Updated: Jul 3, 2020
Throughout modern economic history, you will find that, following times of uncertainty, misery and strife, the emergence of a new economic and political consensus. Here, I’ll be asking the question of whether the Coronavirus pandemic constitutes such a period that the coming few years will see the appearance of a new economic accord.
When reviewing the three stages of Capitalism, one finds that often a shift in economic philosophy occurs during a time of hardship, regardless of whether that hardship was caused by economic or external factors. If we break the capitalist lifespan into three distinct sections, the first being laissez-faire, 19th Century capitalism which focussed on limiting government with little-to-no welfare systems in place for citizens and ran from about 1860-1918˜. Next, came the Keynesian era, 20th Century capitalism (1918-1975˜), often regarded as the ‘golden age of capitalism', Keynesianism saw the welfare state and the growing of the middle class as a priority. Lastly, the current rendition of capitalism, the Neoliberal, 21st Century capitalism (1980-2020?), which returned to the 19th Century model of limiting government, mass deregulation, also it countered Keynesianism by attempting to privatise publicly owned services.
However, as all-powerful as Neoliberalism appears to be on the surface, big questions are being raised over its durability. Much has been made of the ‘new-new-left’ which has brought topics like income inequality, wealth redistribution, nationalisation of services and, to an extent, protectionist trade into the political discussion. Add to that that issues like climate change, which rank very highly on the political priorities of almost all demographics, cannot be solved through an economic creed that prioritises endless growth above all else.
Moreover, questions around Neoliberalism’s survival haven’t solely come from the left. The idea of ‘stakeholder capitalism’ has been mentioned with some ferocity at the World Economic Forum in Davos, with the proposed Davos Manifesto to propose sweeping changes to capitalism and the death of Neoliberalism. Furthermore, even economically liberal news outlets like the Financial Times has been vocal about changing capitalism to suit the needs of the people, as opposed to just the bankers and the elite.
The Winds of Change
So, with change seeming inevitable, what points to that change happening now?
Well, if you look back through history, you’ll find that economic upheaval and political consensus often occurs following a period of instability. For example, the first wave of capitalism fizzled out in the inter-war period, in which the world was reeling from the Great War and the Great Depression, it was there that government began to grow in influence and Keynesianism began to institute packages like the NHS in the UK and massive public works programmes in the US.
Also, the shift away from Keynesianism began with the elections of Margaret Thatcher and Ronald Reagan, whose deregulatory policies gave rise to the economic boom of the 1980s, following the dismal economic circumstances of the 1970s, when Keynesianism had found itself running dry and questions were being asked of its long-term effectiveness.
So, it is clear to see that when questions are being asked of the Neoliberal doctrine, or a once-in-a-lifetime global tragedy takes place, economic and political consensuses are formed. It just so happens that the 2020 Coronavirus Pandemic encompasses both of those.
We’ve had two laissez-faire systems, is it time for the second Keynesian system?
Whilst this symmetricity is easy to find, it isn’t always the best for gauging where the world’s economic consensus is headed. Stakeholder Capitalism seems to be the direction that companies and governments are heading. Stakeholder Capitalism is a hybrid form of Capitalism between a Keynesian fiscal model and a Corporatist public-private model. That is, the government will expand and/or maintain the welfare state, whilst private enterprise begins to work not just for shareholders, but also for workers, customers, suppliers and communities. This means that the Neoliberal idea of ‘endless growth at all costs’ is out the window, and capitalism must adapt to survive.
Wait. Capitalism must adapt to survive?!
Yes, it must adapt to survive. Capitalism is no longer the tried and trusted friend to all. It is no longer under attack from the left, but the right too. This new right, the 21st Century populist right are sceptical of capitalism, and business leaders and governments are beginning to realise that the populist right is getting much of its support from those disaffected by austerity capitalism (i.e. Neoliberalism).
Take the 2016 EU Referendum as an example, the now-infamous bus pledge, to pump £350M into the NHS every week rather than give it to Brussels, was a rebuttal to austerity politics, which underfunded the NHS at every turn. Now, the current Conservative government, to my own astonishment, have taken up a One Nation Conservative position, which seeks to expand public works programmes and to maintain public services; true Keynesianism!
In short, we are already seeing the foreshadowing of this new era of capitalism. A new era of capitalism which will sate the thirst for blood on both the far-right and the far-left and bring about a new consensus. Neoliberalism, as was becoming abundantly clear to anyone concerned with issues like climate change and income inequality, is not a sufficient economic model for the betterment of society. It remains to be seen if Stakeholder Capitalism, or any other form for that matter, can solve these issues – but I’m certain it will be better for society than Neoliberalism ever was. I do feel that given that topics like socioeconomic hardship, and the knock-on effects that has on the likelihood of someone succumbing to COVID-19, as well as the issue of the underfunding of the NHS and the poor pay and working conditions for nurses, doctors and care home workers, and the racial disparity in income and wealth, we are, as a society, beginning to realise that Neoliberalism has brought us to this place. We will see a change in economic thinking; we will see a new political consensus; we will see it soon.
If you would like to learn a little more about Stakeholder Capitalism, watch the video below, which outlines the broad points of the plan and outlines where it differs from Neoliberal Capitalism: