The global crisis of 2008 did not change the world. The financial and political responses to it did. With hindsight, we know the ‘new normal’ that came after 2008 is a world of increased financialisation, alongside austerity, jobless growth, precarity, exploding inequality, tech takeover, and authoritarianism. There have been green shoots of progressive protest and insurrection, but the unrest never sustainably empowered even moderate-left alternatives. The pitchforks never came.
In envisioning a post-coronavirus ‘new normal’, we must make sense of seemingly contradictory developments linked to financialisation. Now, as in 2008, governments are adopting ‘radical’ financial crisis management measures, unthinkable until recently, including widespread income support programs, dividend payment suspensions, and debt moratoria. Some may see this as progressive.
But such emergency measures may be seen as feasible only in the crisis moment and be rapidly abandoned, to be replaced with the crushing weight of a ‘wall of money’ and punitive revenge capitalism. The neoliberals won’t let this crisis go to waste. The pandemic has already made the richest a lot richer, while they fired workers asking for reasonable protections. The virus and the responses to it have reinforced structural inequalities linked to gender and race. Covid-19 is not a ‘great equaliser’.
The present danger is that a financialised ‘recovery’ will follow, which entails further bailouts for the shadow banking sector, new sanctions for the unemployed, housing and other social assets gobbled up by institutional investors seeking new safe havens, and crippling medical debts making the next pandemic wave even deadlier for the poor. Our near-unconditional surrender to tech solutions, expedient during the lockdown, may prefigure a recovery in the form of a high-tech dystopian “Screen New Deal” of zoomed-out life, zoomed-in surveillance, cash anxiety-fuelled FinTech takeover, and civil liberties surrendered.
As the contributions to our recently published Handbook of Financialization show, any ‘new normal’ will be built by societies already impaired by several decades of financialisation. Our contributors identify nine ways in which the pandemic may transform financial capitalism – for better or worse.
Shareholder Value Would Be a Welcome Pandemic Victim
Before Covid-19, the disconnect between capital markets and the productive economy drove extreme inequality and asset bubbles. Share buybacks, high-premium mergers and acquisitions, stock options for top managers and leveraged buyouts by private equity firms starved the productive economy of money for investment and wages. Central banks supported rather than corrected this dysfunctional economy.
The current ‘whatever it takes’ pandemic responses of central banks are further entrenching this disconnect, rescuing capital markets and owners of financial assets while ignoring unemployment, low wages and rising precarity.
A Prosperous Pandemic for Shadow Banking?
Of all central banks, the U.S. Federal Reserve has taken the most audacious measures – in both scale and scope – to prevent Covid-19 from triggering another financial crisis. By purchasing so-called ‘junk bonds’, it has gone all-in to protect the most aggressive and extractive agents of financialisation: hedge funds and private equity funds. Their arsenals are now fully stocked and ready to be deployed for further financialising distressed sectors of the economy, such as elderly care.
Shareholders understand this. The stock prices of firms such as BlackStone and Apollo Group have bounced back spectacularly. Covid-19 will become another major milestone in the long history of central bank-facilitated financialisation, unless other branches of government decisively act to prevent it.
The Great Covid Debt Hustle
Even before this pandemic, households in the United Kingdom, the United States and elsewhere were forced to use debt for healthcare, education, childcare, and even food expenses. People of colour and women disproportionately bore this financial burden and hustled to keep up with loan payments. Now, in midst of a global crisis of social reproduction, individualised and financialised solutions to medical and housing costs are sharpening social inequalities.
Collective solutions supported by public funds would give us all some breathing room while flattening gendered and racial divisions. But we must be wary of diversity talk that uses identity to legitimise a status quo that really prioritises shareholders. The debt collection industry cites its employment of diverse personnel (70% women and 40% ‘ethnically diverse’) as a reason to keep collecting despite unprecedented unemployment.
The Coming Pension Austerity
In the post-2008 stock market recovery, pension funds took even greater risks than before the financial crisis. 2020 will not simply be a repeat of 2008. Pension plans are now in a far weaker position. The proportion of plans with net negative cash flow has doubled: when more money goes out to pay retired workers than comes in, pension funds cannot survive without government support.
Nowhere is this more evident than the USA’s state and local public pension systems, which lost an estimated $1 trillion since March. The deepening unemployment crisis will make matters worse: as government spending on unemployment benefits increases, losses in taxable income mean state revenue available to pay into pension systems shrinks.
Bail Out the Tenants!
Although the last crisis demonstrated the flaws with our financialised housing system, the result was not the de-financialisation of housing, but rather a shift from mortgaged homeownership as a neoliberal dream for all to ‘homeownership-for-some’, coupled with overpriced private rented housing for others.
Policymakers like to talk about treating homeowners and tenants in the same way, but the initial response to the economic fallout from the spread of coronavirus underscores this lack of tenure neutrality. Now is the time to bail out tenants. Their numbers will only increase once funds start buying up properties and ramping up rent levels for ever-larger groups of society.
Time to Smash Dystopias
Pandemics don’t choose their targets, but lockdown and social distancing measures do. Self-isolation is a privilege many cannot afford. The most vulnerable people and countries in the global South are hit hardest.
In Brazil, as fatality rates rise towards an ominous peak, private healthcare companies share prices are making a steep recovery, making the wealthiest wealthier, again. Proposals for universalised waiting lists, and for merging private and deficient public hospital capacities to provide better access to ICU beds, have been rebuffed, to ensure foreign investors will return after Covid-19. Uncertainty looms, but the financialisation of social policy looks set to continue.
Migrant Finance Under Lockdown
The nexus of financialised neoliberalism, restrictive immigration regimes and discriminatory welfare policies in richer economies has generated a ‘migrant division of labour’. Migrants dominate in low-paid work where precarious, abusive and unsafe employment arrangements are endemic. Social distancing and lockdown measures leave migrants three options: to continue working at risk of exposure, forced incarceration in overcrowded dormitories or a precarious return ‘home’.
Job losses and falling wages have created the sharpest contraction in remittances in recent history, with a predicted 20% global drop from US$550 billion in 2019 to US$445 billion. Remittances were never the great financial equaliser global development elites claimed, but as these flows now dwindle, 800 million people face significant nutritional, educational and health consequences.
Subordinate Financialisation and Re-Globalisation
Pandemic uncertainty has led to unprecedented financial outflows from developing countries, which occupy a subordinate position in financialised capitalism. Investors are benefitting from volatility in everything from agricultural produce to manufactured goods, driven by states’ different approaches to lockdown.
After the ‘Great Cessation’ in economic activity, we expect the finance industry will benefit from the global economy’s return to ‘normal’, while costs are once again borne by the state. Rather than ‘de-globalisation’, we can expect ‘re-globalisation’, where governments focusing on resilience will diversify – and potentially regionalise – supply chains and investment. This re-organisation will not bring substantive structural change, and financialised capitalism is likely to live on, with developing countries remaining in a subordinate position.
Send the Debt Collectors Packing
The conditions for the current global sovereign debt crisis were created by the global financial crisis of 2008 and the spurious ‘recovery’ from it. The perils of prioritising debt servicing over guaranteeing access to health are now obvious for all to see.
As the crisis continues, it is worth recalling important examples of unilateral debt repudiation across the nineteenth and twentieth centuries. Historically, decisive political will and the social movement campaigns were crucial when the USA, Mexico, Russia and Costa Rica sent their debt collectors packing.
The past decade has given us a wealth of experience in challenging excesses of financialisation and the presumed legitimacy of debt accumulation. Tools in the growing toolbox include debt audits (Ecuador and Greece), the effective use of courts (Iceland and Spain), and direct action against personal debts (Rolling Jubilee).
This Time Should Be Different
Now, as in 2008, we need to believe a better world is possible and be ready to fight for it, knowing that a financial system designed to discipline, extract and accumulate at all costs will fight back. This time should be different, because we know the battleground better.