Deciphering the Corona Depression
The ‘Corona Depression’ will be unlike the previous Long and Great Depressions
Kumar David-April 4, 2020, 6:38 pm
The world is too much with us; late and soon,
Getting and spending, we lay waste our powers.
Little do we see in nature that is ours;
We have given our hearts away, a sordid boon!
William Wordsworth
A sordid boon indeed. Man has laid waste to the wilderness and pressed nature and her wild creatures ever closer to extinction. Outraged, nature has as if in anger but actually for reasons well understood by science, jumped species and clobbered us with corona. In all things we are out of tune. Sonia Shah puts it like this:
“It could have been a pangolin or a bat. The race to finger the animal source is on. Speculation about which wild creature originally harboured the virus obscures a more fundamental truth, the accelerating pace of habitat loss. Hundreds of microbial pathogens have emerged into new territory where they’ve never been seen before - HIV, Ebola, Zika and a bevy of novel coronaviruses. The majority, more than two-thirds, originate in wildlife which are not infested with deadly pathogens poised to infect us; these microbes live harmlessly in animal bodies. Cutting down forests, expanding cities, towns and industrial activity creates pathways for animal microbes to adapt to the human body”. (https://www.thenation.com/article/environment/coronavirus-habitat-loss/)
The US now has 250,000 cases and 5300 deaths. China has fallen to fourth place behind USA, Italy and Spain and will soon be overtaken by Germany, Francs, Iran and the UK. Liberal-democracy can't cope with this scale of problem. I don’t have knowledge of epidemiology and genetics to make expert comments but am warmed by the call to preserve the world’s wild and splendid places. Wordsworth’s cry of anguish resonates in an age which has discarded the spiritual. Success now means acquiring money; wisdom, nobility of ideals, discipline or, as paramount to Confucius, duty, matter anymore. Un-Buddhistic thanha is the compass that all inculcate in their children when they exhort the young to go forth and succeed. Money, property and accumulation is deemed normal and right. I am no ascetic, sackcloth and ashes do not suit me, but to deem financial success the primary barometer of morality is unrighteous.
How capitalism transformed the world
Two grumpy chaps wrote something about how the world has changed. I am putting it in quotes though this is not verbatim. “Capitalism put an end to old idyllic relations, pitilessly tore asunder the ties that bound man to man and left no nexus but self-interest - cash payment. The heavenly ecstasies of religious fervour, chivalry and philistine sentimentalism were drowned in the icy water of egotistical calculation. Moral worth became exchange value. Exploitation, veiled by religion and illusion, was replaced by direct exploitation in the market. Every occupation hitherto honoured with reverent awe has been stripped of its halo; physician, lawyer, priest, poet and man of science are now paid labourers. The family stripped, of its sentimental veil, is a money relation”.
“Nevertheless capitalism has accomplished wonders surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses. It constantly revolutionises production and society, advances technology, uninterruptedly disturbs society and creates everlasting uncertainty. All fixed, fast-frozen relations, with their train of venerable prejudices are swept away, all new ones become antiquated before they ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life and his relations to his kind”.
Just a bit more: “Expanding markets chase the surface of the globe; nestle everywhere, settle everywhere, establish connexions everywhere. The world market gives a cosmopolitan character to every country. National industries are destroyed; dislodged by products consumed in every quarter of the globe. In place of the old wants new wants require the products of distant lands. Intercourse is in every direction cementing the universal inter-dependence of nations. And as in material, so in the spiritual, the intellectual creations of individual nations become common property. National one-sidedness is gone; from numerous national cultures arises a world culture”.
This is the world that is facing its third great economic and moral depression now. The Long Depression was from 1873 to1896 and the better-known Great Depression lasted all of the 1930s. This time the imbecility of a finance-capital restructured world (imbecile in capitalist terms) and a horrendous pandemic, have come together to ensure that the world after the Corona Depression of the 2020s will be a world utterly transformed and stood on its head.
“None are safe till all are safe” (Ponnambalam Arunachalam: April 1917)
I have been in a free ranging dialogue with two others; others on the blog kept silent. One of the two was CEO or Chairman of one of Lanka’s biggest and best companies – N.G. Wickremeratne better known as Tanky. The other, HRS is a lowly academic like me who foresaw approaching recession/depression quite early; I the sole godforsaken Marxist in the triumvirate. The point is that there was consensus among people with diverse philosophical predilections.
I avoid a he-said-this, someone-said-that style and summarise the important points of consensus. Here goes: This crisis is bigger than anything that the capitalism has faced before. The previous biggest, the Great Depression, seems less severe because it hardly mattered in outposts like Lanka. Is the bubonic plague a better reference? But GD did wreak havoc in the US. And fascism in Europe, the forerunner of apocalyptic WW2. Still, this Corona Depression (my copyrighted term!) could be quite earth shaking. A new world order with China at the helm may emerge. Get out your Edward Gibbon down from the bookshelf and dust off the cover.
We have a ‘globalised’-world (sic!) hence no one will escape. It's not only a virus, an unstable global financial-economic system is also collapsing. The world is set to suffer devastating impacts in the months ahead, apart from health and death. Jobs are disappearing, except fortunately in food production, but even this requires processing, packaging and distribution which has been interrupted
In Lanka’s case imports and exports may be down over 50% at the time of writing. Garment factories have closed down, the tourism/travel/hotel sector has dried up, 3-wheeler buggers can no longer feed their families, daily paid labourers are up shit’s-creek. Say by magic corona disappears in a few weeks, then how much longer for the SL economy to recover in the context of a collapse of the US and European (and Indian?) economies. That’s frightening.
The global economy was fretting about a 2-3% downturn, but it will be worse by an order of magnitude. Could the solution be to reform, or go further and reformat capitalism; slash returns to capital (finance-capital, real-estate, asset-price inflation and fixed capital)? Nope, I say too little too late, and worst of all the wrong remedy. A wag remarked: “This will be music to your Marxist ears”. Well how nice to be proved dead right! Some 100+ of my extended family and close friends live in America, UK, Australia and NZ. They face income reduction, savings evaporation, job losses in some cases and in a worst-case scenario, bankruptcy. Not nice if I become known among family and friends as Mr Marxist-Dead-Right!
Helicopter-money
Washington, the FED and European central banks, completely lost at sea can think on nothing but more of the same; flush the capitalist toilet with $2.4 trillion electronic money and keep real interest rates negative. But the US is 100% in debt and has a 5% budget deficit. Then, this helicopter-money is Modern Monetary Theory (MMT) in action. Where is the catch? It will blow-up at some point: money circulation without a corresponding supply of goods will lead to inflation and then the bond market will crash, i.e. no private buyers of US debt, only the Fed a la Zimbabwe. But before that something else will happen. The question becomes: a) Why work? b) Why compete? c) Why strive for efficiency and productivity? d) Why capitalism at all? The economy is in a Lotus Eater syndrome. This degeneration will precede galloping inflation if $2 trillion-like stimulus packages are habitual. A one-of $2 trillion package the US economy may be able to absorb with limited damage.
The global response of capitalist economies to the 2008 financial crisis showed what happens when central banks and governments flood the economy with liquidity, rather than allowing rotten firms and banks to fall, laying a New Deal type foundation for a sustainable recovery. A business sector hegemonized by finance-capital has mediated the siphoning out of profits from the economy through stock-buyback schemes to achieve asset-price inflation, rather than long-run growth by investing in new plant, R&D and employee skills upgrading. Boeing for example put only 4% of profits into investment and R&D while using 96% to buy-back stocks and pay top-management bonuses. The capitalist system is rotten to the core in relation to the aims of capitalism itself.
Note on Modern Monetary Theory (MMT)
MMT is not well known so this short note. It says any government can fearlessly issues its own fiat-money (money declared by a government to be legal tender). What’s the problem the theory says, it can print more any time. Governments cannot be made to default on debt denominated in their own currency. MMT argues that currency limits restrict finance needed to lubricate growth and calls upon governments to use the printing press to encourage investment, achieve full employment, pay for its own purchases and settle debts. Hence the current US plan to issue $2.4 trillion in helicopter-money, mainly to capitalist enterprises, falls into line with MMT. Advocates say inflation can be controlled by raising taxes and reducing the velocity of money. The problem of demand-pull inflation MMT types say can be controlled by taxation. Ha there’s the catch. If money pumped in by super-QE is removed by taxation the objectives of the exercise are aborted. The economy will not be lubricated, employment will not improve and consumers will remain stranded. On the other hand if tax is not spiked up spiralling inflation is unavoidable. The devil or the deep blue sea?
