No One’s at the Wheel

Commentators have strained to find the right historical reference point for the economics of the pandemic. It’s World War I, and we’re all hoping it will be over by Christmas. It’s World War II, but with planned demobilization. It’s the Great Depression, but faster and in reverse, with job losses first and financial collapse later.

How should we think about resolving the unique kind of economic crisis provoked by coronavirus? Let’s start by imagining, for a minute, an omnipotent technocrat whose aims were to minimize the economic fallout of the pandemic and prepare to get the ordinary business of capitalism back up and running as efficiently as possible. In this fantasy, the technocrat can transfer funds without limit, edit contracts, and coordinate the redeployment of labor.

From this technocrat’s viewpoint, the problem is fairly simple: public health demands that we hibernate as much as possible, so whole sectors of the economy must shut down or run at whatever reduced capacity can be managed at a social distance. Other sectors need to ramp up production  — because they are either “essential” or at least well suited to catering to homebound consumption and telecommuting.

Even in this fantasy, with the deftest demand management and the most frictionless movement of workers, much of the capital stock would be stuck gathering dust amid unused equipment and empty buildings, while the pandemic-ready sectors would expand only at increasing cost because of skill mismatches and other input shortages.

There would then be a temporary fall in potential output, and some of what is left would be diverted to mitigating the pandemic rather than consumption. Even in the technocrat’s ideal world, there are costs to be distributed. There is no reason they should be concentrated among those tied to the locked-down sectors, and the omnipotent technocrat could spread them around with transfers, taxes, and a temporary revising of contractual obligations of all kinds, from bonds to leases and mortgages. When the vaccine arrives, everything comes out of hibernation and goes back to how things were.

But that is not what is happening. Against this perspective, the default market pandemic response is highly irrational. The OECD estimated in late March that, in most countries, shutdowns would directly reduce output by between a fifth and a third for their duration, concentrated in services and construction. Without a massive public response, the sudden precipitous drops of income in those sectors will then cascade into demand shortfalls across the private sector. Businesses shut down, there is a plunge into mass unemployment, people can’t pay rent or mortgages, millions are homeless, and banks collapse. When the vaccine arrives, the economy remains in a deep depression for years.

The irrationality is obvious to everyone, but the capitalist state is not a rational, benevolent, omnipotent wizard of transfers and contracts. Its existing income-support programs are not designed to keep people secure and spending, but to keep them insecure — to keep the unemployed desperate for work and the employed with something to lose. Its ability to coordinate the renegotiation of private financial and rental commitments is hemmed in by the political power of property.

These constraints are pressing up against the state’s unavoidable responsibilities to engage in public provisioning and market “interference” to avoid unconscionable human loss and economic crisis. The virus and its wider crisis have overturned the market conditions on which both labor and capital depend, and so the class struggle has well and truly reconvened at the political level, with demands on the state to use its fiscal and regulatory powers to redirect flows of capital and edit the structure of contractual commitments.

But whose incomes, and whose needs, will be protected? Will we come out the other side of this crisis having forced the wealthy to absorb the hit, with institutions reoriented toward meeting social needs in an egalitarian way, or will we be hungry, weighed down with debt, and facing years of austerity?

As socialists, our ideal is not of the technocrat hoping to restore the former status quo. There is no rational driver at the wheel anyway. Instead, we know that class struggles will shape how this crisis plays out and the extent to which the costs are fairly shared.

Tangled Interests

One way in which labor and capital seem to be “in this pandemic together” is in looking to the government for income support. Where value is not being produced — whether directly because of hibernation, or indirectly because of the cascading demand failure — neither party is getting paid. Both have seen the market bases of their claims on income collapse — workers in the labor market, and firms in the product market. And so both are looking to the state to keep them above water.

Workers have an especially strong interest in maintaining their employer. We stand to a lose a lot from losing a job, particularly because labor markets are usually buyers’ markets, and all the more so now. Employers depend on us, too, but with slack in the labor market, it is an asymmetric relationship.

Our replaceability makes us individually expendable. Other things being equal, employers do have something to lose in dismissing us, even if it is only the cost of training someone new. But changes in labor law in recent decades have tended to shift the risks of market downturns onto particular groups of workers.

Firms have structured their labor force to meet their own needs for security. They give a core workforce relatively safe jobs, and they buy those employees’ loyalty and effort with high pay, perks, and promotion ladders. Surrounding this core, they have a buffer of precarious casual and fixed-term workers, who can be taken on and let go as needed.

The pandemic has made plain that insecure workers are bearing the risks, and the unfairness is extreme and obvious. As ships go down, some are getting on lifeboats, and others are being pushed out to swim. In many small businesses, the captains are going down with their vessels. Most larger organizations will survive, and their managements are already using the crisis to strengthen their power over their “human resources” in the long run.

Employers are quick to argue that the privileges of secure contracts and good conditions are no longer affordable. Labor must push back on this. This is a fight on two fronts: within workplaces and in politics. It is the duty of those who remain employed to not cut management slack. Organizational budgets may be squeezed, with no easy options, but workers need to resist pressure to pick up the tab created by losing colleagues and soldier on. Large organizations have ways to ride out temporary problems — reserves, borrowing power, and public support. Caving prematurely removes employers’ incentive to push for government support.

This is especially true of public institutions like schools, universities, utilities, local government, and social services. Labor here has a special responsibility to hold the line, because they are potential channels for public funds into the rest of the economy. There is no rationale whatsoever for public austerity at this time. But there are also battles worth fighting in large corporations, many of which have substantial reserves and borrowing capacity, and are even now still distributing dividends to shareholders.

Dangerous, Necessary Jobs

A pandemic is the mother of all workplace health and safety issues. While most of us are asked to hibernate, “essential workers” from nurses to cashiers are kept in harm’s way. They have found themselves facing two opponents, the virus and their bosses.

Cashiers and transport and delivery workers are necessary to meeting our basic social needs. The work of distributing food and other goods is so obviously vital, but it isn’t valued as such.

The pandemic has exposed a horrible irony: many of the workers we need most are those on the most precarious contracts with the lowest wages. Salaried professionals are largely able to ride out the virus by working from home, with full pay, while the service workers who make their food, serve their drinks, and deliver their packages are either “flexibly” tossed out of work or pressured into accepting risks to keep the show on the road.

Meanwhile, health workers are on the front lines of disease control, and they are bearing the lion’s share of risk. The failure to provide basic equipment needed for medical workers’ protection is shocking. The low-paid, precarious position of many workers at elderly-care facilities has put both them and their charges in truly awful positions — throwing together those most vulnerable to the virus with those most vulnerable to lost income should they take a sick day.

These past few weeks have seen strikes on the front lines of health care and all along the food supply and goods distribution chain. The list of workers threatening or undertaking strike action to push employers into better virus protection is growing day after day: nurses in Papua New Guinea, doctors in Zimbabwe, Amazon and McDonald’s workers in the United States, Coles supermarket staff and wharf workers in Australia.

Pandemic class struggles have seen mobilization on the other side, too. Bosses are already organizing for suppressed wages, even for essential workers. The Australian Retailers Association’s first instinct was to argue for a minimum wage freeze, while employers across the board have jumped at the chance to argue that the crisis calls for still more “flexibility” in workplace rules.

But the spread of worker resistance has shaken the social legitimacy of managers, and there is widespread sympathy for these workers now understood as essential to social needs. The public can neither tolerate nor survive shortages and delays on care and food supplies.

It is our job to exploit the changing mood and press for permanent protections — from threats to not only health and safety, but also living standards and security. These essential workers have gone uncompensated for bearing health risks inherent to their jobs as well as far more than their share of economic risks.

Care Deficit

The pandemic is rearranging what Miriam Glucksmann calls the “total social division of labor.” Reproductive labor — the everyday, messy, incessant work of cleaning, provisioning, educating, and caring for family, friends, and other kin — is intensifying. There are new needs and problems, and workplace closures have reduced paid reproductive work and confined it to the home.

The pandemic has abruptly transformed care, which many associate with the labor of parenting through childhood. But care cuts across the lifespan, especially right now. The virus’s threat to life is most keenly felt by older people, whose needs have intensified and become much more complicated under social distancing. The same goes for people with disabilities.

In a well-resourced institutional response to the pandemic, health systems should be a functional part of the care work needed for survival. Ideally, intensive care units offer the vital resources — a bed, a respirator, a well-equipped doctor with a team of healthy, properly protected, and sufficiently paid nurses and support workers. But employed medical care is under extreme stress. If health systems fail, unpaid carers will do their traumatizing work for kin in the absence of professional care.

Care work is already a consuming task for many people, mostly women. The pandemic will take women out of paid work in greater numbers than men, and the increased burdens on them will widen the gender pay gap as working women drop hours or lose promotion opportunities later. School closures are privatizing education in a quite literal way — by leaving families responsible for facilitating and resourcing their kids’ distance education, they will reinforce class disparities.

Professional middle-class women have risen up the ranks of corporate hierarchies by relying on paid care of many kinds: day care, schools, and domestic work. The pandemic threatens to undo the advances of liberal feminism and expose the fiction of a “work-life balance.”

Home Improvement

We are entangled in a web of financial commitments suited to a different world: debts, leases, employment contracts, utility bills. We went into the crisis with agreements that had been entered on the presumption that normal life would go on: businesses expected revenue to grow; workers expected to keep jobs; landlords expected their rents; banks expected mortgage payments. Now those expectations have been dashed.

There is no legal requirement that consumption standards remain where people expect them to be. Consumption is neither mandated nor protected by the legal system in the way financial obligations are. But people have a strong sense of entitlement to the standard of living to which they are accustomed, and this can be a powerful political force. The grocery bill is as necessary an outlay as a rent or mortgage payment.

Thus it has become morally difficult for capital and reluctant states to protect the entitlements of landlords and rentiers in the face of general income collapse: it would involve mass evictions — a public health disaster, if nothing else — and commercial bankruptcies.

Tenant rent strikes and housing occupations are on the rise — and not only among households. Big commercial lessees have been some of the first successful rent strikers, because their landlords depend on their survival. Housing tenants are in a much more difficult position individually — so they must organize to bargain collectively and push for a genuine political solution to their predicament.

The political path of least resistance has been to pause evictions and temporarily defer rents, mortgages, and other debt payments for those unable to pay — either through regulation or by persuading banks and landlords it is in their longer-term self-interest. This deals with the immediate public health problem and subdues the most desperate social tension, but it still protects wealth by keeping people on the hook for the future. Accumulated liabilities from missed rent mount into a crushing debt in a matter of weeks. On the other side of the pandemic, we will be weighed down with an even more irrational network of obligations.

As long as incomes are adequately supported by public transfers, the problem does not arise — people will be able to meet their obligations as anticipated. But if these are not enough, consumption needs must trump contractual payments. The principle should be that pandemic losses are best borne out of wealth and not permitted to squeeze present or future incomes from labor.

To the extent that income and revenue losses mean people and firms cannot meet their obligations, those obligations should be nullified for their duration. Where landlords and lenders depended on those payments to pay their own bills, they, too, can be suspended. Ultimately, the chain of obligations can terminate in the banking system, where they can be managed by a central bank.

Remaking the World

The pandemic has underlined our interdependence — in addition to deep inequalities and the neglect of public provisioning for our collective needs. We will hear a lot more in the coming months about sharing the economic burden of the pandemic. But what does “sharing” mean in societies where the status quo was starkly unequal?

We need to put forward proactive collective claims — in workplaces, households, and civil society — about what fair distribution of costs and social provisioning in the pandemic, and beyond, must involve. The basic principles should be:

• Where incomes must take a hit, higher incomes should do so first. Specifically, income from propertied wealth and executive pay should be cut well before incomes from wage earners.

• No workers (paid or unpaid) should have to bear unacceptable risk or degraded conditions.

• People without formal employment need a basic income defined according to need.

• New public investment in health and social service institutions is urgent and must guarantee the safety, security, enhanced conditions, and pay of currently precarious and undervalued workers.

• In many societies, nationalizing key parts of the food supply chain and other essential services will be necessary to ensure that no one goes hungry or without energy and shelter, nor dies providing these basic goods.

• The public costs created by this pandemic should not be a debt borne by this or future generations of workers.

The notion of “sharing the burden” is already being introduced through moves to weaken labor rights and manage expectations of financial support. We need to head this off, or it will be used as a cover for austerity in the aftermath.

In doing so, we should resist scaremongering about the public debt burden. After all, the real income of society is what we collectively produce. In terms of real output, the aggregate cost of the pandemic is our lost production during it — mostly services that would have left little physical legacy anyway.

We will come out of hibernation again with the same capacity to create. The real losses will be in the past. Whatever hangover of financial claims the pandemic leaves should be thought of as a redistribution of wealth, a redistribution of future claims on future production. It is well within our power to annul that hangover entirely, or to push its obligations entirely on the wealthy.

Orthodoxies have quickly been junked to stabilize the existing system. Revealed as superstitions, they will be harder to impose again when this is over. A crisis of this magnitude, with such a profound impact on everyday life, reveals the weaknesses and deep unfairness of the social structure in which it began.

Everyone has been jolted awake to take a look around them. The fact that even conservative governments have found no alternative to jerry-rigging a welfare state is testament to the continued popular strength of egalitarianism. With confidence and organization, we can feed the public mood to reorder the world permanently.