This pandemic is a universal shared experience, and with all universal shared experiences, it will have enormous unseen ramifications throughout our culture, politics and economy.
Moving forward we need to appreciate there can be no new ‘normal’. The virus can re-emerge at any time and a heavy handed trace-track-quarantine infrastructure must be in place until a vaccine is available, and I say that acknowledging that there is no certainty of a vaccine nor how we would even manage to roll out what would be the largest mass medication program the planet has ever seen.
The economic impact of the pandemic can’t be underplayed…
There are growing concerns that any economic recovery later this year could prove short-lived because of a possible deadly resurgence of the coronavirus and a late spike in bankruptcies and defaults, a wicked combination that could cause US households and businesses that barely survived the spring lockdown to go under later in the year.
We are in for a shock. Once we are released from home detention we shall find a desolate landscape of mass unemployment, closed shops and a collapsing housing market.
This is a nightmare scenario. It’s easier to lose jobs than it is to create them and unemployment leads to terrible social ills, including poor health and, at worst, suicide.
A leading economist says the number of unemployed Kiwis is now higher than during the Global Financial Crisis – and the worst is yet to come.
More people are on the Jobseeker benefit than at the height of the global financial crisis (GFC), and it’s going to get worse, one economist warns.
There are now 35.2 people on the Jobseeker benefit per 1000 compared to 34.6 at the peak of the GFC, or a total of 174,630.
Some were already forming the view of difficulties for the world economy before the pandemic became evident. They may have been expecting a repeat of the Global Financial Crisis, that it a financial collapse which would feed into the production side of the world economy. It was too early then to assess what would be the outcome in the longer term.
Suddenly, there was the Covid-19 pandemic. It was a bit like a bazooka firing at an already tottering bicycle. So, it wasn’t going to be a rerun of the GFC – the damage was going to be much greater.
We’re just months away from a Great Depression-style disaster, with “massive bankruptcies”, soaring unemployment and crashing house prices set to hit markets hard.
That’s the view of US demographer and financial commentator Harry Dent, who believes the coronavirus crisis is simply the “perfect trigger” that will set off an already “sick” economy.
While the pandemic has sucker-punched global markets, Dent, who correctly predicted the 2008 crash, said the looming “depression” had been building for years.
The majority of households are in personal financial crisis, or are close to falling into it, an international survey including 3000 New Zealanders showed.
Already one in 10 Kiwi households had missed a mortgage or rent payment as a result of the Covid-19 economic crisis, the research from the taxpayer-funded Commission for Financial Capability indicated.
The impacts of the shuttered economy in March and April fell hardest on young families, Māori, Pacifica and people working on already insecure contracts.
After the 2007-09 financial crisis, the imbalances and risks pervading the global economy were exacerbated by policy mistakes. So, rather than address the structural problems that the financial collapse and ensuing recession revealed, governments mostly kicked the can down the road, creating major downside risks that made another crisis inevitable. And now that it has arrived, the risks are growing even more acute. Unfortunately, even if the Greater Recession leads to a lacklustre U-shaped recovery this year, an L-shaped “Greater Depression” will follow later in this decade, owing to 10 ominous and risky trends.
Despite daily COVID-19 cases hovering around zero and alert level 2 causing a jump in retail spending, experts say the economic fall-out of COVID-19 is just beginning.
It comes as companies such as Fletcher Building, Air New Zealand, Smith’s City and Trade Me announced cuts to jobs and Bunnings and Michael Hill close stores, and the end of the 12-week wage subsidy from mid-June.
Economist Shamubeel Eaqub said that initial pent-up spending after lockdown was expected. As the wage subsidy runs out and the country settles into recession, he expects business cost-cutting to continue.
“This is the beginning: all we’ve seen is the health disruption, the real recession starts now,” Eaqub said.
The Government’s 2020 Budget projects a path of falling income and massively increased expenditures over the next four years.
Deficits totalling $106 billion and total debt of $200 billion or 54 per cent of New Zealand’s annual GDP are forecast. The planned borrowings are an increase of $140 billion on pre-Covid-19 Government debt levels, which were $60 billion, or 20 per cent, of the country’s annual GDP. Another useful comparison is that at the height of the Global Financial Crises/ Christchurch earthquake period, Government debt peaked at $62 billion, or only 24 per cent of GDP.
Total Crown net worth catapults down from $137 billion to $33 billion.
For New Zealand that means the borders must remain shut amputating migrant workers, international students and the tourism industry.
The economic depression this pandemic causes is the second wave of this tsunami after the lost loves. the Government has protected us from the first, it now must focus on the latter and that will demand a Labour Party brave enough to challenge the sleeping dogs of the neoliberal debate that almost destroyed the Party in the 1980s.
The foundations of the 35 year neoliberal experiment in NZ have been exposed an found to be cracked to their core, with the climate crisis demanding a radical change, this pandemic is the perfect time to challenge the religious orthodoxy of free market dogma.
This is a unique challenge for the NZ Left ever since Identity Politics over took class politics as the dominant theory on our side of the political divide. It means currently that the Left in NZ are intellectually better prepared to organise a WoC Mommy Blogger Trans Ally free the nipple petition on Action Station than they are to debate the hegemonic structure of neoliberalism.
This has left the Left intellectually ill prepared to debate the failures of the free market economy and the solutions we must adopt to get out of this.
Here are some thoughts on where NZ needs to go.
Union Membership: We have seen that Unions were the only protection essential workers had during the pandemic and that their input was crucial for developing real service strategies that the bosses were devoid of. Universal Union membership would immediately quench the exploitation of migrant workers AND extinguish the exploitation of International and Domestic Tertiary Students.
Welfare: The legacy of punitive welfare provision to create underclasses that the right turn on each other must come to an end for equality purposes, quality of life purposes and basic human decency.
Living Wage: We need a living wage to replace a mimim wage as a matter of course.
Think Bigger: With free market supply chains now in retreat because of the virus, we need a huge infrastructure rebuild of a basic pharmaceutical industry, we need solar panels on every roof, we need light manufacturing industry, wood processing industry, and an enormous tech upgrade to our internet infrastructure. Tourism can only happen if we build quarantine infrastructure to hold all tourists in quarantine before they begin to travel.
Rebuild Green: The entire rebuild of our economy demands sustainability be front and foremost in all things. Free public transport, solar panels on all roofs, local industry that replaces as many unsustainable parts as possible.
Unleashing NZ entrepreneurship: NZ has a long history of entrepreneurship and we need it now. There should be tax breaks for research and tax breaks for companies that look to be sustainable and ethical. There should be an ease with entrepreneurs walking away from failing business, cauterise the debt and allow them to re-chanel their energies into new green businesses.
Labour are notoriously timid when it comes to challenging the neoliberal hegemonic structure because they were the Party that unleashed this far right experiment upon us and the scars of that debate are still raw in Labour’s psyche, luckily for us the economic depression will be so deep and damaging that even Cautious Jacinda and Extra Cautious Grant have no choice but to reform and rebuild.
There is a live streamed event occurring in July in Wellington bringing together the smartest voices on the Left to debate where NZ needs to go next.
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