Economic Collapse Caused by Capitalism Not “COVID Pandemic”

The aversion of the rich and their political and media representatives to science in general and economic science in particular is legendary. When it comes to making sense of the economy, they rely mainly on irrationalism and discredited ideas. It is no accident that mainstream economics has long been called “the dismal science.” It lacks any robust explanation of economic realities. It is not useful to the public. Back in 2009, leading economists and “financial gurus,” when asked why they think the economy collapsed and wreaked havoc everywhere, relied heavily on “know-nothingism.” “We don’t really know for sure,” many nonchalantly and whimsically repeated.

The need for independent thinking, science, theory, and analysis has never been greater. Society cannot move forward on the basis of outmoded ideas that serve only a tiny ruling elite that is concentrating more wealth and power in its hands with each passing day.

For more than two months now news articles have been carrying headlines and content that create the impression that the massive and destructive economic collapse the U.S. and the rest of the world are suffering through was “triggered” or “induced” by the “COVID Pandemic.”

In other words, the economy was generally fine, or at least working sufficiently well all this time, until we all got sucker-punched by an invisible and sudden “pandemic.” Something “out of the blue,” something external to capitalism itself, is supposedly responsible for 40 million people becoming unemployed in under two months and for trillions of digital dollars being swiftly transferred to the super-rich. According to this nothing-is-inherently-wrong-with-capitalism view, if it were not for the “COVID Pandemic” we would allegedly not be experiencing the economic catastrophe we are experiencing. Things would still be “OK.”

This is the kind of irrationalism promoted recently by Jerome Powell, head of the U.S. Federal Reserve:

This downturn is different from those that came before it. Earlier in the post– World War II period, recessions were sometimes linked to a cycle of high inflation followed by Fed tightening. The lower inflation levels of recent decades have brought a series of long expansions, often accompanied by the buildup of imbalances over time—asset prices that reached unsupportable levels, for instance, or important sectors of the economy, such as housing, that boomed unsustainably. The current downturn is unique in that it is attributable to the virus and the steps taken to limit its fallout. This time, high inflation was not a problem. There was no economy-threatening bubble to pop and no unsustainable boom to bust. The virus is the cause, not the usual suspects—something worth keeping in mind as we respond. ((Powell, J.  At the Peterson Institute for International Economics, Washington, D.C., May 13, 2020.))

This is straightforward disinformation designed to divert attention from and cover up an economic fiasco that was inevitable. Such ideas are designed to block people from engaging in a conscious act of finding out what is really transpiring.

Extenuating factors are not the same as root-causes. Unfortunately, investigation and discussion of both are routinely blocked and undermined by the ruling elite.

The stock market was going to crash, millions were going to become unemployed, banks and large corporations were going to get bailed out again, and other horrible economic problems were going to emerge with or without a convenient pretext, with or without a virus. An unprecedented top-down worldwide lockdown greatly facilitated this. ((In early May 2020, the Governor of New York, Andrew Cuomo, revealed that 66% of hospitalized coronavirus patients were at home before being admitted to a hospital. This casts doubt on the efficacy of the lockdown.  See:  Voytko, L.  Majority Of New Coronavirus Cases In New York Are From People Staying At Home—Not Traveling Or WorkingForbes, May 6, 2020.  Mainstream and independent news articles and reports have questioned the efficacy of face masks, ventilators, and social distancing measures as well. And for its part, Oxford University and others have stopped using WHO data on COVID-19, claiming it is full of repeated errors and inconsistencies.))

The economy was never “succeeding” or “doing great.” Economic growth has been anemic in most capitalist countries for years. Under-employment, debt, insecurity, inequality, pensions, and environmental conditions have been worsening for years.

Enormous financial bubbles such as the student debt bubble, ((CNBC News states that: “Over the past 20 years, college costs have grown at over three times the rate of inflation. The result: 70% of college graduates have student debt, with the average borrower owing more than $37,000 at graduation.”  Note that many students owe well over $60k. See: Patrick B. Healey.  We should all be concerned about the student debt crisis, November 4, 2019.))  The tech bubble, the bubble created by endless “quantitative easing,” and the refusal of capitalist firms to invest in real production are all expressions of a dysfunctional outmoded economy. An economy and society fueled almost entirely by credit and debt does not solve real problems.

A repeat of the big 2008 economic collapse, but only more severe, is something many have been discussing and accurately predicting for years. If anything, the launch of the antisocial neoliberal offensive 45 years ago caused the public health crisis everyone is suffering through today, not the other way around. The rich and their allies have been defunding, privatizing, and wrecking healthcare and other programs and services for decades, leaving the society unable to cope with even basic contingencies. Covid-19 did not break society, the economy, or the health care system, it mainly exposed the problems with all three under capitalism. Marciano reminds us that:

Years of austerity underfunding by Clinton, Obama, Bush and Trump have allowed corporations to profit off our public health care system. The underfunding has severely weakened the response to the COVID-19 crisis. Our public health agencies provide fine and vital human services. Since the 2008 Great Recession, however, they have lost 25% of their work force and now face this crisis without adequate resources. ((Marciano, J.  The COVID-19 crisis: What lessons will we learn?, Ashland Tidings, March 25, 2020.))

This parasitic neoliberal strategy is called “starve it, demonize it, privatize it.” This is what happens when the people are left out of the decision-making process and cannot make any decisions that favor the public interest. Instead, the rich and their allies keep making decisions and taking actions that make things worse for everyone.

The underlying cause of all economic slumps, busts, recessions, and depressions under capitalism is the fundamental contradiction between social production and private ownership. While the majority produces all the wealth in society, a tiny ruling elite controls all the wealth. Production of wealth and control of wealth are separate under capitalism. The working people have no control over the economy that they themselves built and operate. They are therefore blocked from setting a new aim, motivation, and direction for the economy.

An economy based on competing private owners of capital who block conscious human control and planning of socialized production is bound to fail and break down frequently. Competing owners of capital negate the development of an independent, diversified, and self-reliant economy, thereby ensuring destruction and insecurity for millions. The pursuit of maximum profit by competing owners of capital necessarily distorts the economy and produces regular crises. Under these conditions there can be no equilibrium that serves the working people.

New arrangements that empower the people are needed. The current health/economic crisis has brought to the fore many contradictions and openings that the people can exploit to forge ahead. There exists an opportunity to think things anew. A break from the old way of thinking about and doing things presents itself here and now.

Change that favors the people cannot be secured by relying on the cartel political parties of the rich or by going along with what the mainstream media says. The cartel political parties of the rich are committed to preserving the status quo that favors narrow private interests, no matter how damaging this is to the social and natural environment. This is why such self-serving political parties have been viewed as illegitimate and corrupt by many for decades. They lack the consent of the governed and operate undemocratically.

In the coming election cycle it is critical not to get caught up in the propaganda emanating from these anachronistic parties that have solved no major problems. The need is for people to think and act independently. Great things can be accomplished by relying on ourselves. Do not succumb to the false choices or self-serving agendas promoted by the rich and their representatives.

Shawgi Tell is author of the book Charter School Report Card. He can be reached at Read other articles by Shawgi.