Some were fascinated by this spectacle, convinced that a socialist utopia is upon us. We have to get out of this, and quickly. Instead, we need to ask ourselves the same questions that we should always ask: who benefits from these interventions and who pays? Who will be empowered and who will not be empowered?
The crisis itself is already worsening economic inequality. At first glance, government income support plans may seem to help remedy this situation. In reality, they will get almost exactly the opposite. It has been widely noted that many people remain excluded from the safety net, but the problem goes further than that. Where does all this money come from – and where does it ultimately go?
The answer lies mainly in a massive expansion of debt. Wage support is funded by large-scale public borrowing of the type we were told was unaffordable just a few months ago (although this is now supplemented by direct funding with newly created money from Bank of England). Yes, it could usher in a new era of state intervention – but it could just as well herald a new era of austerity.
Conservatives like Sajid Javid – who tweeted that “the whole point of fiscal conservatism in normal times is to be able to act decisively in the event of a real economic emergency” – are already trying to reconcile the response to the crisis with the policy of austerity. Tax hawks will want to draw a line during the crisis period and insist that we must now tighten our belts to pay for it.
Meanwhile, mortgage and rental “vacations” and guaranteed loans for small businesses force people to take on private debts that they will have to pay off at the end of the crisis. Either way, the bulk of the costs will ultimately be borne by ordinary people.
On the other hand, hardly any sacrifices have been asked of banks, owners or profitable companies, such as utility companies. The only members of society who are not asked to share the burden are the “rentiers”: those who earn money by owning assets that they can charge others.
Homeowners have access to mortgage leave but are not required to pass it on to their tenants. If they do, they can recover any missed rent after the crisis is over. Since the same cannot be said of the loss of tenants’ income, many will be more inclined to go into debt or be evicted.
Banks benefit from government loan guarantees with few chains attached. This means that they do not take the risk of extending credit to troubled businesses during a recession – which is borne by the state. Meanwhile, mortgages and credit card debt will still be repaid in full – or with additional interest if a vacation is granted.
Given all of this, wage support works primarily to protect tenant income streams by allowing workers to continue paying rent and bills and debtors to continue paying off their creditors.
The government acted quickly to protect the interests of rentier capital, but it has constantly dragged its feet to protect the interests of workers. In fact, most of the support was channeled through banks, homeowners, employers and utility companies – the government just trusting them to pass it on sympathetically. It’s naive at best and irresponsible at worst.
Guidance innocently declares that mortgage leave for homeowners “will not put unnecessary pressure on their tenants.” Without surprise, emerging anecdotal evidence suggests exactly the opposite. The business interruption loan program has already had to be revised after banks failed to provide low-cost credit to struggling businesses, while the Financial Conduct Authority was forced to stop them from raising fees of overdraft. Meanwhile, some large companies still fire workers, or at best, pocket government support and refuse to supplement it with their own funds.
The government has built an economic bunker from which the annuitants will emerge unscathed on the scene of the ravages caused to the rest of the population. Many will see their bank balances significantly improved as they have been unable to spend money in theaters, bars and restaurants. As economist Gary Stevenson points out, if part of this windfall is spent on property, the result will be to drive up house prices – adding an insult to injury for the poorly paid tenants who will have suffered the bulk of crisis. All of this is simply indefensible.
Crises always create winners as well as losers. The 2008 bank bailouts should have taught us that government intervention is not necessarily gradual. At the time, the state assumed the responsibilities of finance capital and ordinary people finally paid the bill. Now we see a very similar story happening again – but the mechanisms at work are more subtle, the implicit subsidies for the interests of annuitants passing under the radar.
The left must ruthlessly follow the money and ask what pockets it will end up in. It must stand alongside those who demand that the big winners of our economic system pay their share: groups such as London Renters ’Union, demanding a real rent freeze. Wetherspoons workers are still fighting to be paid in full. The Jubilee Debt Campaign, calling for the freezing of repayments of personal debts and their cancellation.
Perhaps, as Stevenson suggests, we should also demand an emergency wealth tax to straighten out this huge tilt of the scales towards wealthy asset owners. Without such measures, we must have no illusions: this crisis will make our economy even more uneven and unstable than before.
• Christine Berry is researcher, writer and consultant