During The Pandemic, A New Variant of Capitalism Has Emerged
Spending is up. The world has been fighting a war against Covid, and in wartime the power of the state always increases. OP, By Larry Elliot, Economics Editor, The Guardian, July 30, 2021. - Excerpts, Ed.:
Over the past 18 months, the world has been amazed at how slippery an enemy Covid-19 has proved to be. The virus first detected in China at the end of 2019 has mutated on a regular basis. Vaccines need to evolve because the virus is changing to survive. The shock to the global economy from the pandemic has been colossal, but things are now looking up – especially for advanced countries. Some are surprised by the pace of recovery, but they perhaps shouldn’t be, because alongside new variants of the virus there has been a new variant of global capitalism. This matters.
For decades the Austrian variant of political economy – the small state, non-interventionist, trickle-down, free-trade, low-tax model based around the ideas of Friedrich von Hayek – was dominant. It replaced the Keynesian variant because in the 1970s a free-market approach was seen as the answer to the challenges of the time: inflation, weak corporate profitability, and a loss of business dynamism. Not even the biggest fan of capitalism would say it is a perfect system, merely that – so far at least – it has proved more durable than its rivals. And the flexibility to adapt to changing circumstances is a big part of that.
The state is now a much more powerful economic actor than it was before the pandemic, much to the disappointment of the free-market thinktanks which are home to Hayek’s disciples. Change was coming even before Covid-19. In retrospect, the last hurrah for the Austrian variant was the aftermath of the 2008-9 financial crisis, a period when the economic orthodoxy insisted on austerity to balance the books. The upshot was weak growth, low investment, stagnating living standards and a backlash from voters..
There were signs of a shift, from the middle of the last decade onwards. Trump was no believer in free trade & called himself a “tariff man”. The unexpectedly strong performance of Corbyn at the UK general 2017- & a powerful anti-austerity message- also moved the dial. PM Theresa May then pledged an end to the policy. Johnson’s shtick at the 2019 election- & subsequently- has all been about levelling up, not about trickling down. This process has accelerated since the start of 2020, at a domestic & global level. Governments of left, right & centre have intervened in their economies in ways that would have been unthinkable 2 years ago: paying wages for furloughed workers; propping up businesses through grants & loans; preventing landlords from evicting tenants; & generally throwing financial caution to the wind.
The world has been fighting a war against Covid, & in wartime the power of the state always increases...
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https://www.theguardian.com/commentisfree/2021/jul/30/pandemic-new-variant-of-capitalism-spending-covid-state
- Does trickle-down economics, Reaganomics actually work? Robert Reich, Ap. 2021.
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