Diverging destinies in a global crisis

Though COVID remains the key factor shaping world politics, its social and political impacts are increasingly uneven. From New York to Delhi, Shanghai to Melbourne, discussions remain focused on COVID casualties, healthcare systems, the quantity and quality of government welfare and, of course, lockdowns. But the conditions from country to country vary wildly. The central debate continues to be whether to prioritise profits over public health. The editorial in the previous edition of this journal surveyed many of these issues, and made a strong case for the elimination of the virus. The subsequent experience of countries that have more or less achieved this goal has vindicated this argument. The Lancet medical journal has reported that countries that acted aggressively against the virus have experienced fewer limits on civil liberties, stronger economic outcomes, and most importantly, fewer deaths.

Yet despite these partial achievements, the virus remains out of control globally, and many countries have no realistic prospect of accessing sufficient vaccines for the indefinite future. As a result, much of the analysis of the pandemic presented in the last edition of this journal remains applicable to the majority of the world’s population, including large parts of Latin America, the Middle East, South-East Asia and Africa. According to official statistics, deaths in the first six months of 2021 have surpassed the first year of the pandemic. Yet we know that this data is deeply flawed, and in some cases entirely worthless. Indonesia has reported roughly 50,000 deaths, but an independent investigation by the University of Washington assessed the real tally – as of May 6 – to be over 110,000. According to the same research the real figure for worldwide deaths at that time was an astonishing 6.9 million, more than double the official figure of three million.

Countries like India offer a terrifying insight into the devastating impact the virus can have in the underdeveloped world. In early May new daily diagnoses peaked at over 400,000, and at the time of writing more than 400,000 people had died. Some have sought to dismiss the Indian catastrophe as a product of Modi’s hard-right administration, a regime similar in style and substance to the authoritarian neoliberalism of Trump and Bolsonaro. It would be spurious to totally discount the impact of conspiracism, machismo, and pro-business leanings of right-wing populist administrations the world over. But such an explanation acts as a cover for the broader Indian ruling class, with little difference in outcomes in states controlled by Congress or even the Communist Party (M). This fits with the earlier experience in Europe and the US, where governments across the political spectrum all tended to prioritise profits over public health. The problem in India and much of the underdeveloped world is capitalism, regardless of whether it presents in neoliberal, authoritarian or proto-fascist guises.

Many commentators have used the horrors seen in India and other poor nations to highlight inequities facing the Global South in terms of their fiscal capacity, social development and pre-existing healthcare infrastructure. Yet it would be a mistake not to also emphasise the role of class divisions within such societies. Despite being home to unimaginable poverty, India now possesses the world’s third largest number of billionaires. These parasites saw their fortunes grow by over $230 billion last year. While essential workers and slum dwellers had their emaciated bodies burnt in the streets, the wealthy took private jets to overseas safehouses. A Wall Street Journal report on the pandemic in the underdeveloped world found similar stories everywhere. In Peru, where the public health system has collapsed due to one of the world’s worst per capita death rates, the middle class and wealthy can purchase oxygen for more than $1,000 a canister. In a society where the monthly average income is US$420, the combination of poor healthcare and a thriving black market turned the pandemic into a form of social cleansing, a targeted massacre of workers and the poor.

In a similar vein, Western governments and pharmaceutical companies have been rightly denounced for failing to ensure access to vaccines for poorer nations. Capitalists have shown once again that they prioritise intellectual property and profits more than human life. Yet the division between rich and poor nations is not the only or even the most important one. For instance, in Lebanon politicians and their cronies gained early access to vaccines back in February. With that vital task completed, it has taken the government another five months to fully vaccinate just 6 percent of the public. This experience is repeated in a number of underdeveloped nations where vaccine scarcity is exacerbated by corruption and class privilege.

In the face of such catastrophes, governments have increasingly turned to repression to maintain their rule. Following a request by the Indian government, Twitter took the shameful step of censoring posts criticising Modi’s handling of the pandemic. In a range of countries, police and executive powers have been strengthened in order to manage dissent. Some of these measures prefigure the pandemic, but have been pushed through in the context of the absolute failure to deal with the virus. The insensitive use of police and military forces to enforce public health measures has rightly aroused opposition everywhere, but is particularly a problem in underdeveloped nations where democratic freedoms tend to be more fragile.

Looking ahead, the situation in the underdeveloped world remains grim. Southern Africa, South-East Asia and most of Latin America are still being ravaged by the virus. Eastern Europe has also been hit extraordinarily hard this year, and there’s no reason to think they will avoid new waves. Given the ongoing issues of vaccine scarcity, weak healthcare systems and enormous slums, it is only a matter of time before other poor countries have deadly new outbreaks for which they are totally unprepared. The scale of the global outbreak also means that the emergence of new variants that increase the contagiousness and severity of the virus is increasingly likely. Such variants act as threat multipliers, making prevention, containment and treatment more difficult.

This terrible state of affairs has produced a deep economic slump in much of the underdeveloped world. Even before the pandemic a range of countries were struggling, most prominently Lebanon, Argentina, South Africa and Mexico. The pandemic has multiplied the misery of these nations, while also damaging those that were previously doing better. India’s economy for instance, contracted by 7.3 percent in the 2020-21 fiscal year, its worst outcome since independence. Peru’s plummeted by 11.6 percent, and negative growth rates were seen in most of Africa, the Middle East and Latin America. Countries that are heavily reliant on tourism and migration have seen some of the worst drops, while those involved in resource extraction have benefited from high prices generated by supply shortages. While the IMF has consistently revised up economic predictions overall, it expects a number of countries – especially among those it describes as “emerging and developing” – to suffer reduced growth rates and increased poverty for years to come. The problem is, as Martin Wolf has pointed out in a series of strong pieces on this issue in the Financial Times, two-thirds of humanity live in this category of nations.

The pandemic is clearly the major factor explaining the difficult situation facing much of the Global South. But the virus has exposed existing fragilities. Decades of structural poverty and underinvestment in health and welfare have made the social and economic impact of the pandemic worse. As well, poorer nations tend to rely on more restrictive and expensive credit lines for borrowing. So although budget deficits were seen in almost every country in the world last year, the details reflect big divergences in policies. In the advanced capitalist nations, much of the deficit was produced by a boost in discretionary spending, whereas in much of the Global South, it was a result of collapsing revenues. Compounding these difficulties are a series of other factors, including the dearth of white-collar jobs that could sustain themselves through the pandemic, a large informal sector, the lack of social infrastructure to lockdown humanely, the absence of tourists, and a 30 percent collapse in foreign direct investment. While growth is expected to pick up again this year, inevitable new waves of the virus and underlying economic weaknesses mean that a strong recovery in the Global South seems some time away.

Many of these arguments will be familiar to readers of this journal. Indeed they were the focus of my editorial in the last issue, with one key difference. Back then, it was the West that was responsible for the bulk of the world’s casualties, especially the US and western Europe. It was Western nations which saw the most calamitous drops in economic growth due to strict lockdowns and out of control caseloads.

Today, the situation is reversed, as the last six months of the pandemic have seen a sharp reversal of fortunes in the parts of the world. A handful of countries such as China, Australia, New Zealand and Singapore have emerged nearly unscathed, after deploying rigorous health measures early on. Strict border closures and lockdowns were vital to achieving these good outcomes, and remain vital to preserving this situation alongside further investment in health and quarantine facilities. But even Western countries that initially failed to control the virus seem to have emerged from the worst of the pandemic, despite the delta variant, and are rebuilding their economies faster than expected.

This bulk of this piece will focus on explaining how the situation has changed so dramatically, as well as assessing the consequences of recent developments for the world system.

Economic rebound

At the peak of the health crisis in 2020, many economists – bourgeois and Marxist – believed that this would be a multi-year event akin to the Great Depression. The IMF concurred, predicting that it would take years before economies returned to their pre-pandemic state, let alone saw new growth. As it turns out, these early predictions were wrong. Notwithstanding the incredible destruction documented above and elsewhere, the Global North has now rebounded from one of the deepest recessions of all time via an historic surge in economic activity. What happened?

Firstly, wealthy governments have provided seemingly endless fiscal and monetary support for businesses across the board. The state opened its pockets to big business in the form of cheap credit, low interest rates, and myriad other handouts. The US saw the most pro-business approach, the centrepiece being Trump’s creation of a $500 billion slush fund for distressed businesses. On top of this and other fiscal measures, the Federal Reserve took the extraordinary measure of purchasing $120 billion in corporate bonds each month, providing corporations with essentially unlimited credit at low cost. Similar measures were undertaken elsewhere, though to a lesser extent. As well as propping up businesses, wealthy nations also substantially increased their expenditure on welfare by implementing a range of furlough schemes. The UK is spending around $66 billion on its furlough program, the figure for Germany is $42 billion, while Australia – a much smaller country which suffered less from the pandemic than most – spent a whopping $90 billion on the JobKeeper program alone. Unemployment benefits also expanded dramatically, the US heading the pack with close to $800 billion spent on federal unemployment benefits. These figures not only prevented a collapse in consumer demand but actually increased it. Household savings in Australia, the US and the UK are substantially up, facilitating purchases on big ticket items such as cars, home renovations and consumer electronics. As a result of these substantial interventions, both individual and corporate bankruptcies are at historic lows. Reuters reported that while bankruptcies linked to corporate restructuring increased slightly during the pandemic,

overall filings, including all personal and other business bankruptcies, for the year were 529,068, compared to nearly 800,000 annually in recent years, and triple that in 2010 at the end of the last recession.

The second factor limiting the collapse is that corporations – especially the largest – have found ways of adapting and restructuring faster than previously expected. The closure of shopping malls and big retailers has led to an unprecedented explosion in online shopping and delivery services, fast-tracking the shift towards e-commerce already underway. This burst of activity – supercharged by the stimulus payments – generated a surge in the logistics and manufacturing sectors, with Amazon nearly doubling its global workforce last year. At the same time, a range of industries have found ways to reorganise to continue and indeed expand production. Outdoor and takeaway dining options have blossomed as one of the few experiences available to health-conscious citizens, taking the edge off some of the initial collapse in hospitality. Delivery services like UberEats and DoorDash have also multiplied and expanded, enjoying bizarrely high valuations despite never making a sustainable profit. Of course, the growth in new areas comes at the expense of others, but the impact so far has been positive for the economy as a whole.

Thirdly, after a relatively short hiatus, a range of major industries have continued to function through the pandemic. Manufacturing output has been building since the middle of last year. Australian manufacturing has been growing steadily since June of last year, as reflected in the Purchasing Managers’ Index (PMI) which measures business activity in the sector. The US situation is similar, and though German, Italian and French manufacturing lagged for much of last year, they’re now heading in the same direction. Services are tracking similarly, despite the overall category being weighed down by the relatively poor performance of restaurants and, even more, hotels and tourism. The construction sector is also booming, driven by rising house prices pushed along by cheap interest rates and a savings glut. Mining and agriculture are reaping the benefits of a surge in the price of commodities driven by growth in manufacturing.

These factors explain why the economic activity of major nations was far less impacted by the lockdowns introduced in the first months of 2021 than those early in the pandemic. In fact, the main factor constraining output in a range of industries is no longer COVID but shortages of industrial inputs and overwhelmed logistics networks. Faced with nearly universal lockdowns and a possible economic depression, companies opted to hoard cash to shore up their position early in the pandemic. They thus sold down their existing inventories and avoided restocking, let alone investing in new production capacity. Just a few months later, the explosion in online shopping suddenly created enormous demand for goods that were now out of stock. Across the world, factories producing cars, computers, chips and other consumer goods were suddenly trying to place orders for parts for which they had no reserves. This scarcity of inputs has forced slowdowns and temporary closures in a range of facilities, as well as increased the prices of goods across the board. It has also produced a crisis in international shipping, with freight prices increasing substantially due to both shortages and misallocations of containers and ships. In these circumstances, shipping workers have been exploited to extreme extents, often ending up stranded at sea in conditions described by the International Transport Workers Federation as akin to slavery.

It is significant to note that these processes have overwhelmingly benefited big capital at the expense of their smaller rivals. The former have reaped the rewards of government stimulus, cheaper and more accessible credit, and greater brand recognition that is vital for online shopping. Large supermarkets and liquor distribution centres boomed at the expense of bars, restaurants and cafes. The shift to working from home also generated growth in a range of industries, including tech companies such as Zoom, pharmaceutical industries, furniture manufacturers and retailers, electronic manufacturing and retailers, and so on. This was accompanied by a boost in spending on home entertainment, including streaming services such as Netflix and Disney+ as well as home gaming consoles. Overall, as with all capitalist crises, the shock generated by the pandemic forced through a substantial reorganisation of industry on new and – for now – highly profitable lines.

The fourth element shaping the economic rebound is the acquisition and distribution of COVID vaccines. The development and rollout of the vaccine – in the advanced capitalist world at least – has exceeded the most optimistic expectations imaginable twelve months ago. A range of countries have now achieved quite high rates of vaccination, headed up by Israel, the UK and the US, with a number of countries in western and northern Europe following close behind. Of course, the political leaders of these nations should not be forgiven for allowing some of the worst death tolls on the planet. Nevertheless, up until the Delta variant cases were trending down, despite the substantial – and in some cases, irresponsible – easing of health measures. What happens going forward is unclear, but it seems likely that casualties will not return to previous levels. In some cases their advantageous access to vaccines is a product of an advanced domestic pharmaceutical sector, while for others it reflects their capacity to pay a premium in order to guarantee early doses. While it is too soon to know whether the vaccines will be enough to stave off waves of new strains, the capacity of mRNA technology in particular to be quickly adapted to new variants is promising. Again, this only applies to those who can access them.

Together, these factors mean that while the world remained in recession in the first quarter of 2021, the prospects for immediate growth are strong if the vaccines hold. Unlike the slow recovery following the global financial crisis (GFC), the IMF has gleefully announced that the advanced economies and China will emerge from the crisis economically unscathed, notwithstanding the comparatively minor fact of hundreds of thousands of dead bodies. Indeed, Australia has already surpassed its pre-COVID GDP levels, with the US and Europe not far behind. The US is predicted to exceed their pre-pandemic position by the time this article is published, with the EU a few months behind. The IMF’s quarterly World Economic Outlook report in April predicted global GDP growth of 6 percent, which would be the highest since 1973.

So capitalism has survived, and some sectors have thrived. But the impact has been highly uneven. Even as many workers and the poor temporarily benefited from improved welfare, the year saw a major distribution of wealth towards the rich, as important sections of capital grew enormously. The Forbes rich list reflects this reality: the wealthiest people on earth overwhelmingly increased the size of their already unimaginable fortunes despite the broader economic collapse. It is horrifying to think that a year that saw so much misery and death could be so profitable. One is reminded of Trotsky’s bitter account of the barbarism of World War One, where “enormous fortunes arose out of the bloody foam”.

Before moving on, it is worth briefly exploring in more detail the conditions in some of the key centres of capital accumulation.

China

China is in a unique situation among the major powers. Despite being the source of the virus, it has subsequently managed to keep it under control. Less affected by the pandemic than most, China was the only major economy to grow in 2020, albeit at a weak 2.3 percent. This has accelerated the rate at which the Chinese economy is catching up to the US, with experts predicting that it will now take place by 2030 rather than 2032. While China’s per capita GDP remains one-sixth of the US figure, the absolute size of its economy gives it a growing geopolitical and economic weight in the world system. According to officially surveyed data – which excludes around 300 million migrant workers and 149 million self-employed – unemployment peaked at just 6.2 percent last year, and has since receded back to 5 percent. Its relative success in handling the health crisis has given China the freedom to engage in proactive vaccine diplomacy. A spokesperson for China’s foreign ministry claimed on 2 June that China had exported more than 350 million doses to over 40 countries around the world, before the US had exported a single dose. Many of these doses have been directed towards counties with which it has growing relations, with a strong focus on Asia and Latin America. In an era where great power competition is front and centre, all of this is an indication of real strength.

On the back of these factors, it would be tempting to assume China will once again drive global growth, much as it did in the aftermath of the GFC. Yet China is in a challenging phase of its economic development, and has indicated it has no desire to take on this responsibility. In 2020 China showed no interest in replicating the substantial stimulus and monetary loosening it deployed in 2008, which amounted to one-sixth of national GDP. In fact, after a brief stimulatory phase, China has for months been cracking down on lending and trying to reduce financial liquidity. In particular, they’ve been imposing fines and restrictions on the shadow banking and finance sectors, which have enjoyed a boom in the past decade. Partly this reflects sincere concerns about the instability and inflationary dynamics that loose monetary policy can breed, most tangibly manifest in the property boom in China’s coastal cities. As well, the high reliance of Chinese corporations on debt – valued at around 160 percent of national GDP – means they are under less pressure to modernise and streamline their operations. The tightening of credit is thus also an attempt to force through a rationalisation and consolidation of capital, and has had the effect of sending a number of state-owned enterprises bankrupt in recent months.

The other element of this crackdown relates to more directly political concerns. A small number of Chinese corporations have grown incredibly powerful in recent years, leveraging their near monopoly over local markets to produce billions in profits. In the process, a layer of celebrity billionaires has emerged, with independent minds, interests and capacities that do not always align with those of the ruling Communist Party. In December last year, the Chinese government announced it would prioritise “anti-trust efforts and prevent the disorderly expansion of capital”. Just weeks later it launched an anti-trust probe into Jack Ma, at the time China’s richest man. It has since blocked his attempt to float his company Ant on the Shanghai and Hong Kong stock markets as well as pushed to curtail its financial activities, costing the man and his company billions. This unfolding clash between Jack Ma and Xi Jinping, now supplemented by government crackdowns on a range of tech giants, is illustrative of the inevitable tensions of China’s unique form of capitalist development. A recent World Economic Forum report, albeit produced by a highly ideological and pro-market body, documented the substantial role played by the private sector:

China’s private sector – which has been revving up since the global financial crisis – is now serving as the main driver of China’s economic growth…they contribute 60% of China’s GDP, and are responsible for 70% of innovation, 80% of urban employment and provide 90% of new jobs. Private wealth is also responsible for 70% of investment and 90% of exports.

While welcoming this dynamism, the central government is concerned to maintain its unquestioned dominance over all sectors of society, including the economy. How this contradiction plays out in the medium term is yet to be seen.

The US

Unlike China, the US allowed the virus to tear through its population as the government failed to take necessary health measures. Nevertheless, it was able to ride out the pandemic with fewer negative economic effects than most. Partly this reflected its status as a nation with deep pockets and access to high-end research and manufacturing capacities. In addition to the figures referenced earlier, according to an estimate by macroeconomist Ceyhun Elgin from Boğaziçi University in Turkey, the US has spent more on COVID stimulus measures than any country other than Japan. The figure he gives for the total stimulus introduced by Trump and Biden is equivalent to 27 percent of national GDP. It also spent over $12 billion on research, development, manufacturing subsidies and early contracts to support the development of vaccines. This has all been crucial to propping up the US economy and allowing it to reopen quickly. The other key factor in America’s success has been its preparedness to let the virus rip, whatever the human cost. Not once did Trump or Biden impose a national lockdown, more fearful of the economic impact than the loss of lives. Nor did states – including Democrat-run ones – take sufficient measures to protect lives.

Regardless of the health impacts, these policies have placed the US in a commanding economic situation. It has lifted most of its health restrictions, and has not yet suffered terrible new waves. The economic benefits of getting the virus under control have been significant. The US has enjoyed a sharp bounceback following the historic contraction in the first half of 2020. US GDP has now exceeded its pre-pandemic heights following consecutive quarters of strong growth since June last year of 7.5, 1.1 and 1.6 percent. Solid figures for job creation suggest the recovery is far from over, with tourism, hospitality and retail driving the creation of over 850,000 jobs in June. Despite this better than expected news, both unemployment rates and overall labour market participation are 2 points worse compared to pre-pandemic levels, at 5.9 percent and 61.6 percent respectively. Predictably, the political class has bitterly fought over the interpretations of these mixed results, with Republicans blaming generous unemployment payments for the elevated unemployment levels and corresponding labor shortages, while Democrats insist that stimulus measures are helping to drive consumer demand and broader growth.

The strong recovery has placed the US in a position of driving the global economy not seen since the early years of the Cold War. For comparison, while the US has consistently outperformed its rivals in the UK, Germany, France and Japan since the GFC, its growth rates averaged a relatively anaemic 2.3 percent from 2010-2019 and never exceeded 3 percent. It was the rise of China that drove global expansion and capital accumulation across that decade. Now the condition of the US economy is such that it is America that is straining the capacity of the world market and lifting others in its wake, with a predicted growth rate of well over 6 percent this year. This dynamic will entrench its economic leadership over the advanced capitalist world going forward. Another advantage the US economy has over comparable rivals is the relative youth of its population, maintained by relatively high immigration and fertility rates. This has multiple benefits, the most immediate of which are increasing the tax base and lowering the cost of social spending, both of which increase the amount of surplus value that can be deployed by the government.

Europe

On both public health and economic measures, Europe has been one of the big losers from the pandemic so far. Along with the US, the region suffered terribly from the virus. As of 3 July, European countries make up a staggering 15 of the top 20 places worst hit as measured by deaths per capita. Central and eastern Europe in particular are a disaster zone, with countries such as Hungary, the Czech Republic, Slovakia and the various Balkan states high on the list. Elevated poverty levels paired with decades of attacks on social services and marketisation of their economies left these nations especially vulnerable. But it is not simply Europe’s periphery where the damage has been done. Governments in the UK, Italy, Sweden, France, Belgium, Germany and Spain have badly failed their populations, resulting in death counts not seen since the world wars.

Unlike the US, however, European governments have in many cases been prepared to engage in nation-wide lockdowns. Thus most citizens of western Europe spent last winter in isolation, as governments were forced to reimpose social distancing measures to stop the second wave. Even today, some restrictions remain in place in most countries. Though to some extent this reflects a higher value on human life produced by historically stronger working-class movements, these lockdowns have been limited by the desire to prop up capitalism to the greatest possible extent. They were thus imposed reluctantly, belatedly, and totally inadequately across the board. In many cases personal and political freedoms were significantly curtailed even as the economy was overwhelmingly kept open. The transparent hypocrisy of this approach, and its subsequent failure to control the virus, fuelled substantial opposition to public health measures. In every case, the lockdowns ended prematurely even as thousands of daily cases were reported; even now countries are opening up despite the Delta strain sweeping through.

Of primary concern to socialists is the fact that these half-hearted policies have been a disaster for public health. But they’ve also severely undermined the broader economy, and with it the lives of working-class people. The damage caused by the pandemic put them at a disadvantage compared to China and others that controlled it more successfully. Yet their repeated imposition of partial lockdowns meant that, unlike the US, their economies have been slow to rebound. While China and US economies expanded consistently from mid-2020, the European Union had a brief respite of positive growth in the July quarter before collapsing back into recession. Britain has achieved marginally better results, though it remains impacted by its catastrophic 19.5 percent contraction in the second quarter of 2020 and the difficulties associated with Brexit. European unemployment figures remain higher than in the US, at 7.3 percent across the EU and 4.7 percent in the UK. The overall figure for the EU masks stark differences; Germany sits on just 3.7 percent, France on 7.5, while Italy, Spain and Greece languish on over 10 percent each. There is no one reason behind this divergence, though the centrality of tourism and travel in southern Europe is clearly a factor.

Aside from the UK and Germany, Europe was also slow to utilise its manufacturing and pharmaceutical expertise to develop and roll out vaccines, especially when compared to the US and China. Some have blamed the slow moving bureaucracies of the EU for the insipid response, a factor which can’t be totally discounted. But Europe has actually produced well over 400 million doses, of which around half have been exported around the world. This willingness to trade has been presented by French President Emanuel Macron as evidence of their global civic mindedness. But in a relatively generous assessment of Europe’s vaccine failures, Professor of European Law Gareth Davies suggests a very different explanation:

The vaccine shortage now demands that market processes be subordinated – at least to some extent – to state planning and supervision, in a switch that is common in times of war or emergency, but alien to the practices of the EU.

Thus the exports of desperately needed vaccines reflects the embedded neoliberalism in European institutions. One farcical example of this is that Australia – a country that has nearly eliminated COVID – was allowed to purchase one millions of doses of AstraZeneca from an Italian manufacturer, even as that country struggled with tens of thousands of cases. Sensing an opportunity in this unfolding disaster, China has provided desperately needed vaccines and PPE to eastern Europe, most notably Orban’s Hungary.

Overall, Europe presents a mixed picture. In the short term, the vaccine rollout is now accelerating and the region seems set for a period of somewhat healthy growth. Yet it remains hampered by a series of fundamental weaknesses, not least of which are a long-term failure to generate a rival to America’s Silicon Valley, and the social and economic fragility of its southern and eastern fringes.

Australia

While Australia is not a major site of capital accumulation, it is the most important example of a Western nation that has managed to practically eliminate the virus. Apart from the journal being produced here, it is therefore also worth discussing because Australia’s handling of the pandemic in 2020 – though inadequate in many ways – could and should have been a model for the rest of the world to follow.

As one of the wealthiest nations in the world, Australia had a number of advantages that have thus far seen it through the pandemic in good stead.

The first and fundamental factor has been the success in containing the virus. Unlike in most advanced nations, government policies were relatively proactive and far-sighted in containing the virus, with a number of strict lockdowns implemented that have successfully eliminated the virus after small outbreaks. At the same time, it implemented a relatively generous welfare scheme in the form of JobSeeker – which temporarily doubled previous unemployment benefits – and JobKeeper – a furlough scheme that guaranteed workers up to $750 a week in income. These policies made Australia one of the countries least affected by COVID in the advanced capitalist world. Aside from Victoria, which endured a painful though necessary three-month lockdown late last year, most of the economy has been open for the last 12 months. Increased welfare payments provided a boost to domestic industries of all kinds, including the significant property market where sales, the construction of new homes and renovations of existing properties are all on the rise. The overall health of the economy is reflected in unemployment figures, which peaked at 7.4 percent in July last year before dropping to 5.1 percent in May 2021. The gravity of the crisis was hidden by the JobKeeper furlough scheme, which makes the information regarding overall participation in the labour market a better measure. Here too the data is positive, back up above the pre-pandemic trend to 66.2 points. Other sectors have also benefited from the strong management of the pandemic; Australia was one of the few places in the world where film and television could be produced last year. Scandalous (though largely unreported) exemptions to the travel ban for celebrities and the sector more broadly allowed it to take advantage of this situation.

The second factor that contributed positively to the economy, contrary to early expectations, was the ban on tourists and immigration. Economists had been nervous about the impact of the loss of tourists and international students, who together contribute around $22 billion to the national economy according to independent economist Saul Eslake. It is true that the revenues of higher education and the hospitality industries have suffered, and there has been downward pressure on rental properties in inner city Melbourne and Sydney. At the same time, Australian citizens have been forced to cancel their annual trips to Bali, Europe and other hotspots; instead their tourism dollars have been spent at home. The figures are substantial: Eslake estimates Australian overseas spending on holidays at an annual $55 billion, much of which will have been redeployed in other ways that benefit the local economy. So the net effect has been positive. Writing for the Sydney Morning Herald, Shane Wright presents data that reinforces this conclusion:

Australians are a nation of travellers. In the 12 months to January last year, more than 11.3 million Australians returned to the country after a trip overseas. The average length of time overseas was about 17 days. By contrast, the country welcomed 9.5 million tourists into the country.

The loss of international students is a different phenomenon. Saddled with absurdly high education costs and restrictive visa conditions that force them into informal employment scenarios, the roughly 700,000 international students Australia welcomes annually bring with them more long-lasting revenues. This explains why governments and universities are so desperate to allow them in; their absence is an unambiguous loss. From a boss’s perspective, the best of all worlds would involve supplementing the spending of trapped citizens with hundreds of thousands of incoming tourists and international students. In contrast, the left should insist that international travel should be subordinated to the interests of workers and the poor. Expanded and specially designed quarantine facilities are vital to allow safe and humane travel between nations. Yet the scarcity of places means they should be filled by the most needy – refugees and migrants fleeing poor and dangerous conditions – not on those who can afford to pay the most.

The third factor strengthening the Australian economy is the boom in prices for primary goods such as iron ore, copper, coal and gas, which represent a substantial chunk of Australia’s economy. The prices of these essential commodities are through the roof, spurred on by the higher demand driven by the global economic rebound. This has given the Australian economy – and government revenues – a massive boost. Estimates for the 2021/2022 budget assumed iron ore prices of $55 a tonne, while global shortages have driven prices well over $200. A writer for the Australian Financial Review estimates that the boom will provide the Coalition government with an extra $36 billion in revenues in the 2021/22 financial year. Tucked away in rural areas that have barely noticed the pandemic, the agricultural sector has also reaped mega-profits due to soaring prices for wheat, barley and beef.

Downside risks

While the positive signs are there for all to see, there remain a number of economic headwinds. The pandemic remains the single biggest factor shaping the world economy. Tourism, trade and a range of industries cannot fully recover until borders and economies are open as before. As a result, new waves – even in the Global South – endanger the social and economic prospects of all by limiting the capacity to fully reopen. It is not simply or mainly that economic disruption in underdeveloped nations could undermine growth more broadly. Evidence and probability suggest that when a virus is given the freedom to move through large populations, it will generate mutations that pose greater risks to the world. The example of the Delta and Lambda variants, which arose from huge outbreaks in India and Peru respectively, are a warning. These strains are now producing new outbreaks and waves, even in countries with relatively high vaccination rates. This then increases the nightmare scenario of a variant emerging that can bypass the protection provided by existing vaccines, as such a mutation would have a strong adaptive advantage in a highly immunised population.

The slow rollout of vaccines remains a risk factor in most countries. Herd immunity is a laudable goal, but new variants mean that experts have had to keep revising up their estimates regarding the proportion of the population that needs to be vaccinated to achieve it. Some now believe that it would take more than 90 percent of citizens being fully immunised. Yet in some countries there has been a tendency for vaccine rollouts to slow well before that level. The US for instance peaked at four million doses per day in April, but is now averaging well below one million a day, despite just 58 percent of people being fully vaccinated. At this rate, the New York Times estimates the population will not be fully vaccinated until July 2022.

How do we explain this seemingly reckless failure to take up a life- and economy-saving opportunity? The self-satisfied middle-class commentariat would have us blame deranged anti-vaxxers, many of whom sincerely believe Bill Gates is planting microchips in our brains via the COVID vaccine. The influence of reactionary anti-science conspiracism is undeniably a factor here, exacerbated by the growth and radicalisation of the hard right. But while this angle generates reliable clickbait and has some truth, it does not fully explain the challenges of widespread vaccine take-up; which is not primarily constrained by conspiracism but by the daily realities of working-class oppression. A recent poll by the Kaiser Family Foundation found that almost half of all American adults yet to be vaccinated cite fear of missing work as an important factor in their decision. A New York Times report on the topic identified a range of structural factors that make it harder for working-class Americans to access vaccines. Here in Australia, vaccine hesitancy has become a stalking horse for a government that has proven incapable of organising a logical and accessible rollout. By launching a cynical debate about mandatory vaccination for healthcare and aged-care workers, the government hopes to distract from its failure to grant paid vaccine leave or organise workplace distribution at key sites.

The second risk factor is the issue of public debt and its relationship with inflation. An enormous amount of debt has been accumulated through this crisis. The US saw its debt-to-GDP ratio increase by around 25 percentage points in 2020, up to 129 percent as of December of that year. The Eurozone, countries that use the Euro currency, increased its debt by 14 points to 98 percent of GDP in the same period, while Australian government debt sat on 30 percent, up from 20 percent a year earlier. The figures for China are difficult to untangle, due to complexities surrounding state-owned enterprises and the opacity of the system broadly. However, debt levels in China have been trending up for years, hence the attempt to curb liquidity discussed earlier.

This situation is sustainable as long as interest rates remain low. But as the recovery gains steam there will be a growing pressure on central banks to tighten monetary policy and increase interest rates. Ultra-low – in some cases negative – interest rates and bond-purchasing programs have allowed governments and corporations to engage in relatively risk-free spending. Even corporations that do not make enough money to cover their debt payments – referred to as zombie corporations – have managed to survive. A Bloomberg study in November of last year found that a quarter of the wealthiest 3,000 American companies can be classified as zombie companies. This group added more than $1 trillion in debt between them last year, bringing their total to almost $2 trillion. The survival of these essentially bankrupt corporations drags down the profitability and efficiency of global capitalism. While placing a floor under the depth of the economic crisis, the availability of cheap credit props up inefficient capitals and prevents the kind of thorough cleaning out of dead labour that would be necessary to restore profit rates and lower the organic composition of capital. This doesn’t preclude growth in the short term, but remains a long-term issue that can exacerbate future crises.

Cheap credit has also fuelled rampant speculation on the stock, bond, real estate, cryptocurrency and commodity markets. Prices have risen substantially across the board, which in turn has increased the production costs of inputs and finished products. A shortage of labour supply has also forced up wages in a number of countries, led by Amazon and other sections of big capital in the US.^[1]

Some bourgeois economists believe that these developments will lead to a vicious cycle of wage and price growth akin to the 1970s, and some on the right are sounding the alarm, calling for an end to stimulus measures and an increase in interest rates. The difficulty is that raising interest rates would substantially increase the cost of debt repayments. In a world so heavily reliant on debt, such a move could drive many companies into bankruptcy and destabilise entire economies. While the US is somewhat shielded by the unique position of the dollar in the world financial system, a range of heavily indebted mid-level countries such as Argentina and Turkey could be ruined by any substantial increases to interest rates.

Others insist that the current spike in inflation is temporary. Janet Yellen, US Treasury Secretary, spoke at the G7 to dismiss inflation concerns as premature. She argued that recent inflation is the product of contingent and temporary factors such as logistical bottlenecks and material shortages. Yellen and her co-thinkers believe these pressures will ease as the world economy gets going and a surge in capital investment comes online. While it is too soon to be definitive there are good reasons to support this view; even prior to the pandemic growth rates were anaemic in the advanced capitalist world.

The final risk to the world economy would be a premature return to austerity and fiscal normality. Everyone agrees that enormous stimulus spending was vital to propping up the economies through the last 12 months. Yet there is much debate about what to do next. The OECD and IMF have put out numerous reports warning against premature austerity, and calling for extended government support. Yet given the political makeup of parliaments and the weak state of the unions, it seems highly unlikely that a sustained era of generous welfare expenditure is upon us. In Australia welfare payments returned to poverty-inducing levels months ago, and the budget was far more in line with previous Liberal offerings than was reported by the media. In the US, Biden has made clear that the top-up of regular unemployment benefits will end in September, though 25 states – not all controlled by Republicans – will have already phased them out by the end of July.

An important caveat to raise is that welfare expenditure and government spending are not necessarily synonymous. It is often assumed by centre-left economists that government expenditure and stimulus measures are beneficial to both workers and bosses. Yet it is possible for governments to spend enormous sums without there being any gain for workers, as for instance with Trump’s tax cuts for the wealthy or the Australian government’s subsidies for business investment. Thus even as the Morrison government phased out emergency welfare programs, it has been prepared to run enormous deficits to prop up big business. Even protectionism, often presented as pro-working class, is really just a mechanism to support capital, with workers shouldering the burden of higher prices. Thus the rise of a more interventionist and economically stimulatory state following the pandemic does not inherently entail a better situation for workers. Only the class struggle can ensure that.

Biden has attempted to win Republican backing for a range of stimulatory policies by portraying them as part of America’s competition with China. To this point, he has had little success. With negotiations over a number of his packages ongoing at the time of writing, it is too soon to predict the outcome of this important debate among the US ruling class. But the result could be of global significance, given the centrality of the US to the economic fortunes and political trends of the world system.

Political reverberations

All of these developments have taken place in a world that was already being shaken by three profound developments: a new cold war between US and China, the rise of a new hard right, and an explosion of radical protest movements, particularly (though not only) in the Global South. The social and economic crises triggered by the pandemic have interacted with and deepened all three of these phenomena.

A new cold war

Though there have always been tensions, the US-China relationship is in its worst state for decades. Under Premier Xi Jinping, China has consciously sought to project itself as a regional and world power. This has involved adopting a more assertive foreign policy; manifest in the violent absorption of Hong Kong, the threats aimed at Taiwan, and the massive expenditure on the Belt and Road Initiative. At the same time, China’s domestic economy has transcended the sweatshop model, deploying technical expertise in a range of fields from digital finance through to 5G. Though it remains decades behind the US in a range of fields, most notably the design and fabrication of semi-conductors, it is determined to catch up. Xi has unleashed the famous “Made in China 2025” program, a national industrial policy which combines careful forward planning and subsidies to develop key industries necessary for military and industrial competition with the US.

This growing Chinese self-confidence has been responded to aggressively by consecutive US administrations. Though Obama made gestures in this direction, it was Trump and now Biden, who have most clearly articulated the American determination to contain China’s rise and to retain its dominant position in the Asia-Pacific region. Trump was decisive in forcing the issue of China to the heart of US politics. Although crude and in some ways counterproductive, Trump’s aggressive mercantilist approach to global politics – “America First” – successfully reshaped discussions on the US role in global affairs. There have been some shifts from the Trump to the Biden administrations, but the general parameters have remained consistent. Biden’s policy is best understood as Trumpism with liberal characteristics: preserving the rational core of Trump’s obsessive hostility towards China while taking a range of steps to renew America’s capacity to compete and repair relations with important allies. Tom Bramble’s piece in this edition is a crucial attempt to make sense of this unfolding situation; he explores the past, present and potential future of these complex and era-defining issues.

Political polarisation

One destabilising factor common to countries on both sides of the Atlantic is the growth of the hard and extreme right. The radicalisation of the Republican party threatens to undermine the entire US empire. Its economic agenda is somewhat in flux; caught between traditional neoliberal hostility to tax and spend policies and a more recent flirtation with right-wing populism. Lacking a clear argument on this issue, it chooses to fight instead around obsessive culture wars and a more or less open hostility to voting rights for Blacks. This agenda runs totally counter to the progressive common sense of the country’s urban centres, and risks further destabilisation of US society and politics. All things being equal, this irrationalist organisation – in which two-thirds of the members do not believe the president of the United States is legitimate – stands a good chance of taking control of the House next year. Such a victory would paralyse key elements of Biden’s agenda and further undermine US prestige among its allies.

The situation in Italy and France is approaching catastrophic proportions, with fascist or proto-fascist parties receiving high levels of support. If things are not so bad elsewhere, the hardening and strengthening of the political right – albeit in different forms – is an identifiable trend across the continent. Some commentators have tried to argue that liberal democracy has proven a successful barrier to fascism, and that the institutionalisation of the extreme right has neutralised it as a force. In reality, the major constraint on the right is that in the absence of serious class struggle, no major section of capital is prepared to back a fascist overthrow. Yet short of that, their consolidation as a major force in European politics is an urgent challenge for the left and the oppressed, who are the targets of their violence and bigotry. If unchallenged, the hard right will enter future contests from a position of substantial strength.

Meanwhile, it is no exaggeration to say that the European parliamentary left is close to collapse. Three decades after the collapse of world Stalinism, it appears that social democracy is now in a terminal decline. The polls are consistently bad. In Germany, the Social Democratic Party that was once the flagship of the world’s socialist movement has just 15 percent support from the public, just a few points clear of the neo-fascist AfD. In France, the Socialist Party is on an embarrassing 6 percent, while its sister party in Belgium sits on 16 percent. In Italy the Democratic Party – which can only generously be described as reformist – has the loyalty of 20 percent of the electorate. In each of these countries – with the partial exception of Italy – liberal centrism in various forms has claimed the mantle of opposition to the conservative and hard right. It is hard to overstate the significance of this historic retreat towards the bourgeois politics of the nineteenth century, in which liberal progressives confronted conservatives with no independent class position manifested in the polls. The situation is different in the UK, Australia and New Zealand, where less representative election systems help to artificially prop up the reformist parties. But with the Corbyn experiment well and truly over, there is little prospect of anything left-wing emerging from these organisations in the foreseeable future.

Of course, politics cannot be read directly off elite machinations and electoral results. In France, for instance, the working class and radical left retain a substantial capacity for explosive mobilisation that is absent in most other European nations. It wasn’t long ago that the Yellow Vests owned the streets with their courageous resistance, and strikes in defence of pensions by railway workers and other public servants in 2019 suggest that the working class is far from defeated. More broadly, the volatility of the general situation and the rise of a shallow but broad anti-capitalist sentiment among young people means there are constant opportunities for unions and the revolutionary left to rebuild their forces.

Mass resistance

The final feature of world politics is that we continue to live in an era of mass social struggles, of which Myanmar and Colombia are just the most recent examples. Some of the grievances driving these movements predated the pandemic, produced by weak economic development and a lack of democratic rights. But in many countries the pandemic has exacerbated existing grievances, with high mortality counts and a growth in poverty, factors that have further discredited vulnerable governments. Given the theme of this piece, it is notable that it has been underdeveloped countries where the most explosive and sustained struggles have taken place. While the short-lived Black Lives Matter movement was the most publicised event of the last twelve months, it was an exception to this broader pattern. The remaining countries that have seen the most substantial protests and strikes have been in the Global South: Iran, Myanmar, Belarus, Colombia, Paraguay, Thailand, Poland, Lebanon and Palestine.

Of these, it is the latter that has had the largest international impact so far. While the Palestinian movement was not a product of the current crises but a longstanding struggle, it manifested many of the similar dynamics seen elsewhere. Furious at the ethnic cleansing of East Jerusalem, Palestinian youths displayed incredible determination in resisting incursions into their community by Zionist thugs. Protests quickly spread to all parts of the Palestinian population, most notably those within so-called Israel who had previously been more quiescent. This movement – culminating in what seems to have been a successful two day general strike – spontaneously created a long sought after unity across all of historic Palestine. This stands in stark contrast to the repeated attempts to patch together a bureaucratic coalition government between the bankrupt leaderships in Gaza and the West Bank. In trying to impose a traditional military paradigm onto a popular rebellion, Hamas hoped to claim leadership over the mobilisations, which electorally at least, seems to have been somewhat successful. A new generation of freedom fighters will need to organise a new resistance project that sees international revolution as the key to Palestinian liberation, though arriving at this necessary conclusion is hampered by the quiescence of the Arab world in the recent round of protest. Meanwhile the Israeli parliament has crowned the fascistic Naftali Bennett as the new prime minister. His bizarre coalition included sections of the Israeli “left”, as well as the Palestinian Islamist group connected to the Muslim Brotherhood, Ra’am. In a sign of what to expect from the incoming administration, Bennett started his term with an assault on Gaza and approved a Zionist march through East Jerusalem that chanted “death to Arabs”.

Though motivated by specific concerns and grievances, each of the movements in the last twelve months display features consistent with those seen since the wave of rebellions in 2011. They continue to be highly decentralised: lacking institutional or political cohesion and even the basic civic infrastructure needed to get to that point. Social discontent has often been refracted through pre-existing social fractures, including various national questions as well as specific social oppressions. The relative involvement of organised workers varies from place to place, but nowhere are they consciously acting as the vanguard. This is true even when they act as one in practice, as for instance with textile and health workers in Myanmar. As well, nowhere have we yet seen a left that can lead or even seriously recruit from these incredible uprisings. On the other hand, nor have we seen governments able to co-opt them by offering reforms and substantial changes to the ruling strategy. Brute repression has been the preferred policy, a tactic that can succeed temporarily, but does not resolve underlying issues in a lasting way. The urgency of rebuilding a left that can intervene into such a circumstance remains clear.

Latin America looks like it will continue to be a focal point for left-wing struggles. The continent has suffered some of the worst impacts of the pandemic, producing severe social and economic dislocations. This compounded the pre-existing tensions generated by highly politicised polities, where sizeable left-nationalist blocs face off against a violent and well-rooted anti-democratic right. In particular, many Latin American countries possess small but serious revolutionary organisations, and a strong history of broader left organisation, which can provide important lessons for the international left as events unfold. Recent developments in Colombia, Brazil and Chile are of particular interest, being some of the largest, wealthiest and most influential countries in the region. Colombia in particular has been one of the key props of the US empire and has had a ruthlessly oppressive and rightist regime for decades. In Brazil, opposition to Bolsonaro appears to be gaining momentum, as protests against his appalling COVID response grow in size and scope. In addition to mass struggles, nine Latin American nations will be holding elections this year. Given the dire conditions across the continent, it’s likely that voters will seek to punish incumbents. The result in Peru, where a left-nationalist leader looks to have won a closely fought election, may be a sign of things to come. We should not exaggerate the radical potential of any new pink tide-style governments, given their well-documented failures.^[2] Nonetheless, a regional defeat for the right would be a positive sign and could result in more offensive struggles for social reforms. For an international left that is struggling to impose itself on events, these precious signs of hope should be studied and cherished as a reminder of what is possible.