The arrival of the Omicron variant, just weeks before Christmas, has caused a large part of the establishment media and the neoliberal elite to salivate at the prospect of more lockdowns. This despite early evidence that the variant is mild even though it appears even more transmissible than the Delta variant. The picture may change once older people and those with underlying conditions become infected. But for the moment, the UK government has limited its response to additional quarantine measures for flights from southern Africa, the restoration of facemasks in shops and on public transport, and ordering everyone – irrespective of vaccine status – to isolate if they test positive.
The counterargument to the government’s apparent lack of action is that in February-March 2020 and again in October-November 2020, the failure to impose lockdowns at an early stage led to far more deaths than might otherwise have been the case. But is this comparing like with like? In February-March 2020, Covid-19 was an entirely unknown disease with a potential fatality rate far higher than earlier flu pandemics. Early modelling suggested that millions of people in the UK would die, as Britain’s hospitals were swamped by several million seriously ill people. And the impact on the economy would be devastating – key workers who keep our critical infrastructure operating would randomly fall ill or die, with no suitably skilled replacements available. Given this potential level of threat, locking down a large part of the economy in order to maintain critical infrastructure – including the NHS – made sense despite the likely damage.
While the disease proved to be far less deadly than originally feared – although still more serious than the flu which some were comparing it to – the absence of a vaccine or approved treatments meant that the second wave – which began by allowing millions of students to relocate in the course of a single weekend – was even more deadly than the first. Despite government promises that we could enjoy Christmas with friends and family, a second – much longer – lockdown was imposed.
By November 2021 though, the majority of the population – and especially the elderly and those with underlying conditions – had been vaccinated. There was also a high degree of natural immunity among those who had recovered from the disease. Although people were still being hospitalised and dying, the link with cases had been broken. And against this, we now have clear evidence of the consequences of lockdowns on the NHS and on global supply chains. As was anticipated, tens of thousands of people who would ordinarily have been diagnosed and treated in general practice, simply failed to show up. Cancer, heart disease and mental health diagnoses plummeted. And the result – by November 2021 – is overwhelmed hospitals, ambulance queues outside A&E, and people dying while waiting for ambulances to arrive. At the same time, global supply chains are seizing up – causing the price of shipping to rise. And with key commodities like food, gas, oil and silicon chips in short supply, prices are increasing at a rate not seen since the 1970s.
Worryingly though, the pandemic restrictions and lockdowns are now so politically polarised that a rational discussion of the changed evidence is not possible. Rather than opposing the government and the corporations, those who self-identify as being on “the left” have adopted an authoritarian lockdown fervour which insists that even the strict lockdown imposed at the end of March 2020 was not draconian enough. Any re-emergence of Covid is met with the demand for an impossible zero-covid policy. Meanwhile, anyone who suggests that the effect on the economy will come back to haunt us, or that a wave of undiagnosed non-Covid illness will overwhelm the NHS, is accused of “putting profits before people’s lives” and “wanting to let the virus rip, no matter how many people die.” Toby Green and Thomas Fazi at UnHerd point to the naivete of this lack of opposition:
“How did such a simplistic view of the relationship between health and the economy emerge, one which makes a mockery of decades of (Left-leaning) social science research showing just how closely wealth and health outcomes are connected? Why did the Left ignore the massive increase in inequalities, the attack on the poor, on poor countries, on women and children, the cruel treatment of the elderly, and the huge increase in wealth for the richest individuals and corporations resulting from these policies?…”
One answer is that what passes for an opposition chose to see the pandemic as a kind of surrogate Second World War, during which the neoliberal state has been forced to intervene in the economy in the face of a wave of popular altruism and solidarity. Government borrowing to fund various emergency bailouts – which have largely favoured the big corporations and the billionaires at the expense of the rest of us – was mistaken for the Keynesian demand management policies used to rebuild Europe and the UK in the post-war years. But as Green and Fazi point out, this was only ever Keynesianism for the rich:
“Neoliberalism relies on extensive state intervention just as much as ‘Keynesianism’ did, except that the state now intervenes almost exclusively to further the interests of big capital – to police the working classes, bail out large banks and firms that would otherwise go bankrupt, etc. Indeed, in many ways, capital today is more dependent on the state than ever… Neoliberalism today is more akin to a form of state-monopoly capitalism – or corporatocracy – than the kind of small-state free-market capitalism that it often claims to be. This helps explain why it has produced increasingly powerful, interventionist, and even authoritarian state apparatuses.
“This in itself makes the Left’s cheering at a non-existent ‘return of the state’ embarrassingly naïve. And the worst part is that it has made this mistake before. Even in the aftermath of the 2008 financial crisis, many on the Left hailed large government deficits as ‘the return of Keynes’ – when, in fact, those measures had very little to do with Keynes, who counselled the use of government spending to reach full employment, and instead were aimed at bolstering the culprits of the crisis, the big banks. They were also followed by an unprecedented attack on welfare systems and workers’ rights across Europe.
“Something similar is happening today, as state contracts for Covid tests, PPE, vaccines, and now vaccine passport technologies are parcelled out to transnational corporations (often through shady deals that reek of cronyism). Meanwhile, citizens are having their lives and livelihoods upended by ‘the new normal’. That the Left seems completely oblivious to this is particularly puzzling. After all, the idea that governments tend to exploit crises to further entrench the neoliberal agenda has been a staple of much recent Left-wing literature…”
The populist right has, to some degree, filled the oppositional void vacated by the self-identifying left. But their adherence to mythical “free markets” and Austrian School economic makes them equally blind to the slow-motion socio-economic train wreck which is only just starting to wash over us. Both right and left equate “the economy” with the financial alchemy performed in stock and bond markets and in the hallowed halls of the central banks. Gone is any understanding that “the economy” is everything we collectively do – it is what causes water to flow when you turn on your tap, and what causes food to arrive in just the right quantities at your local supermarket. It is what prevents you from freezing during the winter, and what ensures there is fuel to power your car on the daily commute. It is the product of trillions of transactions across a complex, global web of delicate, just-in-time supply chains… and you mess with it at your peril.
Insofar as the government considered economic questions relating to the economy, their focus was primarily on staff absenteeism and the threat to critical infrastructure. There were no special scientific committees to consider the socio-economic consequences of pandemic policy. And in the absence of any serious analysis of the medium-long-term impact of lockdowns on the economy – including critical infrastructure, including the NHS – and in the absence of a critical and questioning opposition, the broad default has been in favour of even more restrictions and more lockdowns.
No consideration was given to the UK’s particular dependence upon complex supply chains to maintain our heavily import-dependent way of life (although PPE shortages quickly exposed the problem). And yet disrupted supply chains were an obvious enough issue to anyone paying attention when China imposed the world’s first lockdown:
“The global economy is a house of cards that was just waiting for someone or something to pull the bottom out from under. If it wasn’t a virus, it would have been a flood, a volcano, a solar flare, or some other unexpected disaster. Nevertheless, the fact that China locked down towns and cities in a major global manufacturing region beginning on 23 January means that Britain is going to experience shortages from the first week in March. It takes around 40 days for a container ship to make the journey from China to the UK, meaning that the goods we are currently consuming set sail before the lockdown began. In the course of next week, the just-in-time container ships that we have come to rely upon for everything from phones to fabrics and pharmaceuticals are not going to appear. And even if China were to lift restrictions immediately, we would still be looking at nearly six weeks without supply; followed by many more weeks in which we are playing catch up.”
The problem with supply chain disruption is simple enough to understand. In the wake of the oil shocks, stagflation and economic decline of the 1970s and 1980s, developed states like the UK outsourced much of our manufacturing, mining and agriculture to less developed regions of the planet, where labour was cheap and regulation non-existent. To keep costs to a minimum – and profits to a maximum – corporations and governments ran these supply chains at close to 100 percent capacity on a just-in-time basis. This was both highly-efficient and extremely fragile – although the system could ultimately recover from local shocks, such as the 2011 Japanese tsunami, the 2010 Eyjafjallajökull volcano eruption, or Hurricane Katrina in 2005, it could be devastated by a widespread disruption such as allowing the banking system to fail in 2008 or introducing widespread lockdowns in 2020.
Once a series of backlogs have been allowed to build up – as we now have in all the main container ports around the planet – it is impossible to clear them without massively expanding the entire supply chain to an extend that would render them too expensive to operate. As Jim Rickards at the Daily Reckoning explained earlier this month:
“Forty percent of all the cargo into the United States comes through the ports of Los Angeles and Long Beach. Offshore, there are thousands of containers stacked up on vessels waiting to get in. How many containers can the ports unload on a normal day?
“New containers are coming in. There are daily arrivals. When will that supply chain backlog clear?
“The answer is never. If there are more coming in than you can unload and you have an existing backlog that’s getting worse, it will never clear.
“But let’s just say that with no new shipments coming in, it would take 30 days just to unload what’s already waiting offshore. Thirty days, by the way, puts you into December and the Christmas rush.
“And getting it offloaded in California is just the beginning of the supply chain. You’ve got to put it on a train or a truck and get it to a distribution center and put it on another truck and get it to a store.
“But wait, there’s also a trucking shortage. That’s a big part of the supply chain problem. If you can unload the merchandise but can’t transport it due to a trucking shortage, what good is it?”
What is happening in Long Beach and Los Angeles is also happening in Rotterdam – Europe’s main container port – and Felixstowe in the UK. Clearing the backlog that we have already generated isn’t just about hiring a few more Bulgarian HGV drivers or getting some squaddies to drive trucks. To recreate the just-in-time efficiency of the pre-pandemic years requires the complete reversal of three decades of neoliberal globalisation. And nobody with the power of decision is even going to contemplate that until the system breaks down entirely… as it inevitably will if we continue to impose restrictions and lockdowns in the insane belief that these are consequence-free or, indeed, that they can be overcome by borrowing and spending more inflationary currency.
Nor do our woes end there, because the various players in the game of corporate global economics have not been standing idly by while their profits evaporate. And the actions taken by some of the big players will have some very negative consequences for the rest of us. In response to the backlogs in the ports at Long Beach and Los Angeles, Walmart – the USA’s biggest supermarket and one of its biggest employers – decided that its best interests would be served by hiring its own – smaller – ships, converting them to carry containers, and to divert them to smaller ports in the Gulf of Mexico. In the UK, Asda and John Lewis have followed Walmart’s lead in going it alone. But while this works for big retail corporations, it is another nail in the coffin of independent High Street retailers. This is because the cost of shipping is kept low by mass usage – carrying goods from multiple sources, with smaller customers filling the gaps, as it were, left on the container ship deck by the big importers. Once the big players go their own way – particularly if they have invested in refitting ships and uprating smaller ports to carry containers – they are not about to return to the big shipping lines. That means the general cost of container shipping will rise even as shipping companies go bust and container shipping is sold for scrap. Although before that happens, we face a period of stagflation, as retailers seek to raise prices and cause consumers to cease making discretionary purchases.
For the moment, the unravelling of the global economy is proceeding at the pace of a slow container ship traversing the ocean. As a result, we see only those elements of the crisis which break through into the public consciousness – HGV driver shortages here, empty supermarket shelves there, rising prices seemingly unconnected to either. But these are merely the early symptoms of an imminent collapse of the entire global economy. For the moment, central banks are able to spirit enough new currency into existence to thwart a collapse in the banking and financial system. But this won’t always be the case. Sooner or later, investors are going to conclude that physical assets like land or precious metals are a much better bet than rapidly devaluing fiat currencies that can be created out of thin air at the stroke of a keyboard. In a system which depends upon growth just to exist, anything which causes the system to falter – like supply shortages, fossil fuel depletion or collapsing supply chains – will bring forward the day of reckoning. And where supply chains collapse at the speed of a slow container ship, the banking and financial superstructure will be blown apart at the speed of a photon in a fibre optic cable.
Despite this, our leaders may yet decide that more lockdowns are required. There may even be bankers, economists and climate activists who have convinced themselves that lockdowns are the best way of heading off the crises of industrial civilisation. But let us not claim this time that we didn’t realise that lockdowns have consequences. Because the evidence of lockdown-created economic failure is growing all around us.
As you made it to the end…
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