Following is an interview for a course conducted by the Chinese Academy of Social Sciences (CASS). It will appear in a chinese publication.
The impact of Covid-19
Prof. Yu Haiqing, CASS
Interview with Stavros Mavroudeas (Professor of Political Economy, Panteion University, Athens, Greece)
- It is said that the COVID-19 epidemic is the most prominent systemic risk test in the field of public health that the world has faced since the Second World War, highlighting the contrast between the capitalist countries and Socialist China in the state capability (in Fukuyama’s words). What do you think of this contrast? What advantages and disadvantages do you think the two systems has in dealing with dangerous accidents breaking out suddenly?
The COVID-19 epidemic, and more generally the new ‘emerging epidemics’ that appeared after 1975, bring forth again the need to contrast the ability of capitalism compared to socialism in confronting such public health crises.
The COVID-19 epidemic caused a health crisis for the whole world. At the same time, the global economy was entering a recessionary path that is now characterized as economic crisis. Thus, the COVID-19 epidemic is related to a twin crisis: health and economic. This is recognized by all sides of the spectrum of economic thought (Orthodox, Heterodox and Marxist). Of course, there is a major difference on the causality between the health and the economic crisis. Orthodox and Heterodox views maintain that it is the health crisis that caused the economic crisis; implying that in the absence of the former the latter would not have occurred. Marxist views, on the other hand, argue that the advanced capitalist economies were already entering a recessionary path leading to an economic crisis (Mavroudeas (2020a), Roberts (2020)). The COVID-19 epidemic acted as a trigger that accelerated and aggravated the trend towards the crisis. Several recent reports on the state of different economies give support to the Marxist argument. For example, the recent report by the US NBER (https://www.nber.org/cycles/june2020.html ) declared that the US economy was entering recession in February 2020, before the hit by the COVID-19 epidemic. Similarly, many other reports from other countries – especially for the manufacturing sector (e.g. Germany) but also for the whole economy – point out to the same direction. Hence, Marxism is correct in pointing out that the capitalist economies were already heading towards an economic crisis and that the health crisis brought forward and worsened this tendency.
A health crisis of the type f the COVID-19 epidemic has serious economic repercussions of its own. In order to confront epidemic diseases, it is necessary to suspend social and economic activities (lockdowns, restrictions of factory and other productive activities etc.). These lockdowns are especially necessary when there are no medical tools immediately available (vaccines, medicines etc.) to cure the disease. This restriction of social and economic activities helps to constrain the expansion of the epidemic and gives time to the health system to gather resources for confronting the health crisis. At the same time, this restriction of economic activities depresses the economy. If this happens in times when the economy is already trending towards recession, then the lockdowns accelerate this trend.
This situation poses a critical dilemma for policymakers. When facing a twin crisis (health and economic) and the policy measures required to confront the one crisis aggravate the other, then policymakers must decide to which crisis they will give priority. In Gourinchas’ (2020) pertinent description, ‘policy measures flattening the health crisis curve steepen the economic crisis curve’.
There are fundamental differences on how confronts such a dilemma the capitalist and the socialist economy.
The capitalist economy is based on the private sector and the public sector operates as a support of the former. The private sector works for profit; thus, it engages into activities procuring profits and abstains and/or withdraws from non-profitable activities. Furthermore, the capitalist economy in order to surpass health and economic crises needs to mobilise primarily the private sector (as this is the dominant sector of the economy). This requires using the public sector in order to subsidise the private sector by giving to the latter sufficiently profitable incentives. This is an indirect mechanism that (a) it is not sure that it can work and (b) it wastes time in taking place. Thus, policy measures are slow and fuzzy in a capitalist economy.
On the contrary, the socialist economy operates on the basis of economic planning and its dominant sector is the public sector. Thus, it can have non-surplus producing activities and even loss-making activities if this is decided by social planning. Non-surplus producing activities are viable as socialist enterprises do not operate on the basis of profit-making. Loss-making activities are also viable since they are designated as such by social planning and are structurally subsidized by the other economic activities. Additionally, when faced with an urgent contingency, it can mobilise resources on time and in sufficient numbers as this is a direct mechanism operated by the planning authority. Hence, it is certain that (a) it will take place and (b) be punctual.
For these reasons the socialist economy is better equipped to face contingencies like a health crisis. The capitalist economy can withstand a shorter economic lockdown compared to the socialist economy or even state capitalism. As D.Trump put it for the US economy, ‘it is not built to be shut down’. The fundamental reason is that capitalist enterprises operate for profit; or else they have no reason to exist. Consequently, they cannot operate at a cost of production level and moreover with losses. Unless someone else subsidises them to keep operating, they are going to close. On the contrary, a socialist economy can survive without achieving surplus (profits) by simply covering production costs. For the same reasons it can survive longer even with economic losses. Also, the socialist state can bear much greater burdens than its counterpart in capitalism as the former has much greater economic size and power.
From the previous point follows that socio-economic systems based on a public health sector are better able to cope with the epidemic problem. By analogy, capitalist economies that have a large and efficient public health system face the problem better than those that have a weak public health system and rely mainly on the private health sector (e.g. the US).
- What kind of impact will the outbreak of this epidemic have on the world configuration?
The COVID-19 epidemic has a profound impact on the world configuration. The world system was already in upheaval before the epidemic. The 2008-9 global capitalist crisis has ended the era of the so-called ‘globalisation’ and ushered a period of increased imperialist rivalries. After the collapse of the Eastern bloc, the main Western imperialist powers inaugurated the ‘globalisation’; that is an era of increased internationalization of capital (for a more detailed analysis see Mavroudeas (2019)). The preachers of ‘globalisation’ argued that it was a completely new era, unforeseen before and that this radical change is here to stay forever. Moreover, they argued that it signified the end of national economies and of national conflicts and wars and the spread of (western) democracy all over the world. Within Marxism, the ‘globalisation’ supporters even declared the end of imperialism. None of these ‘stylised facts’ stand up to empirical scrutiny. First, a similar era of increased internationalization of capital existed at least during the 19th century. And this era collapsed after the first global capitalist crisis of 1873-5 and was replaced by a period of increased ‘nationalisation’ (that is return to the national centres) and economic and military conflicts. Second, national economies (and their policies) never ceased to matter. All the main Western imperialist powers conducted their ‘globalisationist’ policies on the basis of their specific national interests and whenever was required the heavy hand of the national state was applied without scruples. In a nutshell, ‘globalisation’ really meant the weakening of most less developed economies and their opening to their exploitation by the main Western imperialist powers. This internationalisation of capital functioned as a typical counter-acting factor to the falling profitability of the more developed capitalist economies; thus, supporting their profitability and their capital accumulation at the expense of less developed economies.
This era run smoothly for the Western imperialist powers till the beginning of the 21st century. However, soon the fundamental contradictions of capitalism resurfaced as the internationalization of capital’s counteracting ability was exhausted. This was exemplified by the weakening of the main Western imperialist super-power, the US. The US economy, despite the benefits of the ‘globalisation’ policies, started to stagger. Similar trajectories emerged in all other major Western imperialist powers and Japan. The eruption of the 2008-9 global capitalist crisis signified the end of the ‘globalisation’, the return to overtly and explicitly national policies and the aggravation of intra-imperialist rivalries. The US Trump administration is the blatant declaration of this process; which however had begun implicitly before.
The COVID-19 epidemic intensifies the ‘de-globalisation’ process. It has become an ideological, political and economic battleground for US’ attempt to bring the People’s Republic of China to its knees. But, more fundamentally it intensifies the dismantling of the ‘globalisation’s’ international value chains; that it the internationalised structures of production and exchange that were constructed during the ‘globalisation’ era. International productive and commercial chains are disrupted due to the lockdowns and the prohibition of movement of people and products from country to country. This leads to a rearrangement of international economic relations along new alliances and on the basis of more overtly national policies. This tendency had begun before the COVID-19 epidemic (see, for example, the BREXIT) but the latter strengthens it further.
- From the point of this epidemic, how do we discern the future development of world socialism? what kind of impact and changes will come out ahead? How should we respond to them?
For the Communist Left and the working-class’ movement, the period marked by the COVID-19 epidemic poses serious challenges. The capitalist world is in deep problems, but the alternative of socialism is not obvious as it is still suffering from the 1989 collapse of the Eastern bloc. Moreover, the majority of the Western Left has been lost in cultural wars and political-correctness, neglected class politics and become a fellow-traveler of bourgeois reformism. The latter is trying to make a come-back in the form of anti-neoliberalism; after its total discredit when it wholeheartedly capitulated to neo-conservative policies in the 1990s. However, this new anti-neoliberalism is simply a façade behind which new conservative policies are being hidden.
First, it is nowadays clear that Neoliberalism has failed miserably. In economic policy, the notion that the market is self-equilibrating and the state should withdraw from the economy has succeeded in increasing the degree of labour exploitation (that is, the rate of surplus value in Marxist terms) but it has failed to cope with the over-accumulation of capital. Thus, the profit rate has not recovered sufficiently. Additionally, its dogmatic view that economic crises are exogenous makes Neoliberalism particularly incapable of formulating economic policies for overcoming crises. By analogy, regarding the health sector, its attempt to privatize public health systems (either directly or indirectly by fragmenting them and creating competition between their segments and by reinforcing public-private partnerships) has seriously damaged them.
The obvious failure of Neoliberalism in the wake of the 2008 global economic crisis marked its substitution by the social-liberal New Macroeconomic Consensus. This is a blend of mild neoliberalism with New Keynesianism. More formally, it is an approach that is Keynesian in the short-run and New Classical in the long-run. The current crisis makes this succession even more evident. Since the first signs of the coming crisis governments not only adopted lax monetary policies but also expansive fiscal policies. In the case of the EU, the coronavirus epidemic led to the disengagement of public spending and deficits from the constraints of the Stability and Growth Pact. Even more striking is the relaxation of restrictions on the countries of the eurozone that are bound by austeriterian economic adjustment programs (e.g. Greece).
Indeed, as the long-run use of monetary policy has led to its exhaustion, the center of gravity of economic policy shifts to fiscal policy as extensive fiscal support packages are announced. Moreover, something unthinkable in the neoliberal times is happening: official voices contemplate the nationalization of strategic sectors of the economy (e.g. Alitalia in Italy).
Additionally, industrial policy is returning explicitly, and in a very active and discreet manner. Indicatively, in the context of the epidemic crisis large sums of money are directed to the health sector; and corresponding vertical industrial policy is not only praised but practically implemented. It should be noted that while Neoliberalism abhors industrial policy in general, its successor (the New Macroeconomic Consensus), at least initially preferred only horizontal industrial policies. Now its pendulum is moving towards vertical industrial policies.
Secondly, there are increasing signs of the forthcoming failure of the New Macroeconomic Consensus as well. The policies it promoted – with the return of a bashful state interventionism and the systematic anti-cyclical use of all state policies – may have averted the catastrophe on the eve of the 2008 global crisis but it failed to rectify the very deep contradictions and problems of the capitalist economy. These problems are already evident in the inability of its economic policies to avert the economic crisis that is being triggered by the coronary epidemic.
The Communist Left and the working-class’ movement should not be the fellow-travelers of the new anti-neoliberal bourgeois orthodoxy. Instead, they should reassert the advantages of socialism over capitalism. They must use this crisis to explain that it is capitalism that creates crises, misery and more frequent pandemics and that replacing it with a planned and democratically run economy would alleviate the living standards of the labouring majority of modern societies.
Apart from this strategic goal, the forces of the Communist Left and the workers’ movement must demand that the burden of the twin crises should be paid by capital. Also, the public health system and in general the public welfare system – that again proved to be the only one able to cope with the epidemic – should be strengthened after years of underfunding and privatisations. Social medicine, emphasis on primary health and universal provision of health and welfare benefits should be the guidelines for these systems.
- Severe infectious diseases are the enemies to all mankind. In your opinion, how did the epidemic highlight the core of a community with a shared future for mankind?
Epidemics are enemies of all mankind but often they are not the product of all mankind but of specific socio-economic systems and the classes that dominate them.
During the last 30 to 40 years, capitalism has become more and more prone to epidemics, in contrast to the prevailing belief that the advances in medicine and the creation of universal and developed health systems had put an end to such phenomena. Especially after 1975 we have the appearance of the ‘emerging epidemics’, i.e. dozens of new diseases, mainly due to viruses, with a frequency that has no analogue in history. These new epidemics are mainly zoonoses, i.e. animal viruses transmitted to humans.
The general explanation of this phenomenon lies in the Marxist thesis on the ‘metabolic rift’, that is, in the realistic argument that capitalism drastically worsens human-nature relations as it blindly promotes the commodification and exploitation of the latter, ignoring natural limitations and social consequences. This thesis does not imply accepting various outrageous ecological views on the return to nature and de-growth, which ignore the fact that (a) all human socio-economic systems intervene and metabolize nature and also that (b) this metabolism is necessary for ensuring even the basic survival of large sections of the human population. But it does mean that capitalism is uncontrollably expanding this metabolism as its central motive is the profitability of capital, which operates with a blind logic (‘après moi la deluge’: I do not care about the system’s survival so long as I get my profit).
But this general explanation does not suffice to explain this increase of epidemics during the last 30-40 years and needs to be supplemented with historical conjunctural determinations. We can reasonably identify the following factors. First, the uncontrolled growth of (otherwise necessary) industrial agriculture has led to the use of problematic hygienic methods that, however, enhance capitalist profitability and has already caused significant problems (e.g. salmonella). Secondly, due to the internationalization of capital (the so-called ‘globalization’), increasing competition internationally imposes the dominance of these production methods as they involve lower costs. Third, the uncontrolled growth of the capitalist agro-industrial complex dramatically limits virgin areas and brings humanity into contact with diseases and viruses that were previously restricted there and concerned small indigenous communities. The latter had either acquired relative immunity to them or the epidemics were limited to these communities and did not spread significantly. Fourth, the internationalization of capital with the proliferation of transport and communication routes between remote areas of the world facilitates the rapid transmission of epidemics throughout the world, while in the past was more limited and therefore more controllable. Fifth, the commodification of the use and consumption of exotic species enhances zoonotic diseases.
Most of these new epidemics (a) do not have strict class barriers but (b) have class asymmetric effects. They do not have strict class barriers because they are transmitted through consumer goods (in the diet) and social gathering and therefore classical methods of class segregation cannot be easily applied (e.g. ‘letting the plebeians die in their ghettos’). However, they have asymmetric effects as workers are more exposed to infections (e.g. ‘front-line workers’), have more unhealthy working and living conditions (e.g. buying cheaper and worse quality consumer products) and of course inferior health care.
This specific character of the new epidemics highlights the necessity to revitalize the socialist movement and struggle to defeat the dominant imperialist powers.
Gourinchas P.O. (2020), ‘Flattening the Pandemic and Recession Curves’ in Baldwin R. & Weder di Mauro B. (eds.), Mitigating the COVID Economic Crisis , London: CEPR Press
Mavroudeas S. (2019), ‘De-globalisation and the Return of the Theory of Imperialism’, σε Kaoru Natsuda K. et al (eds.), Globalisation and Public Policy, London: IJOPEC http://www.ijopec.co.uk/wp-content/uploads/2019/10/2019_13.pdf .
Mavroudeas S. (2020a), ‘The coronavirus pandemic and the health and economic crisis’, https://stavrosmavroudeas.wordpress.com/2020/03/25/4383/
Mavroudeas S. (2020b), ‘Working Hypotheses for the Political Economy of Modern Epidemics’, https://stavrosmavroudeas.wordpress.com/2020/05/27/the-political-economy-of-modern-epidemics-by-s-mavroudeas-marxist-studies-york-university/
Roberts M. (2020), ‘The Virus, Capitalism, and the Long Depression’, interview with Michael Roberts, Spectrezine March 24, https://spectrejournal.com/the-virus-capitalism-and-the-long-depression/