After Coronavirus

Markets are indifferent to who lives or dies. In the aftermath of the Covid-19 crisis it must not be the working class and pensioners that bear the burden, writes Prem Sikka

There are a few things that we have learnt from the coronavirus crisis. You can’t rely upon capitalism to provide essential things for emergency unless there is profit. Hospitals desperately need masks, gowns, aprons, protective equipment, test kits and ventilators, but they can only be provided if a company can make profit. Private hospitals have been mobilised and they are all doing well out of the emergency. Buses owned by giant corporations may be parked idly in depots or carrying fewer passengers due to social distancing rules, but they aren’t going to run them for the vulnerable people or essential workers without profit. The UK government has given them £400 million.

Some would attribute the above to market forces, but markets don’t give a damn about whether people live or die. Essential services need to be provided on a collective basis to people on the basis of need rather than profit. Medicines, protective equipment, ventilators, hospital beds, intensive care unit beds and public transport would come into that category.

Rather than focusing on social good, the UK governments have been aping private sector practices. Doctors, nurses and care home workers have to pay for their education. The cost acts as a form of rationing and also excludes many from pursuing a fulfilling career. Many are burdened with loans, but that did not matter because government got a pat on the back from neoliberals for perpetuating their values. Subservience to capitalist values has ensured that the UK does not have enough doctors and nurses to deal with the crisis. Even before that, there was a shortage of hospital beds, doctors and nurses, as shown by a long waiting list for treatment.

The coronavirus pandemic should make us rethink the role of the state. Is it just a committee of the ruling class or concerned with welfare of the people? Some would say that the benevolence of the state has ensured that thousands of homeless people have suddenly been housed. Well, the state always had resources to reduce or eliminate homelessness but it chose not to. It could have built special shelters, but lacked the political will to do so. So what is so different now? The coronavirus crisis threatened to cause fatalities, wiping out businesses, their pool of skilled labour and consumers. Housing the homeless seemed to be a small price to pay to protect corporate profits and interests. Of course, all this could be dismissed as conjecture, but a test will come after the crisis. It will be interesting to see whether the homeless people remain in shelters or once again turfed out onto streets.

The state needs to accept greater responsibility for tackling homelessness and other social problems. However, under the influence of neoliberal ideologies it has actually worsened them. After the 2007-08 banking crash, the UK government appeased neoliberals with mythical talk of balancing the books and imposed austerity: wage freezes (especially in the public sector), cuts in investment in the National Health Service and other public services and reduced social security benefits. Inequalities increased but neoliberals rejoiced as this enabled the state to fund tax cuts for corporations and the rich. Now the comparatively low-paid health and care home workers, midwives, ambulance drivers, delivery drivers, supermarket workers, bus drivers and postmen are the ones taking high risks and standing between economic oblivion and some sense of sanity. The government and neoliberals are all applauding essential workers, but that is no substitute for a decent wage and an equitable distribution of income.

After the 2007-08 banking crash, many commentators forecast that capitalism will never be the same again. It did not turn out that way. Instead, the UK government bailed out the finance industry, providing guarantees and cash outlays of £1,162bn and quantitative easing of another £435bn. It punished innocent people by imposing a never-ending austerity. Once again, the UK government is bailing out businesses and has set aside an initial £330bn for loans and guarantees through the banking system. Billionaires like Sir Philip Green and tax exile Sir Richard Branson are heading the queue for bailouts. Tax avoidance and past predatory practices don’t seem to be a barrier to securing government handouts. Interestingly, in March 2020 EasyJet paid out a final dividend of £174 million. Some £60 million of that went to its co-founder Sir Stelios Haji-Ioannou. The company was simultaneously seeking a government bailout as shareholders were unwilling to invest. On 6 April, the company secured a government loan of £600 million. No think tank has objected to this or any other corporate bailout.

The coronavirus pandemic may have encouraged the low-paid to see themselves as essential workers and demand higher. The ruling classes would not like that. Unsurprisingly, neoliberal think tanks are busy with class war. They are picking off the low-paid and vulnerable people and reminding them that they are a danger to economic recovery.

From 1 April 2020, the national minimum/living wage for a worker aged 25 or over rose from £8.21 to £8.72 an hour, which is hardly adequate to enable people to make ends meet. To soften the economic impact of the coronavirus crisis, the Institute for Fiscal Studies (IFS) recommended a delay in the rise and even a “temporary cut” in minimum wages. The IFS proposal would penalise many essential workers currently engaged in the fight against coronavirus. It did not urge the government to reduce executive pay/bonuses, or dividends and share buybacks which enrich shareholders.

The Social Market Foundation (SMF) – funded by the likes of Vodafone, Provident Financial, Barclays, Kellogg’s, Novartis, Post Office, BP and KPMG – is urging the government to reduce the value of the UK state pension by abolishing the triple-lock. In 2011, the Conservative and Liberal Democrat coalition government introduced a triple-lock, which meant that the state pension would rise by a minimum of either 2.5%, the rate of inflation or average earnings growth, whichever is largest. Triple-lock was introduced because in the 1980s the government broke the link between average earnings and the state pension. This eroded the value of the pension and condemned many retirees to poverty. Despite the triple-lock, the state pension decreased by around 20% in real terms from 1994/95 to 2017/18.

Depending upon circumstances, the current state pension can be between £134.25 and £175.20 per week – hardly adequate. The amount is taxable. In 2019, the UK state pension was 29% of average earnings, the lowest amongst industrialised nations. The proportion of retirees living in severe poverty in the UK is five times what it was in 1986. The UK public pension spending is about 6.2% of its GDP, compared to an average of 8% for the OECD countries. The SMF claims that its proposal would save the government £4bn a year. Well, actually, if savings was the concern it could have recommended abolition of the £4bn-£5bn annual subsidy given to railway companies. In any case, balancing the government books is not the issue at the moment. Therefore, the SMF proposal is bizarre.

The Office for Budget Responsibility has forecast that coronavirus pandemic could shrink the UK’s economy by 35%. The most effective way to combat that is investment by the state in infrastructure and by nationalising essential services such as gas, water, electricity, railways and buses. The state needs to ensure that people have good purchasing power to buy goods/services produced by businesses. Therefore, neoliberal think tanks’ proposals for hitting the low-paid, the elderly and the vulnerable make no economic or social sense. The government has decided that an income of £2,500 a month per worker is adequate for managing the crisis and that should form the benchmark for minimum wage and state pension. Equitable distribution of income is needed and should be facilitated by repeal of anti-trade union laws, placing worker-elected directors on the boards of large companies, with employees and consumers voting on executive pay.

Now is also the time for the state to redistribute wealth by adopting progressive taxation policies. These can include a wealth tax, a reversal of cuts in corporation tax, a higher marginal rate of income tax on the rich, higher VAT on luxury goods; windfall taxes on banks, supermarkets and hedge funds; a financial transaction tax, a land value tax, elimination of numerous tax reliefs/subsidies for the well-off – just to mention a few.

However, none of this will happen unless people resist the return of the pre-coronavirus social settlement. The resistance would require support from trades unions, the Labour Party and civil society organisations. Without this, neoliberals will once again impose harsh penalties on the 99%.

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