The unique nature of the Covid-19 health emergency has triggered a harrowing economic crisis unlike any other. There has been a drastic departure from what many would recognise as a more traditional response to crisis management; instead of seeking to intensify flagging economic activity, public policy has triggered a rapid, prolonged demobilisation of vast swaths of the economy. While such an approach is essential – not least in an effort to safeguard public health and conserve productive capacity for when we eventually transition to a post-crisis landscape – its immediate implications have been devastating for workers and households, and have exposed deep, fundamental fractures in our economy that long predate this crisis.
The pain induced by the rapid demobilisation has been overwhelmingly endured by marginalised workers and communities forced to grapple with layoffs, exploitation, childcare demands, domestic violence, and health and safety violations, as our social security system – debilitated by a decade of counterproductive austerity – witnesses nearly one million people apply for universal credit.
As we face an unparalleled crisis, we are reliant on unprecedented government response programmes, trade unions and public services to protect us and are indebted to key workers to keep us safe. In so many ways, the response to this crisis has been a defence of society. What, then, became of the so-called wealth generators? After decades of lobbying for farcically low tax rates, a deregulated labour market, ‘light touch’ state interventions, and excessive pay-outs to shareholders and executives under the guise of trickle-down economics, many extraordinarily wealthy corporate bosses are now turning to the state requesting ‘no strings attached’ taxpayer bailouts.
While the economic shock induced by the public health emergency has indeed plunged the viability of companies and entire sectors into perilous doubt, efforts to halt their collapse also raise important questions around mechanisms by which bailouts are secured, whose interests are served, and how companies and sectors should be organised post-crisis. As the Financial Times editorial reads: “Radical reforms — reversing the prevailing policy direction of the last four decades — will need to be put on the table. Governments will have to accept a more active role in the economy. They must see public services as investments rather than liabilities, and look for ways to make labour markets less insecure.”
Among the sectors hit particularly hard by the crisis is that of transportation. With the pandemic reducing demand for flying, the aviation sector – both airline and airport companies – is particularly at risk of collapse. Airlines in the United States have asked for $50 and US airports are reportedly seeking $10 billion, while Boeing attempts to negotiate a separate deal. In the UK, Virgin Atlantic Airways requested a bail out of between £5 billion and £7 billion of taxpayer money.
And yet a brief exploration of recent corporate behaviour of the aviation sector showcases precisely why public support must be contingent on ensuring job security, action on climate change, and a strategic public ownership stake, as well as deep, structural changes in the behaviour of the sector. Aviation is likely to be the largest emitting sector in the UK by 2050 – making achievement of the UK government’s net-zero target difficult, if not impossible without drastic reform. Indeed, the Covid-19 emergency and the climate emergency together pose a monumental threat to a healthy, sustainable future for all.
Fresh analysis published by Common Wealth demonstrates how the aviation sector has favoured the distribution of retained earnings via dividends or share buybacks over increased investment in green technologies or higher wages, while having a poor track record overall on alignment internationally-agreed climate targets. Easyjet and British Airways together have paid out dividends in excess of £2.6 billion since 2014, while the holding companies owning Heathrow, Gatwick and Manchester airports paid out a staggering £4.4bn in dividends and over a five-year period.
Importantly, while the dividends are not the reason the sector is requesting state bailouts, the pattern is indicative of prioritising shareholder interests, while real wages have been stagnant and business investment has been sluggish. Following reports that the UK government is drawing up plans to provide a cash injection in exchange for equity stakes in airlines, ensuring that any bailout is at least contingent on job security, securing workers’ rights and collective bargaining over wages and conditions, fair tax contribution, the adoption of climate targets by the sector in line with 1.5 degrees and clear, transparent plans to meet them, and a permanent public stake to grow public wealth following the crisis should be a priority.
Alongside airlines rests doubt in to the future of railways in the UK, with rail franchises in England being nationalised – at least provisionally – following the suspension of franchise agreements to transfer “all revenue and cost risk” to the government, while in Scotland, ScotRail is also set to be temporarily nationalised. While the scale of the crisis has significantly exacerbated their financial woes, the model of socialising losses while privatising profits has long defined railways throughout the UK, with Northern Rail being nationalised only a few months ago. While intervention to safeguard jobs and maintain safe and reliable rail services for key workers during the crisis is absolutely essential, the primary beneficiary of the temporary nationalisation of UK rail companies’ losses is a complex web of other governments and private shareholders.
Instead of a no strings attached bailout for private rail companies, we need free travel for all key workers at least for the duration of the crisis, long-term public ownership of the railways, and economic security for all workers and households by means of support for income, childcare and rent to ensure that, as railway workers argue: “No one should be putting themselves, and others, in danger because of the financial risks of not taking journeys.”
The global financial crisis and the no strings attached bailouts, austerity, tax cuts for the rich and deregulation that followed – as well as the child poverty, hunger and the stagnant real wage growth that followed that – should act as a template for how not to respond to a crisis. Not only has the economic fallout from Covid-19 shone a glaring light on the sheer scale of social and economic injustices that long precede this crisis, it has exposed the limitations of governance under a model of financialised capitalism that seeks to chase profit for a few and shrink the state footprint.
Out of the post-crisis reconstruction must emerge a new consensus, and conditions attached to bailouts of private companies can play a central role in reforming the economy to expand public wealth, embed workers’ voices, and ensure it is sustainable by design. By replacing the for-profit structure of the public services, a new de-financialised structure of incentives can emerge to meet social, economic and environmental needs. In the middle of the deepest crisis since the Second World War, we cannot leave radicalism to the Financial Times. A systemic crisis requires a transformative, systemic response, and once the period of economic hibernation is lifted and we begin to reconstruct our economy, ‘normal’ cannot and should not be considered an option.