James Galbraith, professor at University of Texas; Albena Azmanova, professor at Kent University, Great Britain
A pandemic may be represented as a ‘natural disaster’. A global depression is however the product of ideology and powerful political actors.
An unprecedented economic crisis is descending on Europe. It is, the president of the European Central Bank, Christine Lagarde, declared recently to the European Parliament, the worst in peacetime.
In the United States, the Federal Reserve Bank reports the worst decline in output and employment in 90 years. The World Bank warns that the world is on the precipice of the deepest slump since 1945—with up to 60 million people pauperised, many in countries already poor.
Lagarde hurried to clarify that this vast human tragedy was, in her view, ‘of no one’s fault or making’—as if a medical crisis could metamorphose into a social crisis all by itself. The catastrophe is however the work of ideas, of politics and of policies.
Science now enables us to edit DNA and to detect gravitational waves in the cosmic curvature of spacetime. Yet in the spring of 2020 governments in the rich liberal democracies of the global north could not provide the basic face masks doctors and nurses needed to save their own lives—and those of others—from the novel coronavirus. In parts of Tuscany, those over the age of 60 could not be put on ventilators if need be.
In the US, testing was botched, delayed and is still not available on demand. In France, vast stocks of personal protective equipment, accumulated for the H1N1 epidemic, had been sold off, stored badly and ruined. In the United Kingdom and Sweden, the authorities thought first to let the virus run free, seeking ‘herd immunity’ at the implicit price of many thousands dead.
These were not mere mistakes or simple accidents: they were political decisions. They were consequences of an ideology built over decades. There were sins of commission and sins of omission—to invoke a pair of concepts developed by Hannah Arendt—their result a fragile economic structure, marked by precarity and primed for collapse.
The sins of commission came first. From the late 1970s, political leaders throughout the west embarked on the formidable project which came to be known as neoliberal capitalism. Deregulation, decentralisation, privatisation, balanced budgets and tight money were key elements of the ‘Washington consensus’ advanced by national elites and the international financial institutions, especially the International Monetary Fund. Public services and welfare programmes were slashed, including critical expenditures on public health.
The initial goals were to break trade unions and curtail inflation, albeit at the expense of core manufacturing capability. By the 1990s these goals were achieved and high interest gave way to a new credit boom, focused first on high technology and, later, largely on real estate and mortgage finance. Manufacturing meanwhile fled to Asia, notably to China, where it was nurtured and protected.
The subprime-mortgage bubble led to the Great Financial Crisis of 2007-09. After that, in many countries, the assault on state capacity continued. Short-term recovery efforts gave way to austerity all across Europe—most notably Italy, Spain, France and Greece—and north America.
Public-health capacity took yet another hit, while neoliberal globalisation made another advance. Rising inequality was a marker of a broad rise in social stress: youth unemployment, mental-health disorders, suicides and in the US an epidemic of opioid abuse. Growth resumed but only on the brittle foundation of still more private and corporate debt.
Numerous sins of omission have followed. In 2017, for example, the European Commission proposed to invest more heavily in vaccines, through a public-private partnership called the Innovative Medicines Initiative. But the drug companies objected and it did not happen.
The US, now under the presidency of Donald Trump, dismantled a pandemic response team at the National Security Council and cut funding for the Centers for Disease Control. In a supreme irony, the administration withdrew the US scientists acting as liaison with the CDC in China.
Lagarde had no role in the development of the neoliberal idea. She came to prominence long after neoliberals had taken control in the former social democracies of the west. She is far from the only person on a long list of those at fault.
But she was finance minister of France before the Great Financial Crisis and managing director of the IMF during the brutal austerity that followed. As a functionary dedicated to an ideology and complicit over decades in the policies which led to the disaster, she has earned her place on that list.