The Wire: Summer 2020 – Covid-19 and geo-politics – Five brief thoughts

(Estimated read time 12 minutes)

Covid-19 and geo-politics – Five brief thoughts

We are hugely proud to have a guest blog from Matthew Goodwin for this edition of the Wire.  Matthew Goodwin is an academic, bestseller writer and speaker known for his work on political volatility, risk, populism, British politics, Europe, elections and Brexit. He is Professor of Politics at Rutherford College, University of Kent, Senior Visiting Fellow at the Royal Institute of International Affairs, Chatham House and previously Senior Fellow with the UK In a Changing Europe.  Matthew has consulted more than 300 organizations around the globe, from the UK Prime Minister’s Office to the President of Germany, U.S. State Department and European Commission and appears regularly in international TV , radio and print media including Newsnight, Question Time, BBC News, Radio 4, Financial Times, and in the New York Times.

How will Covid-19 impact on geo-politics? I’ve recently been giving some talks and presentations on this question and thought it might be helpful to share a few thoughts to keep the conversation going. The reality is that we will not know how this crisis impacts on politics for a long while but here are five suggestions … 

1. The crisis will fundamentally reshape the relationship between citizen and state.

Some contend that in the years to come we will look back at this crisis as a major corrective. The argument is that it was the crash of 1929 which signalled the failure of markets and paved the way for a bigger state, which led to the New Deal in America and welfare states in Europe.

Fast forward to the 1970s and this time around it was the turn of the state to overreach as big government proved unable to resolve intractable economic and social problems. This paved the way for the return of the markets via Reaganism and Thatcherism and an economic consensus that even centre-left social democrats ended up accepting.

Now fast forward again to where we are today.

The Great Recession of 2008-2012 arrived after the markets had once again over-reached and together with the Great Lockdown these two crises are now paving the way for a much bigger and more interventionist state.

I am broadly won over by this argument even if I am sceptical of cyclical theories of history. The sheer scale of government spending as a percentage of GDP, and the mounting pile of debt, underline how -for now- free markets and fiscal conservatism are in retreat.

Inevitably, this new era of big government and big debt will have big effects across the board even if we will not see them for some time. Higher taxation, a further squeeze on the wealthy not only through tax but also public pressure for greater scrutiny and transparency, and public expenditure cuts, to name only a few. It is not hard to see how populists will make hay from this.

The current crisis might also impact on how citizens view the state itself. Through this crisis and the one before it, many people have essentially watched the state come to the rescue on two occasions in little over a decade.

Libertarians will find this disturbing but the reality is that very few voters today will instinctively relate to Ronald Reagan’s quip that “government is not the solution to our problem – government is the problem”. Try running that line on the one in three private sector employees in Britain who just got bailed out by the state.

The end result of all of this may be a broader public acceptance of larger and more interventionist government and a stronger willingness to experiment in state-led instruments, particularly among younger generations that have no real memory of the pre-2008 era. Economic liberals and free marketeers will be on the back foot and will once again have to restate their case to younger people who really have no memory of their creed. As my students remind me, Thatcher and Reagan are now “ancient history”.

And these debates are likely here for the long-term.

The so-called ‘Ratchet Effect’ leads us to expect that after a major crisis the size of government does not revert to its pre-crisis levels. In the aftermath of the two world wars, for example, we saw a massive expansion of state responsibilities and spending commitments while a larger role for the state was generally accepted in wider society.

This made sense at the time but it eventually went on to lead to big inefficiencies and it will take political leadership to know when, and how, to cut back the state this time around. Conservatism is also in a state of realignment and so the reactions to this might not be as predictable as they were in the past.

2. The crisis will leave the left behind further behind

Some optimists argue that the increased visibility of the working-class during this crisis -from the Amazon couriers and postal workers to the tube and bus drivers- might push us out of an era of class division and into an era of greater ‘cross-class solidarity’ and a stronger social fabric.

Those who hold this view might point to studies in the past which suggest that it was during pandemics that collective anger at low wages and poor working conditions, combined with workers themselves becoming aware of their indispensable role in the economy, led to wage increases and better working conditions.

But while some of this might be true, in the near to medium term I take a more pessimistic view.

As I’ve outlined in a few talks now, if you look at the evidence that has emerged over recent weeks then it looks fairly certain that the Great Lockdown will exacerbate the divides in our society that began to sharpen a few decades ago and were then exacerbated by the Great Recession.

It is low-income ‘precariat’ workers in the low-skilled service sector and gig economy, and those with few educational qualifications, who are not only the hardest hit by economic fallout but are also more likely to have the underlying health conditions that will magnify the physical impact of the virus itself.

In the US, for example, research suggests that more than 80 percent of the jobs that will be affected by the crisis are held by low-income workers while in the UK the typical pay for the most strongly disrupted workers in ‘shutdown sectors’ is less than half the pay of those who are able to work from home.

The wealthy and professional middle-classes who have been insulated from the negative effects of globalization will of course feel this crisis -they have elderly mums and dads too. But they will also, on the whole, be much better sheltered from its adverse economic effects.

The finding that more than seven in ten high-income Americans are able to work from home compared to just four in ten of their low-income counterparts speaks to how these different social classes are having -and will continue to have- fundamentally different experiences of this crisis.

In the short-term, our self-isolation was compulsory. But in the longer-term it will become voluntary. And then it will become an economic luxury.

This also fits with the general story of pandemics in the past.

Contrary to the argument that they can be a “great leveller”, recent work finds that most pandemics led “to a persistent and significant increase in the net Gini measure of inequality”. Five years after a pandemic hit it was those with fewer educational qualifications and skills who suffered the most, the very same groups that have been driving much of the political volatility over the past decade.

3. The crisis will fundamentally reshape our view of China

Until now, when people thought about China they often associated it with trade and economic competition. But this crisis looks set to feed a much broader debate about whether or not China and the Chinese people present a ‘systemic threat’ to Western values, human rights and, ultimately, ways of life.

Most people have not had to think about systemic threats in this way since the end of the Cold War. Younger generations have largely not had to think about them at all -unless you consider climate change to be a systemic threat.

While attitudes toward China were already deteriorating before this crisis, an array of surveys since the crisis point to further downturns across the globe, from the United States to the United Kingdom, from Australia to India.

Sensationalist talk about “the end of globalization” is misleading -globalization will muddle on. But as we come out of this crisis, and most likely without an independent international investigation into how it started in the first place, there will likely be greater public pressure on governments to localize key supply-side chains, to bring businesses “back home”, and take a tougher line with China.

The finding that 75 percent of Americans now think that their country should end its dependence on China for medical supplies and 72% want their relationship with China to change is perhaps a sign of things to come. So is recent work which suggests that the British include China and globalization when they are asked who should be blamed for the crisis. Looming Tory divisions over Huawei and 5G are another manifestation of this shifting debate.

This issue will also have big implications for the U.S. presidential election in November. Listen to podcasts by key Trump campaigners and it is clear that they plan to turn the presidential contest into a referendum on China, to try and shift the focus away from the domestic handling of the crisis onto this ‘systemic threat’, and one that they argue is being underestimated by “Beijing Biden”.

Recent surveys point to a potentially receptive electorate. Since the crisis erupted Americans have become far more convinced that China poses a “major threat” (62 percent think so), are more likely to hold unfavourable views of China (66 per cent) and to express no confidence in President Xi (71 percent). And crucially, these views cross party lines.

Disliking China, it seems, is quickly becoming one of only a few things that unites a deeply polarized America.

4. The crisis will push us back down the ‘Hierarchy of Needs’

Domestic governments will likely find that the crisis also reshapes the political issue agenda at home. Already, the collapse of employment figures is being followed by a collapse of public confidence in the the state of their economy and their household finances. Economic pessimism is on steroids.

When Abraham Maslow set out his theory of human motivation in 1943, he argued that it was only once we had satisfied our ‘basic need’ for economic and physical security that we could move on and start satisfying our higher-level need for social esteem, status, acceptance and to fulfil our true potential.

It was the economic and physical turmoil of the two world wars that kept the Greatest Generation focused on those basic needs while it was the relative affluence of the post-war decades that allowed their Baby Boomer children to shift the political debate onto higher-level concerns like environmentalism, multiculturalism and minority rights.

But this crisis on top of the last crisis is pushing us back down the hierarchy of needs, back toward those more fundamental worries over economic and physical security. I think this gives us good reason to expect the most fundamental questions in politics -about economic redistribution, about economic power– to come back with a bang.

In the years ahead I suspect that voters will want to talk a lot more about jobs, who should pay what and why their governments are not doing more to tackle economic and health inequalities.

We can already see how this is playing out in southern Europe, where populists are arguing that the failure to redistribute economically should be mobilised at the ballot box. Italy, for example, will not only leave this crisis as an even poorer and more indebted nation but also as a more Eurosceptic nation too.

This will likely pile further pressure on the wealthy, high net worth individuals and big business. The Richard Branson debate in the UK, the debate over celebrity quarantine posts, the debate about state-aid for “wealthy tycoons” and the decision taken by France, Poland and Denmark to block firms registered in offshore tax-havens from claiming aid are just a few examples of the evolving public mood.

Economic nationalism might not just be a philosophy for right-wing elites. It could easily start to go mainstream.

5. The crisis will further challenge the intergenerational contract 

In America, Millennials recently overtook Baby Boomers as the largest generation. But it also becoming clear that size does not necessarily translate into economic success.

If the Great Recession was a double crisis that unfolded economically and politically then the Great Lockdown is a triple crisis that is unfolding across economics, politics and health. While in terms of health it is disproportionately impacting on the elderly, in terms of economics it is hitting Millennials and the slightly younger Generation-Z (‘Zoomers’) hard.

For example, recent studies find that more than half of Americans under 45-years-old have lost their job, been put on leave or had their hours cut compared to one quarter of their older counterparts. Student debt, sluggish wage growth and a housing crisis add additional layers to this, especially in the UK where lots of research has shown how these recent generations are lagging behind where their older counterparts were at the same point in their life-cycle.

Millennials came into the labour market as the Great Recession hit and many will now likely have their limited recovery reversed, at least temporarily.

Zoomers meanwhile are trying to enter the labour market amid the economic fallout from not one but two major crises. This is especially visible in southern Europe where economies are still unable to offer strong prospects to a new generation of Europeans and where young people are at much greater risk of poverty.

As lots of research shows, coming into the labour market during financial crises puts you onto lower earnings trajectories for decades to come. It is not hard to see how this undermines the implicit contract that the generations that follow will be a little more prosperous than the generations that came before. Millennials and Zoomers -who have lived through two major financial crises and a global pandemic in little over a decade- now look set to be poorer than their parents.

It is really not clear how this will impact on their values, attitudes and political demands going forward. But one thing does seem fairly likely -over time, we will have a generation of voters who will be questioning the social contract like never before.

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