The Great Depression, The Great Recession and the Great Lockdown
By TruePublica Editor: They say, don’t they, that the coronavirus is a great leveller – that it treats us all the same. This is nonsense. COVID-19 has graphically demonstrated that it fully exacerbates preexisting conditions of inequality wherever it turns up – it kills those in more significant quantities who are economically or medically disadvantaged. To answer this question just ask how many key-workers have died on the frontline compared to how many politicians, bankers and corporate leaders have willingly put themselves in the ‘line of fire’ and sacrificed themselves for others. In the UK – that’s a lot versus nil right now.
One thing we can be 100 per cent assured of when the virus subsides, and the lockdown comes to an end – life will not be the same for all sorts of reasons.
From the perspective of the political economy – the world has changed dramatically and forever. Aside from world wars, there have been three events in recent world history where we were ‘all in this together’ – when we weren’t – and the world changed.
The Great Depression
The Great Depression was the worst economic downturn in the history of the industrialised world, lasting from the stock market crash of 1929 to 1939. Consumer spending and investment crashed, causing steep declines in industrial output and employment as failing companies laid-off workers. By 1933, when the Great Depression reached its lowest point, some 15 million Americans were unemployed (20 per cent of US working population) and nearly half the country’s banks had failed. A new president was elected and Roosevelt brought the New Deal to America, which substantially got the USA back on its feet.
Financial contagion reached all advanced economies. It was Britain’s largest and most profound economic depression of the 20th century. The UK’s output of heavy industry fell by a third and employment profits plunged in nearly all sectors. At the depth in summer 1932, registered unemployed numbered 3.5 million, and many more had only part-time work. The UK’s world trade halved. Mining and industrialised working-class towns were hit the hardest and masses were impoverished on the way.
World trade contracted, prices fell and governments faced a financial crisis as the supply of credit dried up. In Britain, pay cuts of 10 per cent were imposed everywhere and taxes rose by 5 per cent. Eventually, Britain was forced to leave the international gold standard. It imposed trade tariffs and interest rates plummeted to 2 per cent. However, to get Britain working again, a government-backed housing project took place and over 200,000 homes were built per year (at its peak over 350,000 homes were built in one year) with a population in the UK of 43 million. With more money washing around the economy, industry picked up, so did more jobs and the cycle of rebuilding the economy took place.
After the war, many people did not want a return to pre-war Conservative economic policies, which they blamed for the hardship of the 1930s, and there was a mood for widespread social change. At the 1945 general election, to the surprise of many observers, Winston Churchill was defeated by the Labour Party headed by Clement Attlee. What emerged was the welfare state and the NHS. The Labour government also enacted Keynesian economic policies, to create artificial economic demand leading to full employment. These policies became known as the “post-war consensus”, and were accepted by all major political parties at different times. It is how the economy was then managed all the way until the late 1970s when the next crisis was born with the arrival of Margaret Thatcher’s Reaganomics plan of trickle-down economic theory.
The Great Recession
The causes of the Great Recession include a combination of vulnerabilities that developed in the financial system – as a direct result of deregulation through political neoliberal policy. It was a series of triggering events that began with the bursting of the United States housing bubble, that led to contagion, the financial crisis and the economic crash that ensued. We all know what happened. Again, we were ‘in this together.’ Britain entered the longest and deepest recessionary contraction since the Great Depression and took much longer to climb out of it.
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Public debt doubled. The result of ‘being in this together’ was austerity. After ten years (2008-18), the IFS calculated that Britain’s economy was 16 per cent smaller had the crisis not happened and that every adult in the country was £5,900 worse off. Productivity has since crashed, median pay fell over the ten years by nearly £4,000, and living standards quickly fell with inflationary pressures adding its presence. The gig economy emerged, and with it came exploitative policy changes such as legalising zero-hours contracts. A Tory-led class war broke out with the delivery of Universal Credit that put the most vulnerable in society in its crosshairs. The Conservative party wanted to wind back the welfare state and the publicly funded health-care system that arose from the Great depression and war years.
The result was public frustration and anger that led to Brexit, the fall of two Prime Ministers and the rise of a populist in the guise of Boris Johnson. The country is by then fully divided with tribalism encouraged and the economy was, by the end of 2019 falling into a productivity and ideologically driven recession. The best economists in the country were warning that a shrinkage of economic activity would rewind all the progress a trillion pounds of national debt had built. Britain was staring at another decade of economic decline. Then a virus arrives.
The Great Lockdown
It is impossible to calculate what the cost of the lockdown will be but it will be huge. There are so many industries, factories and small businesses that produce stuff that can’t be sold to other countries that may well still be in their own lockdown. Households will have depleted savings, debts will escalate and even surplus earnings for those doing well will be thin on the ground. Life will not return to normal for some time to come. Thousands of businesses will go bust, several million will be unemployed – corporate profits, investments, pensions and anything else money-related will swan dive. Once again, we are told, that we’re all in the together.
If class war, tribalism and Brexit was the net result of the Great Recession it won’t be that long before social turmoil will lead to civil disobedience and then quite possibly to an uprising of some sort as a result of the Great Lockdown. Neither will be pleasant.
In the last three years, social unrest around the world has led to the over 20 leaders being toppled and now over half the world are led by populists and ‘strongmen.’ Democracy is in retreat and authoritarianism is on the march.
One of the immediate effects of Covid-19 restrictions is to shut-down most forms of unrest, as both democratic and authoritarian governments force their populations into lockdowns. New laws, some of which are wholly inappropriate, suddenly come into being. And in Britain’s case for too long as the Coronavirus Act gives unprecedented executive power for not six months – but two years.
This is the perfect cauldron for protest. Technology allows for commentary of the ever-lengthening lines of the unemployed meeting those going hungry at ever swelling food banks. And as they are joined by the middle-classes and the trauma of daily life unfolds, their losses will turn to outrage at the failure of government. It is here that the cauldron boils over.
Inequality will be magnified in these circumstances. Big businesses and wealthy people are chartering private jets for “evacuation flights” out of countries hit by the coronavirus outbreak. In the meantime, key workers die in the fight against it.
It’s a reality that the less money you make, the more likely you will end up unemployed. And the less you have, the more likely to suffer from mental health conditions, drug addiction and other permanent situations that spells disaster. But in the face of this crisis – it’s deadly.
Forced to work for whatever they can make, workers risk getting infected and bringing the virus home to their families and spreading it further into the community for months on end. For the bottom half of society – life is about to get seriously bad as if somehow it wasn’t going in that direction in the first place.
In this context, it would be naive of anyone to think that once the COVID-19 crisis has receded, our country can carry on as before. It will have negatively reshaped the economy and everything it supports.
In this downward spiral, anger and bitterness will find new ways to find a voice. How this ends up will be written about for decades. This isn’t seasonal flu where 20,000 of our elderly died. This story reaches us all and it requires an approach to stem the coming revolution of frustration and anger on our doorsteps in towns and cities around the country.
The Great Lockdown of 2020 demands that we think harder and devise a more bold approach to what our future should look like. If politicians believe that it’s business as usual in a few months time, it won’t be long before they are pushed out of office. No-one in the post C19 world wants to hear from the Rees-Mogg’s and Richard Branson’s of the world any more. They showed who they were in a crisis – cowards who ran for hills and profited on the way or asked for public bailouts for their failed enterprises.
No politician in Britain would dare to sell the NHS down a river to Donald Trump’s America after witnessing its right-wing savagery and acts of piracy. Individualism, the beating heart of neoliberal capitalism has been defeated by our collective resolve to help each other in the midst of a real crisis. So much will inevitably change. Maybe the direction of Brexit will change because working conditions, the environment and perhaps a green new deal just like Roosevelt’s New Deal to get the country working and investing in its future will force changes.
And the COVID-19 crisis a wake-up call to all those in power. They will be asked why they failed and then tried to cover-up those tracks of failure.
Others will be asked to make a proper contribution to help society get back on its feet. Money laundering by the banks, offshoring and tax havens will simply be unacceptable. Perhaps boycott programmes will be focused at those seen to be profiteering or simply not paying their taxes. But beware. The big corporations will still have money and will buy market share as bankruptcies escalate and the economic pie gets smaller. Their power over us could accelerate if not kept in check.
In this new environment, Britain’s new world order should be built around justice and equality. To create this future, policy areas currently managed by the ideologies of politics need to be handed to the people and public experts. Health and education should be funded by law as a percentage of GDP and given a 25-year horizon of success – not top-down ‘reform’ every five years by the likes of people like George Osbourne and managed by incompetents like Chris Grayling. Lobbying, lying, and propaganda needs to stop if faith in the institutions that uphold society is to thrive.
We should not hope to be survivors of the coronavirus and the Great Lockdown, but to survive in a world worth living in – one where we took the opportunity and rebuilt and were proud to say we had some hand in it for future generations. People like Boris Johnson, Priti Patel, Matt Hancock, Dominic Raab et al have had their chance and have shown already they are not up to the challenge.