Monday, 25 May 2020 17:05

Welcome to Planet Corona

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 Introduction

The emergence of a global pandemic – in this case manifested as an extremely contagious lung virus, a mutation of SARS – was but a matter of time. Since humanity started to utilize other creatures in agriculture and husbandry, viral mutation rates have seen numerous plagues emerge from the gens animalia to make the leap over to human hosts, from an animal to another. While the excess deaths caused by the sudden overstretch of hospital capacity throughout the world has been tragic, especially as said deaths were preventable, we still should consider ourselves lucky.

The pandemics of the pre-industrial era often wiped out 10-30% of entire populations. The Black Death, the hitherto most lethal pandemic, may have killed half the European population and left an entire civilization devastated. The Coronavirus Pandemic may have been less lethal if the governments and corporations of the world had been more prepared, already from the start in December 2019.

What now are at stake are the healthcare systems, and the ability to even give those seriously infected care. Many states have chosen to install quarantine regimes which has been damaging both to the service economy and to the very complex and established trade networks which have evolved since the end of the Second World War.

Pandemics will continue to emerge as long as we intend to have large-scale animal husbandry – though they most likely would still be relatively rare occurrences. As it previously has been stated, compared with the Spanish Flu and the Black Death the Covid 19 pandemic has been relatively mild, though every human who dies is a tragedy – especially as their deaths would most likely have been preventable with the proper care.

What we however could do is to design our economic system in such a manner that it won’t collapse every time a new unknown disease rears its ugly head.

TL;DR Summary

  • The two dominant theories on inter-regional economic exchange for the last five hundred years have been mercantilism and free trade.
  • Mercantilism stresses that a country should export as much as possible and import as little as possible.
  • Free trade states that there should be as few trade barriers as possible and that each country should ideally only focus on producing and exporting the good which they are “least worst at producing” (David Ricardo).
  • Both these approaches are deeply flawed, and that for other reasons than primarily epidemiological.
  • The idea that Coronavirus will create a more sustainable world is flawed if we look at social sustainability.
  • We argue there is a connection between democratic sovereignty and the ability of a polity to sustain its own basic needs.

 

The arguments for Free Trade

Most of our current trade theories emanate from Europe and from the European imperialist experience (proto-global trade existed before, in the incarnation of the Silk Road). With the Trans-Atlantic trade came spices, gold, silver and slaves which could be shuffled around the trade networks. At the same time as the maritime powers developed colonial empires, Europe as a whole was in a process of emergent statehood – where unified and permanent bureaucratic-administrative bodies grew from what previously had been a collection of feudal fiefdoms.

It was also a period with prevalent and expensive warfare, necessitating the acquisition of gold and silver. Thus, the predominant theory of trade, which also was the first unified theory of trade in a European context, was Mercantilism, the idea that a country should export as much as possible and import as little as possible except for gold and silver. In the context of 17th century European statehood, the state was pre-dominantly seen as a machine to help support a standing army which could expand the state’s territory.

Within mainstream Economics today, Mercantilism is often used as an example of an irrational, pre-modern theory of trade. Irrational both for the individual actors and for the system at large – because if everyone would want to maximize exports but minimize imports soon there will be no one to export to, and everyone would be poorer for this. Yet, if the goal is to acquire enough gold to both buy mercenaries and pay for the arming and feeding of your standing army, if you have a country that is mineral-poor, then Mercantilism is probably the way to go on a continent which is embroiled in a Thirty Years’ War and where the mercenaries expect to get paid in gold.

Having written that, Free Trade has for the last two centuries been the predominant theory of trade in the world. It is a theory of trade which emphasises that the goal of trade should be to maximize the wealth of a country engaging in it, and that the best way to achieve the outcome of wealth maximization should be free trade. With this would mean either two things – that there are as few laws or regulations as possible pertaining the import and export of goods over borders, or that laws and regulations are harmonized as to achieve the same aim.

This article is not going to take a stand on whether or not Free Trade always is to prefer before Protectionism. Some countries with infant industries have managed to take the leap from underdeveloped countries to industrial powerhouses because of protectionist measures which have protected infant industries. The United States, Germany, Japan and South Korea are but four examples. Yet, there is one undisputable mathematical formula which holds an argument for Free Trade, namely the Ricardian Theory of Comparative Advantages, which show that if each of two countries involved in trading focus on the good which they are least bad on producing in terms of efficiency and cost. Thus, they can shift their production toward the potential profitability maximization and thus incur economic growth.

One of the predominant arguments for Free Trade has been the argument that unrestricted trade makes countries co-dependent on one another and thus inhibits them from waging war upon one another. This argument was put to the test in 1914 and largely failed, though since 1945 at large an augmented version of that argument has held sway, namely that free trade guaranteed by a hegemon (America) or by treaties which disconnect vital resources from the state’s ability to use them for strategic purposes.

Thus the arguments for Free Trade is two-fold, namely that it creates economic growth and that it facilitates peaceful relations between countries.

 

The arguments against Free Trade

There are two kinds of arguments against Free Trade, the first one being the protectionist argument that Free Trade would threaten certain sectors of society, for example farmers, miners, industries or certain types of companies which cannot compete against the wages or efficiency of foreign competitors. This argument is treated with contempt by most economists, which sees this as sacrificing the well-being of the entire economy for special interests groups and driving up consumer prices, which is true under a market economy.

The other argument runs against how Free Trade was implemented visavi Developing Countries under the Washington Consensus model, where participating countries were obliged to privatize industries and utilities such as water, electricity and education. This was critiqued by the Alt-globalization movement because these policies were often demanded as conditions for the easement of debt by the IMF and the World Bank (institutions controlled by Western governments), thus bearing unfortunate similarities to blackmail or unethical employment practices built on power disparities. Some of the countries implementing these policies grew in terms of their GDP, others stagnated and others experienced crises. Yet, the common profile of countries like these were that they had large segments of their population living in poverty, and that making resources such as water less accessible helped to cement the steepness of the segments between the income levels, thus keeping the poor poor, though it is debatable whether that was the original intention.

If we also look at industrialization historically, we can see that even the wealthy countries did not initiate industrialization at the same pace. “Late-starters” include all countries apart from Britain and France, and we can see that some countries managed to industrialize under Free Trade regimes, such as Sweden, but that it has been far more common that countries have industrialized using varying means of protections, from South Korea and Japan, to Germany and the United States (protectionism used to be so commonly utilized in the United States that it often was referred to as “the American system” contra the “British system” in the early 20th century). It should also be noted that while the United Kingdom employed Free Trade ideals in their bilateral trade with other countries, that they also until the 1940’s restricted access to British colonies.

Since the 1990’s, arguably, there has been a push for an increased amount of deregulation and harmonization between economies. Examples include the transition from GATT to WTO, the introduction of the Maastricht Treaty, the NAFTA, the TTIP and TPP Free Trade treaties and the discontinued MAI treaty. This policy direction could be said to be what could be  called “globalism”, which originally was coined as a neutral or positive description but in 2020 it is having negative connotations on both sides of the debate, where one side refers to it as a nefarious plot, and the other side refers to it as an anti-semitic conspiracy theory.

The on-going pandemic has showcased the characteristics not of Free Trade, but how the Free Trade Ideology has affected different countries. This is easy to see as different governments and countries during the last 30 years have been more or less utilitarian or ideological in their implementation of Free Trade agreements, and some countries have even voluntarily moved further and made cutbacks on their stockpiles of vital goods such as food, medicine, munitions and equipment such as helicopters and vehicles intended for emergency management. Or oxygen inhalators and face masks. One example is Sweden…

Stockpiles are not trendy

The Cold War was over, and so was industrial society. Instead, we had entered into an entirely new era… one where the national stockpile of not only military equipment but also disaster relief were not essential. Instead, we would focus on a flexible system adapted for aid in distant countries and for advocacy through multilateral forums. This was very much the Zeitgeist of the 1990’s and the 2000’s, and it carried into the 2010’s. At the same point as the apothecaries were privatized (Sweden had a government monopoly on selling prescripted drugs), the government of that era – in its infinite wisdom – decided to trim the stockpile of certain medical equipment, among them face masks and certain medicines. In the case of a medical emergency, it was thought, Sweden would simply buy the things it needed on the world market or ask other countries within the EU for help.

Fast forward ten years and the entire world is engulfed in the Covid-19 Pandemic, and all countries experience a need for hospital beds, medicines, oxygen inhalators and face masks. This would cause problems for countries heavily reliant on the market forces to sort out a global crisis. This crisis is not unique for Sweden – other countries heavily reliant on Free Trade, such as the United States, experience the same kind of hardships and have initial difficulties in assembling stockpiles which they until then have been happy to import from other places, for example China.

Hardly surprising, a lot of the anti-capitalist milieu has piled upon the Neoliberal order, that the failure for the markets to make up for the absence of stockpiles without government intervention is disqualifying the entire post-1991 discourse. That and the subsequent collapse of the service economy brought forth by the pandemic. Much of the economy in the developed world consist of services which – though they may have had a positive impact on local communities and employment, are essentially non-essential for the well-being of the community. Spas, coffee shops, smaller stores and restaurants are employing a significant portion of the young urban population. Most of these companies are hardly making any profits, and are extremely dependent upon their monthly returns. A shock such as the current pandemic will kill a large amount of these companies, turning their employees unemployed, which will decrease their ability to consume and thus lead to a further decline of profits for all companies, turning what initially was a shock in consumer demand into a new great depression, ninety years after the last one.

This has led to triumphant expressions that this current crisis has proven that Neoliberalism is dead, and that we will see a new post-pandemic world. In the 2007-2009 recession, identical claims were made, and they were proven to be equally flawed. So, let us see how the Post-Covid world would probably look like…

 

Welcome to Planet Corona

Covid-19 will not bring forth a sustainable transition in itself. Any such transition will mean a break from the trajectory which was well underway before Covid-19, and as we will see the virus will in fact accelerate our journey through this trajectory. The world was already moving towards creative destruction of smaller and middle-sized companies. E-trading and new net-based forms of delivery were putting traditional family-owned businesses and shops under severe strain, and many firms were already closing down prior to the crisis in most developed countries.

What Covid-19 has done has merely been an acceleration of this trend, and a deepening of it. Companies dependent upon full-time employees and physical places cannot hope to compete with companies that lack physical space to occupy and pay rent for, and employees which they need to cater to. The small to medium-sized companies likely to succeed under this crisis would be companies either heavily reliant on robots or on part-time employees with flexible contracts. This will of course spur the already growing gig economy which already is existent. It will not by itself cause any migration away from the cities and towards the countryside. There could possibly be a lowering of prices of urban properties because of lowered demand, a sort of deflation of the housing bubbles – but that will not increase the demand for workers in cities.

Some may claim that the aid packages offered to companies, and the limited nationalizations which a few governments have engaged in may represent a new paradigm shift. Similar claims were made about the stimulus packages of the Great Recession, yet those gave way to a way of austerity which would hit the social benefit structures of many developed economies. In short, in order to prevent the powerful structures which underpin our financial and economic new world order to collapse under the weight of their own fundamental unsustainability, nominally democratically elected governments decided to transfer wealth previously directed at the poorest members of society to the wealthiest. The same people who were in power in 2010 are still fundamentally in power today, they are funnelled through the same educational systems and think tanks, taught in the same ideology and thus their ideological and mental equipment is based on a philosophy increasingly at odds with reality. Thus, in most countries, apart from perhaps outliers like New Zealand, we are going to see an increased amount of austerity, which will have an added effect of increasing the unemployment in the public sector.

This crisis will last – at least, until around 2024 (and that if we do not experience any other shocks which may prolong it, such as a war in the Middle East or a wave of natural disasters). Eventually, employment numbers will start to rise again, but not to the same levels as around 2019. The new jobs created will also comprise a larger share of part-time contracts, independent contracts, micro-jobs and substitution labour. We could very well hit a new baseline unemployment of around 10%. The global debt will continue to balloon, and new shocks will continue to hit us.

And then, there is automation.

What we are heading towards now if everything is moving ahead in the current trajectory, notwithstanding the climate crisis and the massive over-usage of resources, is a society of extreme inequality, where large segments have fallen into a barter economy while the idea of public education and healthcare will become successively less attractive for an elite dependent on a shrinking class of managers to administrate the IOT-heavy, crypto-funded gated communities within which they thrive, communities which ever-more will resemble medieval fortresses of old.

Does this mean there is no hope?

Rise, we will

What stands clear with the pandemic of 2020, is that the current world economy is very sensitive in the face of shocks, and we can expect the number of shocks to increase, for ecological, social and cumulative reasons. Therefore, it is essential that we self-organize and build up holonic and holarchic communities with the capability to show resiliency in the face of crisis.

The time is here and now, to build parallel institutions and parallel governance, to build online educational facilities to reach the early 21st century Zoomer generation. We need to form communities with the ability to fulfil their own needs of:

  • Food
  • Energy
  • Reserve parts
  • Medical equipment
  • Transport infrastructure

A large part of the future which we would want to help bring about for humanity would be about self-management. This does not mean autarchy or an end to long-distance trading, or that we want to isolate from the wider society. What we need to do is to reach out to, organize and provide education for the classes of people who are seen as increasingly superfluous by our automated world economy – the unemployed and underemployed youth. By giving them access to networks and an ability to create their own economy, we can and we will grow the future technate within this decaying late capitalist civilization.

But this will not come by itself. We all – that includes you – will have to organize, which means join together to increase your resiliency, your ability to survive communally and live in dignity when the superstructure contracts and no longer is capable of providing you the type of life your parents and grandparents once had.

Read 812 times Last modified on Monday, 25 May 2020 17:29