Covid-19: the case for public spending and public ownership

Submitted by AWL on 4 March, 2020 - 11:58
C-19 warning

Covid-19 is spreading. Spreading even faster, in the last week of February, was financial panic.

The Dow Jones share-price index in the USA went down 12% in the week ending 27 February, its biggest drop since 2008.

The first economic effects from a pandemic are in some ways the opposite of the usual beginning of a capitalist slump.

That usually begins with "overproduction" - when capitalists, vying each to outstrip the other in a boom, find they've increased capacity way beyond available market demand, and suddenly cut back on new investment.

With a pandemic there is instead a "supply shock", a disruption of production caused by factories supplying production inputs being shut down.

That would happen with a pandemic even with a socialist economy. With capitalism, though, the "supply shock" can also trigger an economic crisis of the more usual capitalist sort, through a snowballing slump of demand as laid-off workers lose income and capitalists pause investment and luxury spending.

The labour movement should demand a crash increase in NHS funding to enable currently-overstretched hospitals and other facilities deal with the risks of the virus. By enabling hospitals to hire more staff, that increase in funding will also counteract economic slump.

Lisa Nandy, though in general she has positioned herself as the Labour leader candidate least wanting to "pick sides" against big business, has rightly demanded "emergency legislation to guarantee people the rights they deserve such as statutory sick pay from day one for all workers regardless of income… Bosses should not put their profit margins ahead of public health and people need to be able to follow medical advice".

As it stands, workers get statutory sick pay of £94.25 per week only from the fourth day off, after three days unpaid.

Sick pay clauses in union collective agreements give sick pay more comparable to regular wages, and often from day one, though sometimes there is a twist with "attendance bonuses" which effectively make each month's full pay depend on no day off sick that month.

The labour movement should demand full sick pay across the board, no loss of bonuses, and no loss of Universal Credit for claimants "self-isolating" over Covid-19.

We should also demand a crash restoration of funding to local authorities, which will need to deal with much of the social fall-out if the virus spreads widely.

The first answer to a financial and credit crash triggered by a spread of the virus is public ownership and democratic control of high finance.

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