The future of the corona crisis: Economics and politics

March 2020 Food-Bank-Alejandra-OConnell-Domenech-1536x1024
Food bank delivery in New York City. The COVID crisis has greatly worsened the ability of low-wage working-class families to obtain food. (Alejandra O’Connell-Domenech / QNS)

By STEVE LEIGH

Steve Leigh is a member of the Revolutionary Socialist Network in Seattle.

On March 25, 2020, the Senate passed a stimulus bill of at least 2 trillion in the face of the virus. Some of this makes perfect sense from a capitalist viewpoint—loan guarantees to large corporations and to hospitals to buy needed equipment. The origins of the other parts of it are less clear.

The Senate voted to increase UE compensation and send checks of $1200 to each U.S. citizen. The reason for these in part is to stave off social unrest. Since the crisis broke, there have been some strikes and sickouts demanding closures to protect workers—UAW, teachers in NYC, and a strike by bus drivers in Detroit to demand free bus fare.

With large parts of the economy shut down, the fear of riots and other upheavals were realistic. Something had to be done to prevent this. Other measures were expansion of sick leave at the federal level and local bans on evictions and foreclosures. These went much further than similar measures from 2008 on. This shows that this crisis is likely to be more severe than the Great Recession. It is also even more international.

The Great Recession rolled out more slowly and was less deep than this crisis. The U.S. GDP dropped 4-5% in one year during the Great Recession. Expectations now are that in the second quarter of 2020, GDP could drop 50% and over 10% for the year.

The politics of the concessions to the working class make sense. The economics of it are less clear. Payments to workers who are off work, subsidies from the federal government, etc. will at least in theory stimulate consumption. Though many areas of consumption are closed now, those that are left will be supported. Profit for some of the goods already produced will be realized because of the stimulus. That is, some goods that would otherwise stay on the shelves will be sold.

Whether this temporary stimulus will cause long-term production of even still available goods down the pipeline is less clear. This will depend on demand, but more importantly whether capitalists think they can make a sufficient profit from more production.

The Crisis means that less surplus value is being extracted from the working class, though some sectors will actually increase production (medical equipment manufacturers, grocery stores, etc.). The overall profit rate of U.S. capitalists and capitalists across the world will decline precipitously for the foreseeable future. The profits of the still productive sectors are divided by the full mass of capital including those no longer making a profit.

There is another difference between the current crisis and 2008-9. This time industries are shutting down because of health reasons, not because of declining profitability, at least initially. However, the Corona Crisis came just as economists were predicting a new U.S. and worldwide recession anyway. This means that even after the Crisis is over, the effects of it combined with pre-existing declining profit rates will likely continue the recession/depression caused by the Crisis in the first place.

Revolutionaries must be prepared for a long period of depressed economic conditions.

The overall depression in the extraction of surplus value will stiffen the capitalist resolve to resist more concessions to the working class. It is already having the effect of pushing some capitalist representatives to demand re-opening of the economy—i.e., the return to full surplus value extraction. For now, this is a minority opinion, even if it is shared by the Buffoon in Chief.

As the Crisis continues and morphs into a somewhat more typical economic crisis, the conflict between the inherent drive of capitalism for higher profit and the survival needs of the working class will intensify. Capitalists will be less willing to continue dipping into reserves to maintain the survival of workers. Workers will be compelled by survival to fight back. The capitalist desire to manage potential working-class unrest with concessions will decline as the decline of profit intensifies.

The capitalist economy is based on the drive for profit. When the rate of profit goes down, the desire to invest also declines. Declining investment leads to an overall decline in economic activity. Continued stimulus from the government cannot re-energize the economy absent a revival in the overall profit rate.

This scenario played itself out during the Great Depression. The New Deal regulation of the economy and stimulus stalled in the late ’30s . Only World War II, a life and death struggle for U.S. capitalists, forced them to temporarily reduce their commitment to higher profit. It unified the ruling class and reduced direct competition. This only lasted less than four years. However, it was followed by the rebuilding of a destroyed world. World War II was a colossal clean out of capital. As such, it laid the basis for a new capitalist boom, as expected from Marxist crisis theory.

This history points out a very likely result of the current crisis. Even before the outbreak of Covid 19, international tensions were accelerating. Inter-imperialist rivalry was growing. Though we can never predict the future in detail, the current crisis increases the chances that the world could move toward imperialist war.

This means that the Left needs to integrate its propaganda and organizing in defense of working-class living standards with the fight against imperialist war. As with any antiwar organizing, this must be combined with opposition to racism, which will be used to justify war. Anti-racism will take many fronts, from opposing Islamophobia to defense of immigrant rights to opposition to mass incarceration. The latter will be important both to oppose racism and to protect political organizing. Along with this must come opposition to U.S. economic sanctions against “enemy” nations, another instrument of war.

Finally the whip of war hysteria and the false “we’re all in this together” mantra will impose further intensification of gender and sexual orientation oppression. We already see this with some areas declaring abortion an elective surgery!

The current crisis will place unprecedented demands on the revolutionary Left, and we must be prepared to rise to the occasion!

 

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