As the economy is put on hold, the current coronavirus crisis highlights the weaknesses and flaws of our economic system. While the financial meltdown of 2008 failed to provoke a fundamental shift in capitalism, this could be different.
Public health measures, such as social distancing, have severed the flow of goods and people, stalled economies, and is in the process of delivering an unprecedented global recession. Experts forecast immeasurable economic damage, massive unemployment, stagnant or negative growth, evaporation of consumer spending and all of this on a global scale – with Asian economies most likely to emerge the strongest.
Never in the history of the IMF have we witnessed the world economy come to a standstill.During a World Health Organization press conference on March 28th, Kristalina Georgieva, director of the International Monetary Fund, warned the economic fallout from coronavirus is already “way worse than the global financial crisis of 2008.”
Plunging stock market, widening shadow of recession, governmental actions… What is different from the 2008 global financial crisis?
In 2008, the world faced a banking crisis as a result of too much bad debt forcing governments to inject millions and millions into the financial market. However, the crisis that we’re currently in is caused by something external to the economy, something that can’t directly be controlled.
The Covid-19 crisis impacts the “real economy” first (production of goods and services) rather than financial services such as banks or stock markets as it did in 2008. The major role of public policy, at this stage, is not to revive the economy, but to ensure that it remains in a satisfactory state of hibernation, which would allow it to start again quickly. However, once the pandemic is over, banks and financial companies will certainly have to join hands and bear the burden of economic reconstruction. We must avoid the mistakes of the post-2008 era when governments and corporations failed to lay the foundation for a robust and inclusive recovery. The State will have to fully embrace the role (that they tried to stay away from) as welfare state to ensure safety nets.
We need a new capitalism, which is more respectful of people, more concerned with fighting inequalities and respectful of the environment.Minister for Economic Affairs and Finances, Bruno Lemaire (March 30th, 2020)
The end of neo-liberal capitalism?
The main goal of capitalism is the incessant search for low costs with globalisation, a reduction in the government's role and in tax pressure, privatisation and weak social welfare in some countries.The 2020 crisis revealed and enhanced flaws that were already known for a long time: the fragility of public services, especially when they are privatized and subject to cost value logic and also our dependance of certain outsourced production chains because of globalisation. For instance, global economies have become dependent on Asian supplies for all pharmaceutical production. Never before have India and China exported so much medicine.
However it is now the digitization of the world that could be the new way of capitalism in our service-oriented society.
“If the being that I am can be transformed into a set of data that can be managed remotely rather than face-to-face, then I can be cared for, educated, entertained without the need to leave the house… I can watch movies on Netflix rather than going to the cinema, I am treated without going to the hospital… The digitization of everything possible is the means for capitalism to obtain further cost reductions.” (Daniel Cohen, economist and director of the economics department of the École normale supérieure)
Far from talking about a collapse of a capitalist system, it seems that this crisis is accelerating the transition to a dematerialized world.
From a more optimistic point of view, we can cease this opportunity for more sophisticated and flexible use of technology. More than a third of the planet's population is under some form of restriction compelling us all to experience alternative sociability: Internet use has more than doubled; social networks have become the new living rooms; consumption of Netflix and Prime Video has literally exploded; students from around the world are now taking virtual lessons through "Zoom" – collaborative classrooms. In summary, this disease, which forces us to thoroughly review all known categories of sociability and care, is also the great celebration of virtual technology. In the post-Corona world, long-distance virtual life will have acquired a new autonomy – now that we have been forced to discover its potential.
And while not every job can be done remotely, many people are learning that the difference between having to put on a tie and commute for an hour or working efficiently at home was always just the ability to download one or two apps plus permission from their boss. It will be harder – and more expensive – for companies to deny employees those options. In other words, it turns out, an awful lot of meetings (and doctors’ appointments and classes) really could have been an email. And now they will be.
The Covid-19 crisis is first and foremost a human tragedy that comes with a great deal of emotional, physical and financial pain. A crisis of this scale will never be truly resolved until many of the fundamentals of our social and economic life have been remade.
It will probably take years or decades for the significance of 2020 to be fully understood. But we can be sure that, as an authentically global crisis, it is also a global turning point that will hopefully guide us in the right direction.
Link:
Posted from my blog with SteemPress : http://blog.economie-numerique.net/2020/05/11/the-coronavirus-crisis-signals-the-acceleration-of-a-new-capitalism-digital-capitalism/