Coronavirus will not change the world

unless we work for it.

Coronavirus will not change the world
Where on this chart do you want the world to be after coronavirus?

Once Coronavirus no longer threatens to profits corporations will reduce costs by requiring home workers to keep working from home and cancelling leases on expensive offices.

Then they will outsource whatever they can to countries where labour is cheaper.

Then they will reduce their workforce to a minimum thus reducing overheads and increasing productivity and profit.

They will automate massively, investing in AI if they can and review their processes to increase efficiency.

If every corporation slims down their workforce of course each will be laying off someone else’s customers. This will create a vast rise in unemployment, with the resentful newly unemployed funded by governments from a reduced tax base.

This is pretty much what we had

No government wants to be blamed for a large rise in unemployment. Governments will therefore try to blame the victims, the newly unemployed, immigrants and anyone else they can think of.

In the UK the conservative government virtually abolished lockdown restrictions about a week after one of their MPs launched this narrative by saying some of the public were “too willing” to work from home in order to delay the spread of corona virus.

Lockdown feels like a dream but NOW is the time to work for a new future

The corporate wet dream of an unlimited pool of desperate unemployed ready to work for minimum wage or, as a result of unpaid overtime, even less, faces some obstacles, apart from possible consumer revolts and government reluctance to see a huge rise in unemployment that might lose them the next election.

A paper from The Federal Reserve bank of San Francisco entitled Longer-Run Economic Consequences of Pandemics shows that every pandemic since the Black Death resulted in a slump in returns of capital and an increase in real wages for at least 20 years after the end of the pandemic. The downturn and post pandemic increase in real wages persisted even when the Black Death and the Spanish Flu of 1918 were removed from the analysis.

The paper warns that this pandemic might be different because earlier pandemics mainly hit people of working age. But employers should not break out the champagne and order trebles all round just yet. Coronavirus could still start killing or incapacitating younger workers.

Even if Coronavirus leaves the working age population largely untouched a demographic time bomb is waiting to explode.

The wartime baby boom generation are now approaching retirement. This will reduce the supply of labour dramatically. Increased hostility to immigration will only make the shortage worse.

Automation may mitigate this problem but not all jobs can be automated, especially non-routine jobs and manual jobs, such as picking fruit, where the environment cannot be standardised. Even in a standardised environment like a factory inevitable problems, such as a bolt with damaged thread, may need human intervention.

A report on the VOX, CEPR Policy Portal entitled Automation versus procreation (aka bots versus tots) predicts that the decline in the labour force, especially with declining birthrates, will, even allowing for the automation of routine work, produce a labour shortage that could last for decades.

The VOX CEPR report suggests a shorter working week plus automation will create a rise in productivity that lets business maintain the current level of consumerism.

It seems unlikely the working week will be shortened. The Protestant work ethic is too ingrained, and the spike in domestic abuse and divorce as a result of coronavirus lockdown suggest that many relationships benefit if the people involved do not see each other too often thus driving an increase in the working week.

The researchers at the Federal Reserve bank found that war does not reduce but increases returns on capital and imply that wages do not rise after a war. This makes sense. War destroys capital, and the survivors need to be put to work in order to rebuild assets, but typically not enough people die to create a labour shortage.

The economic benefits of war can be seen in the economic success Germany and Japan enjoyed after 1945 when they had to rebuild an infrastructure that has been almost totally destroyed. The political benefits can be seen in the way World War I totally stopped the Great Unrest: the sound of the trumpet stifles the rumble in the bellies of the poor.

Since war creates enhanced returns on investment another option for policy makers, who are generally in thrall to the finance industry and other major industries, is to create wars. Wars will let the 5 day week remain, or even become a six day week. The inevitable post-war baby booms will increase the labour force and, eventually, let employers force wages down.

Prediction is always risky but based on the history of the last few hundred years Corporate Capitalism will adapt by increasing automation, thus reducing the cost of their products and the need for labour. They will also ensure that policy makers create profitable wars, in order to provoke creative destruction of capital, thus boosting return on investment, rather than shorten the working week thus threatening the empires their managers have created. Wars will also benefit policy makers, who really do not like a public with more time to study what their leaders are doing.

A number of left wing pundits think that post corona Capitalism will either die or mutate into something benign. Others predict the death of neoliberalism. They ignore the incredible ability Capitalism, in particular the British-Establishment-financial- political-industrial and American Military-business-financial-political complexes have to adapt and restructure in order to survive and prevent (Corporate) Capitalism being harnessed to serve society not just big business owners.

Right now it seems everyone wants real change but no one knows what they want, knows how to bring it about, or is willing to work for it.

Those who want Coronavirus to change the world must work to make sure the world changes to something they want.

Otherwise the old normal will return.

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Axel P Kulit

See all posts by Axel P Kulit