The Fall of the Neoliberal Empire

These are strange times we live in. One of the more disconcerting developments has been Martin Kettle talking sense, specifically noting that predictions about the lasting impact of Covid-19 on society and the economy are largely wish-fulfilment: "In some cases, the pandemic is merely vindicating whatever the thinker believed in the first place, before the outbreak began. All the pandemic has done is make them believe it more strongly than ever." Before you conclude that he has foresworn the neoliberal Kool-Aid, the dull reality is that Kettle is merely warning against any attempt to junk the centrist consensus: "The NHS needs whatever it takes in a crisis, but at other times health service spending is as long as a piece of string and there has to be a cut-off point, if only to allow spending elsewhere. The borrowing that may or may not save the economy from recession in a crisis will also have to be paid for when the crisis is over."

For all that, Kettle still makes a good point. Commentators have long distinguished between scandals that prompt no change and crises which do, but it would be more accurate to note that only a minority of crises themselves lead to substantive change. Most are simply weathered, like the Swine Flu and Foot and Mouth outbreaks, or their more worrying implications brushed aside, like the now-seasonal floods. More fundamentally, a crisis may reveal an underlying contradiction, but it may have little impact on the trend that this gives rise to. For example, Suez in 1956 was a political crisis, but it didn't represent a fundamental change in British foreign policy, it simply marked the public recognition of the retreat of the UK from superpower status that started with Indian independence in 1947 and continued through the decolonisation of the 1960s.

The belief that "All is changed, changed utterly" by Covid-19 is a form of catastrophism but it also reveals a degree of hope, even excitement, at the possibility of a radical disjuncture. These two tendencies - the one pessimistic, the other optimistic - are most obvious on the political left. In contrast, the right instinctively denies the possibility of change while the centre assumes it can be managed. While many on the left have ridden their usual hobby-horses, suggesting that the current crisis will lead to the adoption of Universal Basic Income or the frustration of Brexit, some have focused on the future of globalisation, reasoning that a global pandemic must affect the networks of trade and economic interaction built up over the last fifty years. This is a reasonable presumption, but I think at heart it is more of an assumption. In other words, there are grounds for believing that globalisation is in retreat but not that Covid-19 is to blame or even that it will accelerate an already-established trend.

James Meadway offers the optimistic view: "The virus is an acceleration of the tendency, apparent since the 2008-9 crash, of a shift away from the dominant version of globalisation. ... And where once the ideology of neoliberalism stressed the need for governments to do no more than create a 'level playing field' for markets to operate in, the post-crash period has seen overt state intervention and state-against-state economic clashes, of which the US-China trade war is the most obvious example … Covid-19, in this sense, is a solvent for deglobalisation. It is unlikely that global trade and travel will ever entirely recover from it once the costs of future pandemics are known and assimilated, just as the financial system never truly recovered from 2000-9." This takes globalisation at face value - the opening of markets - and ignores the reality of economic coercion practised through the "Washington consensus". The US-China trade war is not about halting globalisation but a tussle over primacy in a globalised system.

There is also ample evidence, not least the continuing hegemony of neoliberalism, that 2008 did not mark the pivotal moment when globalisation began to retreat, while the financial system recovered from the turbulence of 2009 and 2010 remarkably quickly, and not just because of the scale of state bailouts and the adoption of quantitative easing by central banks. Financial crashes have real world consequences, but by and large they are the destruction of paper wealth, not real assets. This last crash certainly saw a temporary collapse in cross-border financial flows, but global trade had been declining since the millennium and that trend has continued over the last decade. Some of this may be attributed to the growth in communications and digital goods, but the lion's share appears to be down to import-substitution and the deliberate shortening of supply chains, policies that were originally decried by neoliberals in the 70s and 80s as impediments to growth. In other words, a phase of globalisation is coming to an end as developing countries have moved up the value-chain. From the perspective of the West, the easy profits of the 1980s and 90s are over, but this shouldn't be taken as evidence that globalisation has ended. It is simply mutating.

Branko Milanovic offers the pessimistic view: "But if the crisis continues, globalization could unravel. The longer the crisis lasts, and the longer obstacles to the free flow of people, goods, and capital are in place, the more that state of affairs will come to seem normal. Special interests will form to sustain it, and the continuing fear of another epidemic may motivate calls for national self-sufficiency … That process of unraveling might be, in its essence, similar to the unraveling of the global ecumene that happened with the disintegration of the Western Roman Empire into a multitude of self-sufficient demesnes between the fourth and the sixth centuries. In the resulting economy, trade was used simply to exchange surplus goods for other types of surplus produced by other demesnes, rather than to spur specialized production for an unknown buyer." This is an analysis in which the political response to the pandemic determines subsequent economic development. It is also one that employs the vocabulary of the debunked "Dark Ages", such as unravelling and disintegration.

The historic analogy is misleading. The majority of large-scale specialised production in the Roman Empire was based on trans-Mediterranean trade, such as grain from Egypt, wine from Italy and olive oil from Spain. Land transport was too expensive to support long-distance trade in anything other than luxury goods. This maritime trade was stimulated by both the exceptionally large imperial city (and, to a lesser extent, established cities in the Eastern Mediterranean) and the province-based legions, both of which created concentrations of demand that couldn't be satisfied by local supply. Sea-borne trade declined both due to the diffusion of this demand and because Mare Nostrum became the frontier of Christendom after the Arab and Ottoman conquests rather than the central nervous system of the economy. Mediterranean trade did recover after the Christian and Muslim worlds achieved a modus vivendi, but it now concentrated largely on luxury goods, notably those from Asia and Africa.

The point is that Western Europe did not turn in on itself economically because of its political fragmentation but because specialised Mediterranean trade dried up due to the diffusion of demand and the difficulty of trading across an intermittently hostile border. Reduced to land transport, trade necessarily became more localised in the main and more focused on portable luxury goods when it came to exchange. The collapse of the slave economy and the adoption of feudalism in Western Europe, which was driven by the poor productivity of the slave mode of production and the drying up of slave imports due to the end of imperial expansion, was a progressive development, not a retrograde one. In other words, the material factors of production determined the social formation and ultimately the political superstructure (the Holy Roman Empire of the Medieval era was more than just a conceit). The "multitude of self-sufficient demesnes" was the evolution of the Roman empire not its disintegration. Rome didn't fall.

Milanovic has simply got the causal relationship the wrong way round, but the emphasis on a reading in which collective will, or its failure, is the motivating factor allows him to indulge in some blood-curdling prophecies familiar from fiction: "If more people emerge from the current crisis with neither money, nor jobs, nor access to health care, and if these people become desperate and angry, such scenes as the recent escape of prisoners in Italy or the looting that followed Hurricane Katrina in New Orleans in 2005 might become commonplace. If governments have to resort to using paramilitary or military forces to quell, for example, riots or attacks on property, societies could begin to disintegrate." Most developed economies (the focus of Milanovic's worry - the less developed already have to deal with a lack of money, jobs and healthcare, plus often repressive policing) have already taken steps to provide temporary income support, buttress healthcare and minimise the potential for riots (a lockdown was inevitable once social sites that might contain dissent, like pubs, were obliged to close). The zombie apocalypse isn't going to happen.

Will Davies offers a more clear-sighted analysis of the current context: "For over 40 years after Thatcher first took office, many people on the left have waited impatiently for a successor to the 1970s, in the hope that a similar ideological transition might occur in reverse. But despite considerable upheaval and social pain, the global financial crisis of 2008 failed to provoke a fundamental shift in policy orthodoxy. In fact, after the initial burst of public spending that rescued the banks, the free-market Thatcherite worldview became even more dominant in Britain and the eurozone. The political upheavals of 2016 took aim at the status quo, but with little sense of a coherent alternative to it. But both these crises now appear as mere forerunners to the big one that emerged in Wuhan at the close of last year." There is much to applaud here, but that last sentence is a non-sequitur. There is no good reason to think that Covid-19 is going to finish a process initiated by the events of 2008 and 2016, an assumption that smacks of progressive ideology and a denial of the random in history. Indeed, the persistence of both neoliberalism and the Conservative party suggests business as usual is more likely.

Where Davies subscribes to crystal ball-gazing is in his musing on the possible impact of Covid-19 on society (hardly surprising for a sociologist), and in particular its global dimension: "the spatial aspect of this crisis is unlike a typical crisis of capitalism. Save for whichever bunkers and islands the super-rich are hiding in, this pandemic does not discriminate on the basis of economic geography. It may end up devaluing urban centres, as it becomes clear how much 'knowledge-based work' can be done online after all. But while the virus has arrived at different times in different places, a striking feature of the last few weeks has been the universality of human behaviours, concerns and fears. In fact, the spread of smartphones and the internet has generated a new global public of a sort we have never witnessed before." The idea of a global public implies the potential of global public opinion, and this in turn opens up the possibility of a global demos at some point in the future. It's no coincidence that Covid-19 has triggered such internationalist speculations among British progressives depressed by Brexit.

This is an idea that James Meadway subscribes to as well: "A global, connected public exists today in a way it did not previously, and it has clear impacts: would the UK government have reversed course so speedily if we had not been able to see and understand what China and South Korea and Taiwan were doing, and what Britain was not?" The government did not junk its "herd immunity" strategy because of TV reports from East Asia but because it realised the NHS couldn't cope. I personally doubt that a global, connected public really exists today, or at least any more than it has done in the past. That we are able to consume news and information from other countries in real-time and connect with almost anyone on the planet does not in itself create a global community. To believe that it does is to subscribe to the democratic constructivism that has long been central to the media's mythos (albeit in a national tenor), and which was also a particular feature of the utopianism of the early Internet.

Against this desire for the emergence of a global public we should set the further evidence of dysfunction among the members of the European Union, suggesting that a more modest European demos is still a distant prospect. Of course this reflects the institutional grip of the nation state and doesn't preclude the emergence of an international consciousness, but there is little evidence of the latter struggling against the fetters of the former. The demands for national solidarity (and the concomitant xenophobia) will outweigh the calls for international solidarity, while the interventions taken by government will marginalise mutual aid and class consciousness. There may be moves towards greater national self-sufficiency in certain industries, but this will be in line with existing developments, such as near-shoring, not an inflexion point. The growth of international public opinion, like the market convergence in digital goods, will reflect the evolution of globalisation, not its supersession. Ultimately, the significance of Covid-19 may turn out to be the social atomisation of self-isolation. While that may present a combined supply and demand shock to the economy in the short-term, it is psychologically congruent with the neoliberal trend over the last half century.