It is August 2020, and the Covid-19 pandemic continues to plague the planet. Its mortality rate is low but it has already infected around 15 million people and killed hundreds of thousands. Most governments have and continue to be tormented by an unusual question: “The economy or lives?” Many that have opted for the “economy” have later had to adapt a bit more to the requirements of “life,” and those that made concessions to “life” have later had to lean back toward the “economy.” All of these changes are about pragmatism, and in many cases are essentially a matter of the “relationship of forces” rather than some kind of scientific assessment of “anything.” Put more matter-of-factly, these responses correspond, in large part, to government fears that they will be “pushed aside.”1
The truth is that the initial outbreaks and then resurgence of the virus — which behaves in ways that scientists still do not understand — has paralyzed a significant portion of the world capitalist economy, creating a crisis worse than that of 2008–9, and the deepest crisis since the Great Depression of the 1930s. This can already be seen in the fall of GDP and employment — at least in countries such as the United States and Spain — and remains to be fully revealed in terms of the contraction of growth in global trade.2 As a result, the planet is rife with profound uncertainty over a mixture of an apparently “natural” catastrophe and economic catastrophe that lays bare the vulnerability of the system that — despite the development of “neural networks,” robotics, and the tremendous advances in genetic engineering, which sometimes make it look invincible — is being confronted with choices that seem as if they come out of the Middle Ages.
If we look a little further back, we see that this dual and intertwined shock of pandemic and crisis is coupled with the relative stagnation, endemic weakness, and particular lack of strength that the capitalist economy had been dragging along over the course of the last 10 years — that is, in the period of the post-2008–9 recovery. This chain of events is not insignificant. The rhythms of the pandemic will determine, in part, the timing and dynamics of an economic recovery that will naturally emerge at some point. However, a number of circumstances3 lead to an expectation that — at least in the medium term — it will be even weaker than after 2008–9, with the economy failing to return to the trend predicted before the crisis. In the course of the last decade, the limits of neoliberalism and globalization — which, it is worth recalling, constituted the conditions for the capitalist economy to escape from the crisis of the 1970s — emerged openly and are now magnified under the present conditions. One of the most interesting definitions of the current period lies in the realization that capitalism lacks a clear way out. The lacerating economic weakness and the absence of a strategy, now reinforced by the pandemic and the Great Confinement, have given rise to several circumstances that, considered together, are rather unique historically.
The first circumstance is that the ruling class is displaying, through many of its ideologues, a loss of confidence or certainty about the eternal nature of capitalism’s inherent strengths. This question is revealed in at least three dimensions.
First, there’s the thesis of “secular stagnation.” Maintained by Lawrence Summers, Bill Clinton’s former secretary of the Treasury, it states that unlike what happened during the high points of the neoliberal decades, the huge amounts of money injected since the 2008–9 crisis do not manage to return the economy to the previously predicted trend. That is, it verifies the novel and alarming fact that the capitalist economy cannot seem to find a force that energizes it even if the pace of things is moderated compared to previous decades. A few years ago, Paul Krugman, referring to this “lack of engine” and imagining an impulse comparable to that of World War II, stated ironically the need for an alien invasion of the United States.4 It is to be expected that the endemic weakness of the economy will continue to reign at least in the medium term of the post-pandemic world.
Second, there’s the infamous “end of work” thesis” — a false concept deserving discussion in its own right because of the powerful propaganda it raises within the narrow limits of capitalism, but that nevertheless contains an element of truth.5 Jeremy Rifkin, the author of this thesis that was in vogue in the 1990s (and whose ideas have become a permanent feature of the European Union establishment), wrote another book a few years back titled The Zero Marginal Cost Society.6 In that book — with a subtitle that includes the words “the eclipse of “capitalism” — Rifkin warns that a large part “of the old guard in the commercial arena can’t imagine how economic life would proceed in a world where most goods and services are nearly free, profit is defunct, property is meaningless, and the market is superfluous.”7 The author discusses the logical consequence of the free and finished development of new technologies that, at least in the digital field, show the capacity to reproduce certain services — music, films, books, and so on — without the need to incorporate labor and with almost no capital expenditure requirements, which in neoclassical terms is defined as “zero marginal cost.”
While this complex issue is not fully developed in the present article, two remarks are necessary. The first is that the free development of technologies under capitalist conditions cannot be envisaged. Private ownership of the means of production shapes and to some extent constrains technological development, adapting it — to the degree possible — to its own needs. Patents, “cross-subsidization,”8 and other mechanisms are among the ways in which capital manages to convert into value that which has none, or put a price on something with no price. The second is to note the bit of truth in Rifkin’s reasoning. If technologies were not subject to the constraints of capital, their free development would effectively demand less and less effort in terms of human work, it would mean a greater abundance of goods and services, and it would mean an advance toward the advance towards things being free, the loss of a sense of private property and of the market and, together with them, of profits. Although this is by no means an entirely new phenomenon — “abundance” and “scarcity” are relative and socially determined terms — the truth is that it becomes much more acute and contradictory for capital itself from the moment in which the free reproduction of certain digital services is possible. The general idea of the “end of work” as a trend and as a substrate for the progressive elimination of value, prices, and private ownership of the means of production is, in fact, original to Marx and has been around for a long time, since the publication of Grundrisse.9
The ideologues of capital revive it in two ways: on the one hand, as propaganda and a threat to discipline what could happen under capitalist conditions of production, and on the other hand, as a perception of the strength of a historical trend. It is important to emphasize that, even in its propagandistic meaning, the idea of the “end of work” somehow presupposes the second point, leaving the impression of a system that imagines itself impotent to guarantee by its own internal mechanisms the subsistence of the majorities. This explains the diffusion of the idea of a Universal Basic Income (UBI). It is a proposal subject to multiple interpretations, but is increasingly “discussed” in the context of the pandemic. It is important to emphasize, however, that the most current tribulations of the UBI relate to the consequences of the economic crisis and not precisely to “technological unemployment.”10
Third, there is the confirmation of the aberrant growth of social inequality that slowly moved the academic world and the establishment. Its theoretical corroboration has been popularized in recent years by Thomas Piketty,11 a French economist who follows the postulates of mainstream economics, although he has lately been undergoing a relative shift to the left.25 Piketty’s thesis consists essentially of demonstrating that the increase in wealth and income inequality characteristic of the neoliberal decades is derived from the combination of a high rate of return on capital and a low rate of investment that gives rise to the lagging growth of an upwardly “profitable” economy. In these terms, this joint reality represents the “norm” of capitalism that had previously been an exception after great shocks such as the two world wars of the 20th century, the Russian revolution of 1917, and the crisis of the 1930s. The return of the “norm” determines that inequality tends to restore in the present century the paradigmatic levels of the end of the 19th century. The problem for Piketty is that, as a result of the exceptionality of the post-war period, there is still a “patrimonial middle class” that is threatened with impoverishment — which will provoke strong political reactions.
The thesis of Robert Gordon, a Harvard University economist who has served on all sorts of government councils over the decades, touches that of Piketty in some places, but Gordon’s focus lies in the history of the U.S. economy’s technologies, productivity, and growth. From an economic perspective in which the historical specificity of capital and capitalism almost completely disappears, Gordon refers to it being “normal” that a majority of human existence has been characterized by low-growth. The status quo was shaken only by the “revolutionary century” that extended from the American Civil War to the 1970s, although particularly by World War II and the post-war period. Beginning in the 1970s, the economy lost strength and — with the exception of the 1994–2004 period — tended to reestablish as “normal” the low growth that intensified in the post-Lehman period.12 For the next quarter century, Gordon — a staunch opponent of the thesis of a “Fourth Industrial Revolution” — predicts a growth in productivity and products clearly below the average of the years 1970–2014. It is a situation that could even get worse due to what he calls “headwinds” made up of growing inequality, the lagging increase in the level of education, low population growth, the retirement of the baby boomers and, finally, the upward and unsustainable trajectory of the debt/GDP ratio.13
In more general terms, the combination of weak economic growth and “real” investment, together with an increase in all types of debt (personal, public, and corporate), the technological “threat” and the accelerated increase in inequality, transcends different ideological strands14 and emerges as a kind of “new normal.” One of its most disturbing consequences lies in the destruction of the “middle class” — a euphemism typically used to refer to large sections of the working class15 — or to its highest symbol, the “American Dream,” as a necessary basis of support for “capitalist democracies.” This is a recurring theme that, in the heat of the pandemic, emerges as more urgent and worrisome in the thinking of various commentators, such as Martin Wolf, the leading economics writer for the Financial Times.
False Promises (Or the End of “Progress”)
The second circumstance arises from the way in which these vulnerabilities of capital are felt by the millions of workers and poor people in the central and non-central countries.
The truth is that the economic weakness after the 2008–9 crisis annihilated the weak substitute of “progress” offered by neoliberalism in exchange for “globalization” and the destruction of the conquests of the so-called “welfare state.” In some respects, and particularly during the 1990s and 2000s, a number of compensatory factors have acted to fuel the increase — globally and within most countries — of inequality, including: the proliferation of consumer credit (including subprime mortgages); the mitigation of inequality between countries (enabled by the rise of the so-called BRICS16); the relative reduction in poverty (as understood in World Bank terms;17 the “Chinese Dream;”26 India’s similar dream; and to a certain extent even a Brazilian version; among others. This “devil’s bargain” is what, in the course of the last decade, was watered down first in the “center” and then later in the “periphery.”
It is somewhat surprising that, after so many decades of neoliberalism marked by the increase in inequality — which has led to many studies on the subject — it was only a few years ago that for a large part of the mainstream, including the International Monetary Fund, the issue first became one of serious concern. But it is not so strange. What caused this shift is that for the “lowest-income tenth” of the population, inequality is more tolerable than the idea of “progress” becoming impossible or, worse yet, the possibility of decline. As Wolf points out, inequality as such may not be as socially or politically destabilizing in some societies as it is in others. But a sense of deteriorating prospects for oneself and one’s children certainly matters, as does a strong sense of “injustice.” He also pointed out a few years ago, based on a report by McKinsey & Company, that while increased prosperity reconciles people with economic and social disruption, its absence fosters anger. Recall that the so-called “Arab Spring’ began in 2009 with the self-immolation of a street vendor with a university degree in a Tunisian city. The lack of prospects is at the root of the political and ideological phenomena that, on both the right and on the left, have been shaking up the elites and traditional structures in a large number of countries for several years. Even just before the pandemic, we witnessed open class-struggle phenomena sweeping across much of the planet.
The unity of the pandemic and the Great Confinement magnifies this sense of an absence of prospects in a quite literal way — even if, to a certain extent, it also disciplines and contains the policies of the billionaires implemented in various countries. Nevertheless, the murder of George Floyd unleashed in the heart of the empire what Wolf calls “a strong sense of unfairness” a deep, integrated movement around numerous betrayals and oppressions of both Blacks and whites.
For its part, the litany and lacerating dystopia of the “end of work” — a kind of final blow to the idea of “progress” — manifests itself in three particular ways in the context of the pandemic crisis. First, the direct loss of millions of jobs is not the result of “technological unemployment” but rather flows from the Great Confinement as an image of the fusion between disease and economic crisis. Second, “quarantines” as a central element of economic paralysis function as definitive proof and fuel the overall “self-perception” that — at least for the time being — it is workers and not robots who are the fundamental force driving the economy. Finally, it is quite significant that “technology companies” — including PayPal, Alphabet, Facebook, Tencent, Tesla, Apple, Microsoft, Amazon, and others — are the ones that have increased their market capitalization the most under pandemic conditions. The boom has also reached some smaller companies such as Rappi, Globo, or Pedidos Ya, which do home deliveries of food. But, far from driving away jobs, these companies are emerging as the nuclei of so-called “essential work” and are consolidating themselves at the forefront of the precarity of labor. Even the “unicorns”18 that have laid off workers have done so not to replace them with technology, but instead to restructure due to the crisis.
Overall, the pandemic and the economic crisis have heightened the sense of betrayal and lack of prospects from a system perceived as having little to offer. The American political scientist Ian Bremmer warned about this feeling not long ago in his book Us vs. Them: The Failure of Globalism,19 in which he introduces the concept of “globalism” as an attempt by the elites to convey the idea that “globalization” brings about an improvement for all social sectors. This is the very “belief” that has disappeared from the imagination and that the economic effects of the pandemic push even further away. Just to provide a metaphor for the new way the wind is blowing these days, it is worth noting that Francis Fukuyama, for example, has once again evoked — in his own way — the idea of the class struggle.20
Back to the “Welfare State”?
There is nothing new about the fact that state intervention in the economy — mainly in the United States, the European Union countries, and Japan, in terms of magnitude — have greatly exceeded the monetary and fiscal stimuli implemented in the 2008–9 crisis. The European Union has even just approved a 750-billion euro plan to combat the crisis, financed with common debt and directed, through loans and subsidies, at the most affected countries of the bloc.
The combination of the catastrophic economic impact of the pandemic, the crisis of neoliberalism — manifested above all else, as an inability to address healthcare — and the social and political situation described above, cannot, of course, be dissociated from this macro intervention. Nor can it be thought of in isolation from the immediate differences between the central countries — which with zero or negative interest rates have greater debt capacity — and the dependent or semicolonial countries from which more than $100 billion in capital has fled in recent months. The most interesting reflection, however, lies in the post-pandemic forecasts. Various sectors have concluded that, based on this state intervention, a kind of “reformist statism” could emerge. But the problem is that such a perspective cannot be imagined from the outside. It cannot be imagined given the weakness the capitalist economy — chained to the current upheaval without a way out — has been dragging for more than 10 years. It cannot be imagined in the context of the crisis of neoliberalism and the limits of globalization, nor from the decline and unknown about a “replacement strategy” — issues referred to above. What does all this mean?
First, the particular forms taken by current state intervention do not derive from a “political option” but from the needs of the capital structure itself in the present period. Take, for example, the paradigmatic case of the United States. The Marxist economist Robert Brenner points out that of the more than $6 trillion of fiscal stimulus implemented — according to his calculations — in the last few months by the U.S. federal government, 75 percent (roughly equivalent to $4.5 trillion) went “for the ‘care’ of the country’s biggest and best-off companies,” while only about $600 billion “was allocated to direct cash payments to individuals and families ($300 billion), extra unemployment insurance ($260 billion), and student loans ($43 billion).” In turn, most of that 75 percent has gone to “share buybacks, dividends and executive salary increases.”21 Although the disproportion is obviously considerable, it is worth noting that even the $600 billion is no small amount, and its activation is inextricably linked to the need to contain the “state of mind” discussed in the previous section. But what is most interesting to highlight here is that the absence of restrictions on how most of that 75 percent gets used — enabling, for example, the repurchase of shares as an explicit counterweight to the weakness of investment — responds specifically to a modality of “accumulation” of capital exacerbated over the last decade. State action aims to guarantee this pattern, in the same way that the unlimited purchase of corporate debt guaranteed by the Federal Reserve temporarily decouples stock market capitalizations from the trends of the “real economy.” The unleashing of such “means” — as well as the state’s need to sustain them — derives not, in essence, from “policy decisions” but rather from the exhaustion of new sources for capitalist accumulation that had been conquered during the boom of the neoliberal decades. The growing tensions between China and the United States express, precisely, a fundamental facet of that exhaustion.
The second is closely related to the previous point. If we reflect on the New Deal of the 1930s, it is necessary to observe that it was possible in large part because the United States, despite the great crisis of the Depression, was already the most economically powerful nation on the planet. To give just one example, in 1929 the United States produced 80 percent of the world’s motor vehicles.22 The 1933 Glass-Steagall Act, which separated investment banking from commercial banking, is emblematic in that it cannot be dissociated from the possibility of “productive” accumulation of capital in a nation that became the world’s great industrial power. The characteristics of financial power that today, in their decline, distinguish the United States were still off in the future. It is in the context of these specific economic conditions that the lax and even ambiguous Dodd-Frank law — promoted by Elizabeth Warren of the left wing of the Democratic Party and passed in 2010 — should be interpreted as the most audacious financial restriction to which the disaster unleashed by the fall of Lehman gave rise. The unbreakable relations between commercial and investment banking respond to the characteristics of an extremely financialized capitalism.
Third, and deepening the contrast with the New Deal, its implementation cannot be separated from the unbearable social tensions generated by the Great Depression, combined with the pressure exerted by the existence of the Russian Revolution. These circumstances made the 1930s the decade of the greatest labor agitation in the United States. Of course, it cannot be ruled out that if a greater class struggle erupts in the post-pandemic period — and if it becomes a threat to the very basis of capitalism — the distribution between that 75 and 25 percent will be partially modified, or that some more firm limitations will be imposed on the financial operations of the big corporations and the banks. But even tepidly reformist measures to contain the processes of class struggle will most likely be answered with greater violence by the dominant sectors of capital that lack new profitable sources for expanded accumulation. In this context, new technologies will most likely be used, as always, as a weapon against resistance and to increase the exploitation and flexibility of labor, not to eliminate work. It is worth remembering that, even in the exceptional conditions of the 1930s, the New Deal proved impotent to return the U.S. economy to the pre-Depression trend. In 1937, Congress and the economic establishment even vetoed continuing it, precipitating an abrupt new downturn. Only the “economic miracle” of World War II23 rescued — as Gordon points out — the American economy from the “secular stagnation” of the late 1930s.24
Beyond the immediate measures — which will also vary according to the rhythms of the pandemic, the crisis, and the various tensions being played out under different electoral scenarios — it is to be expected that capital, given the conditions of its current reality, will become even more aggressive. In fact, we are already witnessing this through the labor flexibility being implemented, using the pandemic as an excuse. Likewise, as soon as it is possible, new attempts at pension reform will appear — justified by the enormous accumulated fiscal deficits. At the same time, the limits of neoliberalism, which are largely expressed in growing contradictions between countries, are very likely to lead to more warmongering, although its concrete expression cannot be predicted. The lack of a “replacement strategy” and the continued strong economic dependence between China and the United States will likely translate, among other things, into a more violent U.S. offensive — not only to break China as a competitor but also to increase the freedom of capitalists to take action in that country. The methods to be used, as well as the results, are an open question. But whatever scenarios unfold, there is little doubt that what is not opening for the coming period is some sort of “reformist statism.” Taking all that into account is fundamental to the preparation and strategy necessary for us to take action if we are to avoid new catastrophes for workers and the enormous majority of humanity.
First published in Spanish on August 2 in Ideas de Izquierda.
Translated by Scott Cooper
|↑1||Translator’s note: The title of this article is a play on the title of Luis Buñuel’s 1972 surrealist film Le Charme discret de la bourgeoisie (The Discreet Charm of the Bourgeoisie), which both the author and translator encourage readers to see.|
|↑2||The World Trade Organization had already forecast a decrease of between 13 and 32 percent by 2020. The gap is still too wide to suggest useful historical comparisons.|
|↑3||On the one hand, if the same government policies aimed at containing the crisis after 2008–9 limited the destruction of capital and thus, paradoxically, limited the strength of the recovery, it is to be expected that this effect will be repeated today due to significantly stronger government containment policies (see “Pandemia y crisis: ¿adónde va la economía global?” (“Pandemic and Crisis: Where is the Global Economy Headed?”), La Izquierda Diario, July 1, 2020.) On the other hand, it is to be expected that the qualitative reduction in income that wide swathes of workers and the oppressed are suffering, added to the fears already caused by the pandemic, will limit a recovery in consumption. Also, the unequal timing of the pandemic in different countries naturally delays the return to “normalcy” in international economic relations. An additional essential factor are the conditions of interstate cooperation that after 2008–9 were key, but are now significantly more damaged and face deep structural contradictions (see Paula Bach, “Will Coronavirus Unleash the Next Great Recession?,” Left Voice, March 16, 2020.|
|↑4||Paul Krugman, End This Depression Now! (New York: W.W. Norton & Company, 2012). Translator’s note: The video in which Krugman calls for an alien invasion can be viewed here.|
|↑5||Jeremy Rifkin, The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era (New York: Warner Books, 1996).|
|↑6||Jeremy Rifkin, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism (New York: St. Martin’s Press, 2014).|
|↑8||Nick Srnicek, Platform Capitalism (Cambridge, UK: Polity, 2016), 46.|
|↑9||Karl Marx, Foundations of the Critique of Political Economy (Grundrisse) (1857–61). In the 1990s, Antonio Negri evaluated Grundrisse and developed his own interpretation of this trend Marx had formulated. For a summary of Negri’s approach and a critique, see Paula Bach, “Valor, forma y contenido de la riqueza en Marx y en Antonio Negri: Una diferencia sutil pero esencial” (“Value, Form, and Content of Wealth in Marx and Antonio Negri: A Subtle but Essential Difference”), Estrategia Internacional 17, Autumn 2001.|
|↑10||Translator’s note: While the economist John Maynard Keynes is largely responsible for this phrase becoming part of the mainstream parlance of economics, the idea of job loss caused by technological change goes back much further. Since the dawn of the 21st century, however, the idea has been at the very center of many studies and a source of considerable debate among mainstream economists.|
|↑11||Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Belknap Press, 2014); See also Matías Esquenazi and Mario Hernández, eds., El debate Piketty. Sobre El capital en el siglo XXI (The Piketty Debate: On Capital in the Twenty-First Century) (Buenos Aires: Metrópolis, 2014).|
|↑12||Translator’s note: The bankruptcy of the Lehman Brothers investment bank in September 2008 was the major precipitant of internationalizing the recession that had begun in the United States the previous year.|
|↑13||Robert Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (Princeton, NJ: Princeton University Press, 2016).|
|↑14||See, for example, Wolfgang Streeck, How Will Capitalism End?: Essays on a Failing System (London: Verso, 2016); or David Harvey, Marx, Capital, and the Madness of Economic Reason (New York: Oxford University Press, 2017).|
|↑15||The World Bank defines as “middle class” households that have a low probability of falling into poverty but are not wealthy, with incomes ranging from $13 to $70 per day (based on Purchasing Power Parity in 2011).|
|↑16||Translator’s note: BRICS is the acronym coined in 2010 for Brazil, Russia, India, China, and South Africa — five major emerging national economies that are members of the G20.|
|↑17||The World Bank categorizes those living on less than $1.90 a day as the “extreme poor.” According to a World Bank report, the rate of extreme poverty — which, it should be pointed out, means going from very poor to just “poor” — decreased globally, on average, by 1 percentage point each year between 1990 and 2015. That translates into a reduction from 36 percent of the world’s population to 10 percent, meaning around 1 billion people left the “extremely poor” category. However, between 2013 and 2015, the reduction was only 1 percent. See World Bank, “Decline of Global Extreme Poverty Continues but Has Slowed,” Press Release, September 19, 2018. See also the methodological critique of World Bank research by Australian jurist Philip Alston, United Nations Special Rapporteur on extreme poverty and human rights; “The parlous state of poverty eradication,” United Nations Human Rights Council, July 2020.|
|↑18||So-called “unicorns” are emerging, technologically innovative companies valued at $1 billion or more.|
|↑19||Ian Bremmer, Us vs. Them: The Failure of Globalism (New York: Portfolio, 2018).|
|↑20||Translator’s note: The American political scientist Francis Fukuyama is famous for his 1992 book The End of History and the Last Man, in which he posited that ideological struggle among humans had largely been settled, that the world had chosen liberal democracy, and that free-market capitalism would persist forever, thus signaling the end point of sociocultural evolution.|
|↑21||Robert Brenner, “Escalating Plunder,” New Left Review 123, May–June 2020.|
|↑22||Gordon, The Rise and Fall of American Growth.|
|↑23||A “miracle that, as we all know, resulted in more than 60 million deaths and the destruction of much of Europe, Hiroshima, and Nagasaki, among many other prodigious events.|
|↑24||Gordon, The Rise and Fall of American Growth.|
|↑25||Thomas Piketty, Capital and Ideology (Cambridge, MA: Belknap Press, 2020). For a critique, see (among others) Esteban Mercatante, “Algo huele a podrido en el capitalismo: comentarios sobre lo nuevo de Thomas Piketty” (“Something Smells Rotten in Capitalism: Commentary on the New Thomas Piketty”), Ideas de Izquierda, October 27, 2019.|
|↑26||Translator’s note: First promoted by President Xi Jinping in late 2012, the “Chinese Dream” is a slogan about restoring China’s former greatness and achieving a well-off society with high standards of living for citizens in both rural and urban parts of the country. There are some specific goals associated with the slogan regarding per-capita GDP and modernization associated with the slogan.|