The coronavirus pandemic may have triggered recession, but it has been a long time coming. An inverted yield curve in 2019 was interpreted by economists as a sign of incoming recession. Perhaps it has come a little sooner given the crisis, but it is certainly not an outlier. Global recessions can be seen to occur at regular intervals the IMF suggests, of about 8 to 10 years. Given the last ended in 2009, we are overdue another.
Global capitalism has led to states being more interconnected across the world than ever. Not only has globalisation led to the spread of the virus, but globalisation has also increased the impact of the pandemic, because supply lines are more likely to be disrupted when the chain is longer. The economic impact will also be seen across the world. The financial system revolves around the US and China, both heavily hit, and global recession is likely.
It is interesting how when crisis threatens the government abandons capitalism in favour of socialist measures. After years of austerity, the NHS is underfunded. Government is finally stepping in to make sure the NHS has the resources it needs. In addition, there has been the nationalisation of profits and losses of train companies, an extension of the welfare system, and the guarantee of 80% of workers’ wages. This shows the market’s persistent inability to deal with economic crisis. And increasingly we see problems being solved on a local level. Where central government measures are slow or fall short, communities are pulling together to support self-isolating neighbours. Big business is failing to fulfil demand as they struggle with complex logistics, and in towns and villages across the country small producers and local businesses are adapting to fill the gap. A lesson can be learnt from the pandemic: we must reconnect with local networks.
Recessions are an inevitable outcome of a capitalist system built on growth. The bubble must burst. But what we have seen during this pandemic is that globalised capitalism’s issues are not confined to its tendency for recession. We have become reliant on a global network of trade which is vulnerable to crisis, and have in the process neglected local, sustainable solutions. If one good thing can come out of this distressing situation, it would be the incentive to address and find solutions to the problems of globalisation, and the fundamental limitations of free market capitalism.
Image: Serena Smart