Systemic change all over again?

It’s week 13 of lockdown in London and the dominant feeling is still one of disorientation, of uncertainty. With inevitable modifications, life carries on along familiar lines – the home, the neighbourhood, the work activities, family and friends, recreation and exercise. There is the promise of a gradual restoration of access to the physical venues of public life; non-essential shops are opening gradually and some schools too. *

And yet, there is a troubling suspension of the normal social and economic arrangements and anxiety about the future. I have been reminded of the regime collapse in December 1989 in Romania when the all-powerful leaders of the country, the Ceauşescu family, lost their grip on power. A whole economic/political order broke down then, while now it is merely in abeyance. It seems worthwhile to try to point out the similarities and differences between then and now.

Sudden, overwhelming shock

The 1989/1990 revolution came seemingly out of nowhere. Until it actually occurred, especially in Romania where the system had a distinctive totalitarian, quasi-pharaonic tint, but also the Soviet bloc as a whole, the fall of the communist regime was deemed impossible: the party-state looked in complete control of all the levers of power with ruling elites callously indifferent to the restlessness of their peoples. For this reason, most analysts doubted at first that the apparent break with the past was in fact definitive. It was easy to believe that the ‘old structures’ would re-assert themselves and derail any attempt at systemic change.

In 2020, what has come out of nowhere is a new, highly contagious and potentially lethal virus that thrives on dense human interactions, the very foundation of our prosperity. Many countries, including in Europe, have responded by imposing lockdowns and closing parts of their economies to slow down infection rates and protect their health care systems. Governments have taken on greater economic responsibilities, adopting extensive bailout programmes. Perhaps inadvertently, they are showing that socialism, the socialisation of losses that in previous crises had been reserved for the rich, could be extended to include the poor.

       

Global competition and mimesis are in play

In the early 1990s there was a systemic U-turn which had a certain clarity and simplicity, the reversal of well-established polar opposites: socialism and capitalism, plan and market, authoritarianism and democracy, albeit facilitated by underlying, less obvious, institutional similarities.

Today, without being exactly polar opposites, the Chinese state capitalism and the democratic capitalist systems of the USA and Europe are in a relationship of uneasy, ideological and great power rivalry. The logic of competition is somewhat softer and our understanding of varieties of capitalism more developed. We witness however, a certain fascination with China, a jockeying for position on the global stage, a preoccupation to assign points won or lost depending on how well various challenges are tackled.

Thus, perhaps unsurprisingly, China’s early success in containing the spread of the virus led to a reversal of the consensus regarding the treatment of contagious respiratory diseases in the modern world. According to Neil Ferguson, suppression was not considered an option until “China showed it was possible, though it was late February before it was clear it had worked” (quoted by Paul Taylor in his recent piece for the London Review of Books).

By showing prowess in matters of life and death, China set an example that could not be easily ignored by Western governments, with Italy and then other European countries soon following the containment strategies pioneered in Hubei. The more instructive and effective responses of other Asian countries, such as South Korea, Taiwan or Singapore, who have had greater success in containing the spread of the coronavirus at a lower economic cost, have not stimulated the same interest.

What kind of political economy?

When the Soviet Bloc collapsed, the sense of vindication, triumphalism even, in the West, was palpable. There was a declaration that the end of history had arrived, with liberal democracy and market economies victorious and invincible. There was ideological clarity about what the former communist countries had to do, which was simply to privatise, create markets, organise elections, copy institutions, and prosper in a newly open and peaceful world.

Sheltering in place and large scale state interventions in the economy have also raised anew questions about the kind the capitalism that is now becoming more plausible in the West. We have seen an acceleration of changes in work patterns, with remote working becoming the norm in much of the knowledge economy. Structural inequalities between the white collar and the front line, low-paid sectors have come to the fore, throwing into doubt the values at the core of our consumerist life-styles, and creating further demands for government intervention and policy reform.

The logic of the market has been tempered, but it does apply. In the UK, high-street businesses have received grants; they will be able to benefit too from significant direct transfers to cover salaries for their furloughed employees. Some businesses still have to qualify for loans. Social safety nets have expanded to include millions of new applicants, but they remain means-tested, and payments are generally low.

These are sunk costs that may create a constituency for a way of life adjusted to lower levels of consumption that could tolerate much more extensive teleworking than has been the case in the past. It may also revalue the work of carers – for children, for the elderly.

Fundamentally, smoothing the shock of the pandemic has left untouched underlying inequalities. Our reigning assumptions about human nature and how people need to be motivated and controlled, rewarded and respected within a particular political economy are surfacing, perhaps becoming ripe for re-examination.

The capitalist system is based on the threat of withholding people’s subsistence, as the economist JW Mason has pointed out in a recent blog. This ensures their willingness to sell their labour within asymmetric relations of power that exert a profound disciplining effect, reinforced by businesses as vehicles for private government.

As we well knew in the Soviet bloc and the current experience of China shows, the party-state is also quite capable of withholding people’s subsistence to ensure compliance with a certain regime or ideological commitment.

The looming economic depression will add urgency to these issues and a new consensus about the just distribution of economic and political rights and powers, and the sustainable good life may well emerge.

Solidarity: national, regional, global?

In time, the end of the cold war logic opened up possibilities for inclusion for the formerly marginalised ‘third world’. A more generalised sense of promise took hold:  with the right choice of values, all societies could generate wealth and prosperity. This accelerated globalisation in the last few decades so that it became possible to articulate a set of standards, the sustainable development goals that would be comprehensive, inclusive and effective in saving the planet.

Despite the inability of the USA to provide leadership and sustain multilateral regimes, this hopeful outlook, a certain amount of benevolence, are still visible in support from our global institutions, most obviously at the World Health Organisation and the World Bank. The IMF as well has lived up to its pledge to honour its mandate as lender of last resort and help poorer countries borrow and spend to cushion the economic impact of the pandemic.

The former communist countries of Central and Eastern Europe also experience this shock somewhat differently, despite of the déjà vu of deep losses in levels of economic activity. Their membership of the EU, or just aspiration to join, is offering much more of a chance to weather the economic downturn. Adjustments will no doubt have to be made and it will be interesting to see whether the institutional legacies of their communist past turn out to be hindrances or advantages in this situation.

Liliana Pop

*I would like to thank Bec Evans and Chris Smith for kindly letting me take part in one of their inspiring 7-day writing sprints at Prolifiko.