Opinion: we will only survive COVID-19 with an audacious rewriting of the economy

By Guy Rundle

Tuesday August 18, 2020

(Image: AAP/JOEL CARRETT)

In my local cafe, the smile of the owner is gradually disappearing week by week as he dispenses coffee from behind a piquant little mask. That must have seemed cute a few weeks ago. Now, there is a worry in his eyes that was not there before.

When the first lockdown occurred, he negotiated a deal with the district landlords of his shop for a rent holiday that went for three months. Rent was reintroduced and then suspended again. He has reduced his staff to a single other person in order to give his retinue of staff at least some regular work.

But it’s all starting to come apart.

The Noosa absentee landlords are now wondering if he is ever going to be able to return to the levels of commerce that he has had hitherto — they’re wondering if he will simply put up the closed sign on the shop, head out the back door and keep going. They’re wondering if they should get what renders they still can from whatever reserves he has left, while there’s some steel to get it from.

This would appear to be repeating itself across Melbourne at the moment, and should lockdowns return to other states and to other countries, the same thing will start to happen there.

The lack of a second lockdown in other places has allowed them the benefit — or perhaps the illusion — that they could escape a reckoning through questions about the sort of economy we have, and how well suited it is to any sort of minor interruption.

Everything that is happening now is telling us that this sort of highly complex economy is not set up for even the most minor disturbance, which is really what COVID-19 should actually be.

The simple act of reopening will not be sufficient if a basic level of confidence is not there to inspire people to go out and spend in the manner they once did.

It is clear how easily things come apart. The border disruptions between states are now taking their predictable toll on a national and international food supply, one of the things which federation was specifically designed to guard against.

The grotesque imbalance between the sort of money we spend on luxuries and the amount we spend on what should be necessities is becoming starker by the day. Yet, a vast amount of energy is being expended by the powers that be on keeping social relations exactly as they are, despite whatever rational changes COVID-19 might prompt.

Thus there is now protest at the fact that private corporations are paying out dividends to shareholders, even though those companies have been recipients of JobKeeper.

The difficulty here for those who would seek to preserve the social relations at all costs is that, beyond a certain point, you simply cannot engineer the confidence required to spend or to restore levels of spending and circulation in the private sector.

And there is an absolute and total resistance to any idea that the state might step in — in a good, old-fashioned Keynesian manner — to restore, if not the levels of confidence, then the levels of spending which would fill the gap.

There is an extraordinary level of acceptance here, especially in Australia it would seem, of a whole series of shibboleths about the limited role of government in the economy.

Fran Kelly on Radio National breakfast this week interviewed Matt Comyn, CEO of Commonwealth Bank, in the manner in which one might interview an oncologist about cancer — as someone who can give an entirely disinterested and analytical view of the problem at hand, not one in which interests were at play.

Did Comyn think there was any problem with the fact that dividends were being paid out, even while employees were getting JobKeeper money which would eventually be paid by the taxpayer?

No, surprisingly, Comyn did not think that. Was the level of extra savings at $25 billion such that one might consider negative interest rates as a way of stimulating spending? Comyn thought negative interest rates were not such a great idea. They’ve been tried elsewhere, and hadn’t really been a success.

This is entirely spurious. But Kelly never followed up with the other question, which was whether the head of a bank was objecting to negative interest rates because they might impose an incentive to push money out the door into everyday investment.

The obvious point is that the Commonwealth Bank has no interest whatsoever in whether the economy functions well or poorly at the grassroots level.

Its only interest now is in the higher-flown world of finance, which can apparently tick on endlessly as the economy at street level gets poorer and poorer.

Meanwhile, no one has emerged in mainstream politics with the basic guts or audacity to say that the interruption granted by COVID-19 is an extraordinary opportunity to do some reconstruction of an economy that has become a sort of booby trap.

I don’t want my local cafe to go under. But it might be said that COVID-19 has simply exposed the degree to which we have a policy of having no policy on where spending goes.

The plight, in fact, is that the economy we have now is the result of a system of steadily lowered taxes, higher discretionary spending, high levels of family and public debt, all inevitably directed to the point of consumption in which ever-greater sectors of production have become import sectors — the very reverse of what we have been trying to do with the country for 50 years.

The neoliberal right will, of course, say that this is just a matter of freedom and personal choices. But the current distortions in the economy to deliver the things that we need effectively demonstrate that the very opposite is the case.

Neoliberalism is simply a different system of regulation which prioritises certain forms of expenditure and limits the possibility of others, and therefore systematically removes the option to choose other things which may be of greater importance and utility.

We can not all individually choose to have a better aged care system by an act of a million individual choices; such a thing has to be made as a collective choice.

A neoliberal regime also has a specific role with regard to time, and what one can only call human frailty. Though we know we should save and direct resources towards the things that sustain life — such as proper aged care — the rationality of a system of so-called free choices and individual wants will always win as we respond to the immediate stimuli. We can see this happening in the great superannuation withdrawal that has occurred.

The contradictions of this crisis can be seen nowhere more than in aged care. Simultaneous privatisation and deregulation of aged care means one important thing: that the efficacy of extra expenditure is removed. You don’t really know whether the gold-plated aged care home you have consigned your relative to is really delivering, or if it has dished out the same sort of shoddy care that would be had in a much cheaper home.

Only the very richest people can now afford to have the home-based, 24-hour care necessary in the situation of dementia or other conditions. Yet politicians who won’t be able to afford that have still put in place a system which people contemplate with horror and fear.

Dan Andrews saying he wouldn’t want his mother in a place like this illustrates this as clearly as possible. Where else does he think she is going to end up if she has dementia or other conditions which require constant nursing?

This is simply a retread of the fantasy that everybody has: that they will never put their parents or aged relatives in a home. But sooner or later everybody does, because as we live longer there are increasingly less options for the continued care of a person.

This illustrates not only the irrationality of the system, but its now autonomous character. The fact is, we have created the very opposite of the sort of economy we should have engineered out of prosperity.

And the coming of COVID-19 has made that starkly visible.

We have steered in exactly the opposite direction that the European social democracies did in the post-World War II years, as high-level economic growth occurred. They used higher personal and luxury taxes in order to steer money back into collective control, so it could be redirected towards social investment and the growth of a social plan.

We did what they sought to avoid, which was to allow levels of prosperity to generate personal spending that deprived society of the capacity for greater collective social investment.

Would it be possible that the occurrence of something like the COVID-19 pandemic would allow for an alternative proposal as to how we should organise the economy?

Yes, it would.

This is actually an extraordinary opportunity to reverse that foolish decision to rely on individual consumption and redirect money into social investment, aimed at soaking up the excess savings that some people are accumulating even as others go without a substantial wage.

Such a bond system would rely on the same principles that the war bonds did: first and foremost, of course, to pay for the extra production required to run a total war/social machine. But it was done entirely by borrowing from the public rather than from international money.

That decisively ended the Great Depression by persuading people to spend money on war bonds for patriotic reasons, as well as for their own future security. The governments of the West not only managed to draw back some of the wages that they would pay out through total world production, they also managed to reduce the levels of spending on gambling, alcohol and other diversions, and to prevent the inflation of costs in such diversions which would have been a response to the scarcity of their supply in a war environment.

They did so by making war bonds something other than a simple personal investment. War bonds were an investment in collective security, and in a world mission. They were an expression of mutual support. COVID-19 bonds could be issued to do the same thing as fixed-rate, high-yield bonds separate from the flows of the money market.

And with the stated purpose of redirecting the money towards the things that we now see are essential — such as a better aged care system and a renewed focus on research development, so that we could genuinely be in the race for a COVID-19 vaccine and not be left begging on the global market.

The money from COVID-19 bonds could be used for rapid re-training schemes for many people who will be nearly unemployed, a lot of them from the hospitality industry. Such a system would remove the blackmail of the consumer markets for the future of the wider economy. The money that goes to COVID-19 bonds from savings of those who still have full employment and are accumulating money — money they cannot or do not wish to spend — is redistributed in a manner that increases fairness.

That won’t happen in a political scene that has decisively renounced any sort of dangerous or original strategy which would allow them to present a genuine alternative to the situation we find ourselves in.

So I don’t want my local cafe to go out of business. But if cafes are to go out of business, if there is to be a shift in the basis of the economy, then would it not be better for that shift to be managed consciously, in pursuit of a better society which is close to within our grasp?

The alternative to such an audacious scheme — which is hardly audacious in the grand scheme of political initiatives — is that one morning in late spring of this year, or all at once, 10,000 businesses will suddenly, finally, give up the ghost, hand back the keys, shut the shop and turn the closed sign for the last time.

This article is curated from our sister publication Crikey.

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