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Coronavirus pandemic - a deepening health and economic crisis

28 July 2020

While there may be a perception (one that has certainly been encouraged by political and business leaders) that the worst of the pandemic is over the most recent evidence points to a crisis that - in terms of both health and the economy - is actually deepening rather than easing.

In a briefing at the end of June the World Health Organization (WHO) chief Tedros Adhanom Ghebreyesus warned that the fight against the virus was "not even close to being over"; adding that "although many countries have made some progress globally, the pandemic is actually speeding up."  In July we have seen strong evidence for that trend with record high daily new-infection figures being set and then surpassed as the month progressed.  At the time of writing the global figure for daily infections stands at around 280,000.

Over twenty countries are now recording more than 1,000 new cases of the virus daily while eleven post more than 50 new deaths.  There are currently around seven thousand confirmed deaths reported daily, a fatality count not seen since April.  Overall, global infections stand at over 16 million, with nearly 650,000 deaths (in just seven months since the virus took its first victim).  That it took two months to go from one thousand reported cases to 500,000; another two months to go from half a million to five million; and then, just in the last two months, from 5m to 16 million, shows the degree to which the spread of the virus has accelerated.  That deaths have not risen at a similar rate is a down to a number of factors such as an increase in the number of tests being carried out; the success of suppression measures; improvements in treatment; the fact the more young people are being affected; or that many people in vulnerable categories are continuing to isolate.  These mitigating factors had seen a fall and leveling off in the number of deaths reported daily.  However, they have not overturned the basic tendency for higher levels of infection, and a higher prevalence of the virus, to result in more deaths. This this why - as suppression measures weaken - the daily death figures are once again on the rise.

At this point in the global pandemic there are two distinct trends.  The first is in those countries where the virus is raging - where it has accelerated recently or where it has continued to spread without check for a long period of time.  The second is in countries which had some success in suppressing the virus for a period but which are now experiencing a resurgence.
 
Raging

The current epicentre of the pandenic is the Americas.  At the forefront of this is the United States. Across the country there are 4.2 million infections and the death toll is nearing 150,000.  The Centers for Disease Control predicts that the US death toll will hit 175,000 by mid-August, while Dr. Scott Gottlieb, the former director of the Food and Drug Administration, says total deaths could double by the end of the year to 300,000.

In relation to the US it is no exaggeration to say that the virus is raging out of control.  Figures for reported daily cases are regularly above 70,000 while the figure for daily deaths is currently around the one thousand mark.  Daily cases are at nearly twice the earlier peak seen in mid-April with 42 of of 50 states recording a rise in recent weeks. The US accounts for a third of the total new cases globally, despite having just four percent of the world’s population.

The latest surge is being driven by fresh outbreaks in the south and west of the country. Dozens of hospitals in California, Texas and Florida are at capacity, and some have begun sending away patients they deem least likely to survive.  It would be wrong describe this new peak as a second wave because at no point was the virus suppressed to any significant degree.  Top public health official, Dr Anthony Fauci, has said the country is still "knee-deep in the first wave".  Reflecting on the hope in May and June that the US could flatten the curve of the infection, he said the figures "really never got down to where we wanted to go."  The failure to suppress the virus at an early stage compounded by a rushed opening of the economy has had catastrophic consequences.  A warning by President Donald Trump that the pandemic may "get worse before it gets better" is a partial acknowledgment of this.  It is also an acceptance of a continuing high level of infection and death. However, what isn’t acknowledged by political leaders, both at a federal and state level, both Democratic and Republican, is their own role in bringing this about. Throughout the crisis their main focus has been restoring profit making rather then protecting public health.

Brazil has been the worst-hit county in South America. It is only the behind the US in the number of confirmed cases (2.5 million) while its death toll stands at more than 88,000.  Brazil has recently set new highs for both recorded daily cases (65,000) and deaths (1,293).

Mexico has now surpassed Italy in its number of known COVID-19 deaths, which currently stand at just over 44,000, making the country’s pandemic outbreak the fourth deadliest in the world.  The figures for new cases have been steadily climbing over the past month and a half from less than 3,000 per day at the beginning of June to 6,000 per day towards the end of July.  During that same period, deaths have increased from an average of more than 350 per day to now more than 500 a day.

India now has the third highest number of confirmed cases in the world with over 1.5 million. On Sunday (26 July) daily cases in India went past 50,000 for the first time.  It capped the end of the country’s deadliest week of the pandemic, according to the Times of India, which reported that total cases had grown by 34% and the death toll had jumped by 24%. India is the country where the spread of the virus is accelerating most rapidly. Given its population size, high level of poverty and limited health services it is the country that could ultimately suffer the most.  As an historical parallel 60% of all deaths from the Spanish flu in 1919/20 were in the the sub continent.

More than 812,000 cases and 17,000 deaths have been recorded in Africa.  By far the biggest contributor to these figures has been South Africa which has recorded over 434,200 cases of the 5,940 deaths.  It ranks as the fifth highest country in the world in terms of cases.  As with the other countries mentioned above the spread of the virus is accelerating with record totals for new cases and deaths being set in recent days.

Resurgence

The other feature of the pandemic in recent weeks has been the resurgence of of cases in countries where suppression measures had been successful.

In Australia, one of the countries considered to have dealt well with the the initial phase of the pandemic, there has been a spike in new cases.  These have been centred on the city of Melbourne. In response the state government has reimposed restrictions.  Five million Melbourne residents are barred from leaving home for six weeks, except for essential reasons.  For 3,000 people living in public housing tower blocks, an even stricter lockdown was imposed.  Residents of the nine towers cannot leave for any reason and are subject to a police guard.  The majority of residents are low income and come from non-English-speaking backgrounds. Many are migrants - some who arrived as refugees - from African nations, Vietnam and China. There are many young families and pensioners.  This hard lockdown proved to be counterproductive with the number of infections rising from fewer than 50 to over 200.  Conditions created by the effective imprisonment of people actually aided the spread of the virus.  The experience of Melbourne also reflects the more general trend of the greater impact of the virus on poor people and ethnic minorities - in terms of both health and restrictions of civil liberties.

COVID-19 cases have spiked in Japan in recent weeks, particularly in the densely-populated capital of Tokyo. On July 15, the city raised its alert system to level four, the highest.  The two days each set new record highs for the city with 286 and 293 cases respectively.  On July 24, daily reported cases for the city surpassed 300 for the first time.  Nationally Japan is reporting daily figures last seen in April when the government declared a state of emergency.

In May - as number of new confirmed cases and deaths were falling across - it was assumed that Europe had passed its peak.  But as many countries ease restrictions there are fears that the region could see a second surge in infections.  In mid-June, the EU agency that monitors infectious diseases warned that the risk of a "second wave" of infections was moderate to high.  Those fears and warnings have now come to be realised with a resurgence of Covid-19 across Europe.

Barely a month after Spain ended its state of emergency, cities including Barcelona, Zaragoza and the capital Madrid have seen a surge in new infections, prompting the government to warn that a second wave could be imminent.  The incidence of virus cases in Spain has tripled over the course of July, from 8.8 cases per 100,000 to 27.4 per 100,000.  Several regional governments have re-imposed partial lockdown measures as coronavirus cases begin to rise.

Serbia has seen a dramatic rise in cases with authorities announcing a state of emergency in several towns and cities (later lifted after protests).  Overall there have been 341 deaths and 17,076 cases with some 300 new infections are being reported daily.  Coronavirus, infection rates are also rising sharply again in Austria with daily reported cases reaching figures not seen since April.  The number of active COVID-19 cases has risen from below 400 to 1,315 since mid-June.  In Ireland the National Public Health Emergency Team (Nphet) has warned of a second wave of COVID-19 infection, reaching 150 new cases a day in the coming weeks, and of hospitals being overwhelmed in the winter.  The team’s modeling warned that the “R number” (infection reproduction rate) was already likely between 1.4 and 1.8.

The above provide notable examples of the general trend of a resurgence of the virus.  What is also clear is that this resurgence is directly linked to the “reopening” of economies that has seen the abandonment of suppression measures and a push for a return to the workplace.  It is no coincidence that the major sites for infection and transmission have been workplaces (factories, warehouses, abattoirs, schools) and workers accommodation (particularly migrant hostels and high-density, low-income housing).

Economic crisis

Alongside the health crisis there is also a deepening economic crisis.  This has seen a major contraction in economic activity and growth across the world.  A recent report from the International Monetary Fund (IMF) said that the global economy will take a €12tn hit from the Covid-19 pandemic and that it would take two years for output to return to levels at the end of 2019.  Significantly the report predicted a more severe contraction than that forecast (3%) in its previous report in April (4.9% compared to 3% for the year).

The sharp downturn is affecting all regions and all sectors. Bloomberg has reported that global real estate investment fell by 33 percent in the first half of the year. Hotel investment plunged by 59 percent in the first half of the year with investment in retail properties dropping by 41 percent.  The decline in trade has hit the export orientated economies of south East Asia hard. Japan, the world’s third largest economy, is predicted to announce a 20 percent contraction in GDP on an annualised basis in the second quarter compared to the previous three months.

A report by the Organisation for Economic Cooperation and Development (OECD) has forecast severe economic contractions for all the developed nations.  Germany’s decline in GDP is forecast to be 6.6% this year while Spain’s GDP will fall by 11.1%, Italy’s by 11.3% and France’s by 11.4%. The US, the world’s largest economy, is expected to take a hit of 7.3%.  All of these are outstripped by the predicted slump of 11.5% in the national income of the UK.  These figures are also in line with those contained within a report from the European Commission (EC) which forecasts that the eurozone economy will sink deeper into recession that previously thought.  According to this the bloc will contract a record 8.7% this year before growing 6.1% in 2021. It compares with the EC's May forecast of a 7.7% slump and 6.3% growth.  As is was with the IMF report the projections are becoming more pessimistic with the downturn deepening and the recovery weakening

According to the EC report Ireland’s economy set to shrink 8.5 percent this year.  Some more detail on the Irish economy has been provided in Central Bank of Ireland’s latest Quarterly Bulletin.  It predicts that, this year, private consumption will fall by 10.1 percent; unemployment will average 14.5 percent, while investment will collapse by 34.7 percent.  In a worse case scenario, consumption falls by 13.9 percent, unemployment averages 16.6 percent and investment falls by 44.4 percent.  As a comparison, in the aftermath of the 2008 financial crash, unemployment in Ireland peaked at 14.6 percent.

These reports - and what can be observed on an ongoing basis - provide evidence of a crisis that is severe and will be long lasting.  They undermine expectations of a so called V shaped recovery in which the economy will rebound rapidly from the initial shock of the pandemic.  What this points towards for an explanation of the crisis is not an eternal shock but rather the dynamics within capitalism itself . While the pandemic may have been a trigger - or an accelerator - it was not the cause of this current crisis.  What it did was to expose the weaknesses that were already there and strengthen the trends that were already in train.
 
Response
 
As an immediate response to the crisis national government’s and regional blocs have greatly increased the level of public borrowing in order to provide supports to businesses.  One of the prime examples of this approach is the UK which is projected to borrow more as a share of GDP than it ever has done in the last 300 years, outside of the two world wars. The Treasury has already borrowed £350 billion this financial year.  Since March, the cost of the furlough scheme and other support measures for the economy have cost almost £189 billion. It is predicted that with increasing spending and falling tax revenues the deficit is likely to reach £361.5bn (or 18 per cent of GDP).  As a comparison that is almost twice the size of the deficit at its peak in the 2008-09 global financial crisis.

While this represents a massive financial intervention in the economy there is no clear plan for recovery.  What has been brought forward so far has been notably under-powered and underwhelming. UK Chancellor Rishi Sunak announced a recovery plan in early July - but it only amounted to £30bn (less that 10 per cent of additional spending).  The measures were also limited -  focusing on shoring up the property market, boosting consumer spending and offering temporary tax relief to sectors of the economy such as tourism and hospitality.  One of the highlights of the package the was a discount on restaurant meals during the month of August.  This was ridiculed with the recovery plan dismissed by economic commutators as “more meal deal than New Deal”. The previous week PM Boris Johnson set out what he described as an 'ambitious' economic recovery plan vowing to "use this moment" to fix longstanding economic problems and promising a "new deal" to build homes and infrastructure.  However, this only amounted to £5bn.  Despite the illusion to the original New Deal associated with the Roosevelt administration in the US in the 1930’s and 40’s the plan put forward by the current UK government bears no comparison.  The New Deal ran over several years, with spending each year between about 5% and 7% of the total output of the economy (GDP) each year.  Boris Johnson’s £5bn would be less than a quarter of one per cent of GDP.

The member states of the EU have agreed on a €750 billion recovery package following one of the longest summits in its history.  Under the terms of the agreement the EU Commission is empowered for the first time to borrow directly from the financial markets on behalf of all EU member states.  The package is made up of €390 billion, which will be allocated to individual EU states as grants that need not be repaid, and another €360 billion in conditional loans.  As with the bailouts that followed the 2008 financial crash access to funds is tied to structural reforms (a code word for austerity).  Member states must first submit national reform plans to the EU while while an “emergency brake” can be applied to funding if austerity policies are not proceeding quickly enough.  This recovery programme is primarily a coercive mechanism for the imposition of austerity across Europe. The low priority given to health is revealed by the slashing of extra EU-wide funding for scientific research and health care that had been part of the initial proposal only two months ago.
 
Despite the rhetoric from political leaders about transforming the economy in the wake of the pandemic there is no indication that any of them are going to break from the prevailing orthodoxy and adopt a Keynesian type programme. They didn’t do it in response to the financial crisis and they aren’t going to do it now.  So we can expect the same pattern to unfold - of a massive increase in state spending - that is underwhelming oriented on the capitalist class - following by a long period of austerity in which the working class is forced to pay the costs.  And it is not just governments - the capitalist class itself can’t accept any reforms that would increase costs or enhance the power of labour. Businesses need a return to the old normal in order to operate profitably.  Indeed, for them to recover what has been lost the position of workers will have to deteriorate even further.

Class struggle

The period of the pandemic has witnessed a rising level of struggle against class exploitation and against oppression more generally. This is likely to intensify in the near and medium future as pressure for a return to a capitalist normality is ramped up and the costs of resolving the latest crisis are imposed. Many of these struggles - which already ongoing - will revolve around the immediate question of workplace safety.  There will also struggles - and again these are already happening - over efforts by businesses to reduce wages and working conditions and by governments to cut public services.  The role of socialists in these struggles should be to promote the independent activity of the working class and also to raise local or section struggles to a more general challenge to capitalism.


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