Fighting them on the beaches

Mass refusal of social distancing is the cost of social fragmentation

In every crisis there is the official story and there is reality. While the TV news remains mesmerised by the daily political theatre of Johnson's press conferences, the reality at micro-level is getting grimmer.

First, we've seen a mass refusal to obey the government's "suggestion" that people don't go out. And we've seen shoppers continue to panic-buy food, sometimes crushing through the doors of supermarkets in ways guaranteed to keep the virus exponential.

In response, politicians are railing at their own voters, calling them selfish, with "young men" (a fairly important group if given the amount of war rhetoric being thrown around) being especially stigmatised.

But the weekend’s mass influxes to beaches, street markets and public parks were a direct result of the UK government failing either to issue clear public health messaging, or to begin the kind of lockdowns that have become mandatory Italy, France and New Zealand.

Basically they expected a networked population, taught by 30+ years of neoliberalism to follow their individual self-interest, to start acting like the community-singing cockneys in Passport to Pimlico. The fact that they didn't was wholly predictable, because all many the old sources sources of peer pressure - solidarity, community and respect for expertise - have been blown away.

Second, we've seen the start of victimisations of health workers. Emergency care medics being evicted at 24 hours notice; nurses being insulted in the streets and told they are a health risk; meanwhile hospital managers are being forced to push medics and nurses into critical care without the vital personal protective equipment.

Third, we've seen an immediate surge in financial scams aimed at the elderly and the sick: fake cures sold online, testing kits that don't exist, price gauging by a few small shopkeepers. And in response, a justifiable anger.

Fragmentation

This snapshot should reveal, to anybody who has experienced a situation of social crisis or breakdown, the familiar emergence of numerous "them and us" narratives, which the UK political class need to a) recognise and b) learn how to mitigate.

Right now politicians on all sides are focused on two out-of-control crisies: the epidemic itself and the economic consequences. So in the next 24 hours we're likely to see Boris Johnson stop dithering and order an immediate lockdown, putting police and armed forces on the streets to enforce it.

Horrible though it will look, it is necessary. Because unlike in the Second World War, when Britain was never invaded, the enemy is already here: the virus has no hangups, no psychoses, no class contradictions, no bumbling politicians to hamper its own progress.

But there's a third front, beyond epidemiology and economics: it's civil society. And after 40 years of atomisation as part of the neoliberal project, UK society is not in great shape. This is the thing politicians recoil from saying, because it amounts to criticising the people who vote for you, but it needs saying.

I've heard people from the official world start worrying about "the underclass" during the last 48 hours. The subtext of a lot of their private criticism of those going to Skegness, Matlock or London's public parks is that they're low-educated hopeless people.

In my experience this is completely wrong. To ex-military and civil service types, what they mean by "the underclass" is actually a large part of the working class - both the old, small-town ex-industrial culture and the "new", younger city dwelling culture. The people who turned up at Matlock on Harley Davidsons were not members of an underclass. 

The great conceit of the British political elite is that, faced with wartime levels of risk, the modern population will somehow behave as their grandparents did in the 1940s.

To understand why they won't just watch any movie from that era: Passport to Pimlico, The Way Ahead or In Which We Serve. The micro-behaviours and levels of class deference and collective action exhibited quite naturally in those films would be seen as deviant by many people on the beaches today. 

In the 1940s - and in fact right through to the 1970s - peer pressure was exerted by working class people on each through figures of authority, through a shared humour, and through face to face conversations. And above all a shared culture.

It's not that these things have disappeared during the neoliberal era, but they have become fragmented: people in my south-London community exert peer pressure on each other; so do people in my hometown in Lancashire. But not in the same way, or with the same values.

Solidarity

In the crisis that's about to unfold, someone has to "own" this problem. I am told it is pre-occupuing senior law-enforcement and security people - but it needs to be front of mind for people in politics. 

They need to stop saying to each other that "the underclass is undermining our efforts against the coronavirus” and understand that perfectly decent and ordinary people are reacting to a crisis in ways shaped by decades of social atomisation and commercialisation.

What they need is a clear public information campaign and a compulsory lockdown, with mass testing, tracing and the planned delivery of food, medicines etc to those in need.

In the end the people who have to sort this out is us: the 99%. In my local area we're already seeing spontaneous acts of solidarity and adaptation: one local pub is to reopen as a "community kitchen and food store"; numerous handwritten signs on closed shops explain how they'll adapt to delivery-only or online operations. Signs pasted to lampposts invite people to join local self-help groups on Facebook. People are learning how to queue in two metre intervals.

The labour movement has already played a sterling role in the fight for an 80% wage subsidy. With 7 million union members and 600,000 Labour Party members we could be doing a lot more at community level.

But the most important thing is to argue, unashamedly, for a society based on mutual aid and co-operation. And to back today's expected enforced lockdown, while using social media and our windows and balconies to spread a message of solidarity with each other - and resistance to the profiteers, rogue landlords and xenophobes.

Lock. Down. Now.

Boris Johnon's complacency will cost 000s of lives

Let’s start with some pure mathematics, courtesy of Professor Julia Steinberger at Leeds University. The graph above shows that, until it imposed a compulsory lockdown — arresting people who needlessly left their homes — Italy’s coronavirus outbreak was growing exponentially.

Yesterday Italy saw 793 people die of the disease. Without the lockdown (see the light green line above) it would have been 4,000 — in a single day. That is where the UK is heading.

Fortunately, despite more than two weeks of dither and delay, there is still time to limit this catastrophe. That’s why, yesterday, some of the most eminent professors of epidemiology and public heath called on the government to impose an immediate Italian style lockdown, with movement restrictions within and between areas most severely affected.

Yet Boris Johnson is still prevaricating. And to their discredit no official opposition party has yet gone beyond calls for people to heed his advice.

In case it’s not obvious, people are not heeding the advice. They are going to the beach, or hanging out in parks, and of course standing in massive queues at supermarkets.

I have a hunch that the repeated opinion polls showing around half of Brits approve of the way Johnson is handling the crisis simply reflect the fact that he has not so far ordered them to do anything different.

When every NHS ventilator is occupied and medics are having to take life and death decisions over our loved ones — leaving the frail, and those with co-morbidities to die, as in Italy — we’ll see where the approval rating is then.

Revelations by Alex Wickham show there is deep disquiet even inside the cabinet at the complacent way politics have been “outsourced” to senior public health officials who may or may not know what they are doing. There will be the “mother of all public inquiries” after this, into Johnson’s refusal to get ahead of the crisis.

We need two decisions today: an immediate lockdown in the most affected areas— so everything closes and you only leave your house for essential things. And for the self-employed to be included in the £2,500 a month income scheme.

Self-employed hung out to dry

UK government’s workforce bailout shows why the precariat needs to get organised

The UK government’s employment protection scheme is a partial victory for crisis economics over the logic of capitalism. Late and inadequate though it is, it should be enough to stop an immediate slump in demand.

But it is teaching millions of people a brutal lesson about the logic of the neoliberal labour market. While up to 27 million people in permanent jobs can get a wage subsidy worth £20,000 a year, there are 5 million self-employed people who will get a quarter of that.

Though they will get a tax holiday, and if VAT registered a VAT holiday, most will be forced onto the wholly inadequate and punitive Universal Credit system. Welcome to the world of “I, Daniel Blake”.

It’s not simply unjust, it threatens to take down millions of small businesses — like hairdressing, corner shops — and decimate the construction workforce.

There are more self-employed people in Britain than ever before: a product of the casualisation of the workforce and a tax system that tacitly encouraged needless and even bogus self-employment. The two biggest groups are construction workers (921,000) and professional/scientific workers (609,000).

Many people working in barbers, hairdressers and for taxi companies are forced to be self-employed, though money is collected through a single till, by a company — with the tax authorities turning a blind eye. It’s a neat trade-off: one sixth of the workforce effectively has no employment rights, and in return they get to pay lower taxes and the businesses that employ them avoid paying national insurance.

But last night they paid the price. Because when it came to designing an unprecedented state bailout, neither the self-employed workers nor the small businesses who “employ” them had a seat at the table.

The unions, via the TUC, forced the government to deliver something fast and adequate for the employed workforce : a £2,500 per month wage subsidy scheme. But it’s created a sharp inequity that is being loudly denounced on phone-ins.

Equalise the benefits!

The answer is to allow self-employed people full access to both sick-pay and the employment support scheme — with HMRC acting as their virtual “employer”. If we are not going to enact an emergency universal basic income — and most unions are hostile to it — then we need to universalise what was won on Friday.

By the very nature of self-employment and temporary work, these workers are likely to be the first out of the door as the economy slows down. There is no sense and no economic justice in the move.

There are two lessons to be drawn: first, that unions work. Though they represent only 6.3 million of the 27 million employed workforce, they effectively represented everybody this week. There should be a mass recruitment drive now, by unions, pointing out that — if things get even tougher, being represented helps.

The second lesson is: we need a different kind of labour market. The pubs, hairdressers, taxi firms and construction giants who’ve been exploiting their workforce through bogus or needless self-employment should be told that the price of the bailout is to start hiring people on the books.

There will of course always be temporary and self-employed people in the professional/managerial sectors, and in retail and culture but in a high welfare economy like Denmark they make up just 8% of the workforce, not 18% as here.

The labour movement has been talking for years about organising the precariat and the self-employed, and the reason most of it has been talk is that these workers need a different structure of dues payments and need representing in differnent ways.

Now we have to seize the opportunity. Five million people have been shafted — and if the labour movement does not fight for them, you can bet the populist right will.

Add some noughts, Mr Sunak

UK bond market turmoil signals need for urgent fiscal stimulus

In a crisis, the most important thing the authorities can do is get ahead of the chaos. Yesterday (Thursday) we saw the Bank of England scrambling to do just that - but in a way unprecedented even in the 2008 meltdown. And we still don't know if it will work.

Having cut interest rates to 0.25% last week, and launched a scheme to help banks lend to small and medium-sized businesses, the Bank then faced "deteriorating conditions" in the market for UK government debt.

Normally, in a crisis, investors move their money from risky assets to safe ones; shares are risky, government debt is safer, with the safest ones of all being those with the longest maturities. But in the past week, investors have been clamouring instead for government bonds with the shortest lifespan because these are a close substitute for cash.

So at an emergency meeting, the Monetary Policy Committee not only slashed interest rates again, to 0.1%, but restarted its quantitative easing programme (QE), to the tune of an extra £200bn. 

The normal aim of QE is to simulate the effect of cutting interest rates below zero - ie pump money into the banks - while forcing investors to move their money out of bonds and back into shares, property etc, where they can help fuel growth. 

Yesterday's move had a more urgent objective: to stop investors pulling their money out of the UK financial system altogether. In the past month the pound has fallen 13% against the dollar and 10% against the Euro, despite the fact that the Eurozone is more badly affected by the coronavirus, and that the USA has screwed up its own crisis response.

There is a global flight to safety and the UK, with its poor growth because of damaging austerity programmes, and with high uncertainty around Brexit, looks vulnerable.

The strategic question facing global investors is: which governments will do fiscal stimulus hardest, fastest and most successfully. Up to now the UK has done too little. Rishi Sunak's budget contained, effectively, just £12bn of extra spending for coronavirus. Today he needs to start adding some noughts to the amount spent.

The £330bn soft loan facility to firms, and the £190bn release of bank reserves for lending to small companies were welcome - but this is going to need borrowing and spending by government on a vast scale: to pay people’s wages, to bail out failing airlines, and to force-march the manufacturing sector into producing ventilators.

I have argued before that, like Japan, the Treasury should be prepared to issue debt that is bought direct by the central bank - so-called monetisation. The orthodox view is that this, itself, would undermine sterling and thus fuel inflation, but given we're about to experience the worst economic slump in history, deflation is the bigger danger.

If it won't allow the bank to buy its debts direct, the government in any case needs to borrow at scale: a full emergency basic income scheme for six months would cost around £300bn. That's a massive sum but would still leave UK debt below 90% of GDP (Japan's debt is 196% of GDP) .

As the Systemic Risk Council warns, the Treasury should be wary of relying on globalised financial markets for this newly issued debt, and instead "prioritize distribution to domestic long-term investors".

In practice, this means an element of what economists call "financial repression". You have to be able to prevent money flowing out of the country, and coerce domestic savers to lend to the government by giving them nowhere else to go. 

This is exactly what post-war governments did - and combined with sharp inflation in the 1940s and 50s it quickly eroded the debts they had piled up during the Second World War. But if Britain and other major states did this, the highly globalised financial market would - just as it did in the 1930s - retreat to a series of closed, regional and national markets.

Marx used to say that all economic crises are a memento mori for capitalism: this week's turmoil on the bond market is a memento mori for globalised finance.

Whatever happens in the long term, the growing turmoil must force Chancellor Sunak to take unleash a decisive fiscal stimulus - borrowing hundreds of billions - today. 


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An Emergency Universal Basic Income

Why it's needed and how it might work

Numerous UK politicians are calling for an Emergency Universal Basic Income (EUBI) to mitigate the Covid-19 crisis. Here I want to briefly outline the scale, the problems and the issues around funding it. 

They are all surmountable but it's worth remembering - as all proponents of UBI like me know - that there are cultural objections to it from both capital and organised labour. We may have to overcome these objections pretty quickly if the UK government's conventional measures don't work.

What problem would an EUBI solve?

The government's self-isolation strategy means that up to 6 million workers will need to take sick leave in the next 6-18 months, either because they are sick or looking after loved ones. Those on the lowest paid and most precarious jobs won't be able to afford this, so may work through their illness, intensifying the outbreak.

In addition, massive layoffs are happening as demand slumps.  This combination of mass absence and layoffs creates the danger of:

  • A sudden stop in household consumption

  • Rising household debts leading to morgage and rent arrears, and other defaults which destabilise the finance system

  • Needless transmission and a bigger epidemic because workers who can't afford to be off sick stay at work

This is excacerbated in the UK by the high number of self-employed and precarious workers, compared to other developed countries: there are 4.8m self employed; 0.9m on zero-hours contracts and 1.4 million temporary workers

How does a Universal Basic Income work?

A UBI is regular income paid direct from the state, funded by the taxpayer, to all people of working age, regardless of whether they already have a job or not. Think of it as "a state pension throughout your life". Unlike welfare benefits it is unconditional - you don't have to go through a Kafkaesque process of form filling and proving you are sick, looking for work etc.

A normal UBI proposal, see for example the Compass/JRF research from 2016, or the Finnish trial, is designed the transition to a post-work society, by de-linking work from wages, allowing people to survive precarity and to reduce work time overall. 

For this reason it is usually proposed and trialled at a level below the minimum wage, though radical advocates of it (like myself) believe it should be set around the same rate as the state pension.

In this crisis we are going to need something urgent and different. There are two forms in which the simplicity of UBI could be harnessed temporarily: a universal sick pay scheme and an emergency full UBI. If the second were done you would not need the first. But the second one would require a revolution in thinking by the Treasury and Bank of England.

A Universal Sick Pay Scheme: estimated cost £4.2bn

Everybody who goes sick can claim compensation equivalent to the national living wage, which from April would be £348.80 based on a 40-hour week. 

Since everyone has to suffer the same during the virus, you would scrap all the floors, ceilings, sick-notes and pro-ratas in the current SSP scheme and just pay everyone who cannot attend work because of sickness or quarantine £348.80, through two channels:

(a) the current SSP system

(b) HMRC direct to self-employed accounts

But a new conditionality would have to apply to employers. They would be required to pay everyone who went sick at their full, existing pay rates. As the Resolution Foundation has shown, this often does not happen, especially when you get below the professional/managerial grades.

SMEs and corporates would be required to take this hit - just as self-employed people on incomes of higher than the living wage would be. But the existing loan schemes are available to them, together with cash grants for SMEs

If 6 million people took two weeks off work and claimed this income, it would cost the Treasury £4.2bn in direct payments. 

It could easily be funded by increased borrowing and would more than pay for itself in flattening the curve of infection rates, and in softening the fall in demand.

It should be a no-brainer to do this, and Keir Starmer's new £300- a week sick pay benefit comes close to it, both in scale and in principle. The second version of the proposal is however an order of magnitude bigger:

An Emergency Universal Basic Income: estimated cost £298 billion

The government pays every adult of working age in Britain the equivalent of the national living wage for the next six months, direct to their bank account, regardless of employment status.

For 33 million adults that would cost £11.5 billion a week, or £298 billion in total. It is a huge sum, but smaller than the £330bn in soft loans Rishi Sunak has assumed liability for this week. This would replace the Universal Credit system for all except those with disabilities and caring roles - and would in most cases be more than the UC maximum in any case.

In this proposal, there is a single channel - HMRC to the bank account. The outcome is an immediate fiscal stimulus and it also has the effect of making all sick pay proposals redundant.

As the proposal would be time-limited, you could model the costs, behavioural changes and multipliers fairly easily. At around £9k per adult, the sums sound remarkably similar to various helicopter money schemes that were mooted by central bankers in the last crisis. 

The first objection, beyond how to pay for it, would come from both firms and unions: by delinking work from wages, do you encourage firms to lay off workers, or workers to make behavioural changes they would not have otherwise done. To both the TUC and CBI, the work channel for income support is important because (a) it preserves the workforce and skills and (b) it preserves the cultural status of work (see for example the Rachel Reeves/GMB pamphlet Everyday Work)

For these reasons trade unions and the Labour Party have been traditionally hostile or dubious about basic income schemes.

A second objection, in a fairly high-welfare society like the UK, would be: shouldn't we attempt to achieve the same effects through universal basic services? A UCL study concluded that the provision of free housing, food, transport and IT etc could work better and more cheaply than UBI, because it delivers more bang for bucks in terms of stimulus and the ability to survive a precarious work environment.

The UCL study found that for £42bn a year you could feed everyone, double the social housing stock, give everybody a "freedom pass" for public transport and provide basic phone, internet and TV services.

However, while I prefer the UBS as an early post-capitalist transition measure, it is not suited to a crisis situation - or rather doesn't achieve the bang-for-bucks in the same way. You can't build 1.5 million social homes overnight - nor summon into being a national food service.

How to pay for an emergency UBI

Some on the left are saying we need to "tax the rich" to pay for the needed interventions. Unfortunately the scale of the problem is too big, and in a crisis like this we are going to need tax cuts to stimulate investment and consumption.

The only solution is borrowing and money creation. 

Central banks are now pledged to massive balance sheet expansion, rapidly lowering the quality of the commercial and government debt they will buy. The UK Treasury meanwhile is set to raise debt levels to above £2 trillion by the end of this parliament.

To finance the emergency UBI, HM Treasury should issue a long-maturity gilt to the value of around £300bn, and the Bank of England should expand its balance sheet by that amount and purchase the bond direct.

It would mean overt monetisation of part of the debt, but you could make the case for it in an emergency. There would be an impact on sterling, and there may therefore be capital outflows which would have to be stemmed with targeted capital controls.

Neither of these outcomes are welcome because we need international co-ordination. If the ECB/Fed/BOJ could be engaged in co-ordinating a helicopter money drop, the disorganising effects on the global system would be less.

According to the OBR, the measures announced in Rishi Sunak's 11 March budget are set to add £125bn to public sector net debt, taking it to £2.03 trillion by 2024-5. Meanwhile the Bank of England is currently committed to maintain £435bn of quantitative easing.

By borrowing £300bn now for a temporary, six-month UBI scheme, we would raise UK debt to £2.1 trillion immediately (from £1.8bn now) but the upside is, by the end of a five year period, GDP and capacity would be higher than if we didn't do it. 

Next steps

It should be obvious that the only quick and easy way to do UBI is to do it big, simple and direct to the household. To assuage its critics, supporters of the move need to acknowledge it creates fiscal, currency and reputational risks, and possibly unforseen changes in the relationship between workers and firms. That's why the proposal should be temporary. Those interested in making it happen should start modelling and explaining it.

On its own it may not stave off catastrophe - because the secondary effects in financial markets will be global, and we are already feeling the strain in the banking system of global supply chain slowdowns. 

Analysts at Macquarie Wealth this week warned investors that, by the end of this, UBI schemes and the fusion of central banks with treasuries may become long-term and obligatory: 

We have been arguing that conventional capitalism is dying, or at least mutating into something that will be closer to a version of communism,” they wrote:

“This transition will be marked by cross-currents and external shocks. Ultimately, a fusion of monetary and fiscal levers will lead to MMT-style policies, effective nationalisation of capital, universal income guarantees, and deep changes in work practice.”

Ironically, one of the best ways of avoiding this might be to do the UBI hard and fast now.

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