Showing posts with label free. Show all posts
Showing posts with label free. Show all posts
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Monday 17 January 2022
Welcome to the era of the bossy state
The relationship between governments and businesses is always changing. After 1945, many countries sought to rebuild society using firms that were state-owned and -managed. By the 1980s, faced with sclerosis in the West, the state retreated to become an umpire overseeing the rules for private firms to compete in a global market—a lesson learned, in a fashion, by the communist bloc. Now a new and turbulent phase is under way, as citizens demand action on problems, from social justice to the climate. In response, governments are directing firms to make society safer and fairer, but without controlling their shares or their boards. Instead of being the owner or umpire, the state has become the backseat driver. This bossy business interventionism is well-intentioned. But, ultimately, it is a mistake.
Signs of this approach are everywhere, as our special report explains. President Joe Biden is pursuing an agenda of soft protectionism, industrial subsidies and righteous regulation, aimed at making the home of free markets safe for the middle classes. In China Xi Jinping’s “Common Prosperity” crackdown is designed to curb the excesses of its freewheeling boom, and create a business scene that is more self-sufficient, tame and obedient. The European Union is drifting away from free markets to embrace industrial policy and “strategic autonomy”. As the biggest economies pivot, so do medium-sized ones such as Britain, India and Mexico. Crucially, in most democracies, the lure of intervention is bipartisan. Few politicians fancy fighting an election on a platform of open borders and free markets.
That is because many citizens fear that markets and their umpires are not up to the job. The financial crisis and slow recovery amplified anger about inequality. Other concerns are more recent. The world’s ten biggest tech companies are over twice as big as they were five years ago and sometimes seem to behave as if they are above the law. The geopolitical backdrop is a far cry from the 1990s, when the expansion of trade and democracy promised to go hand in hand, and from the cold war when the West and the Soviet Union had few business links. Now the West and totalitarian China are rivals but economically intertwined. Gummed-up supply chains are causing inflation, reinforcing the perception that globalisation is overextended. And climate change is an ever more pressing threat.
Governments are redesigning global capitalism to deal with these fears. But few politicians or voters want to go back to full-scale nationalisation. Not even Mr Xi is keen to reconstruct an empire of iron and steel plants run by chain-smoking commissars, while Mr Biden, despite his nostalgia for the 1960s, need only walk through America’s clogged West Coast ports to recall that public ownership can be shambolic. At the same time the pandemic has seen governments experiment with new policies that were unimaginable in December 2019, from perhaps $5trn or more of handouts and guarantees for firms to indicative guidance on optimal spacing of customers in shopping aisles.
This opening of the interventionist mind is coalescing around policies that fall short of ownership. One set of measures claims to enhance security, broadly defined. The class of industries in which government direction is legitimate on security grounds has expanded beyond defence to include energy and technology. In these areas governments are acting as de facto central planners, with research and development (r&d) spending to foster indigenous innovation and subsidies to redirect capital spending. In semiconductors America has proposed a $52bn subsidy scheme, one reason why Intel’s investment is forecast to double compared with five years ago. China is seeking self-sufficiency in semiconductors and Europe in batteries.
The definition of what is seen as strategic may well expand further to include vaccines, medical ingredients and minerals, for example. In the name of security, most big countries have tightened rules that screen incoming foreign investment. America’s mesh of punitive sanctions and technology export controls encompasses thousands of foreign individuals and firms.
The other set of measures aims to enhance stakeholderism. Shareholders and consumers no longer have uncontested primacy in the hierarchy of groups that firms serve. Managers must weigh the welfare of other constituents more heavily, including staff, suppliers and even competitors. The most visible part of this is voluntary, in the form of “esg” investing codes that score firms for, say, protecting biodiversity, local people or their own workers. But these wider obligations may become harder for firms to avoid. In China Alibaba has pledged a $15bn “donation” to the Common Prosperity cause. In the West stakeholderism may be enforced through the bureaucracy. Central banks and public pension funds may shun the securities of firms judged to be anti-social. America’s antitrust agency, which once safeguarded consumers alone, is mulling other aims such as helping small firms.
The ambition to confront economic and social problems is admirable. And so far, outside China at least, bossier government has not hurt business confidence. America’s main stockmarket index is over 40% higher than it was before the pandemic, while capital spending by the world’s largest 500-odd listed firms is up by 11%. Yet, in the longer term, three dangers loom.
High stakes
The first is that the state and business, faced by conflicting aims, will fail to find the best trade-offs. A fossil-fuel firm obliged to preserve good labour relations and jobs may be reluctant to shrink, hurting the climate. An antitrust policy that helps hundreds of thousands of small suppliers will hurt tens of millions of consumers who will end up paying higher prices. Boycotting China for its human-rights abuses might deprive the West of cheap supplies of solar technologies. Businesses and regulators focused on a single sector are often ill-equipped to cope with these dilemmas, and lack the democratic legitimacy to do so.
Diminished efficiency and innovation is the second danger. Duplicating global supply chains is extraordinarily expensive: multinational firms have $41trn of cross-border investments. More pernicious in the long run is a weakening of competition. Firms that gorge on subsidies become flabby, whereas those that are protected from foreign competition are more likely to treat customers shabbily. If you want to rein in Facebook, the most credible challenger is TikTok, from China. An economy in which politicians and big business manage the flow of subsidies according to orthodox thinking is not one in which entrepreneurs flourish.
The last problem is cronyism, which ends up contaminating business and politics alike. Firms seek advantage by attempting to manipulate government: already in America the boundary is blurred, with more corporate meddling in the electoral process. Meanwhile politicians and officials end up favouring particular firms, having sunk money and their hopes into them. The urge to intervene to soften every shock is habit-forming. In the past six weeks Britain, Germany and India have spent $7bn propping up two energy firms and a telecoms operator whose problems have nothing to do with the pandemic.
This newspaper believes that the state should intervene to make markets work better, through, for example, carbon taxes to shift capital towards climate-friendly technologies; r&d to fund science that firms will not; and a benefits system that protects workers and the poor. But the new style of bossy government goes far beyond this. Its adherents hope for prosperity, fairness and security. They are more likely to end up with inefficiency, vested interests and insularity.
Monday 20 September 2021
Thursday 2 September 2021
Has Covid ended the neoliberal era?
The year 2020 exposed the risks and weaknesses of the market-driven global system like never before. It’s hard to avoid the sense that a turning point has been reached
by Adam Tooze in The Guardian
If one word could sum up the experience of 2020, it would be disbelief. Between Xi Jinping’s public acknowledgment of the coronavirus outbreak on 20 January 2020, and Joe Biden’s inauguration as the 46th president of the United States precisely a year later, the world was shaken by a disease that in the space of 12 months killed more than 2.2 million people and rendered tens of millions severely ill. Today the official death tolls stands at 4.51 million. The likely figure for excess deaths is more than twice that number. The virus disrupted the daily routine of virtually everyone on the planet, stopped much of public life, closed schools, separated families, interrupted travel and upended the world economy.
To contain the fallout, government support for households, businesses and markets took on dimensions not seen outside wartime. It was not just by far the sharpest economic recession experienced since the second world war, it was qualitatively unique. Never before had there been a collective decision, however haphazard and uneven, to shut large parts of the world’s economy down. It was, as the International Monetary Fund (IMF) put it, “a crisis like no other”.
Even before we knew what would hit us, there was every reason to think that 2020 might be tumultuous. The conflict between China and the US was boiling up. A “new cold war” was in the air. Global growth had slowed seriously in 2019. The IMF worried about the destabilising effect that geopolitical tension might have on a world economy that was already piled high with debt. Economists cooked up new statistical indicators to track the uncertainty that was dogging investment. The data strongly suggested that the source of the trouble was in the White House. The US’s 45th president, Donald Trump, had succeeded in turning himself into an unhealthy global obsession. He was up for reelection in November and seemed bent on discrediting the electoral process even if it yielded a win. Not for nothing, the slogan of the 2020 edition of the Munich Security Conference – the Davos for national security types – was “Westlessness”.
Apart from the worries about Washington, the clock on the Brexit negotiations was running out. Even more alarming for Europe as 2020 began was the prospect of a new refugee crisis. In the background lurked both the threat of a final grisly escalation in Syria’s civil war and the chronic problem of underdevelopment. The only way to remedy that was to energise investment and growth in the global south. The flow of capital, however, was unstable and unequal. At the end of 2019, half the lowest-income borrowers in sub-Saharan Africa were already approaching the point at which they could no longer service their debts.
The pervasive sense of risk and anxiety that hung around the world economy was a remarkable reversal. Not so long before, the west’s apparent triumph in the cold war, the rise of market finance, the miracles of information technology, and the widening orbit of economic growth appeared to cement the capitalist economy as the all-conquering driver of modern history. In the 1990s, the answer to most political questions had seemed simple: “It’s the economy, stupid.” As economic growth transformed the lives of billions, there was, Margaret Thatcher liked to say, “no alternative”. That is, there was no alternative to an order based on privatisation, light-touch regulation and the freedom of movement of capital and goods. As recently as 2005, Britain’s centrist prime minister Tony Blair could declare that to argue about globalisation made as much sense as arguing about whether autumn should follow summer.
By 2020, globalisation and the seasons were very much in question. The economy had morphed from being the answer to being the question. A series of deep crises – beginning in Asia in the late 90s and moving to the Atlantic financial system in 2008, the eurozone in 2010 and global commodity producers in 2014 – had shaken confidence in market economics. All those crises had been overcome, but by government spending and central bank interventions that drove a coach and horses through firmly held precepts about “small government” and “independent” central banks. The crises had been brought on by speculation, and the scale of the interventions necessary to stabilise them had been historic. Yet the wealth of the global elite continued to expand. Whereas profits were private, losses were socialised. Who could be surprised, many now asked, if surging inequality led to populist disruption? Meanwhile, with China’s spectacular ascent, it was no longer clear that the great gods of growth were on the side of the west.
And then, in January 2020, the news broke from Beijing. China was facing a full-blown epidemic of a novel coronavirus. This was the natural “blowback” that environmental campaigners had long warned us about, but whereas the climate crisis caused us to stretch our minds to a planetary scale and set a timetable in terms of decades, the virus was microscopic and all-pervasive, and was moving at a pace of days and weeks. It affected not glaciers and ocean tides, but our bodies. It was carried on our breath. It would put not just individual national economies but the world’s economy in question.
As it emerged from the shadows, Sars-CoV-2 had the look about it of a catastrophe foretold. It was precisely the kind of highly contagious, flu-like infection that virologists had predicted. It came from one of the places they expected it to come from – the region of dense interaction between wildlife, agriculture and urban populations sprawled across east Asia. It spread, predictably, through the channels of global transport and communication. It had, frankly, been a while coming.
There have been far more lethal pandemics. What was dramatically new about coronavirus in 2020 was the scale of the response. It was not just rich countries that spent enormous sums to support citizens and businesses – poor and middle-income countries were willing to pay a huge price, too. By early April, the vast majority of the world outside China, where it had already been contained, was involved in an unprecedented effort to stop the virus. “This is the real first world war,” said Lenín Moreno, president of Ecuador, one of the hardest-hit countries. “The other world wars were localised in [some] continents with very little participation from other continents … but this affects everyone. It is not localised. It is not a war from which you can escape.”
Lockdown is the phrase that has come into common use to describe our collective reaction. The very word is contentious. Lockdown suggests compulsion. Before 2020, it was a term associated with collective punishment in prisons. There were moments and places where that is a fitting description for the response to Covid. In Delhi, Durban and Paris, armed police patrolled the streets, took names and numbers, and punished those who violated curfews. In the Dominican Republic, an astonishing 85,000 people, almost 1% of the population, were arrested for violating the lockdown.
Even if no violence was involved, a government-mandated closure of all eateries and bars could feel repressive to their owners and clients. But lockdown seems a one-sided way of describing the economic reaction to the coronavirus. Mobility fell precipitately, well before government orders were issued. The flight to safety in financial markets began in late February. There was no jailer slamming the door and turning the key; rather, investors were running for cover. Consumers were staying at home. Businesses were closing or shifting to home working. By mid-March, shutting down became the norm. Those who were outside national territorial space, like hundreds of thousands of seafarers, found themselves banished to a floating limbo.
President Xi Jinping in January 2020. Photograph: Nareshkumar Shaganti/Alamy
The widespread adoption of the term “lockdown” is an index of how contentious the politics of the virus would turn out to be. Societies, communities and families quarrelled bitterly over face masks, social distancing and quarantine. The entire experience was an example on the grandest scale of what the German sociologist Ulrich Beck in the 80s dubbed “risk society”. As a result of the development of modern society, we found ourselves collectively haunted by an unseen threat, visible only to science, a risk that remained abstract and immaterial until you fell sick, and the unlucky ones found themselves slowly drowning in the fluid accumulating in their lungs.
One way to react to such a situation of risk is to retreat into denial. That may work. It would be naive to imagine otherwise. Many pervasive diseases and social ills, including many that cause loss of life on a large scale, are ignored and naturalised, treated as “facts of life”. With regard to the largest environmental risks, notably the climate crisis, one might say that our normal mode of operation is denial and willful ignorance on a grand scale.
Facing up to the pandemic was what the vast majority of people all over the world tried to do. But the problem, as Beck said, is that getting to grips with the really large-scale, all-pervasive risks that modern society generates is easier said than done. It requires agreement on what the risk is. It also requires critical engagement with our own behaviour, and with the social order to which it belongs. It requires a willingness to make political choices about resource distribution and priorities at every level. Such choices clash with the prevalent desire of the last 40 years to depoliticise, to use markets or the law to avoid such decisions. This is the basic thrust behind neoliberalism, or the market revolution – to depoliticise distributional issues, including the very unequal consequences of societal risks, whether those be due to structural change in the global division of labour, environmental damage, or disease.
Coronavirus glaringly exposed our institutional lack of preparation, what Beck called our “organised irresponsibility”. It revealed the weakness of basic apparatuses of state administration, like up-to-date government databases. To face the crisis, we needed a society that gave far greater priority to care. Loud calls issued from unlikely places for a “new social contract” that would properly value essential workers and take account of the risks generated by the globalised lifestyles enjoyed by the most fortunate.
It fell to governments mainly of the centre and the right to meet the crisis. Jair Bolsonaro in Brazil and Donald Trump in the US experimented with denial. In Mexico, the notionally leftwing government of Andrés Manuel López Obrador also pursued a maverick path, refusing to take drastic action. Nationalist strongmen such as Rodrigo Duterte in the Philippines, Narendra Modi in India, Vladimir Putin in Russia, and Recep Tayyip Erdoğan in Turkey did not deny the virus, but relied on their patriotic appeal and bullying tactics to see them through.
It was the managerial centrist types who were under most pressure. Figures like Nancy Pelosi and Chuck Schumer in the US, or Sebastián Piñera in Chile, Cyril Ramaphosa in South Africa, Emmanuel Macron, Angela Merkel, Ursula von der Leyen and their ilk in Europe. They accepted the science. Denial was not an option. They were desperate to demonstrate that they were better than the “populists”.
To meet the crisis, very middle-of-the-road politicians ended up doing very radical things. Most of it was improvisation and compromise, but insofar as they managed to put a programmatic gloss on their responses – whether in the form of the EU’s Next Generation programme or Biden’s Build Back Better programme in 2020 – it came from the repertoire of green modernisation, sustainable development and the Green New Deal.
The result was a bitter historic irony. Even as the advocates of the Green New Deal, such as Bernie Sanders and Jeremy Corbyn, had gone down to political defeat, 2020 resoundingly confirmed the realism of their diagnosis. It was the Green New Deal that had squarely addressed the urgency of environmental challenges and linked it to questions of extreme social inequality. It was the Green New Deal that had insisted that in meeting these challenges, democracies could not allow themselves to be hamstrung by conservative economic doctrines inherited from the bygone battles of the 70s and discredited by the financial crisis of 2008. It was the Green New Deal that had mobilised engaged young citizens on whom democracy, if it was to have a hopeful future, clearly depended.
The Green New Deal had also, of course, demanded that rather than endlessly patching a system that produced and reproduced inequality, instability and crisis, it should be radically reformed. That was challenging for centrists. But one of the attractions of a crisis was that questions of the long-term future could be set aside. The year 2020 was all about survival.
The immediate economic policy response to the coronavirus shock drew directly on the lessons of 2008. Government spending and tax cuts to support the economy were even more prompt. Central bank interventions were even more spectacular. These fiscal and monetary policies together confirmed the essential insights of economic doctrines once advocated by radical Keynesians and made newly fashionable by doctrines such as Modern Monetary Theory (MMT). State finances are not limited like those of a household. If a monetary sovereign treats the question of how to organise financing as anything more than a technical matter, that is itself a political choice. As John Maynard Keynes once reminded his readers in the midst of the second world war: “Anything we can actually do we can afford.” The real challenge, the truly political question, was to agree what we wanted to do and to figure out how to do it.
Experiments in economic policy in 2020 were not confined to the rich countries. Enabled by the abundance of dollars unleashed by the Fed, but drawing on decades of experience with fluctuating global capital flows, many emerging market governments, in Indonesia and Brazil for instance, displayed remarkable initiative in response to the crisis. They put to work a toolkit of policies that enabled them to hedge the risks of global financial integration. Ironically, unlike in 2008, China’s greater success in virus control left its economic policy looking relatively conservative. Countries such as Mexico and India, where the pandemic spread rapidly but governments failed to respond with large-scale economic policy, looked increasingly out of step with the times. The year would witness the head-turning spectacle of the IMF scolding a notionally leftwing Mexican government for failing to run a large enough budget deficit.
It was hard to avoid the sense that a turning point had been reached. Was this, finally, the death of the orthodoxy that had prevailed in economic policy since the 80s? Was this the death knell of neoliberalism? As a coherent ideology of government, perhaps. The idea that the natural envelope of economic activity – whether the disease environment or climate conditions – could be ignored or left to markets to regulate was clearly out of touch with reality. So, too, was the idea that markets could self-regulate in relation to all conceivable social and economic shocks. Even more urgently than in 2008, survival dictated interventions on a scale last seen in the second world war.
All this left doctrinaire economists gasping for breath. That in itself is not surprising. The orthodox understanding of economic policy was always unrealistic. In reality, neoliberalism had always been radically pragmatic. Its real history was that of a series of state interventions in the interests of capital accumulation, including the forceful deployment of state violence to bulldoze opposition. Whatever the doctrinal twists and turns, the social realities with which the market revolution had been entwined since the 1970s all endured until 2020. The historic force that finally burst the dykes of the neoliberal order was not radical populism or the revival of class struggle – it was a plague unleashed by heedless global growth and the massive flywheel of financial accumulation.
In 2008, the crisis had been brought on by the overexpansion of the banks and the excesses of mortgage securitisation. In 2020, the coronavirus hit the financial system from the outside, but the fragility that this shock exposed was internally generated. This time it was not banks that were the weak link, but the asset markets themselves. The shock went to the very heart of the system, the market for American Treasuries, the supposedly safe assets on which the entire pyramid of credit is based. If that had melted down, it would have taken the rest of the world with it.
The scale of stabilising interventions in 2020 was impressive. It confirmed the basic insistence of the Green New Deal that if the will was there, democratic states did have the tools they needed to exercise control over the economy. This was, however, a double-edged realisation, because if these interventions were an assertion of sovereign power, they were driven by crisis. As in 2008, they served the interests of those who had the most to lose. This time, not just individual banks but entire markets were declared too big to fail. To break that cycle of crisis and stabilising, and to make economic policy into a true exercise in democratic sovereignty, would require root-and-branch reform. That would require a real power shift, and the odds were stacked against that.
The massive economic policy interventions of 2020, like those of 2008, were Janus-faced. On the one hand, their scale exploded the bounds of neoliberal restraint and their economic logic confirmed the basic diagnosis of interventionist macroeconomics back to Keynes. When an economy was spiralling into recession, one did not have to accept the disaster as a natural cure, an invigorating purge. Instead, prompt and decisive government economic policy could prevent the collapse and forestall unnecessary unemployment, waste and social suffering.
These interventions could not but appear as harbingers of a new regime beyond neoliberalism. On the other hand, they were made from the top down. They were politically thinkable only because there was no challenge from the left and their urgency was impelled by the need to stabilise the financial system. And they delivered. Over the course of 2020, household net worth in the US increased by more than $15tn. Yet that overwhelmingly benefited the top 1%, who owned almost 40% of all stocks. The top 10%, between them, owned 84%. If this was indeed a “new social contract”, it was an alarmingly one-sided affair.
Nevertheless, 2020 was a moment not just of plunder, but of reformist experimentation. In response to the threat of social crisis, new modes of welfare provision were tried out in Europe, the US and many emerging market economies. And in search of a positive agenda, centrists embraced environmental policy and the issue of the climate crisis as never before. Contrary to the fear that Covid-19 would distract from other priorities, the political economy of the Green New Deal went mainstream. “Green Growth”, “Build Back Better”, “Green Deal” – the slogans varied, but they all expressed green modernisation as the common centrist response to the crisis.
Seeing 2020 as a comprehensive crisis of the neoliberal era – with regard to its environmental, social, economic and political underpinnings – helps us find our historical bearings. Seen in those terms, the coronavirus crisis marks the end of an arc whose origin is to be found in the 70s. It might also be seen as the first comprehensive crisis of the age of the Anthropocene – an era defined by the blowback from our unbalanced relationship to nature.
The year 2020 exposed how dependent economic activity was on the stability of the natural environment. A tiny virus mutation in a microbe could threaten the entire world’s economy. It also exposed how, in extremis, the entire monetary and financial system could be directed toward supporting markets and livelihoods. This forced the question of who was supported and how – which workers, which businesses would receive what benefits or which tax break? These developments tore down partitions that had been fundamental to the political economy of the last half-century – lines that divided the economy from nature, economics from social policy and from politics per se. On top of that, there was another major shift, which in 2020 finally dissolved the underlying assumptions of the era of neoliberalism: the rise of China.
When in 2005 Tony Blair scoffed at critics of globalisation, it was their fears that he mocked. He contrasted their parochial anxieties to the modernising energy of Asian nations, for which globalisation offered a bright horizon. The global security threats that Blair recognised, such as Islamic terrorism, were nasty. But they had no hope of actually changing the status quo. Therein lay their suicidal, otherworldly irrationality. In the decade after 2008, it was that confidence in the robustness of the status quo that was lost.
Russia was the first to expose the fact that global economic growth might shift the balance of power. Fuelled by exports of oil and gas, Moscow re-emerged as a challenge to US hegemony. Putin’s threat, however, was limited. China’s was not. In December 2017, the US issued its new National Security Strategy, which for the first time designated the Indo-Pacific as the decisive arena of great power competition. In March 2019, the EU issued a strategy document to the same effect. The UK, meanwhile, performed an extraordinary about-face, from celebrating a new “golden era” of Sino-UK relations in 2015 to deploying an aircraft carrier to the South China Sea.
The military logic was familiar. All great powers are rivals, or at least so goes the logic of “realist” thinking. In the case of China, there was the added factor of ideology. In 2021, the CCP did something its Soviet counterpart never got to do: it celebrated its centenary. While since the 80s it had permitted market-driven growth and private capital accumulation, Beijing made no secret of its adherence to an ideological heritage that ran by way of Marx and Engels to Lenin, Stalin and Mao. Xi Jinping could hardly have been more emphatic about the need to cleave to this tradition, and no clearer in his condemnation of Mikhail Gorbachev for losing hold of the Soviet Union’s ideological compass. So the “new” cold war was really the “old” cold war revived, the cold war in Asia, the one that the west had in fact never won.
There were, however, two major differences dividing the past from the present. The first was the economy. China posed a threat as a result of the greatest economic boom in history. That had hurt some workers in the west in manufacturing, but businesses and consumers across the western world and beyond had profited immensely from China’s development, and stood to profit even more in future. That created a quandary. A revived cold war with China made sense from every vantage point except “the economy, stupid”.
The second fundamental novelty was the global environmental problem, and the role of economic growth in accelerating it. When global climate politics first emerged in its modern form in the 90s, the US was the largest and most recalcitrant polluter. China was poor and its emissions barely figured in the global balance. By 2020, China emitted more carbon dioxide than the US and Europe put together, and the gap was poised to widen at least for another decade. You could no more envision a solution to the climate problem without China than you could imagine a response to the risk of emerging infectious diseases. China was the most powerful incubator of both.
In 2020, the green modernisers of the EU were still trying to resolve this double dilemma in their strategic documents by defining China all at the same time as a systemic rival, a strategic competitor and a partner in dealing with the climate crisis. The Trump administration made life easier for itself by denying the climate problem. But Washington, too, was impaled on the horns of the economic dilemma – between ideological denunciation of Beijing, strategic calculation, long-term corporate investments in China and the president’s desire to strike a quick deal. This was an unstable combination, and in 2020 it tipped. China was redefined as a threat to the US, strategically and economically. In reaction, the intelligence, security and judicial branches of the American government declared economic war on China. By closing markets and blocking the export of microchips and the equipment to make microchips, they set out to sabotage the development of China’s hi-tech sector, the heart of any modern economy.
It was to a degree accidental that this escalation took place when it did. China’s rise was a long-term world historic shift. But Beijing’s success in handling the coronavirus and the assertiveness that it unleashed were a red flag to the Trump administration. Meanwhile, it was growing increasingly clear that the US’s continued global strength in finance, tech and military power rested on domestic feet of clay. As Covid-19 painfully exposed, the US health system was ramshackle and its domestic social safety net left tens of millions at risk of poverty. If Xi’s “China dream” came through 2020 intact, the same cannot be said for its American counterpart.
The general crisis of neoliberalism in 2020 thus had a specific and traumatic significance for the US – and for one part of the American political spectrum in particular. The Republican party and its nationalist and conservative constituencies suffered in 2020 what can best be described as an existential crisis, with profoundly damaging consequences for the American government, for the American constitution and for America’s relations with the wider world. This culminated in the extraordinary period between 3 November 2020 and 6 January 2021, in which Trump refused to concede electoral defeat, a large part of the Republican party actively supported an effort to overturn the election, the social crisis and the pandemic were left unattended to, and finally, on 6 January, the president and other leading figures in his party encouraged a mob invasion of the Capitol.
For good reason, this raises deep concerns about the future of American democracy. And there are elements on the far right of American politics that can fairly be described as fascistoid. But two basic elements were missing from the original fascist equation in the US in 2020. One is total war. Americans remember the civil war and imagine future civil wars to come. They have recently engaged in expeditionary wars that have blown back on American society in militarised policing and paramilitary fantasies. But total war reconfigures society in quite a different way. It constitutes a mass body, not the individualised commandos of 2020.
The other missing ingredient in the classic fascist equation is social antagonism – a threat from the left, whether imagined or real, to the social and economic status quo. As the constitutional storm clouds gathered in 2020, American business aligned massively and squarely against Trump. Nor were the major voices of corporate America afraid to spell out the business case for doing so, including shareholder value, the problems of running companies with politically divided workforces, the economic importance of the rule of law and, astonishingly, the losses in sales to be expected in the event of a civil war.
This alignment of money with democracy in the US in 2020 should be reassuring, but only up to a point. Consider for a second an alternative scenario. What if the virus had arrived in the US a few weeks sooner, the spreading pandemic had rallied mass support for Bernie Sanders and his call for universal health care, and the Democratic primaries had swept an avowed socialist to the head of the ticket rather than Joe Biden? It is not difficult to imagine a scenario in which the full weight of American business was thrown the other way, for all the same reasons, backing Trump in order to ensure that Sanders was not elected. And what if Sanders had in fact won a majority? Then we would have had a true test of the American constitution and the loyalty of the most powerful social interests to it. The fact that we have to contemplate such scenarios is indicative of the extremity of the polycrisis of 2020.
The election of Joe Biden and the fact that his inauguration took place at the appointed time on 21 January 2021 restored a sense of calm. But when Biden boldly declares that “America is back”, it has become increasingly clear that the next question we need to ask is: which America? And back to what? The comprehensive crisis of neoliberalism may have unleashed creative intellectual energy even at the once-dead centre of politics. But an intellectual crisis does not a new era make. If it is energising to discover that we can afford anything we can actually do, it also puts us on the spot. What can and should we actually do? Who, in fact, is the we?
As Britain, the US and Brazil demonstrate, democratic politics is taking on strange and unfamiliar new forms. Social inequalities are more, not less extreme. At least in the rich countries, there is no collective countervailing force. Capitalist accumulation continues in channels that continuously multiply risks. The principal use to which our newfound financial freedom has been put are more and more grotesque efforts at financial stabilisation. The antagonism between the west and China divides huge chunks of the world, as not since the cold war. And now, in the form of Covid, the monster has arrived. The Anthropocene has shown its fangs – on an as yet modest scale. Covid is far from being the worst of what we should expect – 2020 was not the full alert. If we are dusting ourselves off and enjoying the recovery, we should reflect. Around the world the dead are unnumbered, but our best guess puts the figure at 10 million. Thousands are dying every day. And 2020 was a wake-up call.
by Adam Tooze in The Guardian
If one word could sum up the experience of 2020, it would be disbelief. Between Xi Jinping’s public acknowledgment of the coronavirus outbreak on 20 January 2020, and Joe Biden’s inauguration as the 46th president of the United States precisely a year later, the world was shaken by a disease that in the space of 12 months killed more than 2.2 million people and rendered tens of millions severely ill. Today the official death tolls stands at 4.51 million. The likely figure for excess deaths is more than twice that number. The virus disrupted the daily routine of virtually everyone on the planet, stopped much of public life, closed schools, separated families, interrupted travel and upended the world economy.
To contain the fallout, government support for households, businesses and markets took on dimensions not seen outside wartime. It was not just by far the sharpest economic recession experienced since the second world war, it was qualitatively unique. Never before had there been a collective decision, however haphazard and uneven, to shut large parts of the world’s economy down. It was, as the International Monetary Fund (IMF) put it, “a crisis like no other”.
Even before we knew what would hit us, there was every reason to think that 2020 might be tumultuous. The conflict between China and the US was boiling up. A “new cold war” was in the air. Global growth had slowed seriously in 2019. The IMF worried about the destabilising effect that geopolitical tension might have on a world economy that was already piled high with debt. Economists cooked up new statistical indicators to track the uncertainty that was dogging investment. The data strongly suggested that the source of the trouble was in the White House. The US’s 45th president, Donald Trump, had succeeded in turning himself into an unhealthy global obsession. He was up for reelection in November and seemed bent on discrediting the electoral process even if it yielded a win. Not for nothing, the slogan of the 2020 edition of the Munich Security Conference – the Davos for national security types – was “Westlessness”.
Apart from the worries about Washington, the clock on the Brexit negotiations was running out. Even more alarming for Europe as 2020 began was the prospect of a new refugee crisis. In the background lurked both the threat of a final grisly escalation in Syria’s civil war and the chronic problem of underdevelopment. The only way to remedy that was to energise investment and growth in the global south. The flow of capital, however, was unstable and unequal. At the end of 2019, half the lowest-income borrowers in sub-Saharan Africa were already approaching the point at which they could no longer service their debts.
The pervasive sense of risk and anxiety that hung around the world economy was a remarkable reversal. Not so long before, the west’s apparent triumph in the cold war, the rise of market finance, the miracles of information technology, and the widening orbit of economic growth appeared to cement the capitalist economy as the all-conquering driver of modern history. In the 1990s, the answer to most political questions had seemed simple: “It’s the economy, stupid.” As economic growth transformed the lives of billions, there was, Margaret Thatcher liked to say, “no alternative”. That is, there was no alternative to an order based on privatisation, light-touch regulation and the freedom of movement of capital and goods. As recently as 2005, Britain’s centrist prime minister Tony Blair could declare that to argue about globalisation made as much sense as arguing about whether autumn should follow summer.
By 2020, globalisation and the seasons were very much in question. The economy had morphed from being the answer to being the question. A series of deep crises – beginning in Asia in the late 90s and moving to the Atlantic financial system in 2008, the eurozone in 2010 and global commodity producers in 2014 – had shaken confidence in market economics. All those crises had been overcome, but by government spending and central bank interventions that drove a coach and horses through firmly held precepts about “small government” and “independent” central banks. The crises had been brought on by speculation, and the scale of the interventions necessary to stabilise them had been historic. Yet the wealth of the global elite continued to expand. Whereas profits were private, losses were socialised. Who could be surprised, many now asked, if surging inequality led to populist disruption? Meanwhile, with China’s spectacular ascent, it was no longer clear that the great gods of growth were on the side of the west.
And then, in January 2020, the news broke from Beijing. China was facing a full-blown epidemic of a novel coronavirus. This was the natural “blowback” that environmental campaigners had long warned us about, but whereas the climate crisis caused us to stretch our minds to a planetary scale and set a timetable in terms of decades, the virus was microscopic and all-pervasive, and was moving at a pace of days and weeks. It affected not glaciers and ocean tides, but our bodies. It was carried on our breath. It would put not just individual national economies but the world’s economy in question.
As it emerged from the shadows, Sars-CoV-2 had the look about it of a catastrophe foretold. It was precisely the kind of highly contagious, flu-like infection that virologists had predicted. It came from one of the places they expected it to come from – the region of dense interaction between wildlife, agriculture and urban populations sprawled across east Asia. It spread, predictably, through the channels of global transport and communication. It had, frankly, been a while coming.
There have been far more lethal pandemics. What was dramatically new about coronavirus in 2020 was the scale of the response. It was not just rich countries that spent enormous sums to support citizens and businesses – poor and middle-income countries were willing to pay a huge price, too. By early April, the vast majority of the world outside China, where it had already been contained, was involved in an unprecedented effort to stop the virus. “This is the real first world war,” said Lenín Moreno, president of Ecuador, one of the hardest-hit countries. “The other world wars were localised in [some] continents with very little participation from other continents … but this affects everyone. It is not localised. It is not a war from which you can escape.”
Lockdown is the phrase that has come into common use to describe our collective reaction. The very word is contentious. Lockdown suggests compulsion. Before 2020, it was a term associated with collective punishment in prisons. There were moments and places where that is a fitting description for the response to Covid. In Delhi, Durban and Paris, armed police patrolled the streets, took names and numbers, and punished those who violated curfews. In the Dominican Republic, an astonishing 85,000 people, almost 1% of the population, were arrested for violating the lockdown.
Even if no violence was involved, a government-mandated closure of all eateries and bars could feel repressive to their owners and clients. But lockdown seems a one-sided way of describing the economic reaction to the coronavirus. Mobility fell precipitately, well before government orders were issued. The flight to safety in financial markets began in late February. There was no jailer slamming the door and turning the key; rather, investors were running for cover. Consumers were staying at home. Businesses were closing or shifting to home working. By mid-March, shutting down became the norm. Those who were outside national territorial space, like hundreds of thousands of seafarers, found themselves banished to a floating limbo.
President Xi Jinping in January 2020. Photograph: Nareshkumar Shaganti/AlamyThe widespread adoption of the term “lockdown” is an index of how contentious the politics of the virus would turn out to be. Societies, communities and families quarrelled bitterly over face masks, social distancing and quarantine. The entire experience was an example on the grandest scale of what the German sociologist Ulrich Beck in the 80s dubbed “risk society”. As a result of the development of modern society, we found ourselves collectively haunted by an unseen threat, visible only to science, a risk that remained abstract and immaterial until you fell sick, and the unlucky ones found themselves slowly drowning in the fluid accumulating in their lungs.
One way to react to such a situation of risk is to retreat into denial. That may work. It would be naive to imagine otherwise. Many pervasive diseases and social ills, including many that cause loss of life on a large scale, are ignored and naturalised, treated as “facts of life”. With regard to the largest environmental risks, notably the climate crisis, one might say that our normal mode of operation is denial and willful ignorance on a grand scale.
Facing up to the pandemic was what the vast majority of people all over the world tried to do. But the problem, as Beck said, is that getting to grips with the really large-scale, all-pervasive risks that modern society generates is easier said than done. It requires agreement on what the risk is. It also requires critical engagement with our own behaviour, and with the social order to which it belongs. It requires a willingness to make political choices about resource distribution and priorities at every level. Such choices clash with the prevalent desire of the last 40 years to depoliticise, to use markets or the law to avoid such decisions. This is the basic thrust behind neoliberalism, or the market revolution – to depoliticise distributional issues, including the very unequal consequences of societal risks, whether those be due to structural change in the global division of labour, environmental damage, or disease.
Coronavirus glaringly exposed our institutional lack of preparation, what Beck called our “organised irresponsibility”. It revealed the weakness of basic apparatuses of state administration, like up-to-date government databases. To face the crisis, we needed a society that gave far greater priority to care. Loud calls issued from unlikely places for a “new social contract” that would properly value essential workers and take account of the risks generated by the globalised lifestyles enjoyed by the most fortunate.
It fell to governments mainly of the centre and the right to meet the crisis. Jair Bolsonaro in Brazil and Donald Trump in the US experimented with denial. In Mexico, the notionally leftwing government of Andrés Manuel López Obrador also pursued a maverick path, refusing to take drastic action. Nationalist strongmen such as Rodrigo Duterte in the Philippines, Narendra Modi in India, Vladimir Putin in Russia, and Recep Tayyip Erdoğan in Turkey did not deny the virus, but relied on their patriotic appeal and bullying tactics to see them through.
It was the managerial centrist types who were under most pressure. Figures like Nancy Pelosi and Chuck Schumer in the US, or Sebastián Piñera in Chile, Cyril Ramaphosa in South Africa, Emmanuel Macron, Angela Merkel, Ursula von der Leyen and their ilk in Europe. They accepted the science. Denial was not an option. They were desperate to demonstrate that they were better than the “populists”.
To meet the crisis, very middle-of-the-road politicians ended up doing very radical things. Most of it was improvisation and compromise, but insofar as they managed to put a programmatic gloss on their responses – whether in the form of the EU’s Next Generation programme or Biden’s Build Back Better programme in 2020 – it came from the repertoire of green modernisation, sustainable development and the Green New Deal.
The result was a bitter historic irony. Even as the advocates of the Green New Deal, such as Bernie Sanders and Jeremy Corbyn, had gone down to political defeat, 2020 resoundingly confirmed the realism of their diagnosis. It was the Green New Deal that had squarely addressed the urgency of environmental challenges and linked it to questions of extreme social inequality. It was the Green New Deal that had insisted that in meeting these challenges, democracies could not allow themselves to be hamstrung by conservative economic doctrines inherited from the bygone battles of the 70s and discredited by the financial crisis of 2008. It was the Green New Deal that had mobilised engaged young citizens on whom democracy, if it was to have a hopeful future, clearly depended.
The Green New Deal had also, of course, demanded that rather than endlessly patching a system that produced and reproduced inequality, instability and crisis, it should be radically reformed. That was challenging for centrists. But one of the attractions of a crisis was that questions of the long-term future could be set aside. The year 2020 was all about survival.
The immediate economic policy response to the coronavirus shock drew directly on the lessons of 2008. Government spending and tax cuts to support the economy were even more prompt. Central bank interventions were even more spectacular. These fiscal and monetary policies together confirmed the essential insights of economic doctrines once advocated by radical Keynesians and made newly fashionable by doctrines such as Modern Monetary Theory (MMT). State finances are not limited like those of a household. If a monetary sovereign treats the question of how to organise financing as anything more than a technical matter, that is itself a political choice. As John Maynard Keynes once reminded his readers in the midst of the second world war: “Anything we can actually do we can afford.” The real challenge, the truly political question, was to agree what we wanted to do and to figure out how to do it.
Experiments in economic policy in 2020 were not confined to the rich countries. Enabled by the abundance of dollars unleashed by the Fed, but drawing on decades of experience with fluctuating global capital flows, many emerging market governments, in Indonesia and Brazil for instance, displayed remarkable initiative in response to the crisis. They put to work a toolkit of policies that enabled them to hedge the risks of global financial integration. Ironically, unlike in 2008, China’s greater success in virus control left its economic policy looking relatively conservative. Countries such as Mexico and India, where the pandemic spread rapidly but governments failed to respond with large-scale economic policy, looked increasingly out of step with the times. The year would witness the head-turning spectacle of the IMF scolding a notionally leftwing Mexican government for failing to run a large enough budget deficit.
It was hard to avoid the sense that a turning point had been reached. Was this, finally, the death of the orthodoxy that had prevailed in economic policy since the 80s? Was this the death knell of neoliberalism? As a coherent ideology of government, perhaps. The idea that the natural envelope of economic activity – whether the disease environment or climate conditions – could be ignored or left to markets to regulate was clearly out of touch with reality. So, too, was the idea that markets could self-regulate in relation to all conceivable social and economic shocks. Even more urgently than in 2008, survival dictated interventions on a scale last seen in the second world war.
All this left doctrinaire economists gasping for breath. That in itself is not surprising. The orthodox understanding of economic policy was always unrealistic. In reality, neoliberalism had always been radically pragmatic. Its real history was that of a series of state interventions in the interests of capital accumulation, including the forceful deployment of state violence to bulldoze opposition. Whatever the doctrinal twists and turns, the social realities with which the market revolution had been entwined since the 1970s all endured until 2020. The historic force that finally burst the dykes of the neoliberal order was not radical populism or the revival of class struggle – it was a plague unleashed by heedless global growth and the massive flywheel of financial accumulation.
In 2008, the crisis had been brought on by the overexpansion of the banks and the excesses of mortgage securitisation. In 2020, the coronavirus hit the financial system from the outside, but the fragility that this shock exposed was internally generated. This time it was not banks that were the weak link, but the asset markets themselves. The shock went to the very heart of the system, the market for American Treasuries, the supposedly safe assets on which the entire pyramid of credit is based. If that had melted down, it would have taken the rest of the world with it.
The scale of stabilising interventions in 2020 was impressive. It confirmed the basic insistence of the Green New Deal that if the will was there, democratic states did have the tools they needed to exercise control over the economy. This was, however, a double-edged realisation, because if these interventions were an assertion of sovereign power, they were driven by crisis. As in 2008, they served the interests of those who had the most to lose. This time, not just individual banks but entire markets were declared too big to fail. To break that cycle of crisis and stabilising, and to make economic policy into a true exercise in democratic sovereignty, would require root-and-branch reform. That would require a real power shift, and the odds were stacked against that.
The massive economic policy interventions of 2020, like those of 2008, were Janus-faced. On the one hand, their scale exploded the bounds of neoliberal restraint and their economic logic confirmed the basic diagnosis of interventionist macroeconomics back to Keynes. When an economy was spiralling into recession, one did not have to accept the disaster as a natural cure, an invigorating purge. Instead, prompt and decisive government economic policy could prevent the collapse and forestall unnecessary unemployment, waste and social suffering.
These interventions could not but appear as harbingers of a new regime beyond neoliberalism. On the other hand, they were made from the top down. They were politically thinkable only because there was no challenge from the left and their urgency was impelled by the need to stabilise the financial system. And they delivered. Over the course of 2020, household net worth in the US increased by more than $15tn. Yet that overwhelmingly benefited the top 1%, who owned almost 40% of all stocks. The top 10%, between them, owned 84%. If this was indeed a “new social contract”, it was an alarmingly one-sided affair.
Nevertheless, 2020 was a moment not just of plunder, but of reformist experimentation. In response to the threat of social crisis, new modes of welfare provision were tried out in Europe, the US and many emerging market economies. And in search of a positive agenda, centrists embraced environmental policy and the issue of the climate crisis as never before. Contrary to the fear that Covid-19 would distract from other priorities, the political economy of the Green New Deal went mainstream. “Green Growth”, “Build Back Better”, “Green Deal” – the slogans varied, but they all expressed green modernisation as the common centrist response to the crisis.
Seeing 2020 as a comprehensive crisis of the neoliberal era – with regard to its environmental, social, economic and political underpinnings – helps us find our historical bearings. Seen in those terms, the coronavirus crisis marks the end of an arc whose origin is to be found in the 70s. It might also be seen as the first comprehensive crisis of the age of the Anthropocene – an era defined by the blowback from our unbalanced relationship to nature.
The year 2020 exposed how dependent economic activity was on the stability of the natural environment. A tiny virus mutation in a microbe could threaten the entire world’s economy. It also exposed how, in extremis, the entire monetary and financial system could be directed toward supporting markets and livelihoods. This forced the question of who was supported and how – which workers, which businesses would receive what benefits or which tax break? These developments tore down partitions that had been fundamental to the political economy of the last half-century – lines that divided the economy from nature, economics from social policy and from politics per se. On top of that, there was another major shift, which in 2020 finally dissolved the underlying assumptions of the era of neoliberalism: the rise of China.
When in 2005 Tony Blair scoffed at critics of globalisation, it was their fears that he mocked. He contrasted their parochial anxieties to the modernising energy of Asian nations, for which globalisation offered a bright horizon. The global security threats that Blair recognised, such as Islamic terrorism, were nasty. But they had no hope of actually changing the status quo. Therein lay their suicidal, otherworldly irrationality. In the decade after 2008, it was that confidence in the robustness of the status quo that was lost.
Russia was the first to expose the fact that global economic growth might shift the balance of power. Fuelled by exports of oil and gas, Moscow re-emerged as a challenge to US hegemony. Putin’s threat, however, was limited. China’s was not. In December 2017, the US issued its new National Security Strategy, which for the first time designated the Indo-Pacific as the decisive arena of great power competition. In March 2019, the EU issued a strategy document to the same effect. The UK, meanwhile, performed an extraordinary about-face, from celebrating a new “golden era” of Sino-UK relations in 2015 to deploying an aircraft carrier to the South China Sea.
The military logic was familiar. All great powers are rivals, or at least so goes the logic of “realist” thinking. In the case of China, there was the added factor of ideology. In 2021, the CCP did something its Soviet counterpart never got to do: it celebrated its centenary. While since the 80s it had permitted market-driven growth and private capital accumulation, Beijing made no secret of its adherence to an ideological heritage that ran by way of Marx and Engels to Lenin, Stalin and Mao. Xi Jinping could hardly have been more emphatic about the need to cleave to this tradition, and no clearer in his condemnation of Mikhail Gorbachev for losing hold of the Soviet Union’s ideological compass. So the “new” cold war was really the “old” cold war revived, the cold war in Asia, the one that the west had in fact never won.
There were, however, two major differences dividing the past from the present. The first was the economy. China posed a threat as a result of the greatest economic boom in history. That had hurt some workers in the west in manufacturing, but businesses and consumers across the western world and beyond had profited immensely from China’s development, and stood to profit even more in future. That created a quandary. A revived cold war with China made sense from every vantage point except “the economy, stupid”.
The second fundamental novelty was the global environmental problem, and the role of economic growth in accelerating it. When global climate politics first emerged in its modern form in the 90s, the US was the largest and most recalcitrant polluter. China was poor and its emissions barely figured in the global balance. By 2020, China emitted more carbon dioxide than the US and Europe put together, and the gap was poised to widen at least for another decade. You could no more envision a solution to the climate problem without China than you could imagine a response to the risk of emerging infectious diseases. China was the most powerful incubator of both.
In 2020, the green modernisers of the EU were still trying to resolve this double dilemma in their strategic documents by defining China all at the same time as a systemic rival, a strategic competitor and a partner in dealing with the climate crisis. The Trump administration made life easier for itself by denying the climate problem. But Washington, too, was impaled on the horns of the economic dilemma – between ideological denunciation of Beijing, strategic calculation, long-term corporate investments in China and the president’s desire to strike a quick deal. This was an unstable combination, and in 2020 it tipped. China was redefined as a threat to the US, strategically and economically. In reaction, the intelligence, security and judicial branches of the American government declared economic war on China. By closing markets and blocking the export of microchips and the equipment to make microchips, they set out to sabotage the development of China’s hi-tech sector, the heart of any modern economy.
It was to a degree accidental that this escalation took place when it did. China’s rise was a long-term world historic shift. But Beijing’s success in handling the coronavirus and the assertiveness that it unleashed were a red flag to the Trump administration. Meanwhile, it was growing increasingly clear that the US’s continued global strength in finance, tech and military power rested on domestic feet of clay. As Covid-19 painfully exposed, the US health system was ramshackle and its domestic social safety net left tens of millions at risk of poverty. If Xi’s “China dream” came through 2020 intact, the same cannot be said for its American counterpart.
The general crisis of neoliberalism in 2020 thus had a specific and traumatic significance for the US – and for one part of the American political spectrum in particular. The Republican party and its nationalist and conservative constituencies suffered in 2020 what can best be described as an existential crisis, with profoundly damaging consequences for the American government, for the American constitution and for America’s relations with the wider world. This culminated in the extraordinary period between 3 November 2020 and 6 January 2021, in which Trump refused to concede electoral defeat, a large part of the Republican party actively supported an effort to overturn the election, the social crisis and the pandemic were left unattended to, and finally, on 6 January, the president and other leading figures in his party encouraged a mob invasion of the Capitol.
For good reason, this raises deep concerns about the future of American democracy. And there are elements on the far right of American politics that can fairly be described as fascistoid. But two basic elements were missing from the original fascist equation in the US in 2020. One is total war. Americans remember the civil war and imagine future civil wars to come. They have recently engaged in expeditionary wars that have blown back on American society in militarised policing and paramilitary fantasies. But total war reconfigures society in quite a different way. It constitutes a mass body, not the individualised commandos of 2020.
The other missing ingredient in the classic fascist equation is social antagonism – a threat from the left, whether imagined or real, to the social and economic status quo. As the constitutional storm clouds gathered in 2020, American business aligned massively and squarely against Trump. Nor were the major voices of corporate America afraid to spell out the business case for doing so, including shareholder value, the problems of running companies with politically divided workforces, the economic importance of the rule of law and, astonishingly, the losses in sales to be expected in the event of a civil war.
This alignment of money with democracy in the US in 2020 should be reassuring, but only up to a point. Consider for a second an alternative scenario. What if the virus had arrived in the US a few weeks sooner, the spreading pandemic had rallied mass support for Bernie Sanders and his call for universal health care, and the Democratic primaries had swept an avowed socialist to the head of the ticket rather than Joe Biden? It is not difficult to imagine a scenario in which the full weight of American business was thrown the other way, for all the same reasons, backing Trump in order to ensure that Sanders was not elected. And what if Sanders had in fact won a majority? Then we would have had a true test of the American constitution and the loyalty of the most powerful social interests to it. The fact that we have to contemplate such scenarios is indicative of the extremity of the polycrisis of 2020.
The election of Joe Biden and the fact that his inauguration took place at the appointed time on 21 January 2021 restored a sense of calm. But when Biden boldly declares that “America is back”, it has become increasingly clear that the next question we need to ask is: which America? And back to what? The comprehensive crisis of neoliberalism may have unleashed creative intellectual energy even at the once-dead centre of politics. But an intellectual crisis does not a new era make. If it is energising to discover that we can afford anything we can actually do, it also puts us on the spot. What can and should we actually do? Who, in fact, is the we?
As Britain, the US and Brazil demonstrate, democratic politics is taking on strange and unfamiliar new forms. Social inequalities are more, not less extreme. At least in the rich countries, there is no collective countervailing force. Capitalist accumulation continues in channels that continuously multiply risks. The principal use to which our newfound financial freedom has been put are more and more grotesque efforts at financial stabilisation. The antagonism between the west and China divides huge chunks of the world, as not since the cold war. And now, in the form of Covid, the monster has arrived. The Anthropocene has shown its fangs – on an as yet modest scale. Covid is far from being the worst of what we should expect – 2020 was not the full alert. If we are dusting ourselves off and enjoying the recovery, we should reflect. Around the world the dead are unnumbered, but our best guess puts the figure at 10 million. Thousands are dying every day. And 2020 was a wake-up call.
Thursday 22 April 2021
The European Super League is the perfect metaphor for global capitalism
From elite football to tech giants, our lives are increasingly governed by ‘free’ markets that turn out to be rigged writes Larry Elliott in The Guardian
‘The organisers of the ESL have taken textbook free-market capitalism and turned it on its head.’ Graffiti showing the Juventus president, Andrea Agnelli, near the headquarters of the Italian Football Federation in Rome. Photograph: Filippo Monteforte/AFP/Getty Images
Back in the days of the Soviet Union, it was common to hear people on the left criticise the Kremlin for pursuing the wrong kind of socialism. There was nothing wrong with the theory, they said, rather the warped form of it conducted behind the iron curtain.
The same argument has surfaced this week amid the furious response to the now-aborted plans to form a European Super League for 20 football clubs, only this time from the right. Free-market purists say they hate the idea because it is the wrong form of capitalism.
They are both right and wrong about that. Free-market capitalism is supposed to work through competition, which means no barriers to entry for new, innovative products. In football’s case, that would be a go-ahead small club with a manager trying radical new training methods and fielding a crop of players it had nurtured itself or invested in through the transfer market. The league-winning Derby County and Nottingham Forest teams developed by Brian Clough in the 1970s would be an example of this.
Supporters of free-market capitalism say that the system can tolerate inequality provided there is the opportunity to better yourself. They are opposed to cartels and firms that use their market power to protect themselves from smaller and nimbler rivals. Nor do they like rentier capitalism, which is where people can make large returns from assets they happen to own but without doing anything themselves.
The organisers of the ESL have taken textbook free-market capitalism and turned it on its head. Having 15 of the 20 places guaranteed for the founder members represents a colossal barrier to entry and clearly stifles competition. There is not much chance of “creative destruction” if an elite group of clubs can entrench their position by trousering the bulk of the TV receipts that their matches will generate. Owners of the clubs are classic rentier capitalists.
Where the free-market critics of the ESL are wrong is in thinking the ESL is some sort of aberration, a one-off deviation from established practice, rather than a metaphor for what global capitalism has become: an edifice built on piles of debt where the owners of businesses say they love competition but do everything they can to avoid it. Just as the top European clubs have feeder teams that they can exploit for new talent, so the US tech giants have been busy buying up anything that looks like providing competition. It is why Google has bought a slew of rival online advertising vendors and why Facebook bought Instagram and WhatsApp.
For those who want to understand how the economics of football have changed, a good starting point is The Glory Game, a book Hunter Davies wrote about his life behind the scenes with Tottenham Hotspur, one of the wannabe members of the ESL, in the 1971-72 season. (Full disclosure: I am a Spurs season ticket holder.)
Davies’s book devotes a chapter to the directors of Spurs in the early 1970s, who were all lifelong supporters of the club and who received no payment for their services. They lived in Enfield, not in the Bahamas, which is where the current owner, Joe Lewis, resides as a tax exile. These were not radical men. They could not conceive of there ever being women on the board; they opposed advertising inside the ground and were only just coming round to the idea of a club shop to sell official Spurs merchandise. They were conservative in all senses of the word.
In the intervening half century, the men who made their money out of nuts and bolts and waste paper firms in north London have been replaced by oligarchs and hedge funds. TV, barely mentioned in the Glory Game, has arrived with its billions of pounds in revenue. Facilities have improved and the players are fitter, stronger and much better paid than those of the early 1970s. In very few sectors of modern Britain can it be said that the workers receive the full fruits of their labours: the Premier League is one of them.
Even so, the model is not really working and would have worked even less well had the ESL come about. And it goes a lot deeper than greed, something that can hardly be said to be new to football.
No question, greed is part of the story, because for some clubs the prospect of sharing an initial €3.5bn (£3bn) pot of money was just too tempting given their debts, but there was also a problem with the product on offer.
Some of the competitive verve has already been sucked out of football thanks to the concentration of wealth. In the 1970s, there was far more chance of a less prosperous club having their moment of glory: not only did Derby and Forest win the league, but Sunderland, Southampton and Ipswich won the FA Cup. Fans can accept the despair of defeat if they can occasionally hope for the thrill of victory, but the ESL was essentially a way for an elite to insulate itself against the risk of failure.
By presenting their half-baked idea in the way they did, the ESL clubs committed one of capitalism’s cardinal sins: they damaged their own brand. Companies – especially those that rely on loyalty to their product – do that at their peril, not least because it forces politicians to respond. Supporters have power and so do governments, if they choose to exercise it.
The ESL has demonstrated that global capitalism operates on the basis of rigged markets not free markets, and those running the show are only interested in entrenching existing inequalities. It was a truly bad idea, but by providing a lesson in economics to millions of fans it may have performed a public service.
‘The organisers of the ESL have taken textbook free-market capitalism and turned it on its head.’ Graffiti showing the Juventus president, Andrea Agnelli, near the headquarters of the Italian Football Federation in Rome. Photograph: Filippo Monteforte/AFP/Getty ImagesBack in the days of the Soviet Union, it was common to hear people on the left criticise the Kremlin for pursuing the wrong kind of socialism. There was nothing wrong with the theory, they said, rather the warped form of it conducted behind the iron curtain.
The same argument has surfaced this week amid the furious response to the now-aborted plans to form a European Super League for 20 football clubs, only this time from the right. Free-market purists say they hate the idea because it is the wrong form of capitalism.
They are both right and wrong about that. Free-market capitalism is supposed to work through competition, which means no barriers to entry for new, innovative products. In football’s case, that would be a go-ahead small club with a manager trying radical new training methods and fielding a crop of players it had nurtured itself or invested in through the transfer market. The league-winning Derby County and Nottingham Forest teams developed by Brian Clough in the 1970s would be an example of this.
Supporters of free-market capitalism say that the system can tolerate inequality provided there is the opportunity to better yourself. They are opposed to cartels and firms that use their market power to protect themselves from smaller and nimbler rivals. Nor do they like rentier capitalism, which is where people can make large returns from assets they happen to own but without doing anything themselves.
The organisers of the ESL have taken textbook free-market capitalism and turned it on its head. Having 15 of the 20 places guaranteed for the founder members represents a colossal barrier to entry and clearly stifles competition. There is not much chance of “creative destruction” if an elite group of clubs can entrench their position by trousering the bulk of the TV receipts that their matches will generate. Owners of the clubs are classic rentier capitalists.
Where the free-market critics of the ESL are wrong is in thinking the ESL is some sort of aberration, a one-off deviation from established practice, rather than a metaphor for what global capitalism has become: an edifice built on piles of debt where the owners of businesses say they love competition but do everything they can to avoid it. Just as the top European clubs have feeder teams that they can exploit for new talent, so the US tech giants have been busy buying up anything that looks like providing competition. It is why Google has bought a slew of rival online advertising vendors and why Facebook bought Instagram and WhatsApp.
For those who want to understand how the economics of football have changed, a good starting point is The Glory Game, a book Hunter Davies wrote about his life behind the scenes with Tottenham Hotspur, one of the wannabe members of the ESL, in the 1971-72 season. (Full disclosure: I am a Spurs season ticket holder.)
Davies’s book devotes a chapter to the directors of Spurs in the early 1970s, who were all lifelong supporters of the club and who received no payment for their services. They lived in Enfield, not in the Bahamas, which is where the current owner, Joe Lewis, resides as a tax exile. These were not radical men. They could not conceive of there ever being women on the board; they opposed advertising inside the ground and were only just coming round to the idea of a club shop to sell official Spurs merchandise. They were conservative in all senses of the word.
In the intervening half century, the men who made their money out of nuts and bolts and waste paper firms in north London have been replaced by oligarchs and hedge funds. TV, barely mentioned in the Glory Game, has arrived with its billions of pounds in revenue. Facilities have improved and the players are fitter, stronger and much better paid than those of the early 1970s. In very few sectors of modern Britain can it be said that the workers receive the full fruits of their labours: the Premier League is one of them.
Even so, the model is not really working and would have worked even less well had the ESL come about. And it goes a lot deeper than greed, something that can hardly be said to be new to football.
No question, greed is part of the story, because for some clubs the prospect of sharing an initial €3.5bn (£3bn) pot of money was just too tempting given their debts, but there was also a problem with the product on offer.
Some of the competitive verve has already been sucked out of football thanks to the concentration of wealth. In the 1970s, there was far more chance of a less prosperous club having their moment of glory: not only did Derby and Forest win the league, but Sunderland, Southampton and Ipswich won the FA Cup. Fans can accept the despair of defeat if they can occasionally hope for the thrill of victory, but the ESL was essentially a way for an elite to insulate itself against the risk of failure.
By presenting their half-baked idea in the way they did, the ESL clubs committed one of capitalism’s cardinal sins: they damaged their own brand. Companies – especially those that rely on loyalty to their product – do that at their peril, not least because it forces politicians to respond. Supporters have power and so do governments, if they choose to exercise it.
The ESL has demonstrated that global capitalism operates on the basis of rigged markets not free markets, and those running the show are only interested in entrenching existing inequalities. It was a truly bad idea, but by providing a lesson in economics to millions of fans it may have performed a public service.
Friday 25 December 2020
How UK-EU trade deal will change relations between Britain and Brussels
Sam Fleming and Jim Brunsden in The FT
The future relationship deal struck between the UK and the EU (24 Dec 2020) will bring far-reaching changes, as both sides are forced to adapt to the end of Britain’s 30-year membership of the European single market
---Also watch
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The trade agreement between London and Brussels will offer UK and EU companies preferential access to each other’s markets, compared with basic World Trade Organization rules — ensuring imported goods will be free of tariffs and quotas.
But economic relations between the UK and the EU from January 1, when the deal is due to take effect, will be on more restricted terms than they are now.
“Everyone needs to get prepared for a situation next year that will be very different to today,” said an EU official.
A trade agreement along the lines of the one negotiated between the two sides will leave Britain facing a 4 per cent loss of potential gross domestic product over 15 years compared with EU membership, according to the UK’s Office for Budget Responsibility. Failure to secure an agreement would have led to lost potential GDP of almost 6 per cent, the fiscal watchdog estimated.
Below are some of the benefits conferred by the UK-EU future relationship deal, which also includes security co-operation — and the important areas in which Britain’s links with the bloc will fall short of existing arrangements.
1. Trade in goods
The EU and UK’s starting point for the future relationship talks was that they should lead to a deal with no tariffs on trade in goods between the two sides. They also wanted no quantitative restrictions on the volume of goods that could be sold free of tariffs.
That was negotiated, meaning the deal will go beyond what the EU has done with any other advanced economy outside the European single market.
But the agreement is still a very different state of affairs to membership of the EU single market and customs union.
Once implemented, from January 1, a hard customs and regulatory border will exist between the EU and UK, and goods will face checks and controls that can be smoothed at the margins only by co-operation.
The deal will include facilitations such as co-operation on trusted trader schemes, but none of these erase border checks.
“The agreement provides for continued and sustainable air, road, rail and maritime connectivity, though market access falls below what the single market offers,” said the European Commission.
2. Fair business competition
The EU’s offer on tariff-free trade was contingent on the UK agreeing to uphold a “level playing field” on fair business competition in areas such as environmental standards.
Brussels was also keen to ensure the UK does not have unfettered scope to disburse state aid to prized industries, giving them a competitive advantage.
The agreement includes common binding principles on state aid, enforceable in both sides’ courts, which would be able to recover illegal subsidies.
It also includes a painstakingly negotiated “rebalancing mechanism” to deal with a situation where the sides’ regulations in areas such as labour rights diverge over time.
The mechanism, which would be subject to independent arbitration, would allow the disadvantaged side to impose tariffs to restore fair competition.
But, crucially for the UK, it will not be required to follow EU rules directly or be subject to the jurisdiction of the European Court of Justice.
Being outside the European single market has other regulatory consequences for Britain. For example, UK businesses will no longer be able to assume that product authorisations from British watchdogs will allow their goods to be placed on the European market.
3. Fish
The deal creates a five-and-a-half-year transition period during which EU fishermen will have guaranteed access to UK waters.
EU quotas in British waters will decline in the transition by 25 per cent compared with current levels, and this will have the knock-on effect of boosting how much UK fishermen can secure. EU boats currently catch about €650m of fish in British waters each year.
Once the transition period is over, EU boats’ access to UK waters will in principle depend on annual negotiations between both sides. Those talks will also determine the overall quantities of different species that can be caught.
Should EU boats’ access to British waters ever be revoked by the UK, the bloc will have the right to take compensatory measures. These include retaliatory closing of EU waters to UK boats, and the imposition of tariffs on British fish.
The deal also links the UK’s access to the EU energy market to access to British fishing waters.
The UK warded off EU demands for a cross-retaliation power to hit other parts of the British economy should a dispute over fish escalate.
Still, the deal does provide a last-resort “safeguard” option that would allow either side to take emergency measures to protect coastal communities, subject to dispute-settlement arrangements in the agreement.
The deal enshrines the principle that Britain is now outside the EU’s common fisheries policy: an independent coastal state with sovereignty over its waters.
4. Financial services
The City of London will exit the EU’s single market for financial services at the end of the Brexit transition period on December 31.
Both sides have said that the new market access arrangements for UK and EU financial services companies should be based on unilateral decisions by Britain and the bloc, rather than be provided for in the trade agreement.
These so-called equivalence decisions involve each side evaluating whether the other’s financial services regulations are as tough as its own.
Banks and traders have acknowledged that the proposed system is more piecemeal than existing arrangements, and less stable. The EU did not announce any fresh equivalence decisions on UK access to the bloc’s markets alongside the trade agreement on Thursday, resulting in uncertainty in key areas including share trading and derivatives.
The two sides plan to put in place a regulatory dialogue on financial services based on a separate memorandum of understanding.
5. Migration
Current British and EU expatriates have their rights safeguarded by the UK’s 2019 withdrawal agreement with the bloc, but big changes to migration arrangements take effect from January 1.
Britons will no longer have the benefit of European freedom of movement: the right to go to any EU member state and seek to work and live there on the same basis as the country’s own citizens.
Instead, Britons will rely on a visa-waiver programme to travel to the EU for short stays, and on member states’ national rules for the right to work.
Ending free movement for EU nationals in the UK was identified by the British government as one of the benefits of Brexit, allowing the country to devise a new immigration system.
6. Security
The EU and UK have been at pains to emphasise the importance of continuing co-operation in the fight against terrorism and organised crime, although talks in this area were complicated by Britain’s determination to escape the ECJ’s jurisdiction.
But ahead of the deal being finalised, EU chief negotiator Michel Barnier confirmed the sides had found ways to maintain “close co-operation” on crucial matters including the work of the bloc’s crime-fighting agencies Europol and Eurojust, and the sharing of criminals’ DNA data.
Brussels said the deal “builds new operational capabilities, taking account of the fact that the UK, as a non-EU member . . . will not have the same facilities as before”.
The deal establishes that security co-operation can be suspended if the UK breaks away from the European Convention on Human Rights.
Saturday 12 December 2020
Ideological Positions and Economic History
My response to Shekhar Gupta's video
Dear Mr. Gupta
I believe your thesis on economic history is flawed when you argue that Japan, Korea, Taiwan and Singapore have grown because of economic freedoms i.e. I presume you mean free market practices. I have often heard you say that India too should follow free market practices to achieve similar heights. In the above process the elephant in the room i.e. how China rose with state intervention, has also been ignored.
Kindly permit me to state a few historical facts extracted from 'Bad Samaritans The Guilty Secrets of Rich Nations...' by Ha Joon Chang
1. When Robert Walpole became the British Prime Minister in 1721 he launched a Swadeshi* policy aimed to protect British manufacturing industries from foreign competition, subsidise them and encourage them to export. Tariffs on imported foreign manufactured goods were significantly raised while tariffs on raw materials were lowered. Regulation was introduced to control the quality of manufactured goods so that unscrupulous manufacturers could not damage the reputation of British products in foreign markets. Walpole’s protectionist policies remained in place for the next century, helping British manufacturing industries catch up with and then finally forge ahead of the counterparts on the Continent.By the end of the Napoleonic wars in 1815 British manufacturers were firmly established as the most efficient in the world and it was then that they started campaigning for free trade.
2. The US too followed similar protectionist policies, espoused by Alexander Hamilton, which included protective tariffs, import bans, subsidies, export ban on key raw materials, financial aid...until the end of the Second World War (WWII). It was only after WWII, with its industrial supremacy unchallenged, that the US started championing the cause of free trade. Even when it shifted to freer trade, the US government promoted key industries by another means; namely public funding of Research and Development (R&D). Without government funding for R&D the US would not have been able to maintain its technological lead over the rest of the world on key industries like computers, semiconductors, life sciences, the internet and aerospace.
3. In Japan the famous MITI (Ministry of International Trade and Industry) orchestrated an industrial development programme that has now become a legend. After WWII, imports were tightly controlled through government control of foreign exchange. Exports were promoted in order to maximize the supply of foreign currency needed to buy up better technology. This involved direct and indirect export subsidies as well as information and marketing help from JETRO the state’s trading agency.
4. Even Korea has not been an exception to this pattern. The Korean miracle was the result of a clever and pragmatic mixture of market incentives and state direction. The Korean government did not have blind faith in the free market either. While it took markets seriously, the Korean strategy recognized that they often need to be corrected through policy intervention.
5. Singapore has had free trade and relied heavily on foreign investment, but even so, it does not conform in other respects to the neo-liberal ideal. It used considerable subsidies to MNCs in industries it considered strategic. It also has one of the largest state owned enterprises which supplies housing and almost all land is owned by the government.
To conclude, I feel that Mr. Gupta’s advocacy of free markets is based on a fundamentally defective understanding of the forces driving globalisation and a distortion of history to fit the theory. Free markets and trade was often imposed on rather than chosen by weaker countries. Virtually all successful economies, developed and developing, got where they are through selective strategic integration with the world economy rather than unconditional global integration.
Regards
Girish Menon
* Swadeshi is a conjunction of two Sanskrit words: swa ("self" or "own") and desh ("country"). Swadeshi is an adjective which means "of one's own country".
Monday 20 July 2020
Friday 26 June 2020
Economics for Non Economists 1: What is a free market economy?
by Girish Menon
Suma, you have asked a
really fundamental question and I will try to answer it in two parts viz;
-
What is a market
economy?
And
-
What does free mean in
the context of free market economy?
So let’s start with the
first aspect – What is a market economy?
The activity of buying or
selling a good is called a market transaction or a market activity. Thus a
market is a set of arrangements where goods are exchanged for money.
Today most countries in the
world adopt the market model for the production and consumption of goods and
services. They believe in the Adam Smith quote, ‘It is not from the benevolence of the butcher, the brewer, or the baker that
we expect our dinner, but from their regard to their own interest.’
Google Dictionary defines
self interest (own interest) as ‘one's
personal interest or advantage, especially when pursued without regard for
others.’ Some economics texts assume that the self interest of a goods producer
is to earn profits whereas the self interest of a consumer is to maximise her
happiness by paying for goods she requires.
Adam Smith’s theory expects citizens in an economy to be both producers
and consumers of goods. As a producer you are expected to generate a profit
from your toils. You, as a consumer, are expected to use the profits to buy other
goods to live your life.
Based on the above logic, market theory predicts that if all the
citizens of an economy are left to pursue their self interest then it will
result in the automatic production of all goods and services that citizens require
in order to be happy.
Though Adam Smith preferred the word ‘invisible hand’, I have used the
term automatic. Google dictionary defines automatic as ‘working by itself with
little or no direct human control’. In other words producers make and sell
goods which they think will be demanded and hope to profit from it. There is no
authority other than their anticipation of consumer needs that guide their
decision to produce and sell goods. Similarly, consumers pay for a good because
they think it will make them happier and there is nobody telling them what to
buy and consume.
Thus, a market economy would be an economy where the production and
consumption of all/most goods and services is determined by the self interest
of its producers and consumers. This system is also known as capitalism.
So, what is a free market economy?
These days it’s not only the UK
I notice that you seem to be shaking your head. Especially in this Covid
climate you will have noticed the role that the UK
- There are
many buyers for a good in the market and no buyer is large enough to get a
discount on the price.
- There are
many small sellers of a good in the market and no seller is large enough
to set its own price.
- The goods
produced and consumed are identical or homogeneous. In other words a
consumer cannot recognise the producer of the good.
- There must
be freedom of entry to the market – or no barriers that prevent a
potential producer from entering the market.
- There must
be freedom of exit from a market – if a producer wishes to quit a market
then s/he should be able to do so freely and without any sunk costs.
- There must
be perfect knowledge. Producers must have full knowledge of the
technologies used by its rivals and consumer preferences. Consumers must
be aware of the short and long term benefits and costs from consuming a
good.
- The factors
of production must be mobile. It means that the land, workers, machines
used for producing a good should be easily redeployed to producing any
other good when demand changes,
- There must be
no transport costs.
- There must
be independence in decision making. No external forces affect the decision
making ability of producers and sellers.
- No
externalities. The act of production and consumption based on self
interest should not result in benefits or costs to third parties.
I am sure that after you have read the above conditions you will agree
that neither the UK
I will now let Ha Joon Chang have the final word on free markets:
“The free market
(economy) does not exist. Every market has some rules and boundaries (by
governments) that restrict freedom of choice. A market looks free only because
we so unconditionally accept its underlying restrictions that we fail to see
them. How ‘free’ a market is cannot be objectively defined. It is a political
definition. The usual claim by free market economists that they are trying to
defend the market from politically motivated interference by the government is
false. Government is always involved and those free-marketeers are as
politically motivated as anyone. Overcoming the myth that there is such a thing
as an objectively defined ‘free market’ is the first step towards understanding
capitalism.’
@@@@@
- When I presented this article to Suma she said, 'Girish, you have not understood my question. I meant where can I find the free goods that should by definition be there in a free market?'
Monday 13 November 2017
For many, free movement causes more pain – and Brexit seems to be the cure
Deborah Orr in The Guardian
The last 16 months have made one thing clear: it’s much easier to vote to leave the EU than it is to actually leave. Remainers such as myself now find it tempting to say: “I told you so.” This, broadly speaking, is because we’re a bunch of smug know-it-alls, who haven’t even properly asked ourselves why we failed so badly to get our point across last June.
The answer, of course, is that we were and are too busy being smug know-it-alls: certain before the referendum that the idealism of the EU was plain for everyone except the terminally thick and racist to see; and certain afterwards that surely at some point even the terminally thick and racist will start having buyers’ remorse.
The sheer tragicomedy of EU-UK negotiations is indeed getting some people so fed up with the whole farrago that a few Brexiteers are crossing the floor. But, mostly, people view the difficulty of leaving the EU as yet more proof that it’s a money-grabbing, navel-gazing, inert and self-serving bureaucracy, as respectful of democracy as Kim Jong-un and as responsive to the needs of actual people as a gigantic mudslide. An in-depth survey of Brexiteers in Wales last month confirmed pretty much exactly that.
Politicians do understand, on the whole, that the factor above all others that motivates white working-class Brexit voters is free movement, as again the Welsh survey attests. This is why Labour in particular is hamstrung. Backing remain would please its Guardian-reading supporters. But that would alienate many of its core voters. Whatever Jeremy Corbyn’s own views about the EU, the sensible strategy for the short-term is not to seem at all remain-oriented.
Short-term being the operative word. The big trouble with the idealism of free movement is that its intellectual underpinnings demand pain now for future gain. The idea is that people will crisscross the various member countries, working where there’s work to create economic growth, returning home with money, experience and ideas, to start businesses that will attract others in turn, until every country is as prosperous as its neighbour.
This transformation, if it happens, will take generations. But the architects of this grand plan – the experts, the economists, the “elite” – are not the people who feel any short-term pain.
It’s completely unrealistic to ask people to spend their lives wondering where the money is coming from to pay the next electricity bill, whether their children will ever get out of their expensive private accommodation, and whether their grandchildren will be on zero-hours contracts forever, all so that maybe 80 years from now the average living standard of a Lithuanian will be similar to that of a Welshman.
People need their lives to improve now, not to live in stress and worry because things might work out in the future. The theoretical utopians who support the EU are not those who are expected to feel solidarity with their Polish colleagues in the salad-bagging factory. Especially when those colleagues are working towards a different goal. It’s easier to work for low wages if these wages are higher than you would be getting back home; easier to save when you know that a deposit on a house back home with your family is an achievable goal; easier to go without when you know that it’s for a finite time.
Where in the EU do young, unskilled British people head to get such a start in life? Reciprocity doesn’t exist.
In the 1980s, builders went to Germany, as dramatised in Auf Wiedersehen, Pet. In Germany today, builders come from eastern Europe. Wealthy countries in the EU are rightly expected to be generous. But when your own country has not generously shared its wealth with you, it’s hard to accept that you’re the ones expected to carry the burden in this grand new wealth-sharing concept.
In his book Austerity Britain, historian David Kynaston quoted evidence from the Mass Observation project that the people who lived in the areas most devastated by the war were far less likely to be optimistic about the future than those who had got off lightly. Part of their ennui was the knowledge that change had been promised after the first world war, yet hadn’t come about.
The same goes for the areas that were economically devastated in the early stages of globalisation. The EU didn’t save them then; it isn’t saving them now. No amount of promises that the EU is the best hope of shelter from economic change in the future will persuade enough of the hard-up Brexiteers in that 52% vote.
If progressives want to change the minds of Brexiteers, waiting for them to see the error of their ways isn’t going to work. What people need is a quid pro quo that offers them tangible improvements in their lives right now. That, and only that, will keep Britain in the EU.
The last 16 months have made one thing clear: it’s much easier to vote to leave the EU than it is to actually leave. Remainers such as myself now find it tempting to say: “I told you so.” This, broadly speaking, is because we’re a bunch of smug know-it-alls, who haven’t even properly asked ourselves why we failed so badly to get our point across last June.
The answer, of course, is that we were and are too busy being smug know-it-alls: certain before the referendum that the idealism of the EU was plain for everyone except the terminally thick and racist to see; and certain afterwards that surely at some point even the terminally thick and racist will start having buyers’ remorse.
The sheer tragicomedy of EU-UK negotiations is indeed getting some people so fed up with the whole farrago that a few Brexiteers are crossing the floor. But, mostly, people view the difficulty of leaving the EU as yet more proof that it’s a money-grabbing, navel-gazing, inert and self-serving bureaucracy, as respectful of democracy as Kim Jong-un and as responsive to the needs of actual people as a gigantic mudslide. An in-depth survey of Brexiteers in Wales last month confirmed pretty much exactly that.
Politicians do understand, on the whole, that the factor above all others that motivates white working-class Brexit voters is free movement, as again the Welsh survey attests. This is why Labour in particular is hamstrung. Backing remain would please its Guardian-reading supporters. But that would alienate many of its core voters. Whatever Jeremy Corbyn’s own views about the EU, the sensible strategy for the short-term is not to seem at all remain-oriented.
Short-term being the operative word. The big trouble with the idealism of free movement is that its intellectual underpinnings demand pain now for future gain. The idea is that people will crisscross the various member countries, working where there’s work to create economic growth, returning home with money, experience and ideas, to start businesses that will attract others in turn, until every country is as prosperous as its neighbour.
This transformation, if it happens, will take generations. But the architects of this grand plan – the experts, the economists, the “elite” – are not the people who feel any short-term pain.
It’s completely unrealistic to ask people to spend their lives wondering where the money is coming from to pay the next electricity bill, whether their children will ever get out of their expensive private accommodation, and whether their grandchildren will be on zero-hours contracts forever, all so that maybe 80 years from now the average living standard of a Lithuanian will be similar to that of a Welshman.
People need their lives to improve now, not to live in stress and worry because things might work out in the future. The theoretical utopians who support the EU are not those who are expected to feel solidarity with their Polish colleagues in the salad-bagging factory. Especially when those colleagues are working towards a different goal. It’s easier to work for low wages if these wages are higher than you would be getting back home; easier to save when you know that a deposit on a house back home with your family is an achievable goal; easier to go without when you know that it’s for a finite time.
Where in the EU do young, unskilled British people head to get such a start in life? Reciprocity doesn’t exist.
In the 1980s, builders went to Germany, as dramatised in Auf Wiedersehen, Pet. In Germany today, builders come from eastern Europe. Wealthy countries in the EU are rightly expected to be generous. But when your own country has not generously shared its wealth with you, it’s hard to accept that you’re the ones expected to carry the burden in this grand new wealth-sharing concept.
In his book Austerity Britain, historian David Kynaston quoted evidence from the Mass Observation project that the people who lived in the areas most devastated by the war were far less likely to be optimistic about the future than those who had got off lightly. Part of their ennui was the knowledge that change had been promised after the first world war, yet hadn’t come about.
The same goes for the areas that were economically devastated in the early stages of globalisation. The EU didn’t save them then; it isn’t saving them now. No amount of promises that the EU is the best hope of shelter from economic change in the future will persuade enough of the hard-up Brexiteers in that 52% vote.
If progressives want to change the minds of Brexiteers, waiting for them to see the error of their ways isn’t going to work. What people need is a quid pro quo that offers them tangible improvements in their lives right now. That, and only that, will keep Britain in the EU.
Tuesday 20 December 2016
The Problem is Free Trade not Free Movement
Ian Allinson in The Guardian
While freedom of movement has been a hot topic since the debates around Brexit began, few would have predicted it would become such a focus in the Unite general secretary election, in which I’m standing.
Anger around jobs and conditions is justified, but often misdirected. Neoliberal capitalism has been disastrous. Free trade deals enshrine the rights of capital while ignoring the needs of humans and our warming planet. Workers have been dumped out of jobs by the million, work has intensified, workers feel more vulnerable to managerial whim, the share of wealth going to wages has fallen, welfare systems have been slashed and huge areas of life – including education, health and housing – are increasingly commoditised, all while our limited democracy is increasingly hollowed out.
Migrants are prime scapegoats for many politicians and media. Some employers provide fertile material for racists and nationalists. Fujitsu, my own employer, proposes to cut 1,800 UK jobs, hoping to boost profits by offshoring jobs to low-paid countries. Fujitsu is even asking some workers to train their replacements, brought to the UK to learn the job. Workers are being asked to dig their own graves.
When our livelihoods are threatened, workers sometimes respond by claiming privileged access to jobs, housing, and so on, and excluding others on the basis of gender, race or nationality. This is tempting because it sometimes “works” for some people for a short time. But it is misguided. If some workers try to protect their interests at the expense of others, the unity we need to win is undermined and we all lose.
Gerard Coyne is also standing for the general secretary post and his silence on this question, as on so many others, is deafening; meanwhile his relationships with the Labour right are worrying.
Len McCluskey, the present general secretary, though anti-racist, has fudged on workers’ freedom of movement, wrongly conceding ground to racists and nationalists. Just before the EU referendum McCluskey referred to it as an experiment at UK workers’ expense. As a delegate to the Unite conference shortly after the referendum, I moved a motion defending freedom of movement. Unite’s leadership opposed it, with their own motion calling for debate on the question. McCluskey now boasts that he has led this debate “demanding safeguards for workers, communities and industries affected by migration policy driven by greedy bosses”. Beyond dog-whistle politics, what does this mean?
McCluskey explained in a speech for the thinktank Class (Centre for Labour and Social Studies) that his “proposal is that any employer wishing to recruit labour abroad can only do so if they are either covered by a proper trade union agreement, or by sectoral collective bargaining”. All jobs should be covered by union agreements, but union weakness means most are not, and this applies especially to industries in which migrants have to work.
What would McCluskey’s proposal mean in practice? What would count as recruiting abroad? How long would a worker have to be in the UK before they could apply for an un-unionised job?
Giving different rights to different workers based on their nationality is discriminatory and divisive. It undermines solidarity. Blocking employers hiring on the basis of nationality would repeat the mistake of some trade unionists of a previous generation who sought to control the labour supply by excluding women from some jobs, fearing “they” would push down “our” wages. We, Unite’s membership, like the working class as a whole, come from all over the world. This is a strength, not a weakness.
It is free trade, not free movement of people, that has been a disaster for working-class people. Manufacturing has seen colossal job losses in recent decades as production has moved to countries in the south and east. Too often unions have responded by making common cause with the very employers sacking their members, against the foreign competition.
This approach has failed to protect jobs. Whether it is an employer threatening to dismiss and re-engage the same workers on lower pay (like the Durham teaching assistants), replacing workers with cheaper ones in the same workplace, or moving the jobs halfway round the world, workers are right to fight the degradation of employment. You can’t do that in partnership with the employer who is sacking you.
Thankfully workers are not always paralysed by the confusion of their leaders. Unite members at Capita and Prudential won important victories against offshoring. Members at the Fawley oil refinery spurned British Jobs For British Workers slogans and built solidarity to win equal pay for workers of all nationalities instead of trying to restrict the employment of migrants. Inspired by the Prudential win, industrial action in my own workplace currently includes refusal to cooperate with projects to move work offshore.
Unions should be following Fawley workers in demanding everyone is paid the rate for the job, regardless of employer, employment status, or nationality. We should be demanding full pay transparency, monitored by the unions. We should be calling for all jobs to be openly advertised, with no discrimination in hiring based on nationality. And existing workers should refuse to cooperate with handing over work unless their employment is assured.
The labour movement needs to regain the confidence to demand solutions that meet human needs, even when that upsets big business. We won’t do that by turning workers against each other on nationalist grounds, or by fudging the issue.
No general secretary candidate should chase votes by undermining the unity members need to defend their jobs. I am calling on Len McCluskey and Gerard Coyne to join me in championing workers’ rights to move freely (not just within the EU) and opposing any employment restrictions based on nationality.
While freedom of movement has been a hot topic since the debates around Brexit began, few would have predicted it would become such a focus in the Unite general secretary election, in which I’m standing.
Anger around jobs and conditions is justified, but often misdirected. Neoliberal capitalism has been disastrous. Free trade deals enshrine the rights of capital while ignoring the needs of humans and our warming planet. Workers have been dumped out of jobs by the million, work has intensified, workers feel more vulnerable to managerial whim, the share of wealth going to wages has fallen, welfare systems have been slashed and huge areas of life – including education, health and housing – are increasingly commoditised, all while our limited democracy is increasingly hollowed out.
Migrants are prime scapegoats for many politicians and media. Some employers provide fertile material for racists and nationalists. Fujitsu, my own employer, proposes to cut 1,800 UK jobs, hoping to boost profits by offshoring jobs to low-paid countries. Fujitsu is even asking some workers to train their replacements, brought to the UK to learn the job. Workers are being asked to dig their own graves.
When our livelihoods are threatened, workers sometimes respond by claiming privileged access to jobs, housing, and so on, and excluding others on the basis of gender, race or nationality. This is tempting because it sometimes “works” for some people for a short time. But it is misguided. If some workers try to protect their interests at the expense of others, the unity we need to win is undermined and we all lose.
Gerard Coyne is also standing for the general secretary post and his silence on this question, as on so many others, is deafening; meanwhile his relationships with the Labour right are worrying.
Len McCluskey, the present general secretary, though anti-racist, has fudged on workers’ freedom of movement, wrongly conceding ground to racists and nationalists. Just before the EU referendum McCluskey referred to it as an experiment at UK workers’ expense. As a delegate to the Unite conference shortly after the referendum, I moved a motion defending freedom of movement. Unite’s leadership opposed it, with their own motion calling for debate on the question. McCluskey now boasts that he has led this debate “demanding safeguards for workers, communities and industries affected by migration policy driven by greedy bosses”. Beyond dog-whistle politics, what does this mean?
McCluskey explained in a speech for the thinktank Class (Centre for Labour and Social Studies) that his “proposal is that any employer wishing to recruit labour abroad can only do so if they are either covered by a proper trade union agreement, or by sectoral collective bargaining”. All jobs should be covered by union agreements, but union weakness means most are not, and this applies especially to industries in which migrants have to work.
What would McCluskey’s proposal mean in practice? What would count as recruiting abroad? How long would a worker have to be in the UK before they could apply for an un-unionised job?
Giving different rights to different workers based on their nationality is discriminatory and divisive. It undermines solidarity. Blocking employers hiring on the basis of nationality would repeat the mistake of some trade unionists of a previous generation who sought to control the labour supply by excluding women from some jobs, fearing “they” would push down “our” wages. We, Unite’s membership, like the working class as a whole, come from all over the world. This is a strength, not a weakness.
It is free trade, not free movement of people, that has been a disaster for working-class people. Manufacturing has seen colossal job losses in recent decades as production has moved to countries in the south and east. Too often unions have responded by making common cause with the very employers sacking their members, against the foreign competition.
This approach has failed to protect jobs. Whether it is an employer threatening to dismiss and re-engage the same workers on lower pay (like the Durham teaching assistants), replacing workers with cheaper ones in the same workplace, or moving the jobs halfway round the world, workers are right to fight the degradation of employment. You can’t do that in partnership with the employer who is sacking you.
Thankfully workers are not always paralysed by the confusion of their leaders. Unite members at Capita and Prudential won important victories against offshoring. Members at the Fawley oil refinery spurned British Jobs For British Workers slogans and built solidarity to win equal pay for workers of all nationalities instead of trying to restrict the employment of migrants. Inspired by the Prudential win, industrial action in my own workplace currently includes refusal to cooperate with projects to move work offshore.
Unions should be following Fawley workers in demanding everyone is paid the rate for the job, regardless of employer, employment status, or nationality. We should be demanding full pay transparency, monitored by the unions. We should be calling for all jobs to be openly advertised, with no discrimination in hiring based on nationality. And existing workers should refuse to cooperate with handing over work unless their employment is assured.
The labour movement needs to regain the confidence to demand solutions that meet human needs, even when that upsets big business. We won’t do that by turning workers against each other on nationalist grounds, or by fudging the issue.
No general secretary candidate should chase votes by undermining the unity members need to defend their jobs. I am calling on Len McCluskey and Gerard Coyne to join me in championing workers’ rights to move freely (not just within the EU) and opposing any employment restrictions based on nationality.
Wednesday 19 October 2016
I hate Trump and Farage. But on free trade they have a point
Aditya Chakrabortty in The Guardian
Globalisation, as can be seen from the TTIP and Ceta deals, is about protecting big business – against the public. No wonder voters in the US and Europe are turning to populists.
Globalisation, as can be seen from the TTIP and Ceta deals, is about protecting big business – against the public. No wonder voters in the US and Europe are turning to populists.
Illustration by Andrzej Krauze
How they frown. How they fulminate. How they threaten. For decades, presidents and prime ministers, policymakers and pundits have told voters there is only one direction of travel: free trade. Now comes Brexit and Donald Trump – and the horrible suspicion that the public won’t buy it any more. This is how an elite project falls apart. And the elites don’t know what to do, apart from keep insisting the public listen.
In Washington last month, you could barely move for wagging fingers as the heads of the IMF, the World Bank and the World Trade Organisation warned that free trade was in mortal danger. In Ottawa last week, Canadian prime minister Justin Trudeau surveyed the hundreds of thousands of Europeans demonstrating against the continent’s treaty with his country and said: “If… Europe is unable to sign a progressive trade agreement with a country like Canada, well, then with whom will Europe think that it can do business in the years to come?”
Their outriders in the press have dropped the pretence of liberal politesse for red-cheeked self-righteousness. The hairy-palmed hordes are coming for our internationalism! As if internationalism were little more than business-class flights and the freedom to structure derivatives across several time zones. The Economist slaps an image of anti-globalisation demonstrators on its cover with the headline: “Why they’re wrong”. Note that use of “they”, with its shadow of the drawbridge being hastily pulled up. Coming soon, perhaps: “Why can’t we get the 99% we deserve?”
I heartily agree that Nigel Farage and Trump are grotesques. But the free-traders peddle their own untruths. They have insisted that black is white, even as the voters beg to differ. In their seminar rooms, their TV studios and their Geneva offices, they have perpetrated the ideological sleight of hand that equates internationalism with free trade, and globalisation with untrammelled corporate power. The result has been misery for workers from Bolton to Baltimore to Bangladesh. But it has also left the six-figure technocrats who supervise our economic system pushing a zombie idea. Because that is what free trade has become: an idea leached of life and meaning but stumbling on for want of any replacement. We have a globalisation for bankers, but not for children fleeing the bombs of Syria. Security for investors but not for workers.
To see how debased the notion of free trade has become, look at the deal between Canada and the EU that is currently being voted through Europe’s parliaments. It’s called the Comprehensive Economic and Trade Agreement (Ceta), and the fact that you can see it at all is largely down to leaks of the documents, which forced the European commission to publish,. That is after the negotiations were conducted for five years in secret, with even the directives kept hidden from the hundreds of millions of citizens affected.
This is no minor technical work. Provided it is passed in time, Ceta will apply to Britain too – and parts of it will affect Britons’ lives even after we’ve “taken back control”. It has been billed as “a backdoor for TTIP”, the Transatlantic Trade and Investment Partnership, which collapsed this summer amid public opposition both in Europe and the US. Like TTIP, Ceta includes the investor-state dispute settlement system – which hands big business the power to sue governments, including for profits they haven’t made yet. A US multinational with an office in Canada (nearly all of them) will be able to sue Britons for bringing in laws that lose them money. This was the mechanism tobacco giant Philip Morris used to sue Australia’s government for bringing in plain packaging. On that occasion, Big Tobacco was unsuccessful – but it took four years of expensive legal battle.
Free trade used to be about tackling protectionism; now it’s about protecting big business – against the public. If populists take a complex situation, offer a simple answer and warn any dissenters of gruesome consequences, then the free-traders are guilty of populism too. With Ceta or TTIP, it goes like this: if this deal goes through, then economies will grow, jobs will appear, and a rising tide will lift all boats, from super-yacht to rubber dinghy. That is pretty much what mainstream politicians of Europe – both left and right – and their officials are saying about the deal with Canada.
In economic history, never mind that the biggest winners – whether the US in the early 1900s or China now – are those who break the free trade rules. Never mind that the actual forecasts for Ceta show the gains will be relatively meagre. Never mind that the studies cited don’t bother to look at who wins and loses, and by how much.
Most of all, ignore their shared assumption that after any deal the affected economies undergo a short, sharp shock before bouncing back. Anyone’s who has lived through the past eight years has heard that one before. After the financial crisis, the Bank of England and Treasury both kept forecasting a return to normal – and they kept getting it wrong. Eight years on, that bounceback hasn’t materialised. British workers are still not paid as much after inflation as they were when Lehman Brothers collapsed.
That assumption’s lack of substance is called a “dirty little secret” by two independent economists, Pierre Kohler and Servaas Storm, in a recent paper scrutinising the likely effects of Ceta. As they say, it presumes that laid-off workers “will rapidly find new jobs” – whatever the industry, however far away the employer. A car engineer can up sticks and turn into a software engineer. And if there aren’t any actual jobs, they can deliver takeaways for Deliveroo.
The assumptions are both laughably far-fetched and, in the cost citizens are expected to bear, disgusting. No wonder the EU would rather there was as little public discussion as possible.
Using a model employed by the UN, Kohler and Storm found that the benefits of Ceta become microscopic next to the costs. For at least the first seven years after the agreement is brought in, unemployment will rise, wages will fall and economies will see their growth rates decline. Governments will lose revenue, and so increase austerity.
The burden will fall hardest on the poorest, the lowest-skilled, older people and those with disabilities. A senior lecturer at Delft University of Technology, Storm summed up for me the consequences: “The weaker your position in an economy, the more strongly you’ll feel the fall-out.” These aren’t people and regions who are left behind: they’ve been chucked off the train by their own governments. This is the settlement free-traders, left and right, are fighting to impose on voters. Is it any wonder the voters keep plumping for alternatives – no matter how reprehensible, how ruinous?
How they frown. How they fulminate. How they threaten. For decades, presidents and prime ministers, policymakers and pundits have told voters there is only one direction of travel: free trade. Now comes Brexit and Donald Trump – and the horrible suspicion that the public won’t buy it any more. This is how an elite project falls apart. And the elites don’t know what to do, apart from keep insisting the public listen.
In Washington last month, you could barely move for wagging fingers as the heads of the IMF, the World Bank and the World Trade Organisation warned that free trade was in mortal danger. In Ottawa last week, Canadian prime minister Justin Trudeau surveyed the hundreds of thousands of Europeans demonstrating against the continent’s treaty with his country and said: “If… Europe is unable to sign a progressive trade agreement with a country like Canada, well, then with whom will Europe think that it can do business in the years to come?”
Their outriders in the press have dropped the pretence of liberal politesse for red-cheeked self-righteousness. The hairy-palmed hordes are coming for our internationalism! As if internationalism were little more than business-class flights and the freedom to structure derivatives across several time zones. The Economist slaps an image of anti-globalisation demonstrators on its cover with the headline: “Why they’re wrong”. Note that use of “they”, with its shadow of the drawbridge being hastily pulled up. Coming soon, perhaps: “Why can’t we get the 99% we deserve?”
I heartily agree that Nigel Farage and Trump are grotesques. But the free-traders peddle their own untruths. They have insisted that black is white, even as the voters beg to differ. In their seminar rooms, their TV studios and their Geneva offices, they have perpetrated the ideological sleight of hand that equates internationalism with free trade, and globalisation with untrammelled corporate power. The result has been misery for workers from Bolton to Baltimore to Bangladesh. But it has also left the six-figure technocrats who supervise our economic system pushing a zombie idea. Because that is what free trade has become: an idea leached of life and meaning but stumbling on for want of any replacement. We have a globalisation for bankers, but not for children fleeing the bombs of Syria. Security for investors but not for workers.
To see how debased the notion of free trade has become, look at the deal between Canada and the EU that is currently being voted through Europe’s parliaments. It’s called the Comprehensive Economic and Trade Agreement (Ceta), and the fact that you can see it at all is largely down to leaks of the documents, which forced the European commission to publish,. That is after the negotiations were conducted for five years in secret, with even the directives kept hidden from the hundreds of millions of citizens affected.
This is no minor technical work. Provided it is passed in time, Ceta will apply to Britain too – and parts of it will affect Britons’ lives even after we’ve “taken back control”. It has been billed as “a backdoor for TTIP”, the Transatlantic Trade and Investment Partnership, which collapsed this summer amid public opposition both in Europe and the US. Like TTIP, Ceta includes the investor-state dispute settlement system – which hands big business the power to sue governments, including for profits they haven’t made yet. A US multinational with an office in Canada (nearly all of them) will be able to sue Britons for bringing in laws that lose them money. This was the mechanism tobacco giant Philip Morris used to sue Australia’s government for bringing in plain packaging. On that occasion, Big Tobacco was unsuccessful – but it took four years of expensive legal battle.
Free trade used to be about tackling protectionism; now it’s about protecting big business – against the public. If populists take a complex situation, offer a simple answer and warn any dissenters of gruesome consequences, then the free-traders are guilty of populism too. With Ceta or TTIP, it goes like this: if this deal goes through, then economies will grow, jobs will appear, and a rising tide will lift all boats, from super-yacht to rubber dinghy. That is pretty much what mainstream politicians of Europe – both left and right – and their officials are saying about the deal with Canada.
In economic history, never mind that the biggest winners – whether the US in the early 1900s or China now – are those who break the free trade rules. Never mind that the actual forecasts for Ceta show the gains will be relatively meagre. Never mind that the studies cited don’t bother to look at who wins and loses, and by how much.
Most of all, ignore their shared assumption that after any deal the affected economies undergo a short, sharp shock before bouncing back. Anyone’s who has lived through the past eight years has heard that one before. After the financial crisis, the Bank of England and Treasury both kept forecasting a return to normal – and they kept getting it wrong. Eight years on, that bounceback hasn’t materialised. British workers are still not paid as much after inflation as they were when Lehman Brothers collapsed.
That assumption’s lack of substance is called a “dirty little secret” by two independent economists, Pierre Kohler and Servaas Storm, in a recent paper scrutinising the likely effects of Ceta. As they say, it presumes that laid-off workers “will rapidly find new jobs” – whatever the industry, however far away the employer. A car engineer can up sticks and turn into a software engineer. And if there aren’t any actual jobs, they can deliver takeaways for Deliveroo.
The assumptions are both laughably far-fetched and, in the cost citizens are expected to bear, disgusting. No wonder the EU would rather there was as little public discussion as possible.
Using a model employed by the UN, Kohler and Storm found that the benefits of Ceta become microscopic next to the costs. For at least the first seven years after the agreement is brought in, unemployment will rise, wages will fall and economies will see their growth rates decline. Governments will lose revenue, and so increase austerity.
The burden will fall hardest on the poorest, the lowest-skilled, older people and those with disabilities. A senior lecturer at Delft University of Technology, Storm summed up for me the consequences: “The weaker your position in an economy, the more strongly you’ll feel the fall-out.” These aren’t people and regions who are left behind: they’ve been chucked off the train by their own governments. This is the settlement free-traders, left and right, are fighting to impose on voters. Is it any wonder the voters keep plumping for alternatives – no matter how reprehensible, how ruinous?
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