Capitalism, COVID-19, and Crisis: A Class Analysis

(Photo Credit: Mark Lennihan, Associated Press)

By Ikemba X

The Capitalist/Imperialist Class

In the past week, the global economy experienced its worst week since 2008 (following a series of “Worst Weeks”, it keeps getting worse), and the economic crisis is sure to deteriorate as time marches on. Three years of growth in the market have evaporated, unemployment has seen a spike, multiple industrial sectors have slowed to a crawl or stopped moving altogether, and the trillion-dollar injection into the market by the Federal Reserve did almost nothing to stop the free fall (other than transfer toxic assets to the public). If the recession hasn’t already hit us, we’re in for a catastrophe when the bills are due. The following is a brief outline on how we got here, and how much worse it's going to be this time around.

The modern capitalist economy simply cannot function without large amounts of fiat currency in the form of government-backed loans. As the bourgeoisie continues its song and dance of improving the means of production, increasing production of commodities, and better perfecting the division of labor, the price of operating such vast and complex industrial armies and machines is simply too much. In order to compensate for this massive cost, the bourgeoisie in the global core have forged an alliance between industrial and finance capital, exporting ever increasing amounts of production overseas, so that cheaper labor can be exploited. At home, the use of credit, loans, and ownership of companies into shares have allowed capitalists to continue their operations, though the market has grown more unstable than ever before. The financial crisis in 2008 drove capitalism to the brink of collapse, and it was caused specifically by inherent contradictions in the system. The rate of profit has continued to fall, production has become more expensive and commodities are produced in greater volumes for lower prices. Any panic in the market has a ripple effect, and the harsh truth is that a large majority of the world’s “wealth” is artificial, mere symbols in a computer program that rely solely on blind faith. If the bourgeoisie becomes scared enough to taking out its money and halting production, the whole rotten structure collapses. If not for the action taken by the Feds over the past few decades, including multiple bouts of quantitative easing under Obama, the global market may very well have imploded long ago. It took almost a decade for the economy to mostly recover from the 2008 crisis, for the working class a recovery never really came, and some of its effects are still felt in more isolated sectors of the economy today. 

Leading up to the COVID-19 scare, there was an already existing crisis in imperialism and capitalist production. Notably, the Trade War between China and the United States has had negative effects on the rival imperialist powers, who were willing to threaten economic crises while jockeying for hegemony in the world market. The global energy sector was also entering a crisis, with Russia and the OPEC countries at an impasse on restricting oil production, which had the effect of flooding the market with oil. The overproduction of commodities in this critical sector of the economy was causing problems for the bourgeoisie in the United States, who have responded by seizing oil fields in Syria and beating the war drums, threatening Iran with invasion. Meanwhile, European nations are experiencing a contraction of unified dominance as Brexit causes a fracture in European imperialism, and a potential crisis in the UK with the looming threat of a No-Deal Brexit. This would have significant ripple effects on the global market, as the UK is one of the largest economies in the world. 

It is important to remember that this crisis was caused purely through the anarchy of capitalist production. Once the capitalists were bailed out following 2008, imperialist plunder continued and the bourgeoisie recovered, leaving the proletariat to fend for themselves and foot the bill. This time around, production really has stopped, and the effects on the capitalist economy will be disastrous. The Chinese economy today makes up 16% of global Gross World Product, is the second largest economy in the world, and has the largest pool of cheap labor, as well as being a rising imperialist power, offering predatory loans to African countries. Due to the COVID-19 pandemic, factories responsible for 70% of China’s exports have simply ceased to operate or have cut production massively, and travel to and from the country has been shut down completely. Several other countries have shut down massive sectors of their economy such as the airlines, and Italy has shut down its country altogether. Therefore, this latest crisis isn't caused by capitalists being unable to pay for their ventures, but rather there simply is no movement of capital, and no production of commodities. With this monumental economic halt/slowdown, we are staring in the face of a crisis the likes of which we have not seen in almost a century. The COVID-19 is sending the capitalist system into a freefall, and as always, the bourgeoisie and their governments will do everything in their power to make sure the workers absorb the brunt of this fall.

The Proletarian Situation

The situation in the United States is dire for the proletariat. For starters, there is a debt crisis, $14 trillion consisting mostly of mortgages, car loans, student loans, and credit cards. Deepening wealth inequality has accelerated the fall of real wages, and today (even before the arrival of COVID-19) most proletarians are in dire straits. Half of Americans make $30 thousand a year or less, and 70% of Americans live paycheck to paycheck and cannot afford a $400 crisis. Real unemployment was sitting at about 5% and has now spiked to almost 20%, and underemployment or those who have given up on finding jobs represent a forgotten sector that the US government is fine keeping in the dark. With the COVID-19 scare, layoffs are rising at an unprecedented rate, and those who aren't being fired are having their hours cut. In a country where health insurance is tied to employment, a pandemic which causes a spike in unemployment is probably the worst-case scenario for a proletarian.

The COVID-19 scare has also affected the mentality of the working class, who have begun panic buying commodities. This almost immediately resulted in a shortage of goods, which has ripped away the veil which hid the scarcity that does exist in capitalism, just like any other system. Lean manufacturing, or Just-in-Time manufacturing, provided us all with the hallucination that there was always an abundance of products for us to buy. However, after being put under pressure, the lie has been exposed for what it really is. In a nutshell, the transportation system has been developed enough that capitalists can rely on the nomadic lifestyle of proletarians in that industry. There is no large-scale storage of goods, but rather far-away sites that remain available whenever products are needed. Such a system is incredibly volatile, and any disruption in the distribution chain can cause an immediate and drastic shortage. We saw a glimpse of this with the aftermath of Hurricane Maria, when the natural disaster destroyed the colony of Puerto Rico. The result was that there was a global shortage of IV bags, since Puerto Rico was the hub of production for these goods. Now, imagine a crisis like this, but in multiple industries on every level of the production process, and not just based on production itself being shut down, but also on the transportation industry being paralyzed (like what we’ve seen with the decline in airline traffic and mass layoffs of truckers). China produces most of the world’s steel and, as stated before, their industrial production has been slashed in 70% of factories. And that is just one country. Globally, we are already seeing crippling shortages of medical supplies, most notably in Italy, the United States, and Iran, which has been the hardest hit of the three due to imperialist sanctions.

There has also been a growing trend of social distancing and self-isolation as a result of the pandemic. The cultural effects of this have the potential to negatively impact us all. Sowing fear and distrust of each other, the COVID-19 scare threatens to further divide us, further alienate us, and further fuel xenophobic and racist tendencies among white proletarians, as indicated by the recent uptick in racially-motivated attacks against proletarians of East Asian descent. This directly plays into some of the most reactionary and chauvinistic ideas in the US, expressed clearly by the Bourgeois slogan “China Lied, People Died” and scapegoating, such as labeling COVID-19 as the “Chinese Virus.”

In December of last year, the service sector accounted for 97% of new hires according to the Labor department. Additionally, the US economy relies heavily on consumer spending, and while the rush on grocery stores and online shopping may offset this in the short term, less and less people will be able to sustain this spending as incomes dry up in the coming months. Couple this development with the above-mentioned fact that most workers live paycheck to paycheck, and we see a crisis in consumption of commodities, one of the basic causes of capitalist crisis.

In short, the situation looks bad for the proletariat. Congress can’t even pass basic measures, and the clock is ticking. There have been discussions in Congress about a potential UBI bill, but if this crisis continues for several months, one-time checks will not be enough to stop the bleeding. Successive monthly checks may stop the bleeding in the interim, but the ripples effects of mass unemployment are sure to carry well into 2021, if not multiple years beyond. In other words, we’re going to see a crisis the likes of which the world has never seen before.

What Can We Do?

There have been some policies proposed by Social-Democratic elements of the Democratic Party in response to the COVID-19 pandemic. The measures proposed are attempts to treat the symptoms, and not cure the problem. Things like Medicare for All and nationalization of the healthcare system, as well as nationalizing any industries which seek government bailouts, do not get rid of the underlying economic problems which lead to the crisis we are faced with today. Medicare for All in theory protects us all from the virus, but we have seen clearly that the capitalist system of production and distribution has utterly failed the Italians, who have been hit by a chronic lack of medical supplies for their patients. In other words, what good will universal healthcare be if the medical industry itself cannot handle the demand. Currently, the for-profit system in the US offers less than 1 million hospital beds, in a nation of 330 million people. Additionally, our aim should not be to simply treat the sick. We must have a centrally-planned economy, with systems in place that prepare large storages of medical supplies we need for when viruses like this are unleashed on the world. We need an economic system that does not collapse after one month of a fraction of its production being cut. 

Activists should be cautious moving forward in their political work. The most important thing we can implement right now is Serve-the-People survival programs, specifically in terms of food and medical supplies. In doing our work, make sure to have hand sanitizer, gloves, and masks on hand for use and distribution. We should also not allow social distancing and hygiene practices to be spurred on by panic, and use them with clear heads, knowing full well that we are protecting the lives of others through these actions, not just ourselves.

The large-scale demonstrations are coming. No society can have mass unemployment and shortages of basic materials without intensifying the class struggle as a result. We must be prepared to go among the masses where they organize, and organize our own demonstrations, building strong links with the people. Go to the masses, learn from them, and educate them. Most of all, stay safe. Use the time given to us in this crisis to study theory from revolutionary teachers such as Marx, Lenin, and Mao. Do not hesitate, and do not be afraid of study. Study the conditions of the people. I strongly recommend we all crack open Lenin’s “What Is To Be Done” again, in preparation for the coming months.