Coronavirus and the World-Economy: The Old is Dead, the New Can’t be Born

March 27, 2020 at 1:31 pm | Posted in Uncategorized | Leave a comment
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“The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a variety of morbid symptoms appear.”

–       Antonio Gramsci, Selections from Prison Notebooks.

 

The novel coronavirus pandemic has struck the world-economy in a way no other crisis had done before. Earlier pandemics—like the Spanish flu of 1918—struck a world which was far less integrated than today and supply-chains did not then span the planet. Nor was there then the volume of long-distance travel that could transport the virus all over. Since the SARS epidemic in 2002, airline data indicates that air traffic from China alone has increased ten-fold. The Great Depression of 1929-33 settled in over time: now, as countries close their borders and order all non-essential businesses to shutter their stores and offices, economic activity has ground to a halt without parallel. At that time, manufacturing commanded a large share of the economic output, and inventories that piled up could be sold as conditions eased up. Today, services account for the bulk of economic activity and a haircut, an Uber ride, or a dinner at a restaurant foregone cannot be made up. The global financial crisis of 2008-09 may have plunged economies on both sides of the North Atlantic into a recession but not China, India, Brazil and other ‘emerging market economies.’ This time it is different: it affects the entire planet even though its impact is conditioned by how this virus mutates and scythes through populations with different immunities and age, class, gender, and ethnic compositions.

 

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The very distinctiveness of the current situation makes past experience a poor guide even though past experiences can provide some clues. Social distancing as a means to mitigate the spread of the virus will have little effect in densely populated, low-income states. The last major pandemic was the Spanish flu of 1918 which may have come out of Kansas and is estimated to have killed 1 to 2 percent of the world population. But its impact across the world varied widely: 60 percent of its fatalities came from western India where a major drought did not prevent grain exports to Britain and the more malnourished population was more vulnerable.

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The greater vulnerability of the poor to the novel coronavirus, Covid-19, will tragically be repeated once again. Social distancing as a means to mitigate its spread will have little effect in densely populated, low-income states. How do people in slums or informal settlements practice what is misleadingly called social (rather than physical) distancing? In Johannesburg’s Alexandria township, 700,000 people live on 1.9 square miles; the same number of people are crowded into Dharavi’s 0.81 square miles in Mumbai; and Rio de Janeiro’s Rocinha is as large as Dharavi but with only 200,000 people. Daily laborers, and people who sell used clothing or vegetables don’t have the luxury of working from home. Nor do people in slums and favelas have easy access to clean water to practice the hygiene recommended to prevent contagion.

 

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Ethnic and racial minorities in wealthier countries are also less able to practice physical distancing. A study by the Economic Policy Institute in Washington, D.C., found that less that 30 percent of the people in the United States have jobs that can be done from home in 2018. Even if new telework technologies like online schooling are included, only 16.2 percent of Hispanic workers and 19.7 percent of African Americans are able to work from home compared to 30 percent of Whites and 37 percent of Asian Americans.

Taxi owners in New York city who took out large loans to buy the medallions to drive yellow cabs are facing ruin as air traffic virtually ceases and the city shuts down. People supplying essential commodities—fruits, vegetables, and other agricultural products—have no option than to work if they are to feed themselves and their families. And in the United States, they and the workers in abattoirs are poorly-paid migrants.

 

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It should be blindingly obvious that policies implemented in wealthier North American and European countries cannot be blithely applied in the Global South—and yet that is precisely what the Narendra Modi government has done in India. It imposed a virtual ban on movement within the country for 21 days with just 4 hours’ notice—leaving migrant workers stranded and making no provision for wages in a country where upwards of 90 percent of the working population are in the informal sector and the density of population is almost 400 per square mile. Conversely, Jair Bolsonaro of Brazil and Andrés Manuel López Obrador of Mexico have dismissed the pandemic as a minor aberration.

 

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Low income countries also do not have the infrastructure to deal with a major pandemic: Bangladesh has 170 million people but only 500 ICU beds. The worst affected country in Europe, Italy, has only 4 doctors per 1000 people; India has less than 1 and other countries fare even worse. Populations of low income states are also more vulnerable to environmental pollution  which reduces their immunities. One third of coronary respiratory diseases in the world in 2018 were in India which also has the largest number of tuberculosis patients in the world—and the latter are especially at risk for Covid-19. One estimate suggests that 300 million Indians could be infected by the virus by July and fatalities could be anywhere from 2 to 3.5 million.

 

Much of the clothing sold by big brand name corporations in the Global North are made by workers in China, Bangladesh, Laos, Cambodia, and elsewhere. With lockdowns being imposed in Europe and North America, companies are cancelling orders and since manufacturers are only paid once their products are shipped while they have to pay their workers and material suppliers beforehand, they are now stuck with large inventories of clothes that have shelf-lives determined by the season. Their governments do not have the ability to bail out manufacturers in the ways contemplated by governments in high-income states. Unlike the United States, they cannot simply print more currency, especially when the currencies of states in the Global South are plunging relative to the dollar: the Indian rupee is now at a historic low as is the South African rand to take just two examples. It is clear, then, that the impact of the virus will be felt disproportionately by the poor, especially in low income countries.

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If the disproportionate impact on the poor is similar to prior pandemics and crises, it is not at all clear how the world-economy will emerge out of it. Responding to the collapse of stock markets, governments are pumping money into the economy but when people are ordered to stay home, the circulation of money slows down as well—especially for small businesses. The Amazons and the Walmarts may advertise for tens of thousands of more workers, but that will barely make a dent in the number of employees shed by small businesses.

 

Broadening our aperture, the scale and suddenness of economic and social disruption is such that there can be no return to the pre-pandemic situation. Supply-chains within and between states have been severed, perhaps irretrievably. The range and severity of these disruptions would depend on how the Covid-19 impacts populations—depending on the virus’ mutations and age, class, ethnic, and gender distributions of specific population groups with their different disease experience and immunities. Given the expansion of robotics and numerically-controlled machines, the ongoing disruption of supply chains may well lead to a further replacement of workers by these technologies, especially if the virus scythes through low-income economies disparately.

 

Again, while the stock market collapse and the rise of unemployment may recall the Great Depression, conditions today are very different. During the 1920s and 1930s, the industrial working class was a key component of the recovery. Solidarities formed in factories and mines were the basis of organizing against deprivation—to the New Deal in the United States and to the beginning of  the modern welfare state in Europe. Widespread de-industrialization and the destruction of unions in the contemporary world have cut the ground from under the trade unions. In these conditions, as the electoral appeals of Trump, Boris Johnson, Matteo Salvini and others indicate, the atomized successors to historically advantaged middle and working classes have turned against ethnic minorities and migrants; against globalization and towards a reactionary nationalism. This is true not only in Europe and North America but even in South Africa where migrants from other African states face xenophobic attacks.

 

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Keynesian policies adopted in the Great Depression to increase demand did reduce unemployment but not by nearly enough: in the US, it fell from a peak of 25% in early 1933 to 14% in 1940. It was the Second World War which transformed the US into the breadbasket and factory for the Allied war effort and military mobilization which eventually solved it. And after the hostilities, when de-mobilization raised the prospect of surging unemployment again, Pax Americana led to a new burst of economic prosperity that lasted for a little over two decades—the ‘Golden Age of Capitalism.’

 

The Cold War was the essential component of this age: military mobilization and aid to European allies, and domestically a pact between Big Government, Big Business, and Big Labor led to an era of consumerism at home and abroad; the Soviet Union which assumed responsibility to maintain the peace from East Germany to the 38th parallel similarly implemented relatively successful reconstruction in its zone; and independence brought modest rewards to former colonies in Asia, the Middle East, Africa, the Caribbean and elsewhere.

 

Today, the United States exercises no intellectual leadership: indeed, its president with, what Peter Baker and Maggie Haberman characterized in the New York Times as, his “profound need for personal praise, the propensity to blame others, the lack of human empathy, the disregard for expertise, the distortion of facts, the impatience with scrutiny or criticism” has proved singularly inadequate to the task. His attempts to buy exclusive rights to a vaccine being developed by Curevac, a German company funded by the German government has offended and exasperated not only the Germans but all thinking citizens everywhere. This is hardly the type of leadership one expects from the leading power. Even worse, the US prevented a G7 declaration on the virus because of the Trump Administration’s insistence on calling it the ‘Wuhan virus’ instead of the ‘coronavirus’!

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In contrast, China is stepping up to aid countries: sending doctors and medical supplies to countries from Peru to the Philippines, Japan to Spain. Cuba is dispatching its doctors to Europe and elsewhere. The United States, after having failed to secure exclusive rights to a potential vaccine, is now scouring Eastern Europe and Central Asia for medical supplies and refusing to implement its Defense Production Act to compel its domestic industries to produce these vital goods in a critical time.  Rather that demonstrating leadership, seeking to procure essential medical supplies from these poorer states harkens back to Britain’s policies of requisitioning food from its colonies even when they were suffering droughts.

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Meanwhile, Trump’s allies in the U.S. Congress are pushing through a bill to provide about $1,200 dollars (for those with an annual salary of $75,000 or less) and $500 per child: not even enough for a month’s rent in a major metropolitan center. Strong opposition from Democrats overcame objections to increase some contributions to the poor like extending unemployment benefits but these still remain very inadequate and short term. In contrast, the government of Denmark is guaranteeing 75 percent of salaries (upto $3288 a month) of those with annual salaries of $52,400: amounting to almost 13 percent of GDP. It is the provision of cash to the employees and workers whose spending generates multiplier effects that can at least partially revive economies though that also depends on how supply chains are reconstituted.

 

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The Democratic Party seems equally rudderless. Its presumptive presidential nominee, former Vice-President Joseph Biden has hunkered down at his home and has not been seen making policy statements. Though the Democrat-controlled House of Representatives passed an early bill, it didn’t address fundamental problems and they are now likely to adopt the Senate version of the stimulus package, with minor revisions at best. Given the urgency of the situation and the strength of industry lobbies, much of the relief will in any case go to companies that have long avoided taxes including cruise lines that fly the flags of other nations than to the lower classes and to ethnic and racial minorities in the country.

 

The Second World War and the Cold War reconstituted the world-economy on a new basis because the concentration of economic and political power in the United States enabled it to exercise intellectual leadership when most other industrial economies had been devastated, hegemony in the Gramscian sense. The United States no longer has a similar dominance. Nor does any other state or group of states.

 

What the pandemic makes clear though is that we need a fundamental change in institutional structures of the world-economy. Wealth inequality has escalated everywhere in the world and is no longer sustainable. The emergence of a precariat, now subject to extraordinary deprivations by the shutdown of economic activities, is not the result of the pandemic or of low oil prices. State institutions have become increasingly privatized. Distinctions between center-right and center-left parties have been erased and neither one shows any inclination to compel Big Pharma to invest in research to preserve public health and prevent the spread of infectious diseases. Indeed, fifteen of the eighteen major pharmaceutical companies have stopped research on antibiotics and antivirals to focus in medicines that generate large profits: to treat male impotence, addiction from tranquilizers, and heart disease. Viruses jump more easily from animals to humans as nature is being destroyed and as cheap meat is dependent on factory farming which also has disastrous ecological consequences. It is imperative to reduce meat consumption..

 

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How we address these issues—and the issue of global warming and climate change—will be key to a new, sustainable, and more equitable pattern of life. With the old dying, and the new being unable to be born, we are condemned to an unstable and volatile future.

Egypt: Chronicle of a Death Foretold

July 31, 2013 at 6:56 pm | Posted in democracy, Human Rights, International Relations, Political Economy, World Politics | 1 Comment
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Heaping irony upon irony, three weeks after protesters cheered the military for ousting Egypt’s President Mohamed Morsi, the new strongman, General Abdel Fattah al-Sisi called on the people to take to the streets in a show of support for him to defeat “violence and potential terrorism.” And taking the large crowds that gathered in Tahrir Square as a mandate to crush supporters of the democratically elected president, the army launched a massacre of Morsi loyalists at their Cairo sit-in on Saturday 27 June 2013.

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Much has been written about President Morsi’s overreach for power despite having secured only 51.7% of the vote in a run-off against a factotum of the old regime, Ahmed Shafik, the last prime minister to serve under Hosni Mubarak. But perhaps his biggest failure was not to neutralize the country’s coercive apparatus, laughably called its security services.

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Though human rights activists had hoped that as Morsi has himself been targeted by the police during his long years in opposition, he would rein in the police, he openly praised the police for its role in the 2011 revolution—a revolution in which uniformed and plain clothes officers had killed over 800 people, just as they killed Morsi’s supporters last Saturday. The military has also been unrepentant about its role under the old regime: as late as June 2011, General al-Sisi justified the “virginity tests” the Supreme Council of the Armed Forces inflicted, among other humiliations, on women demonstrators during the Cairo chapter of the Arab Spring.

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In yet another irony, the liberals installed in the interim government by the military blamed the massacre on the protesters killing each other! Nor have the liberals protested the interior minister, General Mohamed Ibrahim, a holdover from Morsi’s cabinet claiming that the anti-Morsi crowds in Tahrir Square gave him the mandate to resurrect the old regime’s hated secret police, the Amn al-Dawla or State Security force that had been disbanded in March 2011. As University of Oklahoma professor Samer S Shehata observes, Egypt’s tragedy is that “its politics are dominated by democrats who are not liberals and liberals who are not democrats.”

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When television cameras beam pictures of massive crowds in Tahrir Square opposing President Morsi and the Muslim Brotherhood, it is well to remember that in the first round of last year’s presidential elections, the candidate who won a plurality of votes in Cairo and in Alexandria, Egypt’s second city, was neither Morsi nor his opponent in the run off election, but a secular candidate, Hamdeen Sabahi. Long decades of providing social services to poor neighborhoods in Cairo and other cities, and in the rural areas where most Egyptians live has created a massive constituency of support for the Muslim Brotherhood. No democracy can take root in Egypt by excluding them as the military seeks to do with the connivance of the liberals and the West.

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When secular Egyptians—even radicals like Samir Amin—rejoice at the military’s ouster of a democratically elected president and plaster the general’s photo all across Cairo, they repeat Morsi’s fatal mistake of relying on the army and the police rather than on democratic institutions and protocols. By shutting down Islamists’ media outlets, reviving the secret police, and conspiring to ban the Muslim Brotherhood entirely, the military is fast overturning the gains of the Arab Spring. No future government is safe from military intervention.

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The coup d’etat against Egypt’s democratically elected government will have resonances far beyond the country’s borders. As the oldest and most influential Islamist movement, the Muslim Brotherhood has affiliates across the Islamic world and while these parties have largely renounced violence, now they could well conclude that violence is the only way to achieve power. After all, previously in 1992, as the Islamists were poised to win an election in Algeria, the army annulled the election. After they are denied office a second time, why should they place their hopes again in the electoral process? An ultraconservative Libyan cleric, Sheikh Mohamed Abu Sibra has already admitted that it has become impossible to persuade militias in Benghazi to lay down their weapons.

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The interim government imposed by the military is also not going to be able to solve Egypt’s economic problems that also fueled the opposition to the Morsi government. When the tourist industry was in the doldrums and over 40% of the population was living below the poverty level, Morsi ended the food and utility subsidies as demanded by the IMF as the price for a $4.8 billion loan. As prices soared, food became unaffordable and the World Food Program reported that the growth of a third of all children in the country was stunted in 2011. Neither the military nor the interim government it installed is likely to reinstate subsidies and the military which controls 40% of the country’s economy will zealously safeguard its privileges. No future government will dare tamper with the military’s perks.

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With poverty and disenchantment in the streets, and continuing oppression of the Muslim Brotherhood, chances are that Egypt is in for a prolonged bout of conflict unless international forces intervene. By closing the life-giving tunnels to the Palestinians brutally imprisoned in Gaza, the military has played on Israel’s security fears and inoculated the coup against pressure from Washington. And the collapse of Egypt’s democratic essay has once again prompted the racist trope that Islam is incompatible with democracy. In an op-ed in the New York Times on the day after the coup, David Brooks wrote: “It’s not that Egypt doesn’t have a recipe for a democratic transition. It seems to lack even the basic mental ingredients.”

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It is a real pity that the so-called emerging powers—China, India, Brazil, and South Africa don’t weigh in on the events in Egypt and leave the West to define an ‘international response’! Democracy, after all, is not the exclusive preserve of the West—and the few governments elected by popular vote in Europe and North America before the Second World War were underpinned by colonial or neo-colonial exploitation of the peoples of Africa, Asia, Latin America, and the Middle East. Democracy is no privileged preserve of any peoples–and the peoples of the world ought to pressure governments everywhere to adhere to democratic norms!

 

No-fly zones, Libya and the Arab Revolt

March 17, 2011 at 8:26 pm | Posted in democracy, Human Rights, International Relations, World Politics | 2 Comments
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The United Nations Security Council–with the abstention of Russia, China, Germany, India, and Brazil–has done what military analysts have said would be folly: it has voted to impose a ‘no-fly zone’ on Libya and ‘take all necessary action’ short of ‘a foreign occupation force of any form’ to force Colonel Muammar Gaddafi out of power. ‘All necessary action’ could involve a ‘no-drive zone’ to cripple the Libyan regime’s armored vehicles from attacking Benghazi, Misrata, Tobruk, and other remaining rebel strongholds as well as sending in military advisers.

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Advocates of the resolution have evoked humanitarian reasons–chiefly the regime’s brutal counter-assault using its air force and paramilitary forces to roll back the rebels–for intervention. This is buttressed by the belief that Libya is not even a third-rate power and its defenses can easily be destroyed. And the rebels are clothed in the accoutrements of democracy though the only thing that unifies the rebels is their opposition to the Gaddafi regime and it is not clear what a post-Gaddafi Libya will look like or even whether it will remain unified.

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If humanitarian reasons are the chief justification, then it is clear that there is a double standard that is applied. Much has been made of the Arab League’s call for the imposition of a no-fly zone over Libya, but there has been no report of the fact that it was opposed by both Syria and Algeria. The states in support of the resolution–Saudi Arabia, Bahrain, Kuwait, the United Arab Emirates, Jordan, Oman, and Yemen–are hardly paragons of democracy. The governments of Yemen and Bahrain have brutally crushed demonstrations in their own countries; and Saudi Arabia and four other Gulf Cooperation Council states have sent more than 2000 troops to Bahrain to help the regime stay in power! Saudi Arabia has moreover prohibited protests in its eastern province, declaring such protests “illegal and un-Islamic”–and Saudi Arabia has more than 8,000 political prisoners!

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More importantly, there has been virtually no report in mainstream media in the West, that the African Union has condemned attempts to impose a no-fly zone on Libya. The AU’s 15-member peace and security council resolved, to “reaffirm[s] its firm commitment to the respect of the unity and territorial integrity of Libya, as well as its rejection of any form of foreign intervention in Libya.” It formed an ad hoc committee composed of South Africa, Mauritania, Uganda, and the Democratic Republic of Congo to engage in dialogue with all parties in Libya for a speedy resolution of the crisis.

There is no certainty that the military operation will be a smooth and easy one. Less than a month ago, US Secretary of Defense, Robert Gates, had told cadets at West Point that any secretary of defense who advises a president to intervene militarily in Asia or Africa ought to have his head examined. Admiral Mike Mullen, the Chairman of the US Joint Chiefs of Staff, has said that even the imposition of a ‘no-fly zone’ let alone all the other ‘necessary actions’ voted on by the Security Council will be “an extraordinarily complex operation to set up”–and of course, the major burden will be on the United States which is already engaged in two wars. British Prime Minister David Cameron may have led the charge for a ‘no-fly zone’ but Britain does not even have an aircraft carrier! General Wesley Clark, who commanded NATO forces in Kosovo, has argued that intervention in Libya does not meet critical tests: it is not in US national interest, the purpose of intervention is not clear, political prospects were Gaddafi to be ousted is unclear.

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A ‘no-fly zone’ moreover, might have had a chance of success ten days ago when the Gaddafi regime launched its counter-assault. Now with the rebels in full retreat, and the regime ascendant–with the regime poised to assault the rebel capital of Benghazi–it is not clear whether a no-fly zone alone will suffice. A ‘no-drive zone’ is an even more ‘complex operation’ and increases the odds of British, American, and French casualties–Germany has refused to contribute troops to a NATO operation against Libya and Turkey is unlikely to participate as well. Colonel Gaddafi has promised to take the battle into the Mediterranean and that increases the prospects of Western civilian casualties and an escalation of the war. It will be a war Gaddafi may well lose, but it is not likely that NATO can extricate itself easily–and remember there is no international sanction for a foreign occupation force ‘of any form’ in the Security Council resolution!

If intervention is to promote democracy, George Monbiot notes that the Economist Intelligence Unit ranks Libya 158th of 167 countries on its Democracy Index while Saudi Arabia is ranked 160th–and in Libya “women are not officially treated as lepers were in medieval Europe.”

Here, the double standard is all too obvious. Saudi Arabia in the only remaining “swing producer”–the only oil-producing nation with enough excess capacity to raise production if supplies fall short of demand. But US diplomatic cables released by Wikileaks suspect that Saudi claims of reserves are exaggerated by almost 40 percent.

The Arab Revolt is not really about democracy–elections have not delivered results in the past, and when election results have angered the United States as in the Hamas triumph in Palestine, the US has condemned the results and applauded Israel’s punitive punishment of Gaza. The protests are about a wholesale change–not merely a change of rulers–because where there is a legal opposition, the opposition is often equally discredited.

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Key to the revolt has been an explosion of information–not only through al-Jazeera, but also through the Internet, travel, and TV–and the enormous growth of people aged below 25 to levels unmatched almost anywhere else. The youth exposed to a wider range of information and experiences have greater aspirations–and now that two of the tyrants have been ousted, the sense of empowerment is raised as Brian Whittaker notes.

It is this sense of empowerment that will take a beating if Western forces occupy Libya for a long while. It will signal pro-Western governments in the Persian Gulf–Saudi Arabia and the other oil-rich sheikdoms that they can count on mealy-mouthed appeals for restraint from Washington, London, and Paris as they crush their domestic oppositions. Ironically, this may play well in Iran’s favor. The Islamic Republic is very careful not to portray the conflicts in a sectarian light: if it can portray it as an attack on Muslims, and when Saudi Arabia, the Custodian of Holy Places, sends its troops to slaughter other Muslims, Iran raised the issue not with the Arab League but with the Organization of Islamic Conference. The Iranian Foreign Minister asked the Conference: “How can one accept that a government has proceeded to invite foreign military forces for the crackdown of its own citizens?” Tehran will gain even more credibility with the Arab forces when American, British, and French forces intervene in Libya.

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