For a good number of people, COVID-19 is a medical emergency. But corona has not restrained itself to the paradigms of medicine only. Every sphere of life has been paralyzed after this coronavirus breakout. From education to the definition of security and from social structure to economics, there is nothing that has not been affected by COVID-19.
But will everything go back to its prior state as it was after the nightmare of this coronavirus is over? Will the currently prevailing system of work be restored? Well, after going through historical accounts and current turn out of events, this does not seem as possible.
What Does History Tell Us?
Pandemics have been part of Human history for ages. In every course of a hundred years, from the black death to Spanish flue, a small microorganism jeopardizes the whole functioning of the world. They bring with them enormous disasters and leave with changing the entire landscape of the world. In addition to the social structure, economic systems have also been vulnerable to these pandemics.
COVID-19 is likely to prove itself as the fall of the currently prevailing economic system just like bubonic plague of 1340s. The limited number of workers resulted from the black death took away the bargaining power from feudal lords. The circumstances favored the workers to go ahead and ask for what they need with more power and the lords ended up admitting the terms and conditions as defined by the laborers. Thus, feudalism met its fall there and a new system emerged.
An illustration from the ‘Romance of Alexander’ shows clothes infected by the Black Death being burnt in medieval Europe, circa 1340. Credit: Hulton Archive/Getty Images
Similarities Between COVID-19 and the Great Recession?
The economic crisis brought by COVID-19 takes us back to the largest recession after the Great Depression, the Great Recession of 2008. The uncertainty and “non-quantifiable risk” of 2008 are prevalent in this crisis as well. The calamity of coronavirus has halted a good number of merchant activities around the globe. According to the Atlantic Council, the stock exchanges of giant economies have collapsed to one-fourth of their valuation in the initial phase of the virus which was also the initial stage of the Great Recession. Internationally Monetary Fund referred to that recession as “contagion”, “epidemic in which an invisible virus infects many people and communities.”
Today we are dealing with a real virus. The COVID-19 crisis has given rise to a supply shock which then has translated into demand shock as well. Whereas, the supply shock followed the demand shock during the recession decade ago. The Great Recession was able to be taken care of by the international co-ordination and actions of central banks around the world. The Group of 20 leading nations became a powerful, action-oriented body, convening heads of state and government in coordinating a global response to the crisis. These actions were key to staving off the worst and repositioning the world economy toward growth.
However, the second decade of the 21st Century lacks that sort of coordination as today trade is being used as a weapon in this polarized world. International coordination has the underlying intention of competition rather than co-operation. Hence, the reverie of capitalism of free trade without the influence of governments turns into a myth. In 2008, the structure of the financial system tumbled, however, in 2020, the base of the system has collapsed.
Is Capitalism Dying?
According to the World Economic Outlook, global growth is expected to fall to -3 percent. Countries whose economic activity is based on tourism, hospitality, travel, and entertainment are suffering from major upheavals. The capitalist system works on the principle that people go to work, earn, and spend on consumer products. But due to the lockdown, the workers are unable to use their long-earned money. The recession already proved that the capitalist economy is fragile. Formerly the custodians of capitalism made an outrage on state paying universal income, state bailouts, and the funding of state debts by central banks.
However, it has become consequential in order to keep the economy working and happening in a large scale. Even in the US, the heart of capitalism, the state will inject two trillion dollars into the economy – through a mixture of direct payments to citizens and loans to business – more than half of what it collects in taxes in a year.
Furthermore, the World Economic Forum also claims that the COVID-19 crisis is exposing the flaws of economic structures making well-paid jobs perilous and rare. The “work from home” amenity only serves the specific number of people while those in-service sectors are jobless and suffering from financial tightness. The corporate sector provides no social protections to the workers even in the gig economies. On the verge of serving capitalism, public debt was considered delinquent. Thus, in the pursuit of that, UK and US governments cut down the health budgets that led to undue development in the health sector for the proper treatments and care of the patients. Now, the outbreak of coronavirus lifted the veil of reality from the apparently best Health Care Systems of the world.
UK and Germany tried hard to keep the free market on its feet but paid in the form of a catastrophic number of corona patients. The economic measures taken by Germany’s Chancellor are called as “an unprecedented peacetime state intervention in the economy” by The Times newspaper.
Macquarie Wealth, an Australian Investment Group, has also warned the world that conventional capitalism is standing at the exit door giving way to communism style economic system to take over.
What is the Way Forward?
Nevertheless, it is now important to thoughtfully ponder on the fact that this Coronavirus crisis and climate change are not aliens rather the species of this very planet. It is the time to derive a new formula of the economy or a new version of capitalism at least that ensures the development of a more inclusive and sustainable economy. Unlike the action of the post-2008 recession, which only harnessed more profits for the co-operations without giving any valuable recovery. World Economic Forum urged the states to step ahead and play the leading role of a hero and provide immediate solutions.
In this time of crisis when the trade is strangled by the financial burden, the government should pay for the wages of the business so that the companies do not fire their employees and avoid bankruptcies. This is the perfect time to promote private-public partnerships and encourage research. There is a need for impressive investment in innovation from artificial intelligence to the health care system and bringing forth the policies that ensure public prosperity and benefit. The state should realize that this gigantic economy downfall cannot be handled independently. Rather collective measures are required for long-term economic wellbeing with the help of concessional financing, grants, and debt relief.
The Corona Virus smashed the myth that economic prosperity hides in the lap of capitalism. This pandemic, sooner or later, will leave with consequential changes in the economic system of the world. This fragile system based on capitalism is unable to provide long-lasting economic and social protection. Instead, it only increases income inequality making the rich richer and poor even poorer. This time if we repeat the same mistakes of 2008’s recession, Earth will become an uninhabitable planet to live. Thus, this time longs for the instigation of post-capitalism imagination that ensures the strengthening of global commerce.