I’m the first to brush my teeth before I pronounce the name of John Maynard Keynes (1883-1946). But it was the great economist himself who warned us against the ideas of long-dead economists. Let’s pause before we nod to the latest conventional wisdom among politicians and pundits, that our economic thinking calls for the return of Keynes.
One thinker urging the pause is Robert Skidelsky, quite literally the man who wrote the book on ‘the return of the Master’ (in response to the Great Recession a decade ago). He argues that the current economic crisis is fundamentally unlike the Great Depression. It poses the risk of an ‘inflationary depression’. We need the institutional creativity of Keynes – adapted to problems he did not address.
Skidelsky limits himself to broadly economic problems we face in the short term. But there’s also a difference in the longer-term big picture.
Keynes represents a sophisticated answer to the problem that shaped 19th- and early 20th-century politics: the socialisation of property.
His arguments about state investment in the economy and income redistribution were part of a wider picture of nationalisation of property, industries and services to address the hangovers from obscenely exploitative societies.
The pandemic has highlighted a different problem: the socialisation of free movement of people and capital. Consider the headlines of the last few months.
One has been the impact of lockdown on air travel – and the benefits for the global environment. Never has it been clearer how easily a lot of travel can be cut. Nor has it been clearer how private travel contributes to the public cost of environmental damage.
Next, there has been the political impact on the free movement of people within societies and between them. Social distancing has raised afresh the balance between security and individual liberties.
Cross-border controls and security has also raised afresh the meaning of citizenship and state obligations. Malta and Italy felt justified in closing their ports to irregular immigrants; Portugal has granted temporary citizenship to immigrants so as not to inhibit them from seeking medical help if they are infected by COVID-19.
Third, one of the salient features of the current economic crisis is that it follows closely on the heels of the Great Recession. One reason why the classic Keynesian approach is tricky is because this slump, in many countries, is following not a boom but the slow recovery following another slump.
It is difficult to see how bailouts aren’t going to come with limits to the financial movement of capital
The consequence is that ordinary taxpayers have had to bail out large and wealthy firms for the second time in a decade. The first time round, the wealthy took the money and continued to avoid paying into the coffers that had saved them.
This time round, as Lawrence Zammit has pointed out in these pages, it is difficult to see how bailouts aren’t going to come with limits to the financial movement of capital. There will be moral pressure to equate ‘tax avoidance’ (use of legal loopholes to pay taxes in other, low-tax countries, like the Netherlands, Luxembourg or Malta) with illegal tax evasion.
The pressure will not just be moral. This pandemic has dramatically shown the economic relevance of a functioning health system. The years of privatisation and deep austerity have been a factor limiting the UK’s ability to test and trace in this pandemic, in contrast, say, with Germany.
Once the investment in the social state returns to the front line of political discourse, then the talk will turn to how to fund it. Unless there’s a general increase in taxes, the money will have to come from the wealthy individuals and firms who are paying less taxes than they ought.
Given their current ability simply to move to another domicile, the political debate will take on an international dimension, with a focus on harmonised tax rates to curb the flight of profits.
The new politics will also have an international dimension. This pandemic has been terrible, and China’s handling of aspects of it has been criticised. But supposing the pandemic had arisen in a dirt-poor state with no medical infrastructure? Or even in a failed state? The inability to respond would have gone hand in hand with a massive flight of people across borders.
Given the likelihood of repeat pandemics, the international debate is likely to feature two bones of contention. One concerns the good sense of helping poor states to develop a social dimension – which would address both the flight of capital and people from those countries. But it would mean that the global north would need to stop being the banker of the kleptocrats ruining those states.
The other issue will concern the WHO, whose role in developing the health-service capacities of developing nations will inevitably be caught up, given the high stakes, in the new cold war between the US and China.
The result of all this will not be a single policy or debate but a new environment in which debate takes place, shaping the responses from left to right.
Environmental anarchists on the left will insist both on free movement across borders and against needless air transport. Right-wing nationalists will insist on tighter borders, both against immigration and perhaps a revision of current Schengen terms. Centrists will insist on regional or global regulation, to bring capital under one tax regime and people under a more tightly woven network of care.
What will unite them all will be the agreement that free movement should no longer be associated with freedom from restrictions only. It should be governed by social objectives. The debates will be about the social vision governing those objectives.
The implications for Malta’s economic strategy couldn’t be more radical.