Economic Consequences of the Pandemic

In comments at my personal blog, James Wimberley asked about the recent agreement on a 15 per cent global minimum rate of tax. Over the fold, a section from my book-in-progress (still a bit rough in places), Economic Consequences of the Pandemic addressing this and other points

Over the fold, an excerpt from my book-in-progress, The Economic Consequences of the Pandemic, adapted from an article coming out soon in Australian magazine Inside Story

Comments, criticism and (of course) praise welcome

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I’m racing to get a draft manuscript of The Economic Consequences of the Pandemic, not helped by the fact that Biden keeps doing pretty much what I think he should do. More of the fold. Comments greatly appreciated, as always.
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Writing in the New York Times, Elizabeth Bruenig makes the case against an alliance of convenience between liberals and “woke” corporations against the threat posed to democracy by Trumpism . After acknowledging how desperate the situation has become, she presents the argument, to which I’ll respond bit by bit

Capital is unfaithful. It can, and does, play all sides. Many of the courageous businesses that protested North Carolina’s 2016 “bathroom bill,” for instance, also donated to political groups that helped fund the candidacies of the very politicians who passed the bill.

This is the nature of alliances of convenience. When the Western Allies joined Stalin to fight against Hitler they had no (or at least few) illusions about him, and didn’t rely on him to keep his word any longer than necessary, or to refrain from undermining them in other quarters

It isn’t possible to cooperate with capital on social matters while fighting them in other theaters; capital can fight you in all theaters at once, all while enjoying public adulation for helping you, as well.

This simply isn’t correct as the Biden Administration is showing. Despite co-operating with capital on social matters,. Biden has proposed substantial increases in corporate tax rates and global action against corporate tax avoidance. In this context, it is the position of capital that has been weakened by the toxicity of its usual allies, the Republicans.

Setting aside the fact that capital can in a single moment be both heroic and diabolical — Amazon wants you to be able to vote, but it would prefer if you didn’t unionize — it is, incredibly, even less democratic, accountable and responsive than our ramshackle democracy. Capital rallies to the defense of democracy while aggressively quashing that very thing in the workplaces where its workers labor.

Again, this is what happens in an alliance of this kind. Fights over unionization go on, in parallel with an alliance over the right to vote. Once again, it’s the corporations who face the bigger problem here, with opportunistic Republicans pretending to back the rights of the workers.

I have no idea what to do about this other than know it for what it is. If it were ever the case that knowledge was power, it certainly isn’t so anymore: Knowledge is more widely dispersed than ever; power remains notably concentrated. But knowledge confers a certain dignity. It’s worse to be powerless and unaware than to be powerless and perfectly clear on where you stand.

This is a counsel of despair, without any real basis. Bruenig gives no reason to suppose that the fight for democracy can’t be won, even if it requires alliances between groups with interests that are otherwise opposed. But if the Republicans can be held at bay long enough to allow the passage of strong voting rights law, they will have to reform themselves or face permanent minority status. Getting to that point (for example, by winning bigger majorities in both Houses of Congress in 2022, then scrapping the filibuster) will be difficult, but not impossible

An important limitation of Bruenig’s analysis is that she treats “capital” as a unitary force. There is a sharp division between global corporations, with a long-run interest in the preservation of the rule of law under a democratic government, and the crony capitalists, epitomized by Trump himself, for whom the object is to extract as much as possible from the US economy, as quickly as they can.

Someone with more expertise than me could interpret all this in terms of the “fractions of capital” idea put forward by Poulantzas and others in C20. A search on those terms produced this piece in The Guardian, which covers some of those points.

Updating an old aphorism, “A trillion here, a trillion there, pretty soon you’re talking real money. But how much is a trillion dollars, really? Over the fold an extract from The Economic Consequences of the Pandemic.

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As I argued recently, the decline of soft neoliberalism in the US Democratic Party can be explained largely in terms of generational replacement. What about hard neoliberalism and the Republican Party?
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I’m trying to get the MS of Economic Consequences of the Pandemic finished by May, while chasing a moving target. Over the fold, I return to a favorite topic of mine, the role of generational change. I’ve spent a lot of time pointing out the silliness of most talk about generations, but in the process I’ve learned quite a bit about the nuggets of insight that can be mined by thinking in these terms.

Comments much appreciated. Happy for anyone to raise nitpicking points about typos. There are always plenty in my work, and even more when I’m in a rush. Of course, substantive criticism is always welcome and praise even more so.

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As I’ve mentioned previously, when I started work on Economic Consequences of the Pandemic, I assumed I’d be writing a polemic against austerity, as I did in Zombie Economics. Based on the last crisis, it seemed likely that any stimulus measures would be wound back rapidly, leading to a sluggish and limited recovery. That’s pretty much what is happening in Australia, where I live, but not in the US, where the book will be published. On the contrary, Biden’s policies are pretty much what I would have advocated (certainly if you take into account the razor-thin majorities he is working with). And, with luck, the main elements will be in place by mid-year, long before my book can appear.

So I’m refocusing on the issue of debt and how it can be managed. This was the central issue after the Treaty of Versailles, and also in the return to the gold standard, which prompted The Economic Consequences of Mr Churchill. io o

My central conclusion is a simple one. Rather than aiming for a fixed ratio of public debt to GDP, governments should aim to control the long-term rate of interest on inflation-protected bonds, and set it at a rate of around 1 per cent, about equal to the long-term rate of productivity growth. Since rates are well below that now, there is plenty of room for more public investment.

More over the fold

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Thanks to everyone who has made useful comments on my recent posts. I need to move on to present concerns, so I’m finishing my writing on the post-War Golden Age (or whatever you would like to call this period). Here are some thoughts I still need to organize

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The claim that the mid-20th century represented an economic Golden Age of near-full employment and economic equality, compared to both earlier and later periods, commonly meets two kinds of critical responses. Over the fold, I respond.
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In most societies, there is a myth of a ‘golden age’, a time when men and women lived simply and happily, free from the cares and troubles that afflcit them today. This myth usually includes an account of how, through foolishness or malice, the golden age was lost. In Western versions, the blame has been placed upon women – Pandora opening the box and Eve taking the apple.

In the economic history of the developed world, there is one historical episode which might reasonably be regarded as a golden age. Between 1945 and 1973, developed countries in Western Europe, North America and Oceania experienced strong economic growth, combined with minimal levels of employment and a sharp decline in inequality. In policy terms. the dominant features of this period were the use of Keynesian macroeconomics to stabilize the economy and the development of a fairly comprehensive welfare state, protecting citizens from falling into poverty due to old age, incapacity or unemployment.

Those are the opening paragraphs for Chapter 2 of The Economic Consequences of the Pandemic. Comments and criticism much appreciated.

When I agreed to write The Economic Consequences of the Pandemic for Yale UP, with a target date of May 2021 the idea was that it would be a polemic against austerity along the lines of Keynes’ The Economic Consequences of Mr Churchill, and the The Economic Consequences of the Peace [1] . In view of the rapid resurgence of austerity politics after the Global Financial Crisis, about which Henry and I wrote here, it seemed like a safe bet that this would be a hot topic in 2021. Even when Joe Biden won the election, and then the voters of Georgia gave the Dems a wafer-thin Senate majority, it still seemed likely, that we would see, at best, a half-baked “compromise” along the lines of the Republican counter-proposal to the American Recovery Program.

But here we are, a couple of months later. Not only has the ARP passed with the only significant cutback being the exclusion of the $15 minimum wage rise, but the Administration is already talking about an additional $3 trillion in infrastructure expenditure. If that happens, it will be after I’m due to finish my manuscript, but well before the book comes out.

All of this is great news, but it means I need to produce a different book to the one I had planned and have already written a fair bit of.

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A draft of the first chapter of my book, The Economic Consequences of the Pandemic. Comments, criticism and congratulations all welcome.

Here’s the draft introduction for The Economic Consequences of the Pandemic. Comments, criticism and congratulations all appreciated.