Could COVID Alter Capitalism's Direction?

In a very real sense, the global economy has been on standby, crippled by a global pandemic and kept on life support by the very governments that it attempted to work around in recent decades.  It got something of a frightful scare back in the Great Recession a decade ago, but recrimination and threats if they didn’t use those funds for the greater good failed to materialize and markets went about their usual business, having received the unexpected benefit of over $3 trillion into the global financial system through government investment.  

That decision – to invest in the financial economy instead of the real economy ended by assisting some to become ridiculously wealthy while the majority of citizens continued to fall into debt, with millions slipping even further into poverty.

Will the same thing happen post-COVID? Hard to say.  Yet it has become clearer to market forces that the need for stronger social safety nets and well-funded healthcare systems is more vital to any economy than previously thought.  And, yes, while government invests in both people and businesses, it’s obvious that such a design is unsustainable, since the financial and corporate sector have gained maximum benefit.

But falling slave to that practice in the past actually helped put the world in the vulnerable position it is at the moment.  A great imbalance had occurred, with wealth soaring ever upward to a few and away from average families.  Can we escape that same pattern again by altering the responsibilities of both sellers and buyers as we emerge from the Covid-19 crisis?

It all depends on the willingness of all parties to rebuild the economy by tackling our greatest challenges from the outset – climate change, gender equality, poverty alleviation, meaningful employment, shared prosperity.

The memory of the 2008 financial bailouts should prove a valuable lesson here.  In that instance, corporate relief with publicly funded resources only resulted corporate benefits and public losses.  This time, governments should shape their COVID assistance to the corporate sector by placing certain agreements or conditions on those investments.   An example would be the willingness to build a living wage as a fundamental baseline for all employees, along with benefits that are actually helpful.  Another would be to construct affordable public transport for all or rent geared to income units in larger housing developments.  

2008 witnessed the public sector bailing out the corporate sector through government investments only to see little put back in return.  An effective pandemic recovery package should involve a return on that investment by those businesses receiving recovery funding.  Financial institutions, for instance, used the corporate bailouts of 2008 to lend out 90% of those funds to other corporations as opposed to average citizens or small to medium sized businesses.  It was a lost opportunity.

We are in danger of that again. We have centred our COVID recovery packages on the health crisis instead of using such investments to shape climate change reform or investments in local enterprises.  If we aren’t careful, the billions of dollars in recovery efforts could be squirreled away by the corporate sector instead of being reinvested into the national and local economies once that health crisis is over.

It is fortunate that the corporate pressure to limit the capacities of governments in recent decades weren’t fully successful, since it is actually those government resources that are now keeping the business sector afloat. It’s a lesson that can only be truly learned when the beneficiaries of such bailouts use a portion of their activities and earnings to reinvest back into the public sector once COVID is gone.

This time, governments must resist the temptation, or pressure, to just invest pandemic recovery dollars and instead insist on a publicly-minded partnership for that investment.  That would go a long way to ensuring that public money invested in the private sector would have a strong return for the real economy that average people utilize every day.

This is a moment unlike any other since World War Two ended.  Our ability to remake our potential and possibilities is huge, but only if we come out of COVID with a mutually beneficial partnership between public and private interests.  It remains to be seen if we have learned that lesson.