is nothing more sinister than a metabolic preparation for movement. Cortisol, the main stress molecule, inhibits bodily systems not needed during movement, such as digestion and reproduction, and marshals glucose and free fatty acids as fuel for our cells. 

The stress response evolved to be short lived, acutely activated for only a few hours or days. Yet during a crisis such as the current one, you can activate the stress response for weeks and months at a time. Then an acute stress response morphs into a chronic one. Your digestive system is inhibited so you become susceptible to gastrointestinal disorders; blood pressure increases so you are prone to hypertension; fatty acids and glucose circulate in your blood but are not used, because you are stuck at home, so your risks increase for cardiovascular disease. Finally, by inhibiting parts of the immune system, stress impairs your ability to recover from diseases such as cancer, and Covid-19. 

So why the connection with uncertainty? The stress response is largely predictive rather than reactive. Just as we try to predict the future location of a tennis ball, so too we predict our metabolic needs. When we encounter situations of novelty and uncertainty, we do not know what to expect, so we marshal a preparatory stress response. The stress response is comparable to revving your engine at a yellow light. Situations of novelty can be described, following Claude Shannon, inventor of information theory, as “information rich”. Conveniently, informational load in the financial markets can be measured by the level of volatility: the more Shannon information flowing into the markets, the higher the volatility. 

In two of our studies we found that traders’ cortisol levels did in fact track bond volatility almost tick for tick. It did not even matter if the traders were making or losing money; just put a human in the presence of information and their metabolism calibrates to it. Take a moment to contemplate that curious result — there are molecules in your blood that track the amount of information you process. 

Today, with historically elevated volatility, there is a good chance cortisol levels are trending higher. Immune systems could also be affected. When your body is attacked by a pathogen, your immune system coordinates a suite of changes known as “sickness behaviour”. You develop a fever, lose your appetite and withdraw socially. You also experience increased risk aversion. 

Central to the immune response is inflammation, the process of eliminating pathogens and initiating tissue repair. However, inflammation can also occur in stressful situations, because cytokines, the molecules triggering inflammation, assist in the recruitment of metabolic reserves. If inflammation becomes systemic and chronic, it contributes to a wide range of health problems. We found that interleukin-1-beta, the first responder of inflammation, tracked volatility as closely as cortisol. 

Recently we have focused on the cardiovascular system. Working with a large and sophisticated fund manager, we have used cutting-edge wearable tech that permits portfolio managers to track their cardiovascular data, physical activity and sleep. The cardiovascular system similarly tracks volatility and risk appetite.

In short, here we may have a mechanism connecting financial and health crises. On the one hand, fluctuating levels of stress and inflammation affect risk-taking. In a lab-based study, we found that chronically elevated cortisol caused a large decrease in risk appetite. Shifting risk presents tricky problems for risk management — and for central banks. Physiology-induced risk aversion can feed a bear market, morphing it into a crash so dangerous that the state has to step in with asset purchases. On the other hand, chronically elevated stress and inflammation are known to contribute to a wide range of health problems. 

We are not accustomed to combining financial and medical data in this way. But corporate and state health programs should start. 

The markets today are living through a period of volatility the likes of which I have never encountered. March was, to put it mildly, information rich. As a result, there is now the very real possibility of a second wave of disease. Viruses can make you sick, but so too can information.

‘We can’t go back to normal’: how will the world emerge from the coronavirus crisis?

Times of upheaval are always times of radical change. Some believe the pandemic is a once-in-a-generation chance to remake society and build a better future. Others fear it may only make existing injustices worse. By Peter C Baker in The Guardian


Everything feels new, unbelievable, overwhelming. At the same time, it feels as if we’ve walked into an old recurring dream. In a way, we have. We’ve seen it before, on TV and in blockbusters. We knew roughly what it would be like, and somehow this makes the encounter not less strange, but more so.

Every day brings news of developments that, as recently as February, would have felt impossible – the work of years, not mere days. We refresh the news not because of a civic sense that following the news is important, but because so much may have happened since the last refresh. These developments are coming so fast that it’s hard to remember just how radical they are. 

Cast your mind back a few weeks and imagine someone telling you the following: within a month, schools will be closed. Almost all public gatherings will be cancelled. Hundreds of millions of people around the world will be out of work. Governments will be throwing together some of the largest economic stimulus packages in history. In certain places, landlords will not be collecting rent, or banks collecting mortgage payments, and the homeless will be allowed to stay in hotels free of charge. Experiments will be underway in the direct government provision of basic income. Large swathes of the world will be collaborating – with various degrees of coercion and nudging – on a shared project of keeping at least two metres between each other whenever possible. Would you have believed what you were hearing?

It’s not just the size and speed of what is happening that’s dizzying. It’s the fact that we have grown accustomed to hearing that democracies are incapable of making big moves like this quickly, or at all. But here we are. Any glance at history reveals that crises and disasters have continually set the stage for change, often for the better. The global flu epidemic of 1918 helped create national health services in many European countries. The twinned crises of the Great Depression and the second world war set the stage for the modern welfare state.

But crises can also send societies down darker paths. After the terrorist attacks of September 11, government surveillance of citizens exploded, while George W Bush launched new wars that stretched into indefinite occupations. (As I write this, the US military’s current attempt at reducing its troop presence in Afghanistan, 19 years after the invasion, is being slowed by coronavirus-related complications.) Another recent crisis, the 2008 financial crash, was resolved in a way that meant banks and financial institutions were restored to pre-crash normality, at great public cost, while government spending on public services across the world was slashed.

Because crises shape history, there are hundreds of thinkers who have devoted their lives to studying how they unfold. This work – what we might call the field of “crisis studies” – charts how, whenever crisis visits a given community, the fundamental reality of that community is laid bare. Who has more and who has less. Where the power lies. What people treasure and what they fear. In such moments, whatever is broken in society gets revealed for just how broken it is, often in the form of haunting little images or stories. In recent weeks, the news has furnished us with countless examples. Airlines are flying large numbers of empty or near-empty flights for the sole purpose of protecting their slots on prime sky routes. There have been reports of French police fining homeless people for being outside during the lockdown. Prisoners in New York state are getting paid less than a dollar hour to bottle hand sanitiser that they themselves are not allowed to use (because it contains alcohol), in a prison where they are not given free soap, but must buy it in an on-site shop.

But disasters and emergencies do not just throw light on the world as it is. They also rip open the fabric of normality. Through the hole that opens up, we glimpse possibilities of other worlds. Some thinkers who study disasters focus more on all that might go wrong. Others are more optimistic, framing crises not just in terms of what is lost but also what might be gained. Every disaster is different, of course, and it’s never just one or the other: loss and gain always coexist. Only in hindsight will the contours of the new world we’re entering become clear.

The pessimistic view is that a crisis makes bad things worse. People who study disasters – and especially pandemics – know all too well their tendency to inflame xenophobia and racial scapegoating. When the Black Death came to Europe in the 14th century, cities and towns shut themselves to outsiders – and assaulted, banished and killed “undesirable” community members, most often Jews. In 1858, a mob in New York City broke into a quarantine hospital for immigrants on Staten Island, demanded that everyone leave and then burned the hospital down, fearful that it was putting people outside at risk of yellow fever. Wikipedia now has a page collating examples from more than 35 countries of “xenophobia and racism related to the 2019-20 coronavirus pandemic”: they range from taunts to outright assault.

“In a totally rational world, you might assume that an international pandemic would lead to greater internationalism,” says the historian Mike Davis, a renowned American chronicler of the disasters incubated by globalisation. For Davis, who wrote a book about the threat of avian flu in 2005, pandemics are a perfect example of the kind of crises to which global capitalism (with its constant movement of people and goods) is particularly vulnerable, but that the capitalist mindset (with its inability to think in terms beyond profit) cannot address. “In a rational world, we would be ramping up production of basic essential supplies – test kits, masks, respirators – not only for our own use, but for poorer countries, too. Because it’s all one battle. But it’s not necessarily a rational world. So there could be a lot of demonisation and calls for isolation. Which will mean more deaths and more suffering worldwide.”

In the US, President Trump has tried hard to brand the new coronavirus as inherently “Chinese”, and to use the pandemic as a pretext for tightening borders and accepting fewer asylum seekers. Republican officials, thinktanks and media outlets have claimed or implied that Covid-19 is a man-made Chinese bioweapon. Some Chinese officials, in turn, have pushed the conspiracy theory that the outbreak came to China by way of American soldiers. In Europe, the Hungarian prime minister, Viktor Orbán, recently announced: “We are fighting a two-front war: one front is called migration, and the other one belongs to the coronavirus. There is a logical connection between the two, as both spread with movement.” 

When you’re fighting a war, you want to know as much about the enemy as possible. But it’s easy, in the rush of crisis, to put in place surveillance tools without thinking about the long-term harm they might do. The scholar Shoshana Zuboff, the author of The Age of Surveillance Capitalism, reminded me that, prior to 9/11, the US government had been in the process of developing serious regulations designed to give web users real choice about how their personal information was and wasn’t used. “In the course of a few days,” Zuboff says, “the concern shifted from ‘How do we regulate these companies that are violating privacy norms and rights’ to ‘How do we nurture and protect these companies so they can collect data for us?’”
For governments looking to monitor their citizens even more closely, and companies looking to get rich by doing the same, it would be hard to imagine a more perfect crisis than a global pandemic. In China today, drones search for people without facemasks; when they are found, the drones’ built-in speakers broadcast scoldings from police. Germany, Austria, Italy and Belgium are all using data – anonymised, for now – from major telecommunications companies to track people’s movement. In Israel, the national security agency is now allowed to access infected individual’s phone records. South Korea sends texts to the public identifying potentially infected individuals and sharing information about where they’ve been.

Not all surveillance is inherently malign, and new tech tools very well might end up playing a role in fighting the virus, but Zuboff worries that these emergency measures will become permanent, so enmeshed in daily life that we forget their original purpose. Lockdowns have made many of us, sitting at home glued to our computers and phones, more dependent than ever on big tech companies. Many of these same companies are actively pitching themselves to government as a vital part of the solution. It is worth asking what they stand to gain. “People have a hard time remembering privacy rights when they’re trying to deal with something like a pandemic,” says Vasuki Shastry, a Chatham House fellow who studies the interplay of technology and democracy. “Once a system gets scaled up, it can be very difficult to scale it back down. And then maybe it takes on other uses.”

The prime ministers of both Israel and Hungary have effectively been given the power to rule by decree, without interference from courts or legislature. The UK’s recently rolled-out coronavirus bill gives police and immigration officers the authority – in place for the next two years – to arrest and detain people suspected of carrying the virus, so that they can be tested. The US Department of Justice has, since the outbreak began, filed a request with Congress for a new rule that would allow judges to suspend courtroom proceedings in emergencies, creating the possibility of people being jailed without ever being able to formally object. “Those of us who follow the police know how this goes,” said Kevin Blowe of Netpol, a UK group focused on protest rights. “These powers get put in place, and it sounds reasonable enough at the time – and then very quickly they’re applied for other purposes that have nothing to do with democracy and nothing to do with public safety.”

In a 2008 report on the legal aspects of pandemic response, prompted by the increase in pandemic flu outbreaks, a team of historians and medical ethicists assembled by the American Civil Liberties Union bemoaned a common tendency – resurgent, in their view, since 9/11 – for government to address public health problems using mindsets more appropriate to tracking down criminals. This suspicious mindset, they argued, ended up most affecting racial minorities and the poor. Tactics like these can make fighting the disease harder, by driving a hard wedge of distrust between government and citizens. As the report put it: “People, rather than the disease, become the enemy.”

There’s another school of thought that looks at crisis and sees glimmers of possibility. For thinkers in this camp, the example of the 2008 financial crash looms large. But where, from their view, 2008 led to defeat – with the broad public giving up a great deal while a small few profited – Covid-19 might open the door to political progress.

“I think we’re just so different to how we were before we saw the aftermath of the 2008 crash,” said the American writer Rebecca Solnit, one of today’s most eloquent investigators of crises and their implications. “Ideas that used to be seen as leftwing seem more reasonable to more people. There’s room for change that there wasn’t beforehand. It’s an opening.”

The argument, in its simplest form, is this: Covid-19 has revealed the political status quo to be broken. Long before anyone had heard of the new coronavirus, people died of diseases we knew how to prevent and treat. People lived precarious lives in societies awash with wealth. Experts told us about catastrophic threats on the horizon, including pandemics, and we did next to nothing to prepare for them. At the same time, the drastic measures governments have taken in recent weeks testify to just how much power the state does have – the extent of what government can accomplish (and quickly!) when it realises it must act boldly or risk being seen as fundamentally illegitimate. As Pankaj Mishra recently wrote: “It has taken a disaster for the state to assume its original responsibility to protect citizens.”

For years, in mainstream politics the conventional line – on everything from healthcare to basic living expenses such as housing – has been that even if the world has its problems, expansive government intervention is not a feasible solution. Instead, we have been told that what works best are “marketplace” solutions, which give large roles to corporations motivated not by outdated notions like “the public good” but by a desire to make a profit. But then the virus started spreading, governments spent trillions in days – even going so far as to write cheques directly to citizens – and suddenly the question of what was feasible felt different.

From this perspective, the task today is not to fight the virus in order to return to business as usual, because business as usual was already a disaster. The goal, instead, is to fight the virus – and in doing so transform business as usual into something more humane and secure.

In her 2009 book, A Paradise Built in Hell, Solnit used case studies of disasters – including the 1985 Mexico City earthquake, the 2001 terror attacks and Hurricane Katrina – to argue that emergencies aren’t just moments when bad things get worse, or when people inevitably become more scared, suspicious and self-centred. Instead she foregrounded the ways in which disasters opened up human reserves of improvisation, solidarity and resolve, pockets of purpose and joy, even in the midst of loss and pain. The book was not a call to celebrate disaster – but to pay attention to the possibilities it might contain, and how it might shake us loose from old ways. In Solnit’s telling, “official” disaster responses had a tendency to muck things up by treating people as part of the problem to be managed, not an invaluable part of the solution.

Sometimes this mismanagement is a result of mere incompetence – other times it is more sinister. In her 2007 book, The Shock Doctrine, the Canadian writer Naomi Klein laid out a dark account of crisis politics. In Klein’s view, there is always Disaster 1 – the earthquake, the storm, the military conflict, the economic slump – and Disaster 2 – the bad things that people with power subsequently get up to, such as ramming through extreme economic reforms or gobbling up post-crisis opportunities for self-enrichment, while the rest of us are too dazed to notice. (In fact, Klein argued, these people sometimes engineer Disaster 1 to get the process started.)

Unlike Solnit’s book, The Shock Doctrine doesn’t have much to say about the resilience of everyday people when everything goes horribly wrong. (Indeed, Solnit directly criticised Klein for this omission.) But the two books fit together like puzzle pieces. Both address crisis not in terms of what inevitably – or “naturally” – happens as they unfold, but in terms of choices that people make along the way. And both were well-timed to contribute to the political conversations taking shape in the rubble of the financial crash.

In 2008, days after Barack Obama’s election, his chief of staff, Rahm Emanuel, famously said: “You never want a serious crisis to go to waste.” Today’s leftists, for whom Obama mostly represents disappointment, are prone to agree. They feel that, in the wake of recent crises, they lost, and now is the time to make amends. If, facing a pandemic, we can change this much in a few weeks, then how much might we change in a year?

For anyone making this argument, the contrast between 2008 and the present crisis is striking. Compared to the opaque financial crisis, with its credit default swaps and collateralised debt obligations, the coronavirus is relatively easy to understand. It is a dozen crises tangled into one, and they’re all unfolding immediately, in ways that cannot be missed. Politicians are getting infected. Wealthy celebrities are getting infected. Your friends and relatives are getting infected. We may not quite all be “in it together” – as always, the poor are hit worse – but there is more truth to the idea than there ever was in the wake of 2008.

In this, the optimists believe, there is hope that we might begin to see the world differently. Maybe we can view our problems as shared, and society as more than just a mass of individuals competing against each other for wealth and standing. Maybe, in short, we can understand that the logic of the market should not dominate as many spheres of human existence as we currently allow it to.

“More people are in a position to connect the dots,” Klein said. “It has to do with people’s experiences; for people of a certain age, their only experience of capitalism has been one of crisis. And they want things to be different.”

That screaming buzzsaw noise in the background of this conversation is the sound of the climate crisis. If 2008 is the disaster that Klein and like-minded thinkers want to avoid repeating, climate change is the much bigger disaster they see coming – that they know is already here – and that they want to fight off. Indeed, in the years since publishing The Shock Doctrine, Klein has made climate change her central focus, framing it as the paradigmatic emergency that must be wrenched from the clutches of fossil-fuel profiteers and their enablers in government.

Although Covid-19 is likely the biggest global crisis since the second world war, it is still dwarfed in the long term by climate change. Yet the two problems have suggestive similarities. Both will require unusual levels of global cooperation. Both demand changes in behaviour today in the name of reducing suffering tomorrow. Both problems were long predicted with great certainty by scientists, and have been neglected by governments unable to see beyond the next fiscal quarter’s growth statistics. Accordingly, both will require governments to take drastic action and banish the logic of the marketplace from certain realms of human activity, while simultaneously embracing public investment. In other words, to think of this new level of state intervention as a temporary requirement is to ensure that we continue barrelling down the path to climate disaster.

“We’ve been trying for years to get people out of normal mode and into emergency mode,” said Margaret Klein Salamon, a former psychologist who now heads the advocacy group The Climate Mobilization. “What is possible politically is fundamentally different when lots of people get into emergency mode – when they fundamentally accept that there’s danger, and that if we want to be safe we need to do everything we can. And it’s been interesting to see that theory validated by the response to the coronavirus. Now the challenge is to keep emergency mode activated about climate, where the dangers are orders of magnitude greater. We can’t think we’re going to go ‘back to normal’, because things weren’t normal.”

The analogy between the two crises only goes so far. There is no getting around the fact that the impacts of climate change are more gradual than those of Covid-19. Most people do not feel they or their loved ones could die from the climate crisis this month, and so emergency mode is harder to activate and sustain. As Salamon pointed out to me, if we truly accepted we were in a climate emergency, then every day the news would lead with updates about which countries were reducing their emissions the fastest, and people would be clamouring to make sure their leaders were adopting the policies that worked. 

Illustration: Nathalie Lees/The Guardian

But it is not unimaginable that the experience of Covid-19 could help us understand climate change differently. As the virus has reduced industrial activity and road traffic, air pollution has plummeted. In early March, the Stanford University scientist Marshall Burke used pollution data from four Chinese cities to measure changes in the level of PM2.5, a particularly harmful pollutant that attacks the heart and lungs. He estimated that, in China alone, emission reductions since the start of the pandemic had in effect saved the lives of at least 1,400 children under five and 51,700 adults over 70. Meanwhile, people around the world have been sharing their own anecdotal findings online – stories of sweet-smelling breezes, expanded bike lanes and birdsong returning to neighbourhoods – in a way that almost resembles a digitally distributed Rebecca Solnit project: people catching glimpses, in the midst of a disaster, of a future they know they want and need.

Alongside these hopeful signs, a far less heartening story is unfolding, which fits Klein’s “shock doctrine” framework. Disaster 1: Covid-19. Disaster 2: the dismantling of even the meagre existing rules designed to protect the environment. On 26 March, following lobbying from the energy industry, the US Environmental Protection Agency announced that, in recognition of the pandemic’s effects on the workforce, it will not punish violations of pollution regulations so long as companies can link those violations to the pandemic. China’s environmental ministry has started waiving inspections that assess the environmental impact of industrial facilities. And advocacy groups funded by the plastics industry have launched a public relations blitz on behalf of single-use plastic bags, spreading the unproven claim that the virus is less likely to stick plastic than to the cloth fabric of reusable bags. Looking back at the crisis of 2008, we can see that emissions dropped then, too – only to rebound drastically in 2010 and 2011.

Salamon believes that one lesson of the coronavirus crisis is the power of shared emotion, which has helped make possible radical action to slow the pandemic. “I’m not talking about people giving each other medical expertise. I’m talking about people calling each other up and saying: ‘How are you doing? Are you scared? I’m scared. I want you to be OK, I want us to be OK.’ And that’s what we want for climate, too. We need to learn to be scared together, to agree on what we’re terrified about.” Only then, she said, would governments be forced to act. “It’s good that we’re entering emergency mode about the pandemic,” she said. “But unless we also do it for climate … ” She didn’t finish the sentence.

What kind of actions would it take for the optimists’ vision to materialise? The historian Philip Mirowski, author of Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown, warns against complacency. “The left thought it was so obvious to everyone that the crisis revealed the utter bankruptcy of a certain way of looking at the economy,” he told me. “And it wasn’t obvious to everyone, and the left lost.” How do we prevent the world from going back to a version of the way it was before Covid-19, with the virus vanquished but all of the old ongoing disasters still unfolding?

“The political outcome of the epidemic,” said Mike Davis, “will, like all political outcomes, be decided by struggle, by battles over interpretation, by pointing out what causes problems and what solves them. And we need to get that analysis out in the world any way we can.” One major obstacle, of course, is social distancing, which certainly hinders many time-tested methods of waging such struggles, such as political canvassing and street protest. “The biggest risk for all of us,” said Klein, “is going to be frittering away this time sitting at home on our social media feeds, living the extremely limited forms of politics that get enabled there.”
Davis hoped protesters would find their way into the streets sooner rather than later, and speculated that a street action with all the sign-holding participants spaced 10 or 15 feet apart would make a dramatic media image. He lives in Pāpa‘aloa, a small community in Hawaii, and as our conversation wrapped up, he mentioned that he was planning to spend part of the afternoon doing his part by standing by himself on a street corner, holding a sign. He hadn’t decided what to write on it yet, but was thinking about “SUPPORT THE NURSES’ UNION” or “DEMAND PAID SICK LEAVE”.

Solnit told me she was taking heart from all the new ways people were finding to connect and help each other around the world, ranging from the neighbourhood delivery networks that had sprung up to bring groceries to people who couldn’t get out, to more symbolic interventions, such as kids playing music on an older neighbour’s porch. The Italian political scientist Alessandro Delfanti said he was finding hope from a post-outbreak wave of strikes roiling Amazon warehouses in the US and Europe, and also the steps that workers across different sectors of the Italian economy were taking to help each other secure equipment they needed to stay safe.

What happens next might depend on the optimists’ ability to transport such moments of solidarity into the broader political sphere, arguing that it makes no sense to address Covid-19 without at least trying to fix everything else, too, creating a world where our shared resources do more for more people. “We don’t even have a language for this emotion, in which the wonderful comes wrapped in the terrible, joy in sorrow, courage in fear. We cannot welcome disaster, but we can value the responses, both practical and psychological,” Solnit wrote in A Paradise Built in Hell.

The world feels awfully strange right now, but not because – or not just because – it is changing so fast and any one of us could fall ill at any time, or could already be carrying the virus and not know it. It feels strange because the past few weeks have exposed the fact that the biggest things can always change, at any minute. This simple truth, both destabilising and liberating, is easy to forget. We’re not watching a movie: we’re writing one, together, until the end.