Global Governance
Will COVID-19 Transform States?

Covid-19 has produced the largest increase in government spending outside of wartimes. Governments around the world are providing income support to workers kept from their jobs by quarantines and to mitigate the collapse of demand as ordinary citizens fearful of Coronavirus remain at home and stop travelling, shopping, and going to restaurants, bars and theaters. Governments are investing in the search for vaccines, spending billions for scientists at state and university labs, and in contracts to private pharmaceutical firms, in the hopes that one or more of those will develop an effective drug. At the same time, governments are paying for the construction of multiple factories that will be ready to mass produce vaccines. 

The ways in which states respond to Covid-19 reflect their capacities, their ideological orientations, and the ability of capitalists and other private interests to influence governmental decisions.  The United States stands at one pole. While the US government has the enormous advantage of being able to spend unlimited amounts of money thanks to the dollar’s status as the global currency, the trillions it has spent have been in good part wasted. Supplemental unemployment insurance payments sustained the economy but ended on 31 July. Even more was given to corporations in tax breaks, zero interest loans, and subsidies for retaining workers. However, much of the largess to capitalists ended up fueling speculation in the stock and bond markets, doing nothing to help ordinary workers. Meanwhile, universities, schools, and state and local governments have gotten little. Americans are now facing the coming bankruptcies of many universities, transit systems, museums and theaters, while state and local governments will be forced to dismiss millions of their employees. 

Countries with already existing systems of income support and more robust public sectors have had much smaller increases in unemployment and poverty than the US. The US is unique in financing its universities by charging students tuitions that equal the median worker’s income, costs that students finance by taking on massive amounts of debt that they then have to pay off over decades. If students are unable to attend university in person, the institutions lose income they receive from dormitories and cafeterias. That already has forced some universities to dismiss faculty and other employees. Of course, if there is a prolonged recession, students will be reluctant to take on large debts to pay tuition. These circumstances could bankrupt many universities and already have led those schools to suspend hiring, which will leave the next generation of scholars without jobs and force them from academia. This will have drastic long-term effects in retarding American research in the sciences and humanities. 

While the world waits for the development of a vaccine which could come anywhere from the end of 2020, to a year or two later, to never (remember, there still isn’t a vaccine for AIDS forty years after the discovery of that disease), the US, despite spending more on health care than any country on Earth, has failed to employ contact tracing, enforce quarantines, and then use antibody testing to identify those who have recovered from the disease and can safely interact with others, while providing protective equipment for everyone else. These are the measures that are being used in Germany, South Korea, Taiwan, China, Vietnam, and other places that have been able to keep deaths low and now are able to allow normal life and work to resume. 

The US has not been able to achieve  any of these goals because 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 and the few skilled people doing that task are employed by state and local public health departments or the Centers of Disease Control, all of which have smaller budgets today than they had ten years ago.  

The contrast between the US and the rest of the world provides a real-life demonstration of the importance of strong states with the capacity to develop and implement public health measures rapidly enough to slow and reverse pandemics, and to prevent their citizens from falling into poverty. It also shows the need for a robust social welfare system that can track workers and smoothly step in to provide income support. Of course, in countries where health care is a human right, citizens can go to doctors and hospitals when the feel symptoms, confident they will receive care and not be wiped out financially. Countries, like Germany that built and maintained an excess of hospital beds to be ready for emergencies like the current pandemic, have much lower death rates than Spain or the US which have closed hospitals and reduced the number of beds to save money over decades of neoliberal economizing. 

Popular support for neoliberalism always was limited. The liberalization of finance, and tax cuts for the rich combined with cuts in social benefits, always were elite projects. People around the world are seeing the relationship between governmental capacity and the extent to which they suffer the health and economic consequences of Covid-19.
We don’t yet know if that understanding will be strong enough to change governmental policies and usher in a new era of more assertive and capable states.

If we look at the past century, war and economic disaster have been the forces behind progressive taxation and the expansion of social benefits. Progressive income and estate taxes began during World War I in countries that were both democracies and used conscription to fill their armies’ ranks. Such taxes were described as conscriptions of wealth meant to match the conscription of working-class men. With the end of conscription in most of Europe and the US in the 1970s, tax rates became less progressive. Similarly, social welfare benefits were created and expanded during and immediately after the two World Wars and during the Great Depression of the 1930s. Since then, benefits have at best remained stable and in some countries, above all the US and Britain, have been regularly reduced. 

The pandemic is producing economic hardship that is approaching Depression levels in the US, and the death rate in the US, Britain, Brazil, South Africa, Belgium, and probably a number of countries that are unable or unwilling to count the fatalities, are at double or more of the normal rate. Those are not wartime levels, but then most people in the world have never experiences elevated death rates, and so these tolls are upsetting, disorienting, and panic-producing. 

Are the deaths and economic hardships enough to produce enough political pressure to force government officials to enact new social programs and to finance those with taxes on the rich? It is too soon to say for sure. The strongest evidence that Covid-19 will transform politics comes from what governments already have done. As I discussed above, politicians of the right as well as the left quickly decided to spend unprecedented amounts on relief for the unemployed and to expand medical care. The failures were the result of past cuts in government agencies and infrastructure that made the money spent ineffective. So far, the will to do something remains strong, except among Republicans in the US. Certainly, some of the pressure for spending comes from capitalists who recognize that if demand for goods and services from ordinary people collapses then their firms’ profits will melt away as well. 

On the other side, it is likely that the rich elsewhere in the world will follow the path of American capitalists and turn against government spending. Capitalists always worry that excessive government spending will spark inflation and undercut the value of their wealth. Eventually someone will have to pay for the stimulus, and the rich worry it will be them, and so they well could follow the lead of rich Americans and push for an end to relief. 

In the end, the decisive factor will be the presence or absence of mass mobilization. Fear of death and despair at the collapse of one’s economic security can easily induce passivity. It is possible that people around the world will acquiesce in their immiseration. However, even before Covid-19 there was anger at the ever more extreme distribution of wealth and income and at the ability of financiers to bring down the world economy in 2008 and then get bailed out by governments and not suffer any consequences for their fraud. The clearly unequal way in which the effects of Covid-19 are being felt could provoke mass anger just as well as passive despair. We don’t yet know how such anger would be directed. We see rightwing hucksters like Trump and Bolsonaro trying to turn anger against immigrants and minorities and to convince their supporters that the virus is not real or that it was invented in Chinese labs. Left parties are weak and social movements mostly are disorganized and focus on narrow issues and identity-based politics. However, massive and effective social movements often emerge suddenly. That possibility is the best hope for Covid-19 to produce stronger governments committed to redistribution and to rebuilding states’ capacities to serve their citizens. 
Morality and Law
Elites and the Pandemic: Will Fear of Death and Economic Hardship Lead to Popular Mobilization?
Richard Lachmann
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.
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