An edited and extended version of a talk given by David Yaffe to a Fight Racism! Fight Imperialism! meeting, ‘Coronavirus - who will pay?’ on 10 March 2021. Main article image credit: Steve Eason.
Speaking at a Downing Street press conference on 26 January 2021, with the death toll involving Covid-19 in this country reaching more than 115,000, Prime Minister Boris Johnson insisted that he took ‘full responsibility’ for the government’s handling of the pandemic. He claimed: ‘We truly did everything we could’ to minimise loss of life from coronavirus.
In reality, in the early days Boris Johnson played down the seriousness of the pandemic, insisting it was ‘business as usual’. Most notably this narcissistic bully told a Downing Street briefing on 3 March 2020 that ‘he shook hands with everybody’ after a recent hospital visit where there were coronavirus patients. He lifted border restrictions on 13 March with the support of his scientific advisors, after evidence emerged that the virus was already circulating in the UK, despite a strict quarantine regime for arrivals from Wuhan. Matt Hancock, the Health Secretary, was left to chair the first five meetings of the emergency Cobra committee after news first began to trickle out of China.
At the time the strict approach adopted by countries such as Singapore and New Zealand from early on, with flight bans and quarantine, were regarded as extreme by his ministers. Johnson only announced a full-blown lockdown on 23 March and told people to ‘stay at home’ after Johnson’s former top scientific advisor, the epidemiologist Neil Ferguson, suggested there could be 500,000 deaths if the virus was not brought under control. Public health experts now believe an earlier shutdown could have saved many thousands of lives.
The first lockdown was in place for about seven weeks with various altered restrictions. After it was lifted, the government’s ‘Eat out to help out’ scheme, offering a 50% subsidy for meals up to a maximum £10 per diner taken in registered restaurants from 3 to 31 August, no doubt helped pave the way for the second lockdown from 5 November to 2 December. After Christmas, following the failure of the so-called tier system introduced in the autumn, a third lockdown was announced for 6 January. A roadmap for lifting these restriction was put forward by the government on 22 February 2021. Following this shambles, the government hopes that all restrictions will be lifted by 21 June.
Neil Ferguson has argued that the UK’s coronavirus death toll could have been halved had the first lockdown been introduced a week earlier. A total of 40,883 people had died by 9 June 2020, suggesting at least 20,000 deaths could have been prevented. All three lockdowns were significantly delayed by the government determined to reopen the British economy to profit-making activities. The Resolution Foundation think tank has claimed that delaying the start of the latest lockdown to early January in the face of 50,000 cases a day was a ‘huge mistake’, causing up to 27,000 extra deaths.
It is no surprise that the impact of the coronavirus crisis on Britain has been devastating: in the week starting 8 March 2021 total infections during the pandemic hit 4.3 million, with 124,797 deaths. The total cases per million population are the third highest in the world after the US and Spain and the deaths per million population at 1,832 are the third highest in the world after Czechia and Belgium. There are still more than 788,000 active cases in the UK (Worldometer’s Covid-19 data). The NHS could face a million or so long Covid patients after the pandemic has ended, that is, patients still displaying symptoms of Covid, months after having had it. Despite these appalling consequences, Prime Minister Johnson is still refusing to commit to a public inquiry to look at the decisions taken over the past year. He is hoping that the successful state funded and NHS-led vaccination programme will keep his critics at bay.
The pandemic is expected to have wiped off a staggering $6.7 trillion (£5 trillion) from the global economy in 2020. The predicted fall in global GDP – down 5.2% from $89.94 trillion to $83.19 trillion – is equivalent to the economic output of Germany and France combined. This would be the deepest recession since the Second World War, nearly three times as severe as the one caused by the 2008 financial crisis.
Global debt increased by $15 trillion in 2020 and is on the way to exceeding $277 trillion in 2020, 365% of global GDP after rising from 320% at the end of 2019. This is unsustainable. In emerging market economies debt has risen by 26 percentage points so far in 2020 to approach 250% of GDP. In mid-November Zambia became the sixth country to default or restructure debts in 2020. More defaults are likely as the impact of the pandemic mounts.
A study by the online platform IG found that the major capitalist countries such as the US, UK and EU were most severely hit, with growth set to fall on average 7% in 2020. Emerging market economies will drop by 2.5%. 92% of countries will have been plunged into recession – the highest since the world was hit by the smallpox pandemic in the 1870s. Around 346 billion working hours were lost globally in the first half on 2020, which is equivalent to 555 million full-time jobs worldwide.
Stock markets have seen catastrophic falls. The S&P 500, the benchmark of US companies, suffered one of its worst collapses on record over the first 100 days of the crisis.
Britain faces an economic and political crisis
The UK economy recorded its worst economic performance for more than 300 years in 2020 as the initial impact of the coronavirus crisis hit home. GDP fell by nearly 10%, worse than the 1921 slump after the First World War and Spanish Flu pandemic of 1918.
Chancellor Rishi Sunak had little room for manoeuvre in his March 2021 Budget as he needed first and foremost to stop the British economy from immediately tanking. The state bill for covering the cost of the coronavirus crisis will soar to $407bn over two years. His budget was a spend now, pay later plan. £65bn will be spent in the next two years supporting jobs and investment. But this will be followed by £25bn a year of corporate and income tax rises by the middle of the decade. Sunak is the first chancellor to raise corporation tax rates – in this Budget from 19% to 25% in 2023 – since Labour’s Denis Healey in 1974. His planned tax rises in 2025-26 will leave Britain with its highest tax take – 35% of GDP – since Roy Jenkins was Labour chancellor in the late 1960s.
In the tax year 2020-21 the state will have borrowed a record £355bn, 17% of GDP and the highest level of borrowing since the Second World War. Next year borrowing will be £234bn, 10.3% of GDP, an amount so large, Sunak said, that it has only one rival in recent history: this year. He then started to tell us what his real intentions are. ‘Without corrective action, borrowing would continue at very high levels, leaving underlying debt rising indefinitely.’ This will not be allowed to happen. Instead he will take steps to ensure borrowing falls to 2.8% of GDP by the middle of the decade. This will require a massive attack on the living standards of the working class. As an indication of what is to come, the government stated in early March that the country could not afford more than a 1% pay rise, in reality a real pay cut, for health workers.
Sunak announced in his Budget speech that the personal tax free allowance and the higher rate threshold would be frozen from April 2022 until April 2026, instead of rising with inflation. This will bring 1.3 million relatively lower paid workers into the tax system and create a million higher-rate tax payers by the middle of the decade. This is an attack on the living standards of significant sections of the working class. Aware of the dangerous social and political consequences of going too far too soon Sunak announced that he would extend the furlough scheme, the self-employed grants and the Universal Credit uplift to September 2021.
He then announced that he would increase the very low corporation tax on company profits in April 2023 from 19% to 25%, when the economy is expected to have recovered. Even this would leave Britain with the lowest corporation tax rate in the G7 countries – lower than the US, Canada, Italy, Japan, Germany and France. Nevertheless he would retain the current 19% rate for small businesses with profits of £50,000 or less. He would also introduce a taper for profits above £50,000, so that only businesses with profits of a quarter of a million or more will pay the full higher rate. But that was not all. He created a ‘super-deduction’ tax break that allows companies to reduce their tax bill by 130% of the cost of investment over the next two years. Kid gloves for the capitalist class while he attacks the living standards of the working class.
Pandemic exposes class and racist divisions…
A disastrous combination of poverty wages and overcrowded, inter-generational housing with a failed £22bn test and trace programme has left persistently high coronavirus rates in England’s most deprived communities. An analysis by the Joint Biosecurity Centre (JBC), a government agency set up in May 2020, reported in January that ‘unmet financial needs’ meant people in poorer areas were less likely to self-isolate because they could not afford to lose income. In Blackburn with Darwen and Leicester, two of the UK’s worst-hit areas, more people seeking financial help from the government to self-isolate had been rejected than accepted. The JBC concluded that ‘interconnected factors’ such as deprivation, poor housing and work conditions, and delays in the test and trace system, were all ‘likely to be significant contributors’ to the high coronavirus rates in some areas.
A new analysis by consultancy firm Lane Clark & Peacock has exposed the stark reality of Covid’s impact on England’s most deprived areas. Covid-19 infections rates in some of the most deprived areas of England were nine times worse than those areas deemed to be more socially and economically well off. The barriers facing disabled jobseekers are systemic and the pandemic has clearly exacerbated these barriers. There have been calls for vaccinations at home to stop Covid becoming a ‘disease of the poor’. The Runnymede Trust’s chief executive Halima Begum has pointed out that black, Asian and minority ethnic communities, including the elderly, were particularly vulnerable to being left unvaccinated. Finally various studies have shown that women have been more likely to lose their jobs, quit work and bear the brunt of childcare during lockdown. In a poll of more than 1,000 women conducted on International Women’s Day, one in four said their income had fallen over the past 12 months – the average shortfall was £463 a month.
One in five schools have set up a food bank since the start of the pandemic to give support to struggling local families. More than a third of teachers said their schools delivered food parcels to pupils’ homes and more than a quarter of schools ran breakfast clubs.
Covid-19 lockdown restrictions on young people have led to a sharp quarterly rise in 16-24-year olds not in education, employment or training (Neets). The Office of National Statistics has reported that the number of Neets has risen by 39,000 to 797,000 in the final three months of 2020 – a period in which the economy moved into lockdown. Young people tend to work in sectors hardest hit by the pandemic – hospitality, leisure and tourism – and are more likely to lose their jobs than older workers.
The disproportionate impact of the virus on black and minority ethnic communities has exposed the structural racism in the UK. High increases in death rates occurred among care workers, nursing auxiliaries, security workers and bus drivers and other transport workers, jobs taken by a disproportionate number of minority ethnic workers. In May 2020 statistics showed per capita death rates in English hospitals were twice as high for people from a Bangladeshi background, 2.9 times for those from a Pakistani background and 3.7 times for black Africans as those from a white British background.
In a statement on 16 March 2021 to the House of Commons on security, defence, development and foreign policy, Johnson said: ‘Global Britain is not a reflection of old obligations, still less a vainglorious gesture, but is a necessity for the safety and prosperity of the British people in the decades ahead.’ His real intention was stated earlier in the November 2020 Defence Review when he argued that he had to boost spending in the armed forces in ‘the teeth of the pandemic’ because ‘the defence of the realm must come first’. This is the old imperialism as Chancellor Sunak made clear in the November 2020 Spending Review, when he scrapped the Tory manifesto pledge to spend 0.7% of GDP on aid. The aid budget was reduced to 0.5% of GDP, saving £4bn at the expense of the world’s poorest nations. This at a time when it is known that Covid-19 has hit the least developed countries so hard that up to 32 million people could be pushed into extreme poverty.
Aid organisations have condemned a shortfall in international donor funding for Yemen, including the UK’s decision to cut roughly 50% of its humanitarian aid, as a ‘death sentence’ for people suffering the country’s devastating civil war.
Even this is not enough. The vaccine has now been weaponised against the underdeveloped nations. As The Guardian editorial reported on 23 March 2021, ‘The US, UK and EU have for months blocked a proposal at the World Trade Organization, put forward by India and South Africa, to waive intellectual property rights for Covid-19 vaccines.’ Boris Johnson preaches the virtues of a liberal trading regime for the UK while he imposes a protectionist one on the underdeveloped countries.
State mobilises to save capitalism
Right-wing neo-liberal British Tory governments over the last decade have consistently attempted to limit the economic role of the state in the British economy with little success. The coronavirus crisis has now made this impossible and has forced the government to suspend market mechanisms and use state financial powers to bail out the economy and sustain critical public services. The Johnson government has consistently chosen to outsource those services to more costly and often blunder-prone private companies.
385 government contracts, worth £1.7bn, were awarded to private companies without offering other companies the chance to bid for such work. Under fast-track rules private companies have been handed direct contracts to administer Covid-19 tests, provide food parcels, personal protective equipment (PPE) and other services, and to run an operations room with civil servants to organise these contracts.
The failed attempt to create an adequate and effective coronavirus test and trace system is a case in point. 35 organisations are listed as ‘data processors’ involved in the NHS Test and Trace system. Only four are NHS bodies. 22 organisations are private companies. Serco is one of the
main companies contracted to deliver the system. Another is Deloitte.
On 10 March 2021 the Financial Times reported that a parliamentary spending watchdog has claimed that England’s test and trace programme failed to make a ‘measurable’ difference to the spread of the pandemic, despite an ‘unimaginable’ £23bn of expenditure.
A leaked email from Serco’s Chief Executive, Rupert Soames, grandson of Winston Churchill, confirms the real intent behind this government’s use of public funds to sustain private monopolies. Soames said that he doubted the scheme would evolve smoothly but he continued: ‘If it succeeds…it will go a long way in cementing the position of the private sector companies in the public sector supply chain.’ Serco has been given the bulk of the work recruiting 10,000 of the 25,000 contact tracers for an initial fee of £45.8m which could rise to £90m. Serco has had other contracts with the Home Office to provide accommodation for asylum seekers, an £800m 10-year contract for prisoner escort and custody and a £200m contract to manage two immigration removal centres. In October 2019 Serco was fined more than £1m for failures in relation to the asylum contract. In the past Serco has received larger fines, notably more than £19m as part of a settlement with the Serious Fraud Office over failures in electronic tagging dating back to 2010.
Deloitte manages the registration and appointment booking of NHS Test and Trace and is responsible for holding data and making it available to the NHS. It has recently been ordered to pay a record fine of £15m plus costs of £5.6m for committing serious misconduct between 2009 and 2011 when it audited Autonomy, a former FTSE 100 technology group at the centre of one of the UK’s biggest accountancy scandals. Yet more contracts come the way of private companies such as Serco and Deloitte.
Computercenter, founded by Tory Party donor Sir Philip Hulme, was given a £198m contract by the Department for Education to supply laptops to vulnerable children and those in priority year groups. Its pre-tax profits increased by 50% to $206m. This is the cronyism and corruption that have become the hallmark of a decaying, rotten state monopoly capitalist system.
State monopoly capitalism
State monopoly capitalism is a stage of development of monopoly capitalism in which the fusion of the power of the monopolies with the power of the imperialist state becomes the mode of existence for imperialism. It is the necessary, inevitable way of survival for capitalist economic relations under imperialism.
The pandemic has demonstrated the increasingly autocratic and undemocratic character of the British government desperately attempting to save British capitalism. Handing out huge contracts to chosen companies without public accountability, shielding Prime Minister Johnson’s then special adviser Dominic Cummings and the high-handed announcements of lockdown and other regulations are the actions of a ruling class determined to hold on to state power. For this end they will, in the words of Rishi Sunak, do ‘whatever it takes to support the economy during the crisis’.
A remarkable editorial in the Financial Times (9 May 2020) tells us exactly what is at stake when it argues:
‘Short of a communist revolution, it is hard to imagine how governments could have intervened in private markets – for labour, for credit, for the exchange of goods and services – as quickly and deeply as in the past two months of lockdowns. Overnight, millions of private sector employees have been getting their pay cheques from public budgets and central banks have flooded financial markets with electronic money.
‘One may be forgiven for worrying that the pandemic has brought socialism on its coat-tails. Yet the paradox is that today’s emergency measures are necessary to protect the long-term health of free markets and a capitalist economy. Those who, like this news organisation, value those institutions must welcome this unprecedented intervention.
‘Liberal democratic capitalism, with free and open markets and secure private property rights, remains the best institutional framework to meet the aspiration of freedom and prosperity for all. But liberal democratic capitalism is not self-sufficient, and needs to be protected and maintained to be resilient.’
State monopoly capitalism, for that is what the Financial Times is supporting, is the only way of protecting what it calls ‘liberal democratic capitalism’. It is only possible for the ruling class to do this if it has the support and collusion of the traditional organisations of the working class. And that it clearly has at this point in time. On 20 May 2020 Frances O’Grady, General Secretary of the TUC, alongside Labour’s Shadow Chancellor Anneliese Dodds, called for a ‘national recovery council’ of unions, government and business to rebuild the economy. O’Grady says there will be ‘No business as usual. The unions are back’. The unions have not lifted a finger to protect conditions of front-line workers since well before the pandemic hit home. They are back only to secure their own privileged position having never fought for the rights of low-paid workers. Their presence fosters the illusion that ‘state monopoly capitalism’ can be reformed in the interests of the mass of the working class.
The Financial Times points to what it sees as the class issues at stake. It is concerned that growing numbers of ‘young self-confessed socialists in the US and UK’ view ‘state intervention as a replacement for capitalism, not just a corrective.’ This view as well as that of the ‘young self-confessed socialists’ implies that state monopoly capitalism can be tamed and reformed in the interests of all the people. This is wrong.
During the First World War Lenin argued that ‘socialism is merely the next step forward from state capitalist monopoly or, in other words, socialism is merely state capitalist monopoly which is made to serve the interest of the whole people and has to that extent ceased to be capitalist monopoly. There is no middle course here’. He was to remind a section of the movement a short time later that ‘socialism is inconceivable unless the proletariat is the ruler of the state’, that is, has taken state power.
We must draw our own lessons from the disaster of the global pandemic and the emergence of state monopoly capitalism to show the kind of movement that needs to be built in order, in the words of the Financial Times, ‘to meet the aspiration of freedom and prosperity for all.’
A mass movement on the streets for a new social system – socialism – needs to be built with a programme to solve the crisis in the interests of the vast majority of people. We are attempting to build such a movement. Join us!