By Alex Callinicos
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Virus has created potential for boom—and bust

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Issue 2763
The pandemic could be lucrative for some bosses but not for all
The pandemic could be lucrative for some bosses but not for all

Are we heading, as some commentators claim, for another “Roaring Twenties”, like the economic boom that followed the terrible flu pandemic of 1918-19?

I hope not, since that boom led straight to the Wall Street crash of October 1929 and the Great Depression of the 1930s.

Economies have started to grow as restrictions are relaxed. Moreover, financial markets are still high on the over £7 trillion worth of cheap money that central banks have pumped into them.

But the prospects for the world economy are much dimmer. The Economist magazine, typically a booster for global capitalism, carried a sober warning this week. “Today’s booming economy is also a source of anxiety, because three fault lines lie beneath the surface,” it said.


“The primary fault line divides the jabs from the jab-nots.” This is a rather silly way of admitting that the pandemic still has a long way to run, despite the successful development of vaccines against Covid-19.

We simply cannot “live with the virus”, as health secretary Sajid Javid irresponsibly suggests. According to The Economist, “just one in four individuals all over the world has had a primary dose of vaccine and just one in eight is totally protected.”

This isn’t just because of the global north-south divide, though of course this is very important. Just 2.4 percent of the population of sub-Saharan Africa over 12 has been vaccinated.

But also some rich societies—for example, Japan, South Korea, and Australia—after relatively effective early responses to the virus, have been slow to vaccinate and are now locking down again as the Delta variant rapidly spreads.

Indeed, Mary Daly, the president of the Federal Reserve Bank of San Francisco and a senior member of the US central bank, told the Financial Times, “I think one of the biggest risks to our global growth going forward is that we prematurely declare victory on Covid. We are not through the pandemic, we are getting through the pandemic.”

According to The Economist, “The second fault line runs between supply and demand.” This is partly a matter of the disruption to global supply chains.

The cost of transporting goods from the great Chinese manufacturing hubs to the West Coast of the US has risen fourfold. The global car industry is suffering from serious shortages of computer chips.


But labour markets have also been seriously disrupted. Globally workers in the leisure and hospitality sector have been voting with their feet and refusing to return to low-paid insecure jobs with lousy working conditions.

In the US 12 percent fewer people are working in this sector than before the pandemic.

They may be moving to sectors that have grown during the pandemic such as logistics. This may be a harbinger of future labour struggles as logistics workers discover their power.

Predictions that labour scarcities will push up earnings fast are one factor in Tory chancellor Rishi Sunak’s threats to break the pensions triple lock. That’s because increases in the state pension are tied to the rate at which earnings rise.

Finally, The Economist says, “the ultimate fault line is over the withdrawal of stimulus.” The faster the recovery, the greater the pressure from some capitalists on governments and central banks to turn off the money tap.

Governments cutting back the support they have been giving firms, jobs, and incomes would hit the recovery. So would central banks raising interest rates in response to the widespread fears in financial markets that the rate of inflation is beginning to increase sharply.

Higher interest rates could push into bankruptcy the so-called “zombie firms” that have been struggling to survive.

Their numbers have grown as more firms have loaded up with debt.

Economies in the south whose governments can’t borrow and spend the way the US or Britain can are already making borrowing more expensive.

“The mixture of jabbing too late and tightening too quickly may be painful,” warns The Economist.

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