Capitalism and its response to crises: Who pays?

The global economy is yet again under severe pressure. While it was the global financial market crisis, which shook the global economy to its core in 2007/2008, it is now the coronavirus, which has increasingly undermined capitalist accumulation. With countries forced to implement strong control measures, closing their borders and asking people to stay at home, the global economy based on production in global value chains is more and more under pressure. Job losses in the airlines industry are likely to be only the first signs of rising unemployment with the whole travel industry under immediate pressure. As in 2007/2008, governments are committed to investing large amounts of money in order to keep the economy afloat for the benefit of everyone, as they argue. Nevertheless, what can we learn from the experience of more than ten years ago?

Photo by Sergio Santos

In 2007/2008, banks and the global financial system were ‘saved’ at enormous costs. Governments around the world invested billions of US dollars to ensure that Lehman Brothers remained the only global financial services firm, which actually collapsed. What was initially presented as a rescue effort to the benefit of all, however, soon turned sour. Around the world, people were presented with the bill of the bank bailout. Austerity budget after austerity budget was rolled out.

In the UK, Conservative-led governments have savaged the public sector and welfare system. The very fact that we are in such a vulnerable position now is due to way the previous crisis was handled. Cuts to funding for the NHS plus part-privatisations have ensured that the system may buckle under additional pressure. The relentless deregulation of the labour market, with zero hour contracts one of the key examples, has pushed many working families below the poverty line (see The reality of precarious work in Brexit Britain). When schools are being closed due to the coronavirus, many children may go hungry, as they lose access to their free School meals (The Mirror, 13 March 2020). Foodbanks launch emergency appeals for donations to cater for the additional demands of people thrown into poverty (see, for example, HIMMAH).

Even during normal times, holiday hunger is a widespread phenomenon in Nottingham, for example, where large numbers of children live below the poverty line. ‘In Nottingham North, 39 percent of children are in poverty and in Nottingham South the figure is 33.5 percent’ (Nottingham Post, 24 January 2018). For the UK as the fifth largest economy in the world a shameful situation, but ultimately not surprising. Austerity since 2010 has ensured an ever-wider gap between the rich and the poor.

Crises such as the coronavirus cannot be predicted. The way we respond, however, is the outcome of struggle. Will it be again the poor and working people, who have to foot the bill, or is the burden spread this time round in a progressive manner? The current Conservative government is unlikely to take into account inequality across society. In fact, capital tends to use economic crises to entrench further its interests at the expense of labour. The global financial crises was not only followed by austerity budgets, but also a wave of privatisations and labour market deregulation. It is up to workers to assert themselves vis-à-vis the oncoming capitalist onslaught to ensure that it is not working people again, who bear the brunt of the hardship!

Andreas Bieler

Professor of Political Economy
University of Nottingham/UK

Andreas.Bieler@nottingham.ac.uk

Personal website: http://andreasbieler.net

20 March 2020