How will the Tories fix the Covid fracture? As the pandemic deepens inequality and cripples communities, the Government has a choice
A Covid-19 food bank at St Margaret's Church in Leytonstone. Credit: Tolga AKMEN / AFP / Getty
Predicting the long-term economic and social cost of the Covid-19 lockdown is something of a mug’s game. Perhaps our country will come through the crisis with an economy and citizenry more resilient than many anticipated. Or it may be that the worst fears prove well-founded and we find ourselves confronted with a job of economic and societal reconstruction such as we haven’t seen since 1945.
Will the worldwide economic shock eclipse that experienced in the global financial crisis? It’s too early to be sure, but some think it might.
We could do worse than take a steer from the Italian Marxist, Antonio Gramsci, in resolving that any pessimism bedevilling our intellect during these troubled times will serve to ignite the optimism of our will – in particular, the knowledge that we have the ability, as a people and nation, to apply the correct solutions to overcome whatever destruction the virus might wreak upon us.
The question, of course, is what those ‘correct solutions’ might look like, in the event that the worst-case scenario, or something like it, comes to pass. And that presents a conundrum which has the potential to split British politics down the middle (again) and dramatically recast established thinking.
Would the Government default to the nostrums which have held sway for over four decades, and assert that the appropriate response to a floundering economy is a heavy dose of austerity, and that any fiscal deficit is best and most swiftly reduced through heavy cuts to public expenditure?
Or would it learn the lessons of the past 10 years — not to say those of previous global economic catastrophes — that slamming on the brakes at a time when everyone else, households and businesses, are retrenching is the worst possible medicine. It is, of course, the job of government at such times to lean against market logic by maintaining economic activity and levels of employment through spending — thereby ensuring, too, that tax revenues remain sufficiently buoyant to allow for a faster reduction in the deficit.
If it’s the latter, then we are in for a fundamental reordering of economic priorities that might herald a welcome end — in Britain, at least – to the neoliberal orthodoxy that has dominated the approach of Western governments since the mid-1970s.
In normal times, of course, there would not be an earthly expectation that the Tories would entertain such a radical shift in thinking. It would go against all their natural instincts (well, their instincts since at least the days that Ted Heath was leader). But, this time, any economic crisis would take place against a quite different political backdrop to previous such episodes.
For a start, the Tories have just secured a thumping parliamentary majority by winning the support of working-class England. These are voters often inhabiting deprived towns across the post-industrial north and Midlands — Labour’s old Red Wall seats — who, in many cases, stuck a peg on their nose and voted Conservative for the first time. They will justifiably be looking for payback for having made such a sacrifice, and another long bout of economic hardship when they have barely caught their breath from the last lot will go down like a cup of cold sick. The electoral consequences for the Tories in such a scenario would surely be profound.
The authenticity of pre-lockdown Tory intimations of a more interventionist approach designed to bring investment and opportunity to these places will be severely tested when the bill for the virus eventually lands. For it is then that the Tories will be presented with the choice between abandoning 45 years of economic orthodoxy and forfeiting the trust of their new supporters.
In the context of the sudden materialisation of a multi-billion pounds rescue package designed to tackle the immediate dangers, any future quips about “magic money trees” or “Soviet-style economics” will ring decidedly hollow. The money is there. It always was.
And, so the argument will go, if we can direct it towards protecting jobs and industry from the economic shockwaves caused by a pandemic, we can direct it towards supporting job creation and reindustrialisation in the Redcars and Blyth Valleys when the health crisis passes. After all, there are, as John Maynard Keynes contended, “no intrinsic reasons for the scarcity of capital”.
Any wrong approach on the economy would only deepen social inequalities and injustices. Already the virus is throwing these into sharp relief. The rest of us look on as the more hard-pressed within our society struggle to navigate the lockdown. I’m talking about those who are living in cramped and substandard housing, or in densely-populated areas where green spaces are in short supply, or where a lack of educational resources at home means that children may fall behind academically, or where Mum or Dad have jobs — such as in manual labour or the essential services or industries — which preclude their working from home and compel them to take risks with their health.
We see, too, the elderly of all classes living lives of lonely (and literal) isolation with no end in sight. Little wonder that some of them would sooner step outside and take their chances against the virus than endure more weeks of solitary confinement.
All of this would be made worse if the long-term economic prescriptions meant more crippling austerity and, by extension, deeper privation and the gradual disappearance of more day centres, youth services, libraries and other community outlets that provide a lifeline for the disadvantaged and marginalised.
Much has been said and written about how the Covid-19 crisis has the potential to reshape our world, with activists and commentators asserting that these events have proved them right all along. That was perhaps to be expected. But there can be no denying that the crisis will in the coming months present us with a crunch moment in British politics.
The working-class heartlands, once red, now blue, are the new battleground. The way they respond to the economic crash seemingly coming our way may well determine how long the Tories hold on to them.
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SubscribeI agree with much of this article. However, we truly have not had austerity since the 1980s. A friend said a while ago, when the airports and the restaurants are empty, we know we are in austerity, until then ignore whatever government spins.
I think also we must stop eulogising the public sector and specially NHS. It is causing a real anger in society when so many in the private sector are working much harder than the public sector to provide food, heating, petrol, medicines, equipment etc etc and others are losing their businesses and their jobs because we have all had to save the sclerotic, wasteful and ill prepared health service.
Hopefully people will come to realise we really do need heavy reform of the NHS discarding the quangos and committees and slimming down the management, so the country is never put in this situation again.
It will also be a major opportunity for businesses to reassess where their futures lie. Perhaps more small interaction businesses locally organised. Less acceptance of the globalists and more manufacturing at home. A realignment of media so online debates and information become more popular. Less modelling of outcomes that are never successful, but more testing in communities and their needs. If we are innovative and open to change this pandemic and lockdown could be the best thing for a dynamic UK as we leave a corrupt and crumbling EU.
Extremely well said Anjela! Agreed with every single word you typed.
Another thoughtful article Paul. Thank you. But!
You would think that with all the free spending by most Governments, that the message might have got through that:
Taxation does NOT fund government spending. Taxation does not pay for a thing.
Taxation or austerity is not needed to recover from these times. If anything, as many sensible bankers are indicating, continued stimulus and possibly tax reductions are required. If Governments have borrowed to fund their spending, then that was never necessary. In such a case Central Banks can control any interest rate, and the buyers of bonds are unlikely to want to cash in only to have to invest in much more risky opportunities (see Richard Murphy on that topic). Please catch up with MMT. Go to the GIMMS site to find all about it in easy language. That goes for other Unherd commentators, and of course the traitorous Labour Party.
Finally – Unherd is a great site, even for the non-religious like me! Though I live in far away New Zealand, I find so much of relevance.
I admire Paul greatly, but I am wary of anyone who quotes Gramsci. After all, it is Gramsci’s ‘long march through the institutions’ that led to Paul being losing his job as a union rep for supporting Brexit.
Also, this is just a call for money money printing and borrowing. If people wanted that they would have voted for Comrade Corbyn. To be sure, we might need some short-term stimulus but that should take the form of ‘helicopter money’ paid directly to normal people, not small business loans channelled through the eternally evil banks with 30% interest applied. Beyond that, we need to massively cut taxes as we slash the eternally grasping, incompetent and unaccountable state.
Too true. Gramsci is probably responsible for our nothing degrees and extremely bored young men and women who thought university was shangrila
Maybe I am being too optimistic, but the signs are already there that the Tories are going to take the unprecedented situation as a reason to tackle the economic problems in an unprecedentedly un Tory way, that would have Maggie spinning in her grave.
Whilst Rishi has not admitted yet how much money he is going to print, there can be no doubt he will end up printing lots. What is really hopeful though is that this round of money printing (something that is a natural consequence of population growth and increasing expectations of a better standard of living and something that has always happened since money first replaced direct exchanges of goods) will see a much greater proportion start off in the pockets of ordinary people. Unlike the last lot which ended up in the pockets of the rich and in huge asset bubbles like housing which puts house ownership out of reach for many young people.
We can print as much money as we like but that does not alter the amount of goods and services in the economy. It merely creates inflation which harms the poor and makes us all worse off in the end.
The underlying point regarding the conservative commitment to the people of the Midlands and the North is correct. In fact now is as good a time as any to reaffirm this through a clear industrial policy that rebuilds local manufacturing and supply chains across a number of industries. This will take time and requires catalysts such as capital allowances and some support of buy British even ifs more expensive than (Chinese) imports. Too much of our industry and with it jobs, social structure and individual welfare (content because I have good job and money to pay for a reasonable life) has been exported purely for financial profit. If we take ESG fully into consideration we can do this but must also expect some inflation in locally made goods.
For many in this government there is nothing more important than limiting the economic power of the State, Restarting the economy, limiting unemployment and minimising the number of business failures are goals only in because failure could cost the Conservatives victory at the next election.
Quantitative easing and even conventional Keynesian counter cyclic spending are deeply suspect. Increased taxation is an absolute No No.
Expect another ten years of austerity far more stringent than the past decade
Oh, and he was doing so well….. until ” future quips about “magic money trees” or “Soviet-style economics” will ring decidedly hollow. The money is there. It always was.”…and…
“After all, there are, as John Maynard Keynes contended, “no intrinsic reasons for the scarcity of capital”.”……errrr?!……..
What school of economics did you say you went Paul?
If “The money is there. It always was.” then why do government receipts fail to equal or exceed government expenditure?
“In the context of the sudden materialisation of a multi-billion pounds rescue package designed to tackle the immediate dangers, any future quips about “magic money trees” or “Soviet-style economics” will ring decidedly hollow. The money is there. It always was.”
No it wasn’t. In the wake of the banking crisis governments effectively nationalised the banks debt in order to prevent complete financial collapse. If they had then gone on to rapidly expand government spending this would have risked this debt becoming unserviceable.
Money is ultimately based on trust, had the government risked its financial stability, it’s borrowing costs would have rapidly increased. Nor does the argument that government spending would have paid for itself through economic growth hold any water. Government spending is subject to the same laws as any investment. No ones returns are guaranteed to exceed costs and centralised infrastructure projects have a poor record of being delivered on time and within budget.
Had any western government, unilaterally, vastly increased its spending after the financial crises, then the only benefactor would have been the nations which controlled their budgets, as capital would have rapidly been moved to countries which were not increasing their risk of default or runaway inflation.
The crisis measures being taken now are just that, crisis measures. It would make as much sense for a healthy individual to take highly toxic chemotherapy drugs to prevent cancer, as it would for a government to spend this way during a normal economic cycle.
If anything austerity has left us financially better prepared for this crisis. Without it our troubles would have been greatly magnified.
Given Paul Embery’s day job, he might be better served to focus on why a London fire service stuffed with white English working class people resulted in 72 almost all non-white English people dying in the Grenfell fire. The London fire service is less than 15% ethnic minority compared with 60% ethnic minority population in London. Like so much of London’s public services it would give apartheid-era South Africa a run for its money.
Watching the embarrassment that was Danny Cotton, London fire commissioner, before she resigned, my wife said to me, that if the London Fire Service had been run by immigrants rather than by white flight Essex types Grenfell would never have happened. She’s completely right.
Remember when you read anything by Paul Embery that a public enquiry found that the London fire service’s readiness for the Grenfell Tower fire was “gravely inadequate” and fewer people would have died if it had been better prepared. People like Paul Embery failing to be competent at their job are the reason that 72 people died in Grenfell.