The covid-19 pandemic has highlighted the global crises that were already there, the recognition of a dysfunctional economy and the driving force behind highly unequal societies – which favors new paths, fears and hopes, but the future remains unknown (Translated from Spanish by Alissa D’Vale).
It is impossible to predict the changes that will come from this tragedy, because “there are too many variables and uncontrollable interactions,” says Brazilian economist Ladislau Dowbor, a graduate professor at the Pontifical Catholic University of São Paulo, who sees the coronavirus as a crisis aggravated by a series of other factors.
Neoliberal economic policies have tried to reduce the role of the State and adhere to a fiscal austerity that has limited investments in public health systems. Now all of this has a heavy weight, the poor are more vulnerable to the coronavirus, and the responsiveness to the pandemic has declined. Inequality – reflected in income, housing, poor sanitation, overcrowding and long trips in public transport – favors the spread of the virus and its lethality. This has been verified in the United States and it is feared that it will be widely confirmed in Latin America and Africa.
The poor distribution of the world’s wealth erodes the defenses of society: liberal economists acknowledge this as it has been evidenced in previous epidemics and environmental disasters.
“The covid-19 pandemic will increase awareness of this fragility, especially in Brazil, where the concentration of income is growing rapidly. Its 74 thousand millionaires in 2012 increased to 206 in 2019,” said Dowbor, based on Forbes magazine.
The world’s Gross Domestic Product (GDP) is a total of $ 85 billions of dollars, which distributed per person would ensure $3,700 per month for each family of four, he noted. Additionally, in the tax havens there are $20 billions of dollars.
In his book “A era do capital improdutivo (An Era of Unproductive Capital)”, the economist devotes part of his study on the draining of resources for the financial system, a system that absurdly enriches a few, nothing gets produced and impoverishes the majority.
This financialization of the economy ends up being a barrier to development and generates the frustrations that result in protests, springs, occupations, marches and rebellions.
Many economists are seeking answers to the systemic challenge of the “four converging crises: environmental disaster, explosive inequality, financial chaos, and the coronavirus.” The key is to adapt the decision-making process to define how to use resources and replenish the economy at the service of the common good, Dowbor concludes.
Pope Francis proposed to search for solutions at the meeting “Francis’ Economy” that was going to take place from March 26th to the 28th in Assisi and was postponed to November due to the pandemic. Covid-19 has changed all of the norms by forcing the disruption of nonessential activities, isolating people in their homes, and paralyzing the economy.
Some overturns were imposed. The Brazilian government temporarily abandoned its fiscal austerity policy and approved a “war budget” that allows it to allocate up to 10% of GDP – about $130 billion – in emergency aid to families, workers and businesses. Brazil’s Economy Minister, Paulo Guedes, estimates that by adding the numbers to the contribution to local governments, expenses will reach 37 % more.
The most impressive sums are those of the United States, whose government announced a package of two trillion dollars, 10% of GDP, to offset losses and protect companies and workers against the sudden loss of income. Those measures are reminiscent of the British economist John Maynard Keynes (1883-1946), who proposed state intervention to stimulate aggregated demand and sustain the economy and employment. Guedes would be executing policies opposed to his orthodox liberal ideas learned in Chicago in the 1970s.
But these are pragmatic measures, to avoid an explosive increase in hunger, social seizures and the destruction of the economic system that would make its post-pandemic recovery very costly. Expecting a permanent change in economic policy, a return to Keynesianism can be an illusion. The exceptional expenses will represent a brutal increase in public debt that will serve as an argument for the intensified return of austerity, already claimed by many economists.
In any case, reinforcing the State and public health for the future appears as a logical consequence of this crisis. Pandemics will remain a permanent threat for a long future. The hope of many is that the tragedy of the pandemic – whose dimensions are still incalculable – will move humanity to the point of reducing consumerism, promoting solutions for the climate crisis and for the inequality that is now considered unacceptable.
No political or social forces appear to ensure favorable decisions to such changes in the future; the trend is clearly contrary. The coronavirus forced the closure of borders, deepening nationalism that was already gaining strength and has affected national coordination, which would have been useful in combating the pandemic.
With regards to employment, there is a huge destruction in progress and “nothing guarantees future restoration,” says José Dari Krein, a researcher at the Center for Trade Union Studies and Labor Economics at the University of Campinas, in southern Brazil. Evidences of this are the definitive bankruptcy of many small companies in a “chain effect”, the foreseeable adoption of technologies and the reorganization of businesses to reduce the labor force and policies of the current government.
“There are heavily affected sectors such as tourism, whose de-structuring will hardly allow for recovery,” he adds, and for a long time the demand will remain very retracted. “The scenario that was already bad, with high unemployment (11.6% in February) and many workers in informal sectors has worsened and there are no alternatives for improvement,” this is a reality, not only in Brazil, Krein summarizes.
The president of the Unified Workers’ Central (UWC, the largest union in Brazil), Vagner Freitas, in return, identifies “a moment of opportunity, of solidarity.” The crisis values collective solutions, “strengthens the union by rescuing its role of negotiating agreements”, after some years of deterioration of labor and union rights.
The pandemic calls into question many negative policies and affirms “the need to build strong nations – not just strong corporations –, investments in science, an efficient state to provide services to society and not only to capital,” concludes the unionist.
See the article in the original version: La pandemia podría gestar una economía menos excluyente
To know more see here:
Leave a comment