A Post COVID 19 World, What Will the Next Normal Be Like? – Part I.

One of the things I am currently doing is to try and figure out how a post-COVID 19 world will affect us. While not a classic research piece I do try to stay close to some fundamental works I believe will help me understand. Because I find it such an arduous task I decided to break my ideas down to three posts. The first looking back to economics and society since 1900. Then in the second post my ideas about South Africa, and finally a perspective on a possible way forward.

I do not profess to be right nor that this perspective is exhaustive, but for one thing – that more than ever we are faced with a battle of ideas….

”A global economy, energized by technological change and unprecedented flows of people and money, collapses in the wake of a terrorist attack. The year is 1914.

Worldwide war results, exhausting the resources of the great powers and convincing many that the economic system itself is to blame. From the ashes of the catastrophe, an intellectual and political struggle ignites between the powers of government and the forces of the marketplace, each determined to reinvent the world's economic order”

The above quote (from the PBS series “ The Commanding Heights”) is significant in that it highlights the battle of ideas about society, economy and the human condition during this era.

The Leninist school, who argued that the owners of capital, the monopolies and cartels will enslave a middle, and exploit the worker class, resulting in a deep and permanent divide between rich and poor. Further that “capitalist imperialism” creates a worldwide divide between rich and poor nations.

( International Political Economy by David N. Balaam and Michael Veseth, 2nd ed., 2001, pp. 76-78.)

However, the implementation of the high ideals of social and economic equality and equitability proves difficult. The Stalinist version of this form of socialism is characterized by state central planning and regulation of the forces of demand and supply and an autocratic form of government.

Further, the drastic curtailing of human rights all of these probably killing more people in the USSR through famine than the socialist revolution itself.

In Germany and Italy fascism surge (the backdrop of WW II), while in the west two economic models come to the fore. On the one hand those of John Maynard Keynes and the other the ideas of Friedrich von Hayek.

Keynes accepts the notion of individual ownership and competition of the processes of supply and demand. He, however, argues that it will never ensure full employment and growth. As such the state need to incur deficits (either printing money or borrowings) to ensure full employment and growth. Implied with this is that only with a reasonable rate of inflation and state management, capitalism is workable.

Von Hayek argues against democratic socialism and propagates competition and individual ownership of the processes of supply and demand. The following citations demonstrate this:

A. “…democratic socialism, the great utopia of the last few generations, is not only unachievable, but that to strive for it produces something so utterly different that few of those who now wish it would be prepared to accept the consequences, many will not believe until the connection has been laid bare in all its aspects”

B. “Planning" owes its popularity largely to the fact that everybody desires, of course, that we should handle our common problems as rationally as possible and that, in so doing, we should use as much foresight as we can command”

C. “What our (the socialists…) planners demand is a central direction of all economic activity according to a single plan, laying down how the resources of society should be "consciously directed" to serve particular ends in a definite way”

(The Road to Serfdom by Friedrich von Hayek, Routledge, 1944, pp. 13-14, 36-37, 39-45.)

Keynesian economics dominate until the 1980’s after which Von Hayek’s philosophy is revitalized by Milton Friedman from the University of Michigan and largely institutionalized by Thatcher and Reagan (at least in the US and UK). A large part of the western world embrace these ideas of the logic of a free market, and globalization speeds up on the back of technological advancement. This notwithstanding that the Stalinist socialist system is replaced by a kleptocracy that many believe is corrupt to the core, but astute in using technology to ensure full integration with the global supply chain.

Technological advancement and the ability to enrich the processes of supply and demand create a new elite of technological entrepreneurs, and workers. Supply and demand are largely independent of space and time, working 24/7 as part of an integrated supply chain of goods and services for those who can afford it.

(Space of Flows, Space of Places: Materials for a Theory of Urbanism in the Information Age Manuel Castells)

From my perspective, it is disappointing that the free market ideals (which I personally support) of Von Hayek have its own perversions. The creation of financial derivate instruments becomes a “market” in its own right - complex and so far divorced from the production processes that wealth is created almost as an abstraction, and only by a select few who understand these or those who can afford to hire such experts.

The result is the centralization of capital by a select few who have the means to influence the processes of supply and demand. This together with overexploitation of natural resources seemingly leaves us with a deep and widening gap between rich and poor which essentially translates to a divide in life chances.

Several inflection points during the past 5 decades threatened to derail the “march” of this system, from the oil crisis to 9/11, the war on terror and the 2007/8 financial meltdown.

It is, however, the COVID-19 virus that in a sense “flipped the switch” on the whole system. This “trend break” bring all the fault lines in the system into sharp focus from a political, social and economic perspective.

I am left with one question – how is it that both the high ideals of social democracy and also that of the free market (competition and individual ownership of supply and demand) failed in its implementation. COVID-19, therefore, do not only bring me to a point of considering economics, politics, and society but also our place in all this, and the seemingly flawed characteristics of us as individuals?