Analysis of the Economic System Through the Lens of COVID-19

Crisis moments present opportunities for change; there is a loss of innocence and complacency. The COVID-19 pandemic causes a decline in “polarization” as various communities focus on a “common enemy” with a new collective approach to handling threats. Established relationship patterns in the community become more susceptible to change after a major shock like the pandemic destabilizes them. The failure of the Trump administration both to keep Americans healthy and to slow the pandemic-driven implosion of the economy has shocked the public enough back to insisting on something from government other than emotional satisfaction. The COVID-19 crisis forces people to understand and accept that expertise matters. It is necessary to immediately replace the populists in the Trump administration who attack bureaucracies and expertise that make most governments function on a day-to-day basis. With voters increasingly prioritizing competency over emotive narrative, the time is at hand to sincerely reform social structures in Canada and the US.

Today we recognize the limits of economic rationalization that underpins an ideology based on selfishness. The consequences of the 2008 debacle – slow economic growth and under-employment, and the growing income gap between the wealthy and the rest of society underscores the basis of rational self-interest (selfishness). When challenging ideology (in 2020 the status quo) it is necessary to choose criterion for distinguishing ideas that support the relations of domination from those that do not. The fundamental dogmatism of this economic system of minimal government and regulation is codification of a political ideology defended by proxies. The level of equality of opportunity determines how people perceive inequality. Societies in which individuals have the same chances to obtain valuable outcomes such as income, education and health, have a higher tolerance to inequality. A consequence of the COVID-19 pandemic is the end of our romance with market society and hyper-individualism.

The fabrication of trickle-down economics provided the opportunity to dismantle the gains of the New Deal. It justified slashing funds for welfare programs to support a pro-growth agenda under the mantra that centralized planning of big government doesn’t work – it creates a culture of dependency that can trap people. Promoted under the guise of creating jobs and job security the power elite support legislation that weakens unions to support a wage suppression agenda. Following defeats in the 2008 elections, conservative groups provided the resources to set up support for ‘citizen groups’ such as the Tea Party. The two main planks of the Tea Party are small government and less money being put into social welfare programs, which includes the expanded healthcare reform. The right-wing media lies have come home to roost. So-called “junk plans” that don’t actually cover common medical expenses, such as lab tests contribute to this problem, aren’t very different from going without insurance altogether.

Max Weber noted by loosening the hold of custom and tradition, rationalization led to new practices that were chosen because they were efficient and predictable, rather than customary. A rational society is one built around logic and efficiency rather than morality or tradition. Rationalization of the economy during the 1980s created the mindset that the economy requires less and less engineering (regulations), and would be capable of fixing itself. This, in turn, created the notion that there exists an inherent natural law unaffected by human endeavor and weakness that drives the economy. “Convictions are more dangerous enemies of truth than lies,” claimed Nietzsche. Nietzsche argues “concepts are metaphors which do not correspond to reality.” Although all concepts are human inventions (created by common agreement to facilitate ease of communication), human beings forget this fact after inventing them, and come to believe that they are ‘true’ although they do not correspond to reality.

Growth and fundamental levels of change only tend to occur when we are out of our comfort zone. The disruption of the pandemic moves us far from equilibrium, where certainty and predictability no longer reign supreme. So, we might look at the crisis as a blessing in disguise, albeit an unwanted one. Crises tend to present themselves as either acute or chronic circumstances. Now on top of a system of  ongoing increasing inequality, the COVID-19 pandemic is driving the United States and the world economy into highly volatile perturbations, with both wealth and employment literally disappearing. In the lives of most people, this is an external crisis raining upon them, exacerbated by COVID-19 but, not of their own making. Yet, through these losses, many people are coming to reflect on their values and choices and are making adjustments – due to the acute crisis – that actually benefit them. However, many other people die all the time because of their position in society. And the pandemic crisis is revealing a lot of these deeper structural problems with the way we organize social life.

David Harvey explains, “For any system of thought to become dominant, it requires the articulation of fundamental concepts that become so deeply embedded in common sense understanding that they are taken for granted and beyond question.” Neoliberalism has successfully reached this point in postmodernity, making it postmodernity’s defining ideological feature. The Great Recession of 2008 saw the rich get richer and the poor being ripped off. The Occupy Wall Street protests challenged the excess of corporations in general, and in particular, a government controlled by corporate money, and the insecurity of job tenure and the menace of layoff that it implies. The consequence of this was that the Trump administration became attracted to reactionary politics which emphasized a return to traditional identity and its values; the destruction of the “deep state” responsible for undermining it, which includes eliminating key bureaucracies – including the ones that could have provided a head start in responding to the COVID-19 risk.

Income inequality creates disadvantage for particular segments of the society. Widening inequality also has significant implications for growth and macroeconomic stability, it can concentrate political and decision-making power in the hands of a few, lead to a suboptimal use of human resources, cause investment-reducing political and economic instability, and raise crisis risk.  Policies that focus on the poor and the middle class can mitigate inequality. Irrespective of the level of economic development, better access to education and health care and well-targeted social policies, while ensuring that labor market institutions do not excessively penalize the poor, can help raise the income share for the poor and the middle class. Income distribution matters – IMF findings suggest that raising the income share of the poor and ensuring that there is no hollowing-out of the middle class is good for growth through a number of interrelated economic, social, and political channels.

This sudden credit crunch exposes those that have too much debt and weak business models and have taken excessive risk. Their distress spreads to the rest by way of business closures, job losses, and fire sales of otherwise good assets. Matters are made even worse if the economic victims have financed their activities with borrowing, such that their losses eventually strike the balance sheets of creditors that were unwise enough to lend to them. Fear of these repercussions contracts credit across the board. For many Canadians and Americans the sudden 2020 downturn in the economy creates mind-numbing distress. Then there is the long-term issue: “By the time that most individuals achieve a point in life where incomes and savings rates are great enough to invest excess cash flows, they generally do not have 30 years left to reach their goal. This is why losing 5-7 years of time getting back to “even” is not a viable investment strategy.”1

A consequence of the coronavirus epidemic in Canada and the U.S. is an understanding of the limits of a country’s medical system. It has led to system-wide disruptions that physicians say are necessary for combatting the immediate, un-ignorable threat of COVID-19 – but that may, by default, force individuals who do not have coronavirus to shoulder a heavy burden. Those with chronic conditions will have to fight harder to get the care they need, not only now but also after the outbreak ends, when hospitals are left to deal with backlogs from appointments canceled en masse. Anyone with the misfortune to get into a car accident or have a heart attack during the outbreak will be at the mercy of a strained system. And in this environment, the gulf between people who can and cannot afford to spend the time and money to seek out good care will become ever-more apparent.2 Market-based solutions for social organization have failed.

The failure of the existing consumerist institutions and supporting dogma has put the health and economic viability of citizens throughout the world in jeopardy. Individuals and communities must support a paradigm shift – that includes an effort to concentrate all practical efforts to bring the greatest good to the most people (and other species) over the longest time by rethinking and redesigning production and consumption patterns. John Kenneth Galbraith remained optimistic about the ability of government to improve the lot of the less fortunate. “Let there be a coalition of the concerned,” he urged. “The affluent would still be affluent, the comfortable still comfortable, but the poor would be part of the political system.” The violence exacerbated by the COVID-19 crisis cries out for a new model of democratic governance. However, we must not let laissez-faire apologists explain away various failures during the pandemic by the existence of a vast left-wing conspiracy. Through the COVID-19 window we recognize the importance of returning to laws based on equality of the person rather than laws of the market.

1 The Disconnect Between The Markets & Economy Has Grown (23 Sept 2019)  https://www.hvst.com/posts/the-disconnect-between-the-markets-economy-has-grown

2 Jaime Ducharme. (26 March 2020) Coronavirus Will Have Long-Lasting Impacts on the U.S. Health Care System—And the Poorest Will Suffer Most. https://time.com/5810260/coronavirus-will-have-long-lasting-impacts-on-the-u-s-health-care-system-and-the-poorest-will-suffer-most/

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