As the world continues to reel from coronavirus shock, a question lingers: why were our global economic systems so poorly equipped to handle this crisis? The answer may lie in a meeting that took place 76 years ago and laid the foundation for those systems.
The Bretton Woods conference of 1944 was arguably the most important meeting of the 20th century. The agreement that came out of the conference answered an important question: how would societies that created wealth surpluses (controlled by an elite investor class) prevent that investor class from destroying society? The question was relevant given the events of the 1920s and 1930s, when the global investor class – what we today refer to as the richest 1% – had made some really bad decisions. Not least among those were the decisions that led to the Great Depression and the rise of fascism in Germany and Italy. So the 1% had to be controlled. But how?
The answer that Bretton Woods came up with – limit financial speculation through the use of currency controls tying every currency to the US dollar and the dollar to gold – was both unsatisfactory and temporary. In the 1970s, the Bretton Woods System came apart and the global investor class began to run amok. Financial crises almost immediately began to proliferate, just as they had in the run up to the Great Depression. Today, investors continue to treat markets like casinos.
When investors lose (and they lose chronically) ordinary people pay the price. The examples are almost too commonplace to mention – the mortgage market collapse that heralded the 2007-2008 recession is one example, but there are dozens of examples at every level. Taxpayer money is constantly used to bail out investors who made bad decisions or to prop up industries that would otherwise not be viable.
“Global capitalism” is a misnomer. Capitalism is taught in economics textbooks as the theory that governments should not interfere in free markets. Instead our economic systems privatise profit and socialise risk through governments that are more accountable to the global 1% than to their own citizens. “Socialism for billionaires” or “neo-feudalism” would be more apt.
And so comes 2020, with a global public health crisis that has demonstrated just how fragile our economic systems are. Others at New Frame have written about how public health systems are not fit for purpose, but it bears repeating.
People on the left often think of “intersectionality” – the idea that an individual may face multiple levels of discrimination through sexism, racism, etc – as a sort of perverse contest. Which is the most oppressed community and how were they uniquely brutalised? Such discussions quickly devolve into pointless academic arguments.
But intersectionality is the key to making strong public policy. If you have a health system that meets the needs of the most marginalised community – say impoverished black HIV-positive women with disabilities and no disposable income – that health system will better meet the needs of everyone. The entry points that the person with the most need requires to access meaningful care are the same entry points that facilitate better quality and more comprehensive care for everyone. If a public system can protect the most marginalised, it can protect everyone.
Instead of wrestling with the question of how to ensure high quality universal access, we’ve become obsessed with running hospitals as if they were corner shops. The results, unsurprisingly, are poor.
The current global public health crisis is one symptom of an even larger global crisis. The post-Bretton Woods system is unfit for the 21st century.
Is it time to hit the reset button and start afresh?
The crisis of the status quo
In July 1944, it was clear that the global economic systems that had been stopped to fund World War II could not be allowed to restart.
In June 2020, global economic systems are largely on hold, this time because of a virus. We must again recognise that a return to the status quo is not an option. The status quo has led us to crisis.
What is the crisis? Covid-19 may be the obvious threat, but we must distinguish the symptoms of the crisis from its root causes. The virus is a symptom. Scientists have been warning us about something like this for years, and many governments have a recent history of poor preparedness for coronaviruses. What prevented us from being adequately prepared for this moment?
There are other crises, some of which threaten our very survival as a species. Most obvious among these are those related to climate change and the threat of a global nuclear war. The likelihood of either or both of these is higher than ever, as the Trump regime continues to prioritise short-term profit above all else. But these are still symptoms. The moment demands clarity; we must not fool ourselves into thinking that addressing symptoms can fix the system.
We have created a class of super-rich people who have inordinate power to determine how global decisions are made. That class exercises its power to maximise its own short-term profit no matter the longer-term costs (and sometimes no matter the short-term costs). They know that while they keep the profits, any losses will be socialised. Under such circumstances, this class will consistently and repeatedly cause crises. This is the root cause.
It’s tempting to go from that conclusion straight to the need for a revolution to overthrow that class and replace it with another class – Marx’s dictatorship of the proletariat perhaps. But we must look deeper (as genuine Marxist analysis does) to understand the structures that have led us here. What are the material conditions which generate a class which has both the ability and the desire to endanger humanity for a small profit?
How we got here
The answer to this question can be found in mercantilist Europe and the brutality of the colonial systems established by Europeans, which were based on principles of commodification and competition. The harm these principles cause today is indisputable. In Anglo-American corporate law, profit is literally the only thing on which a publicly traded company may base decisions. This is justified by a vague appeal to the selfishness of human nature, but when was the last time you saw someone push uGogo over to snatch an ice cream from a six-year-old and think, “That’s just human nature”? We rightly see such a person as a sociopath, but we’ve built our economic and social models on the premise that everyone ought to act like that person.
Biologically one of the key attributes that separates humans from other animals is the amount of time and energy it takes to rear our young. Every parent knows that the saying, “it takes a village to raise a child” isn’t a meaningless cliché. The way we raise our children necessitates that we be kind to one another. Where is the kindness in the system that has led us to the Covid-19 moment?
To reset, we must learn from systems based on different principles – the opposite principles. Our economic systems should be built on principles of inclusion and mutual aid, not exclusion and competition. And instead of seeking to profit from our surroundings, we must protect the environment we inhabit from ourselves.
The Covid-19 crisis has proven one thing: the global economy is going to be reset one way or another. Corona will not be the last such shock of this century, and it may not even be the last shock of this decade. Over the past 20 years we’ve seen three coronaviruses emerge – SARS, MERS and now Covid-19. Why would there not be another? Why would that one not be even worse than this one? Why would the melting polar ice caps not lead to more climate-related disasters? Why would Trump’s rollback of the cold-war era nuclear weapons treaties not lead to a disaster?
Any of these shocks could spell the end, not just of the economic system, but of the 300 000-year-old experiment we know as humanity. If we are able to rise to the occasion and hit the reset button on the global economy, we should count ourselves very lucky. If not, a more brutal and a more permanent form of “reset” is not far off.