Popular demands could force some elites to make significant concessions and that, in turn, would create splits between elites forced to compromise with non-elites and those in other countries who are able to continue with neoliberalism. Covid-19 could disrupt the current stable global alliance of elites all committed to neoliberal policies and create sharp national differences that will produce global divisions and elite conflicts, writes Valdai Club expert Richard Lachmann.
How will the coronavirus pandemic affect elite power and relations among elites within the United States and throughout the world? Elites in many countries, but especially in the United States, have demonstrated that they lack either the strategic judgment or the organizational capacities to prevent the spread of Covid-19 or to mitigate the economic effects of the prolonged lockdowns that have been necessary to limit the rapid spread of the virus.
The disastrous shortcomings in America’s response to Covid-19 are legion:
Despite spending 50% more, both per capita and as a percentage of GDP, on medical care than any other country in the world, the US still is unable to implement the mass testing for Covid-19 that has allowed East Asian countries to stem the virus. Hospitals lack enough ventilators, not to mention masks and gowns for their staff.
Mass quarantines, a necessary measure to stop or at least slow the spread of the virus, have left at least 20% of the US workforce unemployed by the end of May. The $2 trillion relief measure, the so-called CARES Act, has proven unable to quickly send much of that money to the unemployed or to their employers, in large part because of the convoluted and decentralized system the US uses to pay out all social benefits, with the exception of Social Security, and the preference for tax credits tilted toward the rich over any sort of direct payments.
Meanwhile, corporations and well-connected crooks already are profiting from government relief funds and exploiting the misery of ordinary Americans. Drug and medical supply corporations and providers of less essential goods are jacking up prices. Well-connected businesses receive tax cuts and special subsidies through the relief bills. The Federal government paid FedEx more than twice as much as it would have cost to use Defense Department transport planes to ship health supplies. The Federal Reserve is providing trillions of dollars to large corporations that will use more of the money to pay off debts incurred from stock buybacks and mergers than to keep workers on their payrolls.
It is easy to see the failure to respond to the health and economic emergencies as the result of Donald Trump’s unprecedented ignorance, corruption and cupidity. However, that way of thinking is highly incomplete and can lead to the mistaken view that if Biden is elected president this November and he restores the Obama era all will be well again.
In reality, the US government is handling the current crisis in the same way that it deals with most problems. In January I published a book, First-Class Passengers on a Sinking Ship: Elite Politics and the Decline of Great Powers , that I’d been working on for ten years. I felt that the United States already was deep into its decline, and I wanted to explain how that came about. I thought I would be able to get a clearer idea if I could compare the US with the previous dominant world powers: Britain and before that the Netherlands.
I found that in all three cases narrow elites gained control over the governments and economies of the dominant power. In so doing they monopolized resources and authority that otherwise could have been used to make investments that would have allowed their countries to fend off challenges from geopolitical and economic rivals. We see that today as the US loses the capacity to make and fund plans to convert the economy to green energy, educate the next generation for the sorts of jobs that will exist in this century, or build the basic infrastructure needed to ensure Americans have safe water, clean air, and reliable transportation.
We see the same failures in the medical field. The American healthcare system is organized to allow private entities to maximize their profits. As a result, there is no central coordination and the most effective but least profitable public health measures do not receive enough funds. Contact tracing requires training and paying a large staff of public health workers. That is not profitable. Similarly, manufacturing personal protective equipment, tests for corona virus and its antibodies, and the swabs and reagents required for those tests, are not smart investments in the eyes of for-profit firms. Such items are not needed on a day-to-day basis and so can’t justify the costs of building factories that would sit unused or underused most of the time.
Elite power also has distorted the efforts to provide relief to the millions left unemployed by quarantines for Covid-19. For decades, elites have been able to insert property claims, tax breaks, and monopoly rights into government policies and procedures. As a result, government programs are organized to reward elites’ property interests over everyone else’s need for secure employment and healthcare. Elites use crises as opportunities to leverage their control over elected officials to gain new privileges for themselves.
So it should be no surprise that $170 billion, almost 10% of the CARES Act total, went for tax breaks that benefit the rich. Indeed, 82% of that will go to people making over $1 million a year, and because of the way the law was written the superrich beneficiaries will be mainly real estate and hedge fund investors. The 43,000 people who will gain from these provisions will get an average of $1.7 million each. Compare that to the maximum $1200 all the other Americans receive. The $1200 checks are one-time payments. The tax breaks are structured to give rebates over several years.
The provisions that provide help to small businesses so they could keep their employees on the payroll were distorted by elite power as well. Hedge fund managers lobbied to ensure that the numerous small companies they own would be eligible for these loans that never have to be repaid even though their small business in reality now are part of gigantic firms.
No American elite would be better off if the government created a centralized universal healthcare system or allocated economic relief to ordinary Americans to sustain their incomes. As a result, we can’t expect elite conflict to change US governmental policies. Transformation will come, if it does, only through massive sustained mobilization We are seeing some signs of that in the widespread protests to the police murder of George Floyd in Minneapolis, and in the rising number of wildcat strikes by workers angered at the lack of safety precautions and employers’ refusal to pay bonuses for working in hazardous conditions. However, protests would need to be sustained over months and would also have to mobilize voters to turn Trump out of office and give Democrats a Senate majority. And then protests would need to continue into 2021 and beyond to ensure that the Biden administration would not submit to (or eagerly embrace) the dictates of Wall Street, as Obama did during the crisis of 2009.
Elsewhere in the world the picture is mixed. We should not be surprised when poor countries with weak governments, like that of India, adopt ill-considered and ineffective policies and leave the mass of poor citizens to fend for themselves, even to the point of starvation, in a shutdown economy. Indian elites have no material interest in the wellbeing or even in the mere existence of most of their fellow citizens, and so are content to maintain a low tax/low capacity government. At the other end of the spectrum South Korea, Taiwan, Australia, New Zealand, and China have been highly effective both at stemming the spread of Covid-19 and in protecting their citizens from economic harm. Elites in the three Asian countries are constrained by powerful governments that regulate the private economy and yoke elites and their wealth to state-directed economies. Legacies of strong unions and other forms of mobilization constrain capitalists in Australia and New Zealand.
Europe presents a mixed picture, muddled by the degree to which the EU has blurred the lines between elites within and across countries and made it harder for national governments or unionized workforces to limit elite self-dealing. German elites, and those in other rich countries, have powerful interests in maintaining the EU’s unity. That will require some aid from richer to poorer EU countries to prevent economic disaster. How much aid and under what conditions will be determined much less by the actual needs of southern or eastern members of the EU and much more by the extent to which the masses in those countries mobilize to oppose new effort to impose further neoliberal austerity and instead demand new social benefits.
Elites around the world seem quite unified in their desires to limit the costs they will have to pay to combat Covid-19 or to compensate ordinary workers for their economic losses. The question is whether death, fear of death, and economic hardship will lead to popular mobilization, and if so where in the world that will occur. Popular demands could force some elites to make significant concessions and that, in turn, would create splits between elites forced to compromise with non-elites and those in other countries who are able to continue with neoliberalism. Covid-19 could disrupt the current stable global alliance of elites all committed to neoliberal policies and create sharp national differences that will produce global divisions and elite conflicts.
