Over the course of just a few months, the Covid-19 global pandemic has shattered practically every shibboleth in the neoliberal bible.
The first and most obvious victim is the idea that money is a scarce resource. In recent years, any proposal for economic redistribution and increased welfare spending — such as those championed by Corbyn in the UK and Sanders in the US — has been met with the same smug question: “How are you going to pay for that?”. Even worse, the standard response of Left-wing politicians has been to contrive elaborate funding plans to prove that their programmes were ‘fully-costed’, rather than to challenge the mainstream narrative. For as long as most of us can remember, the entire debate around fiscal/budgetary policy has been based on the assumption that the government’s budget is like that of a household or private firm.
When David Cameron said in 2011 that “if you have maxed out your credit card, if you put off dealing with the problem, the problem gets worse”, he was inferring that the government deficit is just like credit card debt and that a country that racks up too much debt will end up facing bankruptcy, just like an individual or business. This logic has been used — in the UK and elsewhere — to justify vicious slash-and-burn austerity policies (including budget cuts to healthcare, education and other social services) which have punished the weakest and most vulnerable in society, resulting in 120,000 excess deaths in the UK alone.
The coronavirus crisis has now revealed the austerity logic to be an utter sham: as advocates of modern monetary theory (MMT) have been saying for years, states that issue their own currency and issue debt in their own currency (i.e. every advanced country in the world with the notable exception of the eurozone) can never ‘run out of money’, nor can they become insolvent because, unlike households or firms, they can literally create money out of thin air. That’s what being a currency issuer means. In recent weeks, governments around the world have announced massive spending plans and double-digit deficits; yet, curiously enough, we haven’t heard any of the usual screams of “How are you going to pay for that?”.
On the contrary, even mainstream commentators are now admitting that these massive deficits don’t pose a problem because they will most likely be ‘monetised’ by the countries’ respective central banks: simply put, the latter will buy up as many government bonds as necessary and keep them on their balance sheets for as long as they like (potentially forever). As Lord Turner, the former head of the UK’s Financial Services Authority, recently said: “I do think the time is right for monetary finance. There would be a clarity of assuring people that there is no limit on the money available.” And there you have it, the austerity lie exposed: there has never been a lack of money for education, healthcare, infrastructure, welfare and other public services.
All the pain, suffering and misery imposed on millions of people as a result of austerity was entirely a political choice. All the cries of “How are you going to pay for that?” were simply a way to maintain the deeply unequal relations of power in our societies. To dramatically restrict our ability to imagine economic and political alternatives. But “all of these excuses that we have been given as to why we cannot treat people humanely have suddenly gone up in smoke”, as Alexandria Ocasio-Cortez said. If money can be created out of thin air to fight a ‘war’ against a deadly virus, doesn’t it follow that the same can be done to ‘wage war’ on poverty, unemployment, inequality, ecological collapse – all of which are much deadlier evils than Covid-19.
The second neoliberal shibboleth shattered by the pandemic is the superiority of private and liberal strategies over centralised economic planning and the welfare state, and the obsolescence of nation-states. For years (well, decades), we’ve been told that governments are wasteful and inefficient; that markets are able to operate more efficiently both in the short term and in the long term; and that governments are largely powerless vis-à-vis the forces of the global economy.
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