Coronavirus – Public Reading Rooms https://prruk.org/ The Politics of Art and Vice Versa Sat, 04 Apr 2020 16:49:00 +0000 en-US hourly 1 https://wordpress.org/?v=6.1.1 The pandemic, the working class and the left https://prruk.org/the-pandemic-the-working-class-and-the-left/ Wed, 25 Mar 2020 15:40:22 +0000 http://prruk.org/?p=11678 The Coronavirus pandemic is accelerating across the world. Every few days the scope and scale of the disease is increasing. Hundreds of thousands of people are being infected, many thousands have already died and many tens of thousands will die.

In China where the outbreak was first identified, it has been brought under control but elsewhere it is spreading rapidly. In its wake the virus is transforming everyday life. The main way to fight it is self-isolation and social distancing. No longer can people socialise as they did. Grandparents cannot help look after their grandkids. The schools are shut. The supermarket shelves are often empty. Bars, clubs restaurants and all social amenities are closed and will remain so possibly for many months.

The world is turned upside down and everyday life is changed in a way that nobody was expecting.

Swift action in China against the virus gave the rest of the world a breathing space. It gave other countries a few weeks in which to make preparations but few heeded the warning signs. In the US and Europe, few if any preparations were made by governments. Trump called the virus a hoax. He had already closed the White House pandemic office and last July had withdrawn the only US medical epidemiologist embedded in China’s disease control agency in Beijing. This was a ‘Chinese’ virus and would not infect US citizens. But Europe not China is now the epicentre of the virus and many thousands more will die here than there. In the US itself there has been precious little testing and the disease is running rampant.

As governments flounder and struggle to stop the spread of the pandemic, ordinary people are coming together in self-help groups, in streets and on estates and throughout the community, to make sure the vulnerable and the elderly are not abandoned. In the UK, thousands of these groups sprang to life almost spontaneously. They are social solidarity in action and are taking some of the strain off local councils who have seen services decimated through central government cutbacks. This is not only heart warming but is a cause for hope and optimism.

Society is creaking under the weight of the tasks necessary to protect people in this outbreak. It is ill-prepared. The health service is poorly resourced and short of staff and basic equipment. The medical staff struggle to find protective masks. There are insufficient beds and not enough ventilators. The doctors will have to decide who lives and who dies. More morgues are being prepared. All this stems from years of austerity cutbacks which followed the bailout of the banks in 2008. Over that period there has been a massive transfer of wealth from working people to a small elite in society.

When the government says not to panic few believe it. When the supermarkets say there is enough food for all even fewer believe it. The supermarket shelves are emptying. The just-in-time food supply chain is fragile and could easily collapse.

The pandemic has detonated an enormous crisis. It is a crisis not just of health care but of the economy, of our political structures and of society as a whole. It is a global existential crisis of the entire system, it presents a real threat to the continuation of capitalism. Is this an exaggeration?  Some argue that the old routines of society will return once a vaccine is found. People will go back to work, production will resume and things will pretty much return to ‘normal’

Of course it is possible for the ruling class to recover its position, even from such a deep crisis. But is it also possible now to see an alternative path to a new kind of society. A struggle is now engaged over the future – can this rotten system be ended?  For many years this has seemed an unattainable prospect for those on the left. But in the midst of this crisis the possibility of fundamental social change is posed.

The virus has stripped the ideological mask away from society. Every thing that was hidden is now illuminated for all to see. The pandemic unleashes the same social and political dynamic that the world wars did. It accelerates class divisions and class struggle and reveals the real relations of things in society. We can see clearly the social power of the working class. The bankers, the Richard Bransons, the hedge fund managers and the speculators are exposed as the drain on society that they actually are. They add nothing of value.

The real value in society is to be found in those who constitute the actual subject of production, that is in labour itself. It is an ideological sleight of hand that makes the capitalist rather than the worker appear as the motor of production. For those of us on the left this is a truism that we learnt in our early time in the movement. But the change that the virus creates is that this now becomes apparent to all, as clear as day. Everyone now not only sees it but they come out on their balconies and shout it and make noise with pots and pans about it and whatever else they have to hand. And in Edinburgh they sing it in the form of Proclaimers’ songs dedicated to the ‘unsung heroes’ of this crisis – the nurses, the doctors and all those who are keeping society going during this crisis.

Society as a whole recognises the truth that it can dispense quite happily with the bankers but nurses are essential. Even the ruling class understands this and sees its own impotence in the crisis. The virus illuminates this essential truth: that working people embody the common decency of humanity.

Millions of people now recognise the uselessness of this system and of those who rule us. ‘Don’t we need a new form of society?’ ‘Why are things like this?’ This goes beyond leftist propaganda and becomes the talk of everyday life. In the solidarity networks these questions and these discussions are taking place. ‘What sort of society do we want?’. And when the answer to that question is ‘Not This One’, then something is in the air. A profound change in mass social consciousness is taking place.

The questions keep coming. Why are there no medical masks, no ventilators, no hand sanitizer? Where do we get these things? The answer is simple. Requisition the resources from the private health care system, instruct manufacturers to produce for human need. Society can be organised on radically different lines and can serve the interests of the vast majority and not those of a small minority.

This is a potentially explosive situation in class relations. The economic compulsion on the backs of the working class is undermined. Everyone remembers Theresa May saying in the 2017 general election that there was no magic money tree to pay for an increase in nurses’ wages. Now it seems they have found a whole magic money forest to try and preserve their dominance.

So what will happen next? The ruling class senses the danger and is prepared to move quickly and to give ground in order to maintain class rule. They are trying various strategies to preserve their position. At the beginning Johnson and his chief adviser Cummings were both keen on the ‘herd immunity’ strategy which proposed letting the virus rip through society. However after a public outcry and the publication of a study by epidemiologist Professor Neil Ferguson and others from Imperial College which suggested the strategy could lead to the deaths of 250,000 in the UK and up to 1.2m in the US, ‘herd immunity’ was shelved. The government withdrew it declaring that it had never been its strategy in the first place.

The pandemic has driven the world economy into recession to be followed by slump outstripping both the crisis of the 1930s and that of 2008. All the accumulated contradictions within the system that drove previous crises are once again brought to the surface in an even more powerful and destructive way. The measures taken to try and revive capitalist economies over the last ten years have built a massive burden of indebtedness into the system which now threatens its collapse. In its wake it reveals the fragility of all the existing political and social structures in society.

The Tories do not have a clear strategy to extricate themselves from this agglomeration of crises. A class truce is proposed by both Tories and Labour Party to deal with a national emergency. The Tories are prepared to temporarily suspend some of their sectional interests. The Labour Party, deeply wounded by its election defeat, is keen to present itself as a loyal, constructive and responsible opposition.

Jeremy Corbyn, whom the Conservative Party has attacked as a threat to the nation and as an ‘anti-semite’, now becomes an important elder statesman with whom one can work. You will hear little about the anti-semitism crisis in the Labour Party in the coming period. And Corbyn will be replaced by Keir Starmer who is very much a politician that leading Tories believe they can do business with. Some argue that Starmer should be brought into a national unity government. They believe that they will need Labour’s help in order to survive this crisis.

This political truce has its dangers for both parties. Both parties risk being outflanked and surpassed as the catastrophe gathers pace. In this situation the Labour Party is in a potentially powerful position, but doesn’t yet realise it – or more accurately wants to avoid the responsibilities that now rest on its shoulders. It welcomes being asked into the establishment’s inner circles and warns workers to accept and not go beyond what the Tories propose.

But the reality is that labour itself – the working class – is able at this point to exert its social, economic and political power. The Labour Party must represesent the interests of the working class in this context. It must lead, because what we are seeing is a shift in the balance of class forces in society, a change that few of us could have imagined only a few weeks ago. Working people are becoming aware of their power and the possibility of uniting with others across borders.

There is a sense that something must really change and a recognition that society must not return to how things were before the pandemic. Another, better world will have to be made.

The question for the radical left is how are we to respond? Do we have anything to say in this situation?

We cannot just repeat the old formulas. We have to reawaken our historical perspectives of socialist transformation. The answers do not lie in mirroring the strategies of the revolutions of the twentieth century. We must grasp the interplay of the social forces which are presented to us today, historically conditioned as those are, and which form the terrain on which we must fight. Previous revolutionary struggles cannot just be repeated. They left a legacy of positive and negative aspects which will shape our actions now.

Lenin and the Bolsheviks were the product of a specific constellation of historical and social forces. We must fight with the comrades we have and the social forces which exist in our time.

Many millions of people are beginning to understand the need for real social change and are preparing to fight for the new society they want to see. The initial skirmishes in this battle will take many forms and socialists should engage creatively with the new forms of organisation that are emerging and not impose preconceived ideas as to how the struggles should unfold.

The left in the country has been riven by deep divisions over Brexit but in other countries too socialist organisations have been confined to a small political space; and comrades have been isolated from each other in separate organisations, often battling over the minutiae of political differences. I believe it is time to try and unite those socialist forces which understand both the gravity of the crisis and the tasks necessary in the coming period.

There will continue to be political differences and I am not suggesting the abandonment of principles. Instead I am suggesting the abandonment of subjectivity because that is required of us. It is our duty as socialists. We must try and rise to the level necessary to play the historical role that the left has always claimed for itself.

The virus has disrupted the ability of the ruling class to subordinate working people in line with its overall class interest. The virus stops capital reproduction dead in its tracks. The Tories are prepared to give ground because they understand the weakness of their own position. They speculate that this ground can be recouped from labour once everything gets back to ‘normal’. In this belief they have some willing allies in the labour movement. These people are so imbued with the ideology of the ruling class that they cannot imagine the world being any different.

But there is movement now at the base of society. There is anger, a desire for change and there needs to be organisation.

The working class is faced with the possibility, no more than that at this moment, of resolving – in its own interests – some of the problems it has faced for many decades. It begins to recognise the impossibility of continuing to live in a world dominated by capital. A question is posed. How do we create a society based on human need and not profit?

For the radical left there is a new mass audience. Ideas that would have seemed outlandish a few weeks ago now make perfect common sense. Who will now justify the billions or even trillions of dollars being spent on nuclear weapons and other military hardware? Why do we not distribute food to the poor and vulnerable? Why are there food banks? Surely food should be distributed to everyone? Increasingly production and distribution are being brought under state control in the interests of the population as a whole. This cannot be only necessary and desirable during a national emergency. It has to be the bedrock of our society.

There must be no going back and we need to be organised, becoming hegemonic with a new narrative that centres planning, public ownership and solidarity at the heart of our society. The desire for ‘normality’ after the crisis will play into the Tories’ hands, We must resist this and win the case for social, economic and political transformation.

There is a lot more to say on the question of internationalism and on the question of climate change.  During the crisis the decline in industrial production, the reduction of air travel and exhaust emissions reduces pollution and leads to better air quality. There are once again fish and dolphins in the canals of Venice. The fight against the pandemic has to be accompanied by a complete re-thinking about the organisation of society and its relation to the natural world. In the future society must be organised in such a way that the natural world is protected and not destroyed.

We all need to write about and discuss these crucial matters. I will try and write some more on them myself, especially about why building the international movement is a primary task at this moment, and about the dangers we face from the far right should we fail.

Let us recognise the scale of the tasks we face and bring together those forces that have a common understanding of the necessity of ending this system, not saving it.

Time is not on our side. Rosa Luxemburg’s understanding that in her historical period humanity stood on the crossroads between ‘socialism or barbarism’ has never been more true than in ours.

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Coronavirus and capitalism https://prruk.org/coronavirus-and-capitalism/ Thu, 05 Mar 2020 11:47:07 +0000 http://prruk.org/?p=11564 Michael Roberts on the implications for the world economy of the Coronavirus epidemic

Disease, debt and depression

As I write the coronavirus epidemic (not yet declared pandemic) continues to spread.  Now there are more new cases outside China than within, with a particular acceleration in South Korea, Japan and Iran.  Up to now more than 80,000 people infected in China alone, where the outbreak originated. The number of people who have been confirmed to have died as a result of the virus has now surpassed 3,200.

As I said in my first post on the outbreak, “this infection is characterized by human-to-human transmission and an apparent two-week incubation period before the sickness hits, so the infection will likely continue to spread across the globe.”  Even though more people die each year from complications after suffering influenza, and for that matter from suicides or traffic accidents, what is scary about the infection is that the death rate is much higher than for flu, perhaps 30 times higher.  So if it spreads across the world, it will eventually kill more people.

And as I said in that first post, “The coronavirus outbreak may fade like others before it, but it is very likely that there will be more and possible even deadlier pathogens ahead.” That’s because the most likely cause of the outbreak was the transmission of the virus from animals, where it has probably been hosted for thousands of years, to humans through use of intensive industrial farming and the extension of exotic wildlife meat markets.

COVID-19 is more virulent and deadly than the annual influenza viruses that kill many more vulnerable people each year.  But if not contained, it will eventually match that death rate and appear in a new form each year.  However, if you just take precautions (hand washing, not travelling or working etc) you should be okay, especially if you are healthy, young and well-fed.  But if you are old, have lots of health issues and live in bad conditions, but you still must travel and go to work, then you are at a much greater risk of serious illness or death.  COVID-19 is not an equal-opportunity killer.

But the illnesses and deaths that come from COVID-19 is not the worry of the strategists of capital.  They are only concerned with damage to stock markets, profits and the capitalist economy.  Indeed, I have heard it argued in the executive suites of finance capital that if lots of old, unproductive people die off, that could boost productivity because the young and productive will survive in greater numbers!

That’s a classic early 19th century Malthusian solution to any crisis in capitalism.  Unfortunately, for the followers of the reactionary parson Malthus, his theory that crises in capitalism are caused by overpopulation has been demolished, given the experience of the last 200 years.  Nature may be involved in the virus epidemic, but the number of deaths depends on human action – the social structure of an economy; the level of medical infrastructure and resources and the policies of governments.

It is no accident that China, having been initially caught on the hop with this outbreak, was able to mobilise massive resources and impose draconian shut-down conditions on the population that has eventually brought the virus spread under control.  Things do not look so controlled in countries like Korea or Japan, or probably the US, where resources are less planned and governments want people to stay at work for capital, not avoid getting ill.  And poor, rotten regimes like Iran appear to have lost control completely.

No, the real worry for the strategists of capital is whether this epidemic could be the trigger for a major recession or slump, the first since the Great Recession of 2008-9.  That’s because the epidemic hit just at a time when the major capitalist economies were already looking very weak.  The world capitalist economy has already slowed to a near ‘stall speed’ of about 2.5% a year.  The US is growing at just 2% a year, Europe and Japan at just 1%; and the major so-called emerging economies of Brazil, Mexico, Turkey, Argentina, South Africa and Russia are basically static.  The huge economies of India and China have also slowed significantly in the last year.  And now the shutdown from COVID-19 has pushed the Chinese economy into a ravine.

The OECD – which represents the planet’s 36 most advanced economies – is now warning of the possibility that the impact of COVID-19 would halve global economic growth this year from its previous forecast.  The OECD lowered its central growth forecast from 2.9 per cent to 2.4 per cent, but said a “longer lasting and more intensive coronavirus outbreak” could slash growth to 1.5 per cent in 2020.  Even under its central forecast, the OECD warned that global growth could shrink in the first quarter. Chinese growth is expected to fall below 5% this year, down from 6.1% last year – which was already the weakest growth rate in the world’s second largest economy in almost 30 years. The effect of widespread factory and business closures in China alone would cut 0.5 percentage points from global growth as it reduced its main forecast to 2.4 per cent in the quarter to end-March.

Elsewhere, Italy endured its 17th consecutive monthly decline in manufacturing activity in February. And the Italian government announced plans to inject €3.6bn into the economy. IHS Markit’s purchasing managers’ index for Italian manufacturing edged down by 0.2 points to 48.7 in February. A reading below 50 indicates that the majority of companies surveyed are reporting a shrinking of activity. And the survey was completed on February 21, before the coronavirus outbreak intensified in Italy. There was a similar contraction of factory activity in France, where the manufacturing PMI fell by 1.3 points to 49.8. However, manufacturing activity increased for the eurozone as a whole in February, as the PMI for the bloc rose by 1.3 points to 49.2, but still under 50.

The US, so far, has avoided a serious downturn in consumer spending, partly because the epidemic has not spread widely in America.  Maybe the US economy can avoid a slump from COVID-19.  But the signs are still worrying. The latest activity index for services in February showed that the sector showed a contraction for the first time in six years and the overall indicator (graph below) also went into negative territory.

Outside the OECD area, there was more bad news on growth. South Africa’s Absa Manufacturing PMI fell to 44.3 in February of 2020 from 45.2 in the previous month. The reading pointed to the seventh consecutive month of contraction in factory activity and at the quickest pace since August 2009. And China’s capitalist sector reported its lowest level of activity since records began. The Caixin China General Manufacturing PMI plunged to 40.3 in February 2020, the lowest level since the survey began in April 2004.

The IMF too has reduced its already low economic growth forecast for 2020.  Experience suggests that about one-third of the economic losses from the disease will be direct costs: from loss of life, workplace closures, and quarantines. The remaining two-thirds will be indirect, reflecting a retrenchment in consumer confidence and business behavior and a tightening in financial markets.”  So “under any scenario, global growth in 2020 will drop below last year’s level. How far it will fall, and for how long, is difficult to predict, and would depend on the epidemic, but also on the timeliness and effectiveness of our actions.”

One mainstream economic forecaster, Capital Economics, cut its growth forecast by 0.4 percentage points to 2.5 per cent for 2020, in what the IMF considers recession territory. And Jennifer McKeown, head of economic research at Capital Economics, cautioned that if the outbreak became a global pandemic, the effect “could be as bad as 2009, when world GDP fell by 0.5 per cent.” And a global recession in the first half of this year is “suddenly looking like a distinct possibility”, said Erik Nielsen, chief economist at UniCredit.

In a study of a global flu pandemic, Oxford University professors estimated that a four-week closure of schools — almost exactly what Japan has introduced — would knock 0.6 per cent off output in one year as parents would have to stay off work to look after children. In a 2006 paper, Warwick McKibbin and Alexandra Sidorenko of the Australian National University estimated that a moderate to severe global flu pandemic with a mortality rate up to 1.2 per cent would knock up to 6 per cent off advanced economy GDP in the year of any outbreak.

The Institute of International Finance (IIF), the research agency funded by international banks and financial institutions, announced that: “We’re downgrading China growth this year from 5.9% to 3.7% & the US from 2.0% to 1.3%. Rest of the world is shaky. Germany struggling to retool autos, Japan weighed down by 2019 tax hike. EM has been weak for a while. Global growth could approach 1.0% in 2020, weakest since 2009.”

What are the policy reactions of the official authorities to avoid a serious slump?  The US Federal Reserve stepped in to cut its policy interest rate at an emergency meeting. Canada followed suit and others will follow.  The IMF and World Bank is making available about $50 billion through its rapid-disbursing emergency financing facilities for low income and emerging market countries that could potentially seek support. Of this, $10 billion is available at zero interest for the poorest members through the Rapid Credit Facility.

This may have some effect, but cuts in interest rates and cheap credit are more likely to end up being used to boost the stock market with yet more ‘fictitious capital’ – and indeed stock markets have made a limited recovery after falling more than 10% from peaks.  The problem is that this recession is not caused by ‘a lack of demand’, as Keynesian theory would have it, but by a ‘supply-side shock’ – namely the loss of production, investment and trade. Keynesian/monetarist solutions won’t work, because interest rates are already near zero and consumers have not stopped spending – on the contrary. Jon Cunliffe, deputy governor of the Bank of England, said that since coronavirus was “a pure supply shock there is not much we can do about it”.

And as British Marxist economist Chris Dillow argues, the coronavirus epidemic is really just an extra factor keeping the major capitalist economies dysfunctional and stagnating. He lays the main cause of the stagnation on the long-term decline in the profitability of capital. “basic theory (and common sense) tells us that there should be a link between yields on financial assets and those on real ones, so low yields on bonds should be a sign of low yields on physical capital. And they are.”  He identifies ‘three big facts’: the slowdown in productivity growth; the vulnerability to crisis; and low-grade jobs. And as he says, “Of course, all these trends have long been discussed by Marxists: a falling rate of profit; monopoly leading to stagnation; proneness to crisis; and worse living conditions for many people. And there is plenty of evidence for them.”  Indeed, as any regular reader of this blog will know.

And then there is debt.  In this decade of record low interest rates (even negative), companies have been on a borrowing binge.  This is something that I have banged on about in this blog ad nauseam.  Huge debt, particularly in the corporate sector, is a recipe for a serious crash if the profitability of capital were to drop sharply.

Now John Plender in the Financial Times has taken up my argument.  He pointed out, according to the IIF, the ratio of global debt to gross domestic product hit an all-time high of over 322 per cent in the third quarter of 2019, with total debt reaching close to $253tn. “The implication, if the virus continues to spread, is that any fragilities in the financial system have the potential to trigger a new debt crisis.”

The huge rise in US non-financial corporate debt is particularly striking.  This has enabled the very large global tech companies to buy up their own shares and issue huge dividends to shareholders while piling up cash abroad to avoid tax.  But it has also enabled the small and medium sized companies in the US, Europe and Japan, which have not been making any profits worth speaking of for years to survive in what has been called a ‘zombie state’; namely making just enough to pay their workers, buy inputs and service their (rising) debt, but without having anything left over for new investment and expansion.

Plender remarks that a recent OECD report says that, at the end of December 2019, the global outstanding stock of non-financial corporate bonds reached an all-time high of $13.5tn, double the level in real terms against December 2008. “The rise is most striking in the US, where the Fed estimates that corporate debt has risen from $3.3tn before the financial crisis to $6.5tn last year. Given that Google parent Alphabet, Apple, Facebook and Microsoft alone held net cash at the end of last year of $328bn, this suggests that much of the debt is concentrated in old economy sectors where many companies are less cash generative than Big Tech. Debt servicing is thus more burdensome.”

The IMF’s latest global financial stability report amplifies this point with a simulation showing that a recession half as severe as 2009 would result in companies with $19tn of outstanding debt having insufficient profits to service that debt.

So if sales should collapse, supply chains be disrupted and profitability fall further, these heavily indebted companies could keel over.  That would hit credit markets and the banks and trigger a financial collapse.  As I have shown on several occasions, the profitability of capital in the major economies has been on a downward trend (see graph above from Penn World tables 9.1).

And the mass of global profits was also beginning to contract before COVID-19 exploded onto the scene (my graph below from corporate profits data of six main economies, Q4 2019 partly estimated).  So even if the virus does not trigger a slump, the conditions for any significant recovery are just not there.

Eventually this virus is going to wane (although it might stay in human bodies forever mutating into an annual upsurge in winter cases).  The issue is whether the ‘supply shock’ is so great that, even though economies start to recover as people get back to work, travel and trade resumes, the damage has been so deep and the time taken so long to recover, that this won’t be a quick one-quarter, V-shaped economic cycle, but a proper U-shaped slump of six to 12 months.

Michael Roberts blogs at the Next Recession

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