The Return of the State

Economies around the world have developed rapid-onset bipolar disorder. On the one hand, we are in the throes of a self-induced economic depression. Stopping the spread of the novel coronavirus Covid-19 has meant severely limiting human social contact. Work, both in the production of goods and in the service economy, is a social activity. And so putting sociality on hold has meant the slowing and stopping of much economic activity. What work can continue, what is essential and what is not, is now decided mostly by government.

At the same time, in order to actively treat people infected with the virus, save lives, and stop health systems from being overwhelmed, countries have had to rapidly ramp up specific economic activity and production. Personal protective equipment, ventilators, hospital beds, home delivery services — all of these are in short supply and have been the targets of state intervention, from gentle cajoling to commandeering of supply chains to outright nationalisation. In fact, one of the likely takeaways from this crisis is that the state was not active enough in ensuring their availability to frontline workers.

The Tories under Boris Johnson have abandoned the NHS internal market and are coordinating healthcare at a national level once again. New York is treating its clumsy patchwork of private hospitals as a de facto single statewide public system. Spain has nationalised its private hospitals. In France, Emmanuel Macron has effectively created a domestic face mask industry to guarantee self-sufficiency as countries compete for scarce global supplies. Perhaps most strikingly, Donald Trump has invoked the Defense Production Act, a Korean War-era piece of legislation that allows him to control industrial production of anything ‘essential to national defence.’ Its first application was to force General Motors to produce ventilators at a shuttered factory in Ohio on the government’s terms after polite negotiation failed.

Then there is economy-wide intervention. Governments first in Denmark and Norway, then in the UK and across much of Europe, began paying the wages of those staying home from the job, in effect nationalising payroll for many millions of workers. Central banks like the US Federal Reserve are buying up and guaranteeing corporate bonds and small business loans: public intervention into private investment, the beating heart of capitalism, that goes well beyond anything seen during the post-2008 Great Recession.

Balancing this delicate dance of simultaneous contraction and targeted expansion is not being left to markets and price signals but is the object of explicit economic planning the world over. Left to its own devices, the market would not produce what we need right now, nor where we need it; the profit motive would not pause for a pandemic.

We shouldn’t confuse this sudden bout of planned intervention for a recognition of the inadequacy of markets in meeting human needs, of their indifference to any criterion other than profitability. For governments and policy-makers this disaster statism is a stopgap to allow things to return to ‘normal’.

Calculating and Coordinating

However, as we argued in The People’s Republic of Walmart, economic planning is already normal, if almost entirely hidden, in today’s capitalist system. Gargantuan corporations such as Walmart and Amazon, Volkswagen and Airbus are internally planned economies run through command and control. They are simultaneously bad bosses and good planners. In the era of big data, sophisticated algorithms, and computing power unimaginable just decades ago, they are solving complex calculation problems of the kind that led right-wing economists like Ludwig von Mises and Frederick Hayek to argue against the very feasibility of socialism.

Indeed, perhaps the strongest argument ever mounted against the Left by the Right was that the calculation and coordination involved in running a complex economy to satisfy disparate human needs and desires simply could not be consciously carried out. Only decentralised price signals operating through the market, miraculously aggregating an infinitude of disparate information, could guide an economy without dramatic failures, misallocations, and ultimately, authoritarian disasters.

Ironically, it was soon after these debates reached their peak in the 1930s that the world entered a period of total war that was also characterised by massive state intervention and direction of the economy. By fiat, governments solved complex coordination problems reminiscent of those facing us in today’s pandemic: how to reorganise an important part of production and distribution to meet a singular, overarching goal.

Governments not only financed the war effort, they directed it. The US government created entirely new industries like the production of synthetic rubber and centrally distributed raw materials through the War Production Board. As Andrew Bossie and J.W. Mason, two economists at the Roosevelt Institute who looked at the role of the state in economic transformation during the Second World War, write: ‘Thinking about the role of the public sector in fostering investment in new industries or technologies, we should not think of it as merely providing resources … its role is to bear risk and to solve coordination problems, both of which it can do in a way that private businesses cannot.’

If Amazon’s impressive logistics infrastructure shows up the argument that conscious calculation is impossible — all while showing that planning on its own is not enough for emancipation — it is broader efforts such as those during emergencies that offer a glimmer of how to deal with the potentially much thornier problem of economic coordination.

How do we ensure the right goods and services get to the right people? How do we distribute inputs into production up and down supply chains? How do we divide our economic capacity amongst the kaleidoscopic diversity of human needs and desires? Today, how do we ensure we are producing sufficient numbers of ventilators at a time of dramatically reduced industrial output and ensure all care and service workers have adequate PPE?

The coronavirus pandemic is forcing states to face these tricky coordination problems that they have left to the market for decades. Justin Trudeau’s government, for example, has signed an agreement with Amazon to distribute medical supplies around Canada. While undoubtedly a slight to the unionised, publicly owned Canada Post, the agreement shows the recognition that today’s corporate giants are also consummate planners. And that they increasingly provide public services.

The new and sudden embrace of a more muscular state direction of multiple sectors of the economy represents an instinctive, implicit application of the Left’s historic critique of the market: that if something is beneficial but not profitable, or even insufficiently profitable, it will not be produced, and that if something is harmful but still profitable, it will continue to be produced. The pandemic is offering a glimpse of an economy based on the satisfaction of human needs, not the accumulation of money.

Contrasting Models

Planning may be back, and it may also be reaching far beyond the four walls of individual corporations, but there’s no denying it is undemocratic and oriented towards capitalism’s survival. Amazon’s low-wage, surveillance-heavy distribution network is delivering N95 masks to Canadian hospitals. GM’s logistical know-how, built on union-busting and race-to-the-bottom globalisation, is helping small-scale American ventilator producers source components, reorganise supply chains and ramp up production.

So far, governments are spending a lot, at times eroding the power of markets and prices, but doing so without gaining more permanent control over production, over distribution, and over the competing uses of real resources. This is top-down planning driven by technocrats rather than bottom-up planning in the hands and in the service of workers and communities.

Even in the face of pressing extra-market requirements, governments have lacked the wherewithal to confidently orchestrate the economy where needed. Instead, they are reluctantly and only on an ad hoc basis taking on the most extreme irrationalities of market-based production and distribution. The triumph of the market in recent decades didn’t mean the public wouldn’t blame governments for the failure to supply essential medical equipment during a pandemic.

Our vision for economic planning is one that works in the service of all, not the protection of some. Socialist economic planning must be synonymous with a radical expansion of democracy into the economic sphere: workers with control over how they work, consumers with control over what is produced, and communities with control over how things are distributed.

Investment decisions shouldn’t be left up to bankers. With the financial system once again on the ropes, any nationalisation of banks must be permanent this time so that they can be turned into a public utility and run democratically with genuine popular participation. Under such a system, investment boards could collectively decide how society distributes resources to future production. Similarly, innovation councils could be responsible for deciding which projects should be given the resources and time to experiment with new processes and products.

In the short term, every nationalisation or bailout undertaken during this crisis should include a permanent equity stake for the government and stringent conditions over executive compensation, working conditions, unionisation, and shareholder dividends. Public support must come with benefits for the public — and must herald the beginning of a new system oriented in the first instance towards fulfilling their needs.

The limits of public planning in just one country are obvious. The spread of the coronavirus pandemic has shown that borders are a fiction. Pathogens do not need passports. But capitalist governments have ignored this — and strengthened border controls throughout the crisis. In a deeply unequal global economy, we have to ensure that once any business is taken into public hands, especially any related to pharmaceuticals or medical equipment, its goods and services are allocated internationally on the basis of need. This is not only a matter of justice but in the interest of all for this same epidemiological logic.

Even with a vaccine, no country in the West would be safe from a pandemic so long as sub-Saharan Africa remained exposed. The Left’s response to the panicked de-globalisation and nationalist retrenchment being produced by this pandemic must be a strong socialist internationalism. Re-localising chemical reagent supply chains away from China and back to Germany under state control, as Angela Merkel’s government is proposing, but with the aim of improving the public health of Germans alone, is an epidemiological irrationality. Re-localising production is rational in some cases, but such rationalised supply chains must be in the general interest. Otherwise we risk a re-emergence of the state that is indissoluble from a rise in national rivalries.

A New World

The particular nature of this crisis, the concomitant mobilisation of the healthcare and care sectors alongside the demobilisation of much of the rest of the economy, presents an opportunity for permanent post-crisis planning. This could allow us to reconstruct our society to meet major challenges such as decarbonisation. To avoid a persistent economic depression, countries across the world will need massive public investment to restart economic activity and support demand shortfalls. The obvious form of economic stimulus, already apparent before the pandemic struck, is a global Green New Deal, a planned and just transition to a green economy.

Massive investment in clean energy, electrification, mass transit, decarbonised industry and more is overdue. Great swathes of the clean transition, from the development of synthetic hydrocarbons needed for long-haul shipping and aviation to the commercialisation of small modular reactors, require conscious ‘moonshot’ public-sector shepherding — ambitious, exploratory projects which are too risky for the private sector.

One of the rationales for a Green New Deal is that it replaces the ironically glacial market-based approach to decarbonisation with the greater efficiency of planning. Now, because the pandemic has demonstrated so comprehensively the inadequacy of the market’s response to one short-term planetary emergency, we are more able to make the argument about its inadequate response to another, more long-term planetary emergency.

When we go back to work, we will be different people. In the last few months, we have seen a glimpse of the world through a looking glass. Jails have been partly emptied, people without homes have found their way into homes without people, health has been prioritised, even if haltingly, over profit, and incomes have been at least partly distended from work.

The danger of the current ‘disaster socialism’ scramble is that it could further entrench planning for profit, where losses of enterprises are socialised while their profits remain private, or are taken into state control for the national instead of the general interest. Instead, we should argue for a restructuring of the economy according to democratically decided plans. With such a vision, even in social isolation, may we learn the lessons of social solidarity.

Planning is a necessary condition for a rational economy that works in the interests of all its participants. But it must be genuinely democratic to serve this purpose. If we fail to build the case for such a system, our only alternatives are a path back to the tyranny of the market — or a departure into an authoritarian state capitalism that may even be worse.