The response of many western governments to the pandemic has been to collapse their economies and maintain social support through a very large fiscal expansion. Some observers have questioned if this would herald the demise of capitalism as a means of organising our affairs? Does the pandemic herald the end of capitalism?
The operation of capitalism as a social system relies upon the market for the distribution of goods and services. It is a monetary system, using price signals as an allocation mechanism, and the profit motive as a motivational driver. Key to the system is the exercise of personal choice in determining what to buy and when to buy it. Some goods need to be purchased collectively, which calls for governmental provision that is funded through the tax system. Another important role for government is to regulate the markets and to correct for market failure. In making the distributional decisions about taxes and subsidies, a collective decision framework is called for. In the western liberal democracies, this is in the form of representative government. All of this has ceased to operate during the pandemic.
The market is still used for the distribution of goods and services, but consumer choice can only be exercised during lockdown for 'essential goods'. The lack of a clear definition of what is essential and what is not has been something of a legal question during the pandemic so far. Absurd cases have arisen, such as the denial of the Welsh government that female sanitary products were essential. This interruption of the market has had two effects that may store problems for later on. First, it means that, owing to the high levels of income support, households are generating higher than usual levels of savings. Second, because people are not spending, and because government assistance is aimed at income support, profit levels are falling and the closure of firms is accelerating. Capitalism operates as a 'Money-Go-Round', and if one element seizes up, then the whole system becomes fragile.
There has been little public consultation over any of this. The organs of representative democracy have been suspended. The English local elections scheduled for May 2020 were postponed and it is currently uncertain whether or not the English local elections, the English mayoral elections, and the elections to the Scottish and Welsh Parliaments will go ahead as planned in May 2021. In place of a representative democracy, and autocratic technocracy has assumed control of the government, with key decisions being made by 'scientists and experts'. The scientists and experts who have assumed control display the British desire to centralise and the risk aversion of the British Civil Service. The population has been largely compliant so far, but rumblings of discontent and non-compliance with the regulations are starting to grow.
The key question is whether or not this represents the end of capitalism? Much depends upon how temporary these measures turn out to be. If a high level of vaccine delivery can be achieved, then the economy and civil society can start to thaw sooner than otherwise. This is the critical uncertainty. If a thaw can be achieved in the near term, then the process of normalisation can begin at the same time. If a thaw cannot be achieved, then the Conservative government of Boris Johnson will achieve what Jeremy Corbyn failed to achieve in two general elections - a Socialist Britain.
Two cases during the pandemic have given us a hint at what that might be like - the NHS Test and Trace App and the Oxford Vaccine. A test and trace facility is key to the management of the spread of the COVID virus. Despite there being commercial options available, the NHS decided to develop its own tracing App. The scientists and experts took control and the centralising tendency in NHS management took over. The result was far from the world beating App that was promised. The actual result - at a cost of just under £12 billion - was a non-functional App. In the end, a functional App was developed with the assistance of Apple and Google. The episode highlights how life could be if normality does not return.
By way of contrast, an effective vaccine was delivered in record time. This came about because sufficient government money was pledged to cover the cost of the initial research. This was handed on to the competitive oligopoly of the pharmaceutical companies to commercialise. It then received regulatory approval in record time and is now being delivered by private firms on contract to the NHS. If anything, this case demonstrates the best result of capitalism. A worthwhile social purpose - mass vaccination - that is underpinned by the government is being delivered by private sector companies. This represents the system working as it should.
This is an important point as we go forward. The emergency socialism of the pandemic has managed to ensure that public health is maintained and that households are not impoverished. This is a major achievement. But as we look beyond the crisis period, the public sector is unable to deliver goods and services effectively. There needs to be some return to the market and that needs to be underpinned by a return to representative democracy. It is quite likely that the pandemic will have rejuvenated capitalism rather than hastened its demise.
Stephen Aguilar-Millan
© The European Futures Observatory 2021
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