Equality or austerity after COVID?

Jul 8, 2020

Can the COVID crisis help drive a more equal Australia? The crisis reveals an alternative is possible, focuses attention on social needs and exposes the macroeconomic risks of growing economic insecurity. However, the shadow of debt and ‘snap back’ loom large.

Return of the visible state

Necessity is central to neoliberal politics. The famous mantra of TINA – There Is No Alternative – framed market restructuring as both inevitable and technical, a ‘golden straight jacket’ which states wore because the alternatives meant economic demise. That has changed. Governments have acted swiftly to directly intervene in economies. Not only has the state prohibited some forms of economic activity, it has also facilitated the rapid expansion of others. International travel was effectively shut down, mobile health clinics were opened.

This prompts a wartime analogy. An external threat suddenly changes politics to legitimate overt government direction of the economy. We now see the economy can be reorganised towards a goal determined by democracy, rather than by competition within markets. While the goal is different, in both cases an external, politically determined objective guides production and consumption. Government action reveals economic activity can be reorganised to meet socially determined goals. In other words, there are alternatives.

Politicising need

Political economists have long argued that politicising needs as rights is central to winning social demands. The socialist dictum ‘from each according to their ability, to each according to their need’ highlights a tension in the organisation of market economies that are both remarkably productive and yet unable to guarantee that basic needs are met.

Needs may be contextual, rather than absolute, but they are directly connected to lived experience. In a health crisis, needs become central to policy making. If governments want people to stay home, then people need to be assured they will be housed and fed. If emergency workers are to continue, they need assurance their children will be cared for. The policies that follow reflect the politics of need.

The most dramatic initial act was to double Newstart by creating a new payment, the ‘COVID supplement’, set to run until September. Welfare to work requirements were suspended and the new payment extended to the unemployed and to students (but not to those with disability or the retired).

The supplement reveals that unemployment and students payments are below what most people consider a minimum standard of living. This is tolerated for the unemployed through a form of wedge politics that constructs the unemployed as ‘undeserving’, and for students through norms that presume students will combine study with paid work (thus the payment tops up that paid income). Both assumptions were unravelled by the crisis, which tossed thousands instantly into unemployment and shut down the industries on which most students (and young people) depend for jobs.

Other assumptions of Australian welfare remained in place. Migrants were systematically excluded. Those on other payments were left largely as they were (reflecting an assumption that recipients were not impacted by the economy’s freeze).

The government might have gone further and used the crisis to more thoroughly challenge unjust norms. Instead, much of the stimulus is aimed at propping up Australia’s privatised welfare state. Private schools received assistance, public schools and universities did not. Funding for free childcare aided private providers, and private hospitals were saved from collapse not through nationalisation but by bailouts.

Housing proved particularly tricky. Surprisingly it was easier to house rough sleepers than to guarantee rights for private renters. Our financialised housing markets make it hard to secure tenure and end eviction, while keeping the money moving and asset prices high. Breaking that nexus is now imperative.

Risking together

The Treasury website states three priorities during the crisis; ‘Support for Individuals and Households’, ‘Support for Businesses and Employers’ and ‘Supporting the Flow of Credit’.

Households increasingly underpin global systems of credit. Repayments of mortgages, super contributions, insurance premiums and regular payments for phones, energy and water are ideal targets for new models of collateralisation.

Households manage unstable incomes into stable outgoings because their reproduction depends on it. They have become the ‘shock absorbers’ of the monetary system. But there are limits. If households become unreliable, they threaten an important pillar of financial confidence and liquidity, a fact increasingly recognised by international financial institutions and central banks, as well as governments.

Liberalisation has not only left many individually vulnerable, but insecurity is also increasingly a collective macroeconomic risk to liquidity, creating a potential alignment between the demands of liquidity and equality with important implications for future politics. However, the failures to protect private renters and exclude many casual workers from payments, indicate we are yet to move from crisis responses to systemic change.

Planning for retrenchment

One of the biggest challenges the Federal Government faced in responding to the COVID onset was how to successfully manage the short term health crisis without provoking a structural political realignment. The very strategies that have been used to promote profitability – labour market flexibility, financial deregulation, workfare and investor rights – became barriers to effective health responses. How do you put a towel around the Emperor during the crisis without keeping it there when the crisis ends?

The temporary nature of the policy responses is the key to unwinding social protection. Both JobKeeper and JobSeeker require new decisions to keep them going. Even if there is some extension, it is likely to again be temporary or significantly reduced. The ballooning public debt will loom large: even if the sums are smaller than elsewhere, at record low interest rates and could disappear entirely through innovative monetary policy.

Australians have been taught over decades to fear public debt – from Hawke’s trilogy commitment to Howard’s ‘budget black hole’ and the recent election. Reasserting political limits to state finances is critical to resuming business as normal, and potentially the most important political fight of our lifetimes.

Even so, it will be difficult to simply turn the tap off. Businesses do not operate like finance, where changes in expectations take hold almost instantaneously as future implications are quickly factored into present prices. Demand and production in the ‘real economy’ will return slowly. It will be months, maybe years, before it returns to its past capacity. Until it does there will be little incentive for private investment.

In the meantime, JobKeeper and JobSeeker already prop up the reduced flow of income. Taking them away would act as a significant contractionary intervention, pushing the economy further into recession. Instead of cuts, the economy needs additional stimulus as it awakens, as banks again begin to demand mortgage payments and landlords reimpose rents. The only alternative is deflation, lowering prices to meet what households can afford.

Where to now?

Rather than predicting, my aim is to identify opportunities. We have seen governments have choices – we should remind people of that. We have seen that as production fell – as we had fewer resources to play with – somehow we could lift thousands out of poverty and homelessness. Yet, as the economy grows and prosperity is restored, so too is poverty.

Contesting austerity will likely rely on some old principles, refashioned to a new context. Focusing of social needs and demanding those needs be met. The current policies create an opportunity to resist a conscious return to poverty benefits and indifference to homelessness. Of course, doing so not only requires rhetoric, but organisation. As social isolation brings this into relief, that is perhaps the biggest challenge of all.

Share and Enjoy !


Receive articles straight to your Inbox

How often?

Thank you for subscribing!