The outbreak of COVID 19 has enlarged the UK state. This blog explores whether this emergency enlargement of the state may come to serve progressive purposes
The enlargement of the British state, necessitated by the economic crisis induced by the COVID-19 pandemic, has occurred incredibly swiftly. But it would be unwise to assume that it will therefore be ephemeral, reverting to ‘LME’ type once the crisis has passed. There are both dangers and opportunities inherent in this development.
There is a great deal that is new about British economic policy at the moment. Most obviously, the state is now covering the wages of millions of private sector workers unable to work normally, or at all. We have also seen a dramatic increase in the direct ‘monetary financing’ of public spending by the Bank of England.
At the same time, there is also rather a lot which is depressingly familiar. This is, in part, because the crisis response has relied upon pre-pandemic economic practices which the covidist state has as yet been unable to transform. For example, care homes have become the front line of the battle against COVID-19, largely because the social care system (or industry) in Britain has been so poorly managed for so long.
It is also, in part, because many of the forms of economic statecraft which emerged following the 2008 financial crisis have been underlined as key aspects of the British state’s economic crisis toolkit. Private banks have yet again been mobilised, but constitute a rather unreliable mechanism for supporting the real economy, and the Bank of England has turned to no-longer-unconventional monetary policies such as quantitative easing to boost capital markets.
A much enlarged state has led to fears of an emergent ‘state capitalism’, whereby interventions are oriented towards sustaining certain firms and industries deemed essential to maintaining a given distributional order, locking in wasteful and morally abhorrent inequalities for the sake of a failing accumulation model. This is a very real prospect, although the upheavals caused by COVID-19 means there are many contingencies at play.
My paper The Covidist Manifesto: Assessing the UK state’s emergency enlargement (co-authored with Nick O’Donovan, Daniel Bailey, Adam Barber, David Beel, Katy Jones, Sean McDaniel and Rebecca Weicht) considers how the covidist state could be reoriented towards a progressive agenda of political-economic transformation. There would appear to be five main opportunities.
Above all, the covidist state is a bailout state. There may never be a better opportunity for state actors to place conditions on firms now requiring government support. While the priority will rightly be securing ongoing employment for as many people as possible, it is not unreasonable to think that we can also assess firms in terms of their business practices, and social and environmental impacts, before the nature and extent of support is determined.
Secondly, the covidist state is also a welfare state, of sorts. There will soon be millions of new recipients of Universal Credit (UC) recipients, as well as a new income-replacement mechanism for the self-employed. This will expose the many flaws in UC, and there are many gaps in the Self-Employment Income Support Scheme (which younger, precarious workers are most vulnerable to). Nevertheless, the principle that welfare provision is a legitimate mechanism for protecting citizens from wider economic circumstances over which they have no control has been resurrected. Higher rates of tax are now likely, providing an opportunity for a redistributive agenda (including a windfall tax on wealth, to ensure those who prospered while the public sector’s resilience was eroded are not spared responsibility this time around).
The pandemic-induced crisis must be addressed, but should not distract us from an intensifying climate crisis, which also represents a major threat to life and well-being. COVID-19 shows us, thirdly, that the British state is able and willing to become a crisis state, curtailing individual liberties and rationalising economic activities where necessary to confront systemic challenges. The same approach must now be hard-wired into action to address climate change.
Fourthly, the covidist state is likely to evolve rather quickly into a financially repressive state. Despite the suggestion from former chancellors Sajid Javid and George Osborne that pre-pandemic austerity equipped Britain to cope with the current crisis, it is clear that Austerity 2.0 is infeasible, in part because the deficit will be too large for spending cuts to play a meaningful role in any fiscal ‘correction’ without inflicting near-unimaginable damage.
Inflating away the value of public debt might well be the least bad macroeconomic policy option available (not least given the absence of other inflationary pressures within the economy for the foreseeable future). The challenge would be to ensure its mechanisms – such as cheap loans from publicly-owned or -controlled banks, and restrictions on the investment practice of institutional investors – are designed to support a more sustainable growth model, as well as more secure forms of pensions saving.
Finally, the covidist state can embrace the foundational economy – a conception popularised in recent years in response to the destruction of austerity. As Julie Froud, Sukhdev Johal and Karel Williams show, ‘much of the economy of the UK or other industrialised countries comprises everyday services meeting household and small business needs. These foundational activities are not only important in terms of employment but because they provide the infrastructure of everyday life which can enable households, businesses and other organisations to function.’ The foundational economy spans the public and private sectors, and can be understood as part of a broader, locally-rooted system of social reproduction which also includes unpaid, domestic tasks.
The COVID-19 pandemic has underlined the importance of foundational activities in ensuring society can continue to function even amid a severe crisis of accumulation. Indeed, the economy in general has little chance of recovering if the foundational economy is not maintained, since it underpins the ostensibly more productive parts of the economy. Yet the foundational economy has been plagued by poor regulation, inappropriate business models, under-investment and low pay. The pandemic has actually required central government to intervene to co-ordinate some foundational activities, most obviously in healthcare, but also in ensuring food supplies to the most vulnerable (albeit inadequately). It is important that the notion that some parts of the economy are more socially useful than others survives the present crisis.