Entering into 2020 we expected the mass movements that erupted all over the world in 2019 and the conditions that gave rise to them to continue. But as C.L.R. James once observed “you never know when it is going to explode.” And explode it did.
The speed and depth of the economic crisis that enveloped the globe in the wake of the pandemic was unprecedented. The economic shockwaves and the ongoing public health crisis, which is now peaking in many countries around the world, has exposed the rot of capitalism. The existing inequities and inequalities heading into the crisis, that were already driving a wave of mass movements, have been supercharged–and the climate crisis is deepening.
Economic crisis and government response
The early days of the pandemic saw shockwaves to supply chains and turmoil in the stock market, posting several days of stock market losses either exceeding or nearing the 1929 stock market crash.
The initial response of treasuries around the world was to back stop the market by providing emergency liquidity–first to the tune of billions, and then into the trillions. Interest rates were cut effectively to zero, and governments through both monetary and fiscal policy pumped millions of dollars into the economy.
The early lockdowns and fear of an unknown virus created a production shock. A significant chunk of businesses shut down their production; this was coupled with the longer and more extensive closure of retail, restaurants, entertainment and tourism industries. Globally, tens of millions of workers were losing their job. In the US, by the first week of April new jobless claims had jumped 3000% as 6.6 million people filed for unemployment in one week. The previous record was 650,000 new jobless claims at the height of 2008. Well over 50 million Americans filed an unemployment claim in 2020. Even now, new jobless claims exceed the height of the 2008 recession and over 25 million remain unemployed.
This scene was repeated in most countries across the world. Government and central bank monetary intervention were fairly quick to stem the bleeding in the stock market and shore up the global financial system. The fiscal policies across the world had mixed success in terms of addressing unemployment and a crumbling economy. By and large, governments opted for a mix of direct emergency supports to households and some sort of bailout of businesses in the form of loans and subsidies. Trillions were marshalled to backstop the global economy.
In countries less impacted by the virus, like China and Vietnam, the economic recovery was relatively speedy, though it should be noted this recovery is still far away from the pre-virus growth trend.
K shaped recovery
For most countries the economic recovery has been K shaped. The wealthy, those with assets and high incomes, have not only recovered but are seizing on cheap money and inflated equities to increase their wealth. But those at the bottom of the economic ladder are struggling further behind. Racialized workers, women, migrants (often a combination of these) have been the hardest hit–by both the economic crisis and the pandemic–but the least supported. They face higher unemployment and riskier jobs, lower wages/benefits and greater barriers to access of supports. Racialized workers across North America have been disproportionately exposed and harmed by the virus. Two-thirds of California’s dead have Spanish surnames. In Toronto, over 75% of COVID cases were racialized residents, with 24% of all cases Black residents. A staggering figure repeated across many jurisdictions. On top of that the racial wealth gap has grown larger than ever. The pandemic has deepened existing racial inequities.
In the corporate sector there is ongoing shake-up as brick and mortar retailers–already facing challenges heading into the pandemic–are in crisis competing against big online retailers like Amazon. The monopolization tendencies within capitalism have been accelerated by the pandemic, as companies that have access to equity markets have a large leg up on small and medium enterprises. The flip side is that companies that were on life support, so-called zombie companies that are only able to service their debts, were able to survive the crisis because of the flood of cheap money. The number of zombie companies looks like it will actually increase.
While the stock market has returned to record highs, this has nothing to do with the underlying fundamentals of the economy. This is clear in the case of the valuation of the car maker Tesla, with a market cap greater than the next nine automakers combined despite producing a fraction of the cars and making a pittance in revenue. The stock markets have become completely untethered to the underlying economic reality. Cheap credit and a mass infusion of government funds has created a glut of money that is shovelled into increasing stock valuations.
But make no mistake, we are still in the beginning stages of the economic crisis. How the ruling class is choosing to address this crisis is creating the conditions for further political and economic turmoil. And there are real divisions within the ruling class about how to respond. Some prefer pursuing a Keynesian light policy of more government spending and investments over the medium term (the OECD recently warned governments about pursuing austerity), while others are advocating emergency supports and leaner long-term spending.
Whatever the path, it is unclear what will happen as governments around the world remove direct supports for businesses or after the initial phase of the recovery occurs. Governments have accrued tremendous debts, though the servicing requirements are quite low. 2021 is likely to see further economic recovery and growth, but this only reflects the depths of the initial phase of the crisis.
The global divisions within the ruling class going into the crisis are not going away either, which is worsening both the economic and the public health crisis. The pandemic is still raging across many countries and looks set to get much worse before it gets better. Case counts are exceeding previous highs in the spring, new mutations are being discovered. The development of the vaccines is certainly a welcome sight, but their rollouts thus far have been painfully slow. More deaths and economic uncertainty look all but certain in the short-term.
But the advanced economies are leveraging their wealth and power to address the crisis that could profoundly damage poorer nations. Access to PPE and the vaccine are not being shared equally, with many countries unable to secure vaccines for all until 2024. Poorer nations that don’t have privileged access to financial markets are in for a rough ride as they take on a mountain of debt. Already 100 countries have sought some form of relief from the IMF and it is estimated that 50 countries could be facing a debt crisis this decade.
Meanwhile in Canada
In Canada, the early days of the pandemic had governments on all levels scrambling to respond. In places like Ontario, Quebec and BC, cases of COVID-19 had appeared, mainly in racialized communities, as early as January and yet the calls of advocacy groups for immediate government measures (paid sick days, emergency relief funds for laid-off workers and a response to the growing anti-Chinese racism and xenophobia) were unheeded.
With an expected spike in the number of confirmed cases of COVID-19 in February and March of 2020, provincial governments finally began taking measures to institute lockdowns and restrictions. The sudden closures resulted in a significant shock to the Canadian labour market and devastating rates of job loss. More than 3 million jobs were lost in the months of March and April and the unemployment rate hit a record high of 13.7 per cent in May.
The impact was of course much greater on low-waged workers and racialized communities. As provinces began reopening and employment rates improved over the summer months, these demographics experienced the lowest recovery rates. This was confirmed in July when, for the first time, Canada’s Labour Force Survey collected and published disaggregated race-based data. The results showed much greater unemployment levels for racialized Canadians. The July numbers showed the unemployment rate for white Canadians at 9.3 per cent while Black, South Asian and Arab Canadians all had unemployment rates at around 17 per cent or above.
The modest recovery in Canada over the summer months was in line with the K shaped model occurring in many countries–with low-waged workers, and in particular low-waged female workers, at the very bottom with the lowest employment gains.
Following the start of a devastating second wave of the pandemic in fall, the latest job numbers available show Canada’s unemployment of 8.6 percent in December (10.2 per cent for racialized Canadians) remains well above the pre-pandemic rate. December saw the first increase in unemployment in eight months. With most provincial governments having implemented stricter measures and lockdowns in December the hospitality and retail sectors took the brunt job losses. To put this all in perspective unemployment in the last 12 months has increased 45 percent in Canada, women and racialized workers have been the hardest hit. The impact of this crisis on workers has been severe and looks to remain so for quite some time.
There is no doubt that throughout the 10 months of the pandemic, government measures such as the Canada Emergency Response Benefit (CERB) and changes to EI eligibility criteria, both of which were introduced in response to massive public pressure and tireless advocacy by the decent work movement, helped cushion the blow of the economic crisis. However, the lack of action on the part of provincial and federal governments on providing housing and workplace protections as well proper funding for public services, resulted in the deepening of the crisis and a destructive second wave. Workplace outbreaks continued with many frontline workers having no access to paid sick days or pandemic pay; privatized and poorly funded long-term care homes continued to see high infection rates and increasing number of resident deaths; a surge in school outbreaks occurred due to large class sizes and chronically underfunded schools lacking proper equipment and infrastructure to provide a safe environment; and an eviction wave ran rampant through cities as many provinces failed to implement eviction bans and in places like Ontario even further stripped tenants’ rights making it easier for landlords to evict.
While governments at all levels and of all stripes failed to act to protect working people during the crisis, the same cannot be said for supports for big business. One of the earliests measures introduced by the federal government was he Canadian Emergency Wage Subsidy (CEWS), a 75 percent wage subsidy for employers with almost no requirements or strings attached. While public services and infrastructures that were crucial to getting us safely through the pandemic were underfunded, billions of dollars of public funds were funneled to the private sector. A rash of companies, including those running for-profit long-term care homes that were the sight of the worst outbreaks, took in millions from the government while turning a profit. Some companies paid out dividends to investors while collecting government money. To date $55 billion of public money has been paid out to private companies, and the program is set to run through till the summer.
Unlike the Conservatives in 2008, the federal Liberals have pursued a policy of substantial short-term spending, keeping businesses afloat and preventing a full-scale labour collapse. How long they will keep this up is anyone’s guess, but this isn’t the 2008 ruling class playbook.
Support for the federal Liberals has remained high during the crisis and it is a strong possibility that they will call an election in 2021 to capitalize on this. Erin O’toole, who has more effectively voiced a right-wing populist economic message is a savvy and dangerous politician who is positioning himself to take advantage of the openings the crisis is likely to provide. Other provincial governments could also look to call elections this year before the federal programs like CEWS expire in the summer.
No return to normal
There are some who think that once the virus is beaten back, the economy will swiftly recover and all will be well. It is true that 2021 will be a year of robust economic growth, but that is because 2020 was a deep recession. The inequality and polarization that were features of the system going into this pandemic are not going disappear when the virus is controlled. The Black Lives Matter protests over the summer and this week’s storming of the U.S. capital by far-right supporters of Trump are no aberrations, they are symptoms of a political and economic system in crisis.
Millions remain unemployed or underemployed. Small firms are facing a real crisis in the medium term, especially as government supports wane. The possibility of a V shaped recovery so vaunted by the pundit class has long since passed us by. In the short-term we are in a struggle for lives, to protect people from the winter wave of the virus. In the medium-term we will be in a fight over who pays for the crisis. Lurking in the background, the on-going climate crisis is pushing the contradictions of capitalism to a breaking point.
Rather than a return to a mythical pre-pandemic, we are entering a period of upheaval and crisis. Revolutions, the formation of new political parties, the disgracing of old ones and birth of mass movements were the offspring of the 2008 crisis. This time it will be no different. There will be many twists and turns to come.
But we can’t simply be observers of crises, hoping they can be resolved so we can return to the slow and steady fight for incremental reforms. If 2020 taught us anything, it’s that capitalism is crisis prone. We have to seize on each crisis with verve and vigour in order to transform in a way that advances the interests of the multiracial working class, and that weakens imperialism and settler colonialism. Campaigns like the fight for paid sick days, defunding the police, ending evictions and fighting for safe schools show us the way in which we can leverage the emerging cracks in the capitalist system and the divisions within the ruling classes to push for reforms and build worker power.
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