The global Corona pandemic has now resulted in a collapse of GDP in many countries. Recently, it was reported that UK GDP reduced by 20.4% in the month of April. What surprises is the reaction to this. Some economic commentators reacted in panicky terms to this news and talk about the economy dropping off a cliff, as if the drop in DGP is a complete surprise.
Of course, the collapse of GDP is simply the result of a deliberate shutdown of the global economy for many commodities. Governments worldwide imposed restrictions on human interaction and, as expected, much of economic activity came to a screeching halt. Would one have expected something else? The drop in GDP is not an economic crisis at all, but a consequence of the management of a pandemic by governmental authorities worldwide.
So, our current economic predicament is far from a normal economic crisis; it is a consequence of deliberate management of human activity, of which economic interaction and wealth creation is only a part. And as such we need to assess in a different light than a regular economic crisis, such as the depression resulting from the Financial Panic of 2008. Only very rarely in history there has been a similar crisis in processes of economic wealth creation. The only ones that come to mind are the ones resulting from natural phenomena, such as the Great Frost of 1709. Indeed, three centuries ago a similar shutdown of the economy occurred and a similar collapse of economic output resulted.
Economic crisis management
We have to conclude that the economic “collapse” that results from such a natural crisis is to be expected. It is part of the planned management of such a crisis.
What is critical is how one manages the return of the economy after such a shutdown. And that is where the real economic crisis starts. Our contemporary economy is very different from the one in 1709 and its architecture is aimed at delivering a wide range of economic commodities. The Corona crisis showed us that many of these commodities are of less importance than others: Food, health and shelter were prioritised over luxury goods such as cars and cruises. It points to the potential to induce a fundamental reassessment of the functioning of the global economy. Various writers even pointed to the possibility to move to a greener economy.
Crisis in economic management
However, this does not seem to be the case. Instead, governments worldwide are trying to revive the economy and its complex supply chains to its former “normal”. And the imposed recovery measures seem to be firmly founded on neoliberal principles, benefiting the top 1%, while mainly neglecting the remaining 99%.
Overall the management of the economic recovery can be called incompetent. This is most visible in the US and the UK, where incompetency is on clear display.
What is causing this incompetency?
The answer to this question has be found in the very nature of the neoliberal ideology that is currently guiding economic policy making in governments worldwide. Neoliberalism denies that human economic creativity and productivity is founded on its sociality. The contemporary global economy as a whole is a commons. Neoliberalism denies this very fundamental fact. Instead, it adheres to purely individualistic perspectives on human activity and it allows the private appropriation of the global economic commons by transnational corporations under the guise of entrepreneurialism.
In order to save us from such incompetent managerialism, we have to rethink our ideological guiding principles. It is not clear how we can return to competent management of the economy without a fundamental revolution in this guiding ideology. I refer to the recent discussion by Martin Parker for further thoughts on this vexing problem.