COVID-19 Will Reshape Our Relationship with the State
Although it is not yet known how coronavirus impacts on politics, it will almost certainly fundamentally reshape the relationship between citizen and state.
Visiting Senior Fellow, Europe Programme
Those who believe in cyclical theories of history argue the infamous stock market crash of 1929 signalled the failure of markets and paved the way for a bigger state, which then led to the New Deal in America and welfare states in Europe.
Fast forward to the 1970s and it was the turn of the state to overreach as big government proved unable to resolve intractable economic and social problems. This paved the way for the return of the markets via Reaganism and Thatcherism and an economic consensus that even centre-left social democrats ended up accepting.
Now fast forward again to where we are today. Some contend that in years to come we will look back at the coronavirus crisis as a major corrective, because the Great Recession of 2008-2012 arrived after the markets had once again overreached and - together with the Great Lockdown - these two crises are paving the way for a much bigger and more interventionist state.
Fiscal conservatism in retreat
Although I remain broadly sceptical of cyclical theories, the sheer scale of government spending as a percentage of GDP and the mounting piles of national and global debt certainly do underline how - for now - free markets and fiscal conservatism are in retreat.
Inevitably, a new era of big government and big debt creates huge effects even if we do not see them for some time. Higher taxation, a squeeze on the wealthy through tax and public pressure for greater scrutiny and transparency, and public expenditure cuts, to name a few.
Although it is not hard to see how populists can make hay from this, COVID-19 might impact how citizens view the state anyway, especially as it has now come to their rescue on two occasions in little over a decade.
The result could be a broader public acceptance of larger and more interventionist governments and a willingness to experiment in state-led instruments, particularly among younger generations with no real memory of the pre-2008 era. Economic liberals and free marketeers are on the back foot and, once again, will have to restate their case.
These debates are here for the long-term. The so-called 'Ratchet Effect' means we expect after a major crisis that the size of government does not revert to pre-crisis levels. In the aftermath of both world wars, a massive expansion of state responsibilities and spending commitments saw a larger role for the state generally accepted in wider society. This made sense but eventually led to big inefficiencies. Political leadership is needed to know when and how to cut back the state.
Increased visibility of the working-class during coronavirus - from Amazon couriers and postal workers to tube and bus drivers - might also push us out of an era of class division and into greater 'cross-class solidarity' and a stronger social fabric. Studies suggest that previous pandemics saw collective anger at low wages and poor working conditions combining with workers becoming aware of their indispensable role in the economy, and led to both wage increases and better working conditions.
But, while some of this might be true, emerging evidence shows it looks fairly certain the Great Lockdown will actually exacerbate divides in our society that began to sharpen a few decades ago, and were then worsened by the Great Recession.
It is clear the virus has uneven effects, both in health and economic terms. Low-income 'precariat' workers in the low-skilled service sector and gig economy and those with few educational qualifications are the hardest hit by the economic fallout, and are also more likely to have the underlying health conditions that magnify the physical impact of the virus itself.
Data suggests people from black and minority ethnic groups are more likely to die of the disease than white people. And we also now know that in the UK working age population, it is male construction workers, nurses, security guards and taxi drivers – ‘elementary workers’ - who are most likely to suffer disproportionately high death rates. Overall, working class C2DE voters were also more likely to vote Conservative at the last general election.
In the US, research suggests more than 80 percent of the jobs affected by the crisis are held by low-income workers while, in the UK, typical pay for the most disrupted workers in 'shutdown sectors' is less than half the pay of those able to work from home.
The wealthy and professional middle-classes insulated from the negative effects of globalization will still feel the effect of coronavirus – especially those with elderly parents. But overall they will be much better sheltered from its adverse economic effects.
The finding that more than seven in ten high-income Americans are able to work from home compared to just four in ten of their low-income counterparts speaks to how these different social classes are having - and will continue to have - fundamentally different experiences of this crisis.
In the short-term, our self-isolation was compulsory. But in the longer-term it will become voluntary. And then it will become an economic luxury, which also fits with the general story of pandemics in the past.
Because, contrary to the narrative they can be a ‘great leveller’, recent work actually finds most pandemics lead to a ‘persistent and significant increase in the net Gini measure of inequality’. Five years after a pandemic hit, it was those with fewer educational qualifications and skills who suffered the most - the very same groups that have been driving much of the political volatility we have been witnessing over the past decade.
Although we will not know how this crisis impacts on politics for a long while, we do know it will almost certainly fundamentally reshape the relationship between citizen and state.