U.S. Capitalism Confronts Coronavirus — For the Wealthy

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As the spread of the coronavirus roils the stock market and upends the social and economic lives of working people in the United States, the federal government is stepping in to address the crisis. But in whose interests?

FT Montage/Bloomberg

COVID-19 is wreaking havoc across the globe, shutting down social activity and upending economies in country after country. Some countries have managed to stem the tide — what epidemiologists call “flattening the curve,” which allows health care systems to ramp up to confront a pandemic as the number of cases unfolds more slowly. In the United States, though, the situation grows worse by the minute, thanks to a malignant narcissist of a president incapable of mustering even a moment’s “statesmanship” in the face of what is not only a governmental crisis but also a human one. Instead, Trump worries about “his numbers.” Not a man who reads or, it seems, even really thinks, but only reacts, he comes across as believing the virus can be willed to afflict only his political enemies.

But as Trump and his appointees bumble their way through the pandemic, each day of their failure surely to be a day of death for someone ostensibly under their watch, keep your eye on what the functional adults within the capitalist class do. That is where you will see an economic system that puts profits before human needs reveal some of its worse characteristics.

Capitalism’s functional adults — bankers, financiers, wealthy politicians, corporate CEOs, the idle rich who continue to live off the fortunes accrued by their robber-baron grandparents and great-grandparents — are clamoring for concerted action to ensure that they don’t take a financial hit. They’re worried about their part of the economy: the banks and the stock market, hedge funds, corporate bonuses, and so on. They have a big ally in President Trump, who measures his success by how the New York Stock Exchange closes each day. They’re much less concerned about the part of the economy where the rest of us make a living, if we can.

For what is going on 10 years, we’ve been hearing about America’s “recovery” from the economic collapse of 2008, especially in the period from the last couple of years of the Obama presidency until now. Official indicators had been boasting of a boom: low unemployment, steady growth in the number of jobs, and a bull market. Sure, the “new” jobs largely consist of part-time work at minimum wage, and most workers get little out of a successful day on Wall Street. Yet for the last decade the capitalists have touted the “good news” of an economic recovery in their compliant corporate media. Meanwhile, some 45 million people in this country, nearly 15 percent of all Americans, are “poor” despite being employed — pushed below the official “poverty line” when you add housing and medical costs to their monthly expenses. They make too little to purchase both shelter and food in most large American cities, leading to the phenomenon of the employed homeless. A third of all U.S. workers make less than a third annually of what it takes to raise a family without money anxieties.

And now along comes coronavirus to make all this even worse. Should you worry? After all, the U.S. Federal Reserve Bank is on the case.

Federal Reserve to the Rescue?

Throughout the week beginning March 9, financial markets went wild. Stopgap measures at the New York Stock Exchange, aimed at shutting down trading if losses reach a certain point, were triggered automatically. Traders dumped stocks on “jitters” over the virus and uncertainty about the world’s response, especially the response by the U.S. government — which had its scientists warning things would get worse while Trump and his minions looked into TV cameras and lied outright, saying the country had contained the spread, nearly “airtight.” Over the course of the week, the Fed took action, pumping nearly $1.5 trillion into the financial system to calm the tumult in the market.

All this was a reaction to a week of volatility that culminated on Thursday, with a wild trading session at the end of which the Dow Jones Industrial Average had dropped by nearly 10 percent — the largest single-day percentage decline since October 19, 1987, the “Black Monday” stock market crash. It was after that collapse that the failsafe measures triggered in 2020 were first instituted.

The capitalist class surely welcomes the sentiment behind the Fed intervention, but at least some of them can see beyond their own immediate financial interests to the more systemic problems in the broader economy. In comments to CNBC, Ebrahim Rahbari, director of global economics at Citi Research (an arm of one of the world’s largest investment banks), celebrated the Fed’s focus on “safeguarding market functioning” and on providing “liquidity in scale,” but even he had to admit it wasn’t going to fix the larger economic problems beyond the financial sector. “[W]e think these measures will still not be sufficient to durably stabilize market sentiment yet in light of credit concerns and escalating health concerns,” he said.

In other words, the Fed actions may bolster the short-term health of one part of the economy. The specific measures include extending Fed purchases to include a variety of maturing financial instruments such as bills, notes, and Treasury Inflation-Protected Securities, which will create an illusion of less volatility. And the government will be bailing out the big financial institutions, offering hundreds of billions in repurchase agreements (so-called repos). These repos are a type of short-term borrowing that dealers in government securities can use to raise short-term capital. In other words, the Fed is funding the capitalists with the cash reserves they use to operate.

But will it work? The Fed’s own estimates are that a 20 percent decline in the U.S. equity market would result in about a 1.25 percent drop in the U.S. gross domestic product (GDP). When GDP falls, meaning there’s less production, unemployment rises. When there’s less employment, there’s less cash in the economy with which people can buy goods. That, in turn, reduces the rate of production even more, leading to greater unemployment. Pretty soon, being employed but homeless looks pretty good compared to the alternative. And even if the market “rebounded” the next day, after Trump’s declaration of a national emergency, it promises to remain volatile as the economy beyond the stock market feels these sorts of effects of the coronavirus crisis.

Make no mistake about it: the Fed’s intervention signals a realization among the bourgeoisie that cyclical capitalism faces a catastrophic downturn. It is also designed to buttress the wealthy.

Leaving the Masses to the Wolves

Meanwhile, the working class bears the brunt. As social distancing becomes the norm, low-wage service workers in restaurants lose their jobs, with nothing to fall back on and no government help. Factories face closures; as the Detroit Free Press reported on March 11, “The auto industry is on high alert.” Hourly union workers “are in a unique bind. They can’t self-quarantine and work from home.” And “industry forecasters are predicting global light-vehicle sales will be down by 3.7 million units this year … because of the virus.”

Local and national newspapers are beginning to feature running lists of the job losses. Supply shock from the shutdown of global supply chains led the Port of Los Angeles to lay off 145 drivers after ships from China stopped arriving. As businesses have workers telecommute, a Seattle-area corporate-shuttle service let 75 people go, and a restaurant-services provider furloughed 200.

These are just a small sampling of stories we will be seeing by the dozens in the coming days and weeks. By the time you read this, you can safely assume these numbers have grown by one or two orders of magnitude.

Now, imagine what that $1.5 trillion Fed infusion could buy for the rest of us. It could, for instance, fund paid sick leave for workers, very few of whom in the United States enjoy what is a basic right in many other countries. It could fund payments that would allow parents of children whose schools are closed to stay home from work and care for them. And it could be pumped into remediation efforts for the most at-risk segments of our population: the tens of millions without any health insurance, the homeless, the elderly, and the immunocompromised.

The federal government’s response at week’s end was along these lines, but far less substantive and with every indication that politics and shoring up the capitalist system will come before people’s needs. Late Friday, the U.S. House of Representatives passed legislation negotiated with Treasury Secretary Steve Mnuchin — representing the impetuous man-child president, who says House Speaker Nancy Pelosi has been too “mean” to him to warrant direct talks — that slightly bolsters unemployment insurance, and allows for some emergency food assistance for households with children who typically receive free or reduced-price meals at their now-closing schools (a mere $1 billion, which is a far cry from the amount of the market bailout). It also creates a national paid sick leave policy, although it is limited to this year — to ensure it doesn’t become the kind of permanent program to which workers in nearly every other wealthy industrialized country have access. Employers with fewer than 500 workers will have to provide two weeks of paid sick leave, and provide at least two-thirds of usual pay for workers who can take up to three months of paid family and medical leave related to being quarantined or caring for children whose schools are closed. All of this will be offset with the IRS reimbursing the costs to employers in the form of tax credits — meaning average taxpayers, not the capitalists themselves, will be covering the costs. 

The Senate, as of this writing, still needs to pass the legislation — which is likely to happen, although perhaps it will be amended. Trump signaled late Friday that he would sign the bill, despite having falsely claimed earlier that it’s all a Democratic ruse to “get some of the goodies” they’ve been after for decades. Senate Majority Leader Mitch McConnell had said it was an “ideological wish list” and complained that “left-wing political messaging may have taken priority over the needs of our country.” But the pressure of the crisis pushed these politicians beyond where they genuinely want to go.

Assumedly, those “needs” include shoring up fossil-fuel companies in addition to the big banks. As the Washington Post reported on March 10, “Trump and advisers have been taking calls … from concerned energy sector allies, who have voiced concern and at times exasperation not only about oil prices, but also privately warning against the administration supporting any sweeping paid sick leave policy.” Apparently, there was talk of a government bailout, particularly of shale companies.

Of course, the House measures aren’t some “ideological wish list.” The Democrats are simply more aware that the greater the disruption, the more likely it is that the mass of people in this country will begin to question the capitalist system altogether.

That sentiment comes through in the remarks of Deborah Burger, a registered nurse and president of National Nurses United, speaking at a roundtable on the virus on March 9 in Detroit. Asked by a reporter how the United States could afford to make any COVID-19 free for everyone in the country, she erupted in anger.

Bringing up the polio vaccine, she declared, “Nobody asked how you pay for it, because what they saw were children in iron longs that were going to be damaged forever.” And she continued, “How insane and cruel is it to suggest that we have to figure out how to pay for it when we can actually go to war and not ask one question, but to prevent this kind of a disease, we have to say, ‘How can we pay for it?’”

The answer is this: on the backs of the working class. That’s how confronting the coronavirus will be paid for, and it’s not just through our tax dollars being deployed to bail out the ruling class. It will be in the form of lost jobs, lost homes, and lost lives.

The U.S. Centers for Disease Control admonish us to wash our hands often to steer clear of this virus. That’s good advice. So is this: let’s wash our hands, once and for all, of this corrupt system of capitalism that flings us from crisis to crisis, from boom to bust, from employment to unemployment, and that is ultimately leading us to the destruction of the planet and human life as we know it.

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About author

Scott Cooper

Scott Cooper

Scott is a writer, editor, and longtime socialist activist who lives in the Boston area.