Capitalism and the pandemic

May 29, 2020
In times of crisis, the capitalists have always needed the centralised resources of the state to maintain and defend the system.

The scale and scope of government measures to deal with the COVID-19 crisis have surprised many people. Long-held neoliberal dogmas have been pushed aside.

Government action is clearly decisive: the bourgeois fetish of the budget surplus has been junked and huge deficits run up; after being frozen for 20 years, the dole rate has been doubled; economic sectors and firms are everywhere putting their hands out for government support; firms are being encouraged and even directed to produce vital medical supplies.

The political will and funds were never available for climate action, health or welfare. But suddenly huge amounts of money — hundred of billions of dollars — have been committed to the pandemic problem.

Very obviously, there are some big problems with this financial largesse: it is skewed towards business; large groups of people have been left out — most casuals, backpackers and international students — and support for many others is inadequate. Residential rents remain a huge problem as do mortgages.

Small government?

You may remember Coalition MP Barnaby Joyce’s stupid outburst last Christmas about getting the government out of his life, as he happily grazed on his fat parliamentary salary!

Neoliberals like to call for small government. This is just ideological rubbish, which they don’t believe for a minute. They actually want a big government for some things: police, courts and prisons; security and surveillance of the people; the military; control of labour; and government subsidies and contracts.

What they really object to is spending on the needs of ordinary people — welfare, health, education, housing and regulations to protect the community (“red tape”).

But right now, it is clear that state action and huge spending on healthcare and supporting people economically is key to saving the system. The ruling class may not like it but they know it is necessary — at least for the time being.

Role of the state in a crisis

In times of crisis, the capitalists have always needed the centralised resources of the state to maintain and defend the system.

For example, during World War I in Germany the role of the state greatly increased. To supply the enormous needs of the armed forces in conditions of modern industrial warfare and feed the population in the face of the Allied blockade, the government had to rationalise and direct business.

But the economy remained in private capitalist hands and the employers still took their profit on every transaction. Russian revolutionary Vladimir Ilyich Lenin used the term “state capitalism” to describe this new reality. Something similar also happened in Britain.

After the October 1929 stock market crash, the United States entered into the Great Depression. Up to a third of the workforce was unemployed; factories were shut; widespread social distress stalked the country and the ruling class worried about social unrest. President Franklin Roosevelt launched numerous initiatives under the label of the New Deal — most notably the Works Progress Administration in 1935 to provide employment for the jobless through an extensive program of public works. He made a famous comment about capitalism needing a bit of socialism to ensure its survival.

He had to endure often furious opposition from reactionary oligarchs, but the US remained capitalist through and through. While the New Deal has been uncritically hyped up, there is no doubt that Roosevelt’s leadership helped save the capitalist system. (It is worth noting that very high unemployment levels persisted to the end of the 1930s and were only really ended by the onset of World War II.)


The federal government has not nationalised anything yet, but the concept is definitely lurking around today.

Look at the airline crisis. Virgin and Qantas are struggling, especially Virgin. The government says the two-airline policy has served us well. In a recent article, financial journalist Adele Ferguson said Australians don’t want a monopoly. I don’t think this is necessarily true at all. Yes, a monopoly by privately-owned Qantas would undoubtedly lead to fare hikes and price gouging. But what about a publicly-owned Qantas monopoly? After all, Qantas was in public hands until 1993–95.

People want good public services in areas like health, the postal service and so on. There would be a lot of support for an airline industry that is brought back into public hands and run sustainably as a public service.

Of course, having nationalised industries is not the same as socialism.

For instance, historians have dubbed the period 1850–1914 in Australia as “colonial socialism”. The public sector was very large. Even in the early 1930s in New South Wales, for instance, the state ran quarries, brickworks and butcher’s shops. But private capital never lost its control of the country’s economic organisation. However, it accepted public economic activity in essential areas in which it could not profitably operate — the railways being the prime example.

But in today’s context, the struggle for nationalisation can threaten the whole neoliberal project and help us advance further.

The pandemic crisis has made it crystal clear that a big, well-funded health system is critical and it should be in public hands — and free. British Prime Minister Boris Johnson was moved to say (before he got sick), “There really is such a thing as society”, a direct reference to Margaret Thatcher’s crazy remark that there is no such thing as society. It was a revelation to him, but most of us have always known this.

I was struck by the following description of China’s stupendous effort to produce medical supplies in a recent series of articles by Vijay Prashad and others.

“The speed of the production of medical equipment, particularly protective equipment for the medical workers, was breathtaking. On January 28, China made fewer than 10,000 sets of personal protective equipment (PPE) a day, and by February 24, its production capacity exceeded 200,000 per day.

“On February 1, the government produced 773,000 test kits a day; by February 25, it was producing 1.7 million kits per day; by March 31, 4.26 million test kits were produced per day. Direction from the authorities moved industrial plants to churn out protective gear, ambulances, ventilators, electrocardiograph monitors, respiratory humidification therapy machines, blood gas analysers, air disinfectant machines, and hemodialysis machines. The government focused attention on making sure that there was no shortage of any medical equipment.”

This shows what government control (and significant public ownership) can achieve in a crisis situation.

Snapping back?

Morrison wants the economy to “snap back”, but any such transition will be fraught, both economically and politically. The new normal won’t be the same as the old. The pandemic may not go away — if ever. The impacts of the climate change crisis will become more and more severe. We may well be in one or more crises from now on.

Many businesses have collapsed and won’t be around any more.

Airlines, for instance, won’t be back in business any time soon: our international borders are closed and social distancing rules will make domestic flights very difficult.

The education sector (especially universities) is heavily dependent on overseas students. It has taken a very big hit. Morrison told overseas students to go home! Most cannot. Has the cash cow been fatally wounded?

Unemployment is likely to remain very high for some time. The bosses may not like the new higher dole level, but any attempt to snap back to the old poverty rate will be a huge political problem for them.

The health system has long been under neoliberal attack: privatisations, under funding and corporate-style leadership. But, in the crisis it is clear that all that matters is free public healthcare. The private hospitals could do nothing; they had to be incorporated into the state sector.

Will snap back mean a return to healthcare austerity? That would be crazy. There will be more pandemics and climate-related health demands that require a strong, well-funded public health system. Portugal is a good example. A key reason why it has responded well to the pandemic compared to neighbouring Spain is that austerity cutbacks in health had been largely reversed in the last few years — due to the influence of the left on the government.

The outsourcing of basic medical supplies to low-wage China has been shown to be incredibly short-sighted. We need to be able to produce key things right here, and in very large quantities in a crisis. And preferably we need publicly-owned enterprises to do the job, so price gouging and profit-seeking are taken off the table.

The consumerist madness will take a hit. People want the basics but confidence will remain low for some time.

The whole fetish of budget surpluses has taken a big hit. A lot of people will now expect large amounts of money to be thrown at serious problems.

The bushfire crisis marked a watershed in public perceptions of the climate crisis. But before that could fully play out the coronavirus pandemic was upon us. So popular political consciousness has had to grapple with two enormous shocks this year. Confidence in the system has been shaken.

Conversely, many people must surely now feel that, if the political will is there, almost any problem can be tackled and funding is no problem. The old neoliberal response to any reform — “Where's the money going to come from?” — will no longer have the same traction.

Of course, the neoliberal journalists will still do their best to talk about future generations having to pay for the current crisis outlays. There is talk of raising the GST — one of the most regressive ways imaginable to deal with the debt. We should be talking about ending negative gearing and seriously taxing the rich.

The big problem is the lack of an adequate left-wing political vehicle that can seriously exploit the possibilities of this new reality and start to develop strong campaigns for fundamental change.

Morrison is looking forward to things getting back to the way they were. Socialists are looking forward to a resumption of open political activity and struggle, but we can be confident that the political terrain won’t be the same as before.

[A longer version of this article was first published at Links: International Journal of Socialist Renewal. Dave Holmes is a member of the Socialist Alliance.]

You need Green Left, and we need you!

Green Left is funded by contributions from readers and supporters. Help us reach our funding target.

Make a One-off Donation or choose from one of our Monthly Donation options.

Become a supporter to get the digital edition for $5 per month or the print edition for $10 per month. One-time payment options are available.

You can also call 1800 634 206 to make a donation or to become a supporter. Thank you.