Corporate Law

On ‘Corona Crash’ and Neo-capitalism: In Conversation with Ms. Grace Blakeley


The following is an edited transcript of an interview with Ms. Grace Blakeley, economics and politics commentator, journalist, and celebrated author of ‘The Corona Crash: How the Pandemic Will Change Capitalism’, conducted by Binit Agrawal (Founding Editor, LSPR). In this interview, Ms. Blakeley and Binit discuss State responses to the forces of capital, climate, and the COVID pandemic, and how society must address the challenges they pose.

Binit: Ma’am, you must have read about the ongoing farmers protest in India, wherein millions are protesting the government’s move to open up agriculture to corporate houses, while reducing state support to agriculture. They argue that this would open them up to exploitation at the hands of deep-pocketed crony capitalists. An unlikely supporter of this move, often cited by the government is the IMF. How fair is it on the part of an international institution like IMF to support such a policy? Do you think IMF is right in encouraging anti-welfare policies in the global south, even when western countries extend significant support to their agricultural sector in various forms?

Grace: International organizations like the IMF and the World Bank are notorious for consistently intervening in the affairs of states in the global South to promote a free market agenda that supports the interests of international capital at the expense of workers. The IMF and the World Bank push a particular agenda – often referred to as the Washington Consensus – which involves support for privatization, capital account liberalization, the removal of subsidies for basic necessities and various other neoliberal policies. This was most obvious in the 1980s, when the Structural Adjustment Programs were pushed upon many poor states in exchange for emergency debt relief. Not long ago I had the academic Walden Bello on my podcast – he famously broke in to the World Bank Headquarters to locate documents that would show the IMF’s programs in the Philippines were being supported by the US government because the US wanted to undermine a democratically-elected regime there. 

Since then, the IMF and World Bank have claimed that they no longer adopt such an approach and have sought to include many of the Sustainable Development Goals in their reform packages – but this has been all talk and very little action. Many states, like India and Ecuador at the moment, are being pressured by these international financial organizations to adopt a particular approach to development – one that puts the interests of big businesses over those of ordinary people. Privatization, the removal of restrictions on capital mobility, tax cuts – all these things benefit big business, especially large multinationals located in the global North, at the expense of workers. In that sense, I do think these organizations are encouraging anti-welfare policies in the global South. 

Binit: I had an opportunity to read your book “Stolen: How to Save the World from Financialisation”. Therein, you argue that the global recovery from the 2008 financial crisis went wholly in favour of the top-1%, even though they were the ones who caused it in the first place. You have also very recently authored, “The Corona Crash”. Do you think there has been a change in how governments are responding to the current crisis when compared to the 2008 crisis? Has the change, if any, been positive?

Grace: Pandemics tend to increase inequality. Historical evidence, and more recent economic research, suggests that the gap between rich and poor has widened during and after many recent pandemics – from SARS, to Swine flu and Ebola. This one is no different. It is becoming increasingly obvious that Covid-19 is a pandemic that is being lived in two halves. Wealthy professionals are disproportionately likely to have kept their jobs, own their own homes and have private pensions. Their wages have remained relatively high, they’ve been given a break on their mortgages, and they’ve been forced to reduce their spending down to essentials. For others, the experience has been completely different. Those who were on low incomes before the pandemic are disproportionately likely either to have lost their jobs or seen a fall in pay. Most of their spending already went towards essentials, meaning they’ve been less able to save.

The response to the financial crisis was to give support to the banks through bailouts, and to the wealthy through loose monetary policy that pushed up asset prices. As things stand, it doesn’t look like the response to this crisis will be that different. Thanks to the weak and unequal recovery from the financial crisis, most economies weren’t doing very well when the pandemic hit. Individual firms have become much more reliant on states to support their activities in this context – and the pandemic has deepened this trend. States are providing huge sums of money to private businesses to help them through this recession – just like they did with the banks after the crisis – and leaving everyone else to fend for themselves. The result of the pandemic is therefore going to be a much more centralized economy – one in which a small number of firms, financial institutions and states survive from the carnage created by this pandemic, giving them a great deal more power over society – and also a more unequal economy.

The only way to deliver a robust recovery will be to invest in decarbonization, creating new jobs, and boosting productivity over the long run. Governments should invest in jobs creation in areas like research and development, engineering and construction, and health and social care, which will both support the recovery and help their economies deal with long-term issues of climate breakdown and demographic ageing.

Binit: We have seen a global rise in inequality in the past two decades. In India, the top 1% is cornering over 76% of national wealth every year. However, countries in the global south have little bandwidth to increase their taxes. If they increase taxes, they find that companies and individuals easily move out of the country to other countries, further shrinking the national revenue. What workable solution would your propose to the dilemma of tax competition? Do you see any change happening at the global level on this issue?

Grace: Some of the biggest corporations in the world have been sitting on huge piles of cash for years, without ever seeing the need to invest it. For some companies, these cash piles have provided the buffers that have allowed them to weather the pandemic. For others, they have grown as profits have risen on the back of the shift in consumer spending habits seen over the past year.  There are two ways of getting at that cash: tax it, or encourage businesses to invest it. The first you can only do through some form of business tax increase combined with massive international coordination to curb avoidance and evasion. You would also have to impose some form of capital control to prevent businesses from moving all their cash out of the country. This is often very challenging without international cooperation – and there has been little of this in recent years. 

The second thing you could do is increase public investment. When businesses are too nervous to spend themselves, it’s up to the state to do it for them, boosting growth to such levels that it ultimately becomes profitable for them to do so. Simply increasing public investment to boost corporate profits would create jobs, but it might not do so in a particularly equal way. This is why I think it’s very important for states to consider socializing investment in their economies – either through taking an ownership stake in some of the biggest companies and banks, or by setting up public banking systems or sovereign wealth funds that can support such investment and ensure the returns are shared equally. 

Binit: You have researched extensively on financialization. One of the things which has happened in the last few decades is the complete financialization of agricultural goods like rice, wheat, coffee, tea, etc. Today, the prices of these goods are determined not by the farmers in Nigeria or Ivory Coast, but by derivative commodity traders sitting in New York and London. How does it affect the livelihood of farmers? Do you feel such trading is representative of extreme and parasitic financialization, where financialization itself is the end?

Grace: The financialization and commodification of the means of subsistence – the basic things that we all need to survive – have been a hallmark of neoliberalism. Whether its food, housing, or healthcare, the basic goods and services that everyone needs to live a decent life have increasingly been subjected to the brutal logic of the market. As a result, some people have been excluded from being able to access these goods while others have profited from being able to speculate over the value of these commodities on financial markets. Agricultural commodities are a good example, but so is housing – both of these goods are increasingly seen as ‘assets’ over which to speculate, rather than basic requirements of living a good life. 

But financialization isn’t the only problem. The issue isn’t simply that ‘commodities’ like food have been financialized, so their values go up and down based on the whims of investors in financial centers in the global North: the problem is that these things are treated as ‘commodities’ in the first place. Food, housing, and healthcare shouldn’t be allocated subject to the market mechanism – they should be provided to everyone who needs them, free or very cheap at the point of use. 

Binit: Every time someone argues against inequality and extreme wealth concentration, they are countered by mentioning the charitable deeds of the billionaires. Whether it be the Gates Foundation, the charity of Warren Buffet or Mr. Bezos’ new climate fund. Do you feel that these charitable foundations are able to achieve their goals of reducing world poverty or of fighting climate change? Why is that even after years of mega charity by the uber-rich, we see few changes on the ground? Can the world rely on these benefactors to fight its biggest challenges?

Grace: Our reliance on big business and capitalist states to ‘save the world’ is self-defeating. 

The central logic of capitalism is endless accumulation – even if a business wanted to prioritize goals like reducing inequality and solving climate breakdown, if either of these aims compromised the business’ capacity to generate profits, it would lose investment and could ultimately collapse. Even if solving climate breakdown would ultimately promote the interests of the capitalist class as a whole, any intervention large enough to solve the problem (which doesn’t include ‘solutions’ that allow half the planet to be submerged by rising sea levels or desertified by rising temperatures) would disrupt accumulation too deeply to be entertained.

The capitalist state is supposed to solve this challenge by encouraging—or forcing—firms to take difficult actions in the short-term that will nevertheless promote their interests over the long term. But the state is also structurally constrained by the nature of the capitalist system: governments rely on capital accumulation to sustain both their legitimacy among the general public, and their valuable links with private interests.

Finding our way out of this cul-de-sac requires building power outside of these institutions in order to shape what happens within them. The only real counterweight to the power of the owners of capital is the power of organized labor; and the only real counterweight to the power of the capitalist state is the organized power of the majority of people. We can’t rely on Bill Gates to solve the climate crisis, but nor can we rely on Joe Biden. The majority of people on the planet—the ones who will be harmed most by climate breakdown—have to mobilize to demand a different way of organizing society: one based on meeting the needs of the many, rather than the greed of the few.

Binit: Ma’am, my last question to you is what are you reading these days? Would you like to recommend something that your read recently to our readers?

Grace: One book on imperialism I read recently and thoroughly enjoyed was Vincent Bevin’s book The Jakarta Method, and another is Nkruma’s Neocolonialism. I would also recommend reading Baran and Sweezy’s Monopoly Capitalism for a more theoretical look at how modern capitalism reproduces itself. My good friend Leo Panitch sadly passed away last year, but his work is an invaluable resource for understanding global capitalism – particularly The Making of Global Capitalism. On tax avoidance and evasion, Nick Shaxson’s book Treasure Islands is a fantastic introduction; and Ann Pettifor’s book The Production of Money is also a very good introduction to money creation.

Obviously I’d like for everyone to read my book The Corona Crash, which references a lot of these texts!

Image Credits: Huckmag