Could Covid-19 vanquish neoliberalism?

Excerpts from Thomas Fazi’s Could Covid-19 vanquish neoliberalism?

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. …

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?”. …

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. …

So governments have surrendered many of their national prerogatives to supranational organisations — the most obvious example being the European Union (EU) and monetary union — while state-owned firms and public services, including public hospitals and healthcare facilities, have been progressively underfinanced and privatised (often by appealing to the aforementioned austerity logic). … According to OECD Health Statistics, Italy and Spain have today fewer hospital beds per inhabitant than China; France and Germany fewer than South Korea or Japan. Governments around the world are rushing to boost their hospital capacity but for tens of thousands of people it is too late already. …

This brings us to the third neoliberal shibboleth blown away by the coronavirus: the benefits of belonging to the European Union and eurozone. There’s a reason EU and euro countries — most notably Italy and Spain — have been hit so hard: the EU remains the only economy in the world where neoliberalism has been embedded into its very legal structure and effectively constitutionalised, through strict rules against government support to local industries, the constant encouragement of deregulation, the enshrinement of the ‘four freedoms’, and, above all, by depriving states of the central plank of economic policy, the currency.

The EU’s guiding principle was approvingly espoused by Italy’s former economics minister (2006-2008), the late Tommaso Padoa-Schioppa: to “weaken social protection” in all areas of citizens’ life, “including pensions, health, labour market, education”. It thus shouldn’t come as a surprise to find out that the European Commission made 63 individual demands of member states to cut spending on healthcare provision and/or privatise or outsource healthcare services between 2011 and 2018, in order to meet the arbitrary debt and deficit targets enshrined in the EU’s fiscal rules, as revealed in a recent report by the Emma Clancy, a political advisor in the European Parliament. …

Finally, the current crisis is exposing the madness of today’s hyper-integrated supply chains and the delocalisation of production that has taken place in recent decades, with countries finding out that they lack factories to produce basic medical equipment (such as masks) or much-needed medicines, which have suddenly become scarce with the collapse of global supply chains. Hyper-globalisation, just like the marketisation of public services, has proven to be not only a serious ecological, economic and social problem, but a threat to national security as well.

Full essay here.