PART I
ANALYSES
The Old is Dead, the New Canât be Born
Coronavirus and the World-Economy
Ravi Arvind Palat
The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a variety of morbid symptoms appear. Antonio Gramsci, Selections from Prison Notebooks.
The novel coronavirus pandemic has struck the world-economy in a way no other crisis had done before. Earlier pandemics â like the Spanish flu of 1918 â struck a world which was far less integrated than today and supply-chains did not then span the planet. Nor was there then the volume of long-distance travel that could transport the virus all over. Since the SARS epidemic in 2002, airline data indicates that air traffic from China alone has increased ten-fold. The Great Depression of 1929â33 settled in over time: now, as countries close their borders and order all non-essential businesses to shutter their stores and offices, economic activity has ground to a halt without parallel. At that time, manufacturing commanded a large share of the economic output, and inventories that piled up could be sold as conditions eased up. Today, services account for the bulk of economic activity and a haircut, an Uber ride, or a dinner at a restaurant foregone cannot be made up. The global financial crisis of 2008â09 may have plunged economies on both sides of the North Atlantic into a recession but not China, India, Brazil and other âemerging market economies.â This time it is different: it affects the entire planet even though its impact is conditioned by how this virus mutates and scythes through populations with different immunities and age, class, gender, and ethnic compositions.
The very distinctiveness of the current situation makes past experience a poor guide even though past experiences can provide some clues. The last major pandemic was the Spanish flu of 1918 which may have come out of Kansas and is estimated to have killed 1 to 2 per cent of the world population. But its impact across the world varied widely: 60 per cent of its fatalities came from western India where a major drought did not prevent grain exports to Britain and the malnourished population was more vulnerable.
The greater vulnerability of the poor to the novel coronavirus, Covid-19, will tragically be repeated once again. Social distancing as a means to mitigate its spread will have little effect in densely populated, low-income states. How do people in slums or informal settlements practice what is misleadingly called social (rather than physical) distancing? In Johannesburgâs
Alexandria township, 700,000 people live on 1.9 square miles; the same number of people are crowded into Dharaviâs 0.81 square miles in Mumbai; and Rio de Janeiroâs Rocinha is as large as Dharavi but with only 200,000 people. Daily labourers, and people who sell used clothing or vegetables donât have the luxury of working from home. Nor do people in slums and favelas have easy access to running water to practice the hygiene recommended to prevent contagion.
Ethnic and racial minorities in wealthier countries are also less able to practice physical distancing. A study by the Economic Policy Institute in Washington, D.C., found that less that 30 per cent of the people in the United States have jobs that can be done from home in 2018. Even if new telework technologies like online schooling are included, only 16.2 per cent of Hispanic workers and 19.7 per cent of African Americans are able to work from home compared to 30 per cent of Whites and 37 per cent of Asian Americans. According to the latest available figures in 2017, 30 per cent of the households in the US lacked broadband access â underlining not only the limitations of telework but also of online schooling.
Taxi owners in New York City who took out large loans to buy the medallions to drive yellow cabs are facing ruin as air traffic virtually ceases and the city shuts down. People supplying essential commodities â fruits, vegetables, and other agricultural products â have no option than to work if they are to feed themselves and their families. And in the United States, they and the workers in abattoirs are poorly-paid migrants â though subway ridership in New York has fallen by 87 per cent, in poorer neighbourhoods populated by migrants from Latin America and Africa, subway stations are almost as crowded as they were in pre-lockdown days.
A three-tiered system of privilege thus develops in the most powerful country in the world: the affluent withdraw to their second homes in the hills and seaside resorts, placing intolerable burdens on local medical facilities; a middle class trying to work at home and school their children; and a working class compelled to lay their lives on the line and work in stores, fields, transportation, and other essential services.
It should be blindingly obvious that policies implemented in wealthier North American and European countries cannot be blithely applied in the Global South â and yet that is precisely what the Narendra Modi government did in India. It imposed a virtual ban on movement within the country for 21 days with just 4 hoursâ notice â leaving migrant workers stranded and making no provision for wages in a country where upwards of 90 per cent of the working population are in the informal sector and the density of population is almost 400 per square mile. Six weeks after the national lockdown was imposed, when trains were finally organized to take migrant workers home, the Karnataka state government refused to let them go because construction companies were anxious not to lose their labour, effectively confining them to their jobs in serf-like conditions.
Additionally, the clampdown has itself aggravated problems, especially the issue of gender inequality. In many places, the lockdown has led to an increase in the incidence of domestic violence as women and children are confined to their homes, and often deprived of their phones and thus unable to ask for assistance.
Rather than social distancing â especially in cities such as Mumbai which has a population density of 73,000 per square mile â and confining people to tiny tenements separated by tarpaulins or tin walls, epidemiologists advocated community participation. Yet, the ban on movement has expelled millions of migrant labourers from the cities where they have no opportunity to earn to walk hundreds of miles to their villages â perhaps the greatest exodus in history after the Partition â exposing them and others to the virus! A disease which was imported into the country by those who could travel and study abroad is devastating the lives of those who could least afford to protect or feed themselves!
Conversely, Jair Bolsonaro of Brazil and Andrés Manuel López Obrador of Mexico have dismissed the pandemic as a minor aberration. Bolsonaro has even denied that Covid-19 is anything more than a cold, at least before he himself was infected, and the drug cartels are imposing night time curfews in the favelas and in a deliciously ironic twist, Mexico is securing its border with the United States!
Low income countries also do not have the infrastructure to deal with a major pandemic: Bangladesh has 170 million people but only 500 ICU beds. The worst affected country in Europe, Italy, has only 4 doctors per 1000 people; India has less than 1 and other countries fare even worse. Populations of low income states are also more vulnerable to environmental pollution which reduces their immunities. One third of coronary respiratory diseases in the world in 2018 were in India which also has the largest number of tuberculosis patients in the world â and the latter are especially at risk for Covid-19. Though early estimates of infections in India proved to be unduly pessimistic, and very good contact tracing and isolation helped contain the spread of the virus especially in Dharavi, India has at the time of writing the third highest number of infections in the world after the United States and Brazil and this might well be an underestimate given the inadequacy of health infrastructure in the country.
Much of the clothing sold by big brand name corporations in the Global North are made by workers in China, Bangladesh, Laos, Cambodia, and elsewhere. With lockdowns being imposed in Europe and North America, companies are cancelling orders and since manufacturers are only paid once their products are shipped while they have to pay their workers and material suppliers beforehand, they are now stuck with large inventories of clothes that have shelf-lives determined by the season. The Bangladesh Garment Manufacturersâ and Exportersâ Association reported this week that orders worth $1.8 billion have been put on hold and $1.4 billion cancelled. This has led to millions of workers being sent home without pay.
Their governments do not have the ability to bail out manufacturers in the ways contemplated by governments in high-income states. Unlike the United States, they cannot simply print more currency, especially when the currencies of states in the Global South are plunging relative to the dollar: the Indian rupee is now at a historic low as is the South African rand to take just two examples. It is clear, then, that the impact of the virus will be felt disproportionately by the poor, especially in low income countries.
If the disproportionate impact on the poor is similar to prior pandemics and crises, it is not at all clear how the world-economy will emerge out of it. Responding to the collapse of stock markets, governments are pumping money into the economy but when people are ordered to stay home, the circulation of money slows down as well â especially for small businesses. The Amazons and the Walmarts may advertise for tens of thousands of more workers, but that will barely make a dent in the number of employees shed by small businesses.
Broadening our aperture, the scale and suddenness of economic and social disruption is such that there can be no return to the pre-pandemic situation. Supply-chains within and between states have been severed, perhaps irretrievably. The range and severity of these disruptions would depend on how Covid-19 impacts populations â depending on the virusâ mutations and age, class, ethnic, and gender distributions of specific population groups with their different disease experience and immunities. Given the expansion of robotics and numerically-controlled machines, the ongoing disruption of supply chains may well lead to a further replacement of workers by these technologies, especially if the virus scythes through low-income economies disparately.
Again, while the stock market collapse and rise of unemployment may recall the Great Depression, conditions today are very different, During the 1920s and 1930s, the industrial working class was a key component of the recovery. Solidarities forged in factories and mines were the basis of organizing against deprivation â to the New Deal in the United States and to an expansion of the modern welfare state in Europe. Widespread de-industrialization and the destruction of unions in the contemporary world have cut the ground from under the trade unions. In these conditions, as the electoral appeals of Trump, Boris Johnson, Matteo Salvini and others indicate, the atomized successors to historically advantaged middle and working classes have turned against ethnic minorities and migrants; against globalization and towards a reactionary nationalism. This is true not only in Europe and North America but even in South Africa where migrants from other African states face xenophobic attacks.
Keynesian policies adopted in the Great Depression to increase demand did reduce unemployment but not by nearly enough: in the US, it fell from a peak of 25 per cent in early 1933 to 14 per cent in 1940. It was the Second World War which transformed the US into the breadbasket and factory for the Allied war effort and military mobilization which eventually solved it. And after the hostilities, when de-mobilization raised the prospect of surging unemployment again, Pax Americana led to a new burst of economic prosperity that lasted for a little over two decades â the âGolden Age of Capitalism.â
The Cold War was the essential element of this age: military mobilization and aid to European allies, and domestically a pact between Big Government, Big Business, and Big Labour in the United States led to an era of consumerism at home and abroad; the Soviet Union which assumed responsibility to maintain the peace from East Germany to the 38th parallel similarly implemented relatively successful reconstruction in its zone; and independence brought modest rewards to former colonies in Asia, the Middle East, Africa, the Caribbean and elsewhere.
Today, the United States exercises no intellectual leadership: indeed, its president with, what Peter Baker and Maggie Haberman characterized in the New York Times as, his âprofound need for personal praise, the propensity to blame others, the lack of human empathy, the disregard for expertise, the distortion of facts, the impatience with scrutiny or criticismâ has proved singularly inadequate to the task. His attempts to buy exclusive rights to a vaccine being developed by Curevac, a company funded by the German government, has offended and exasperated not only the Germans but all thinking citizens everywhere. This is hardly the type of leadership one expects from the leading power. Even worse, the US prevented a G7 declaration on the virus because of the Trump Administrationâs insistence on calling it the âWuhan virusâ instead of the âcoronavirusâ!
In contrast, China is stepping up to aid countries: sending doctors and medical supplies to countries from Peru to the Philippines, Japan to Spain. Cuba is dispatching its doctors to Europe and elsewhere. The United States, after having failed to secure exclusive rights to a potential vaccine, is now scouring Eastern Europe and Central Asia for medical supplies after initially refusing to implement its Defense Production Act to compel its domestic industries to produce these vital goods in a critical time. Rather that demonstrating leadership, seeking to procure essential medical supplies from these poorer states harkens back to Britainâs policies of requisitioning food from its colonies even when they were suffering droughts.
After much wrangling, and overcoming sustained opposition from a group of small but rich âfrugalâ member states, the European Union instituted a debt-financed deficit spending programme at the union-level to help its poorer states. While this does not quite mutualize debts of member states, it assures the EU of permanent access to market credit. Moreover, though the leaders of member states evaded the question of how to raise money to service the common debt besid...