By Mah Hui Lim and Michael Heng
PENANG and SINGAPORE, Apr 6 2020 (IPS)

The Chinese word for crisis consists of two characters – “weiji”. Wei means danger and ji means opportunity. Every crisis is pregnant with danger and risks but also with opportunities – for some to make money, for others to learn valuable lessons, and for society to reorient or restructure its priorities, institutions and even the system.

Mah Hui Lim

Roosevelt’s 3 Rs policies were relief, recovery and reforms. He implemented large scale public works to mop unemployment, introduced social security safety net which still exists today, tamed and regulated finance by separating investment banking from commercial banking, and set up regulatory watchdogs for the stock market.

The 3Rs led to the eventual recovery of the economy and most significantly to a well-regulated financial system that did not experience major financial crises for over 40 years. Government took on a bigger role in the economy.

The negative aspects of the crisis have been widely covered in the mass media, and would not be repeated.

If there is any silver lining to this dark cloud, it is found in some of the unintended positive consequences of this crisis – carbon emission choking the world is down significantly, traffic congestion has lighten up, crime rates have declined, the mountain of garbage generated has declined, communities have come together to help the afflicted, nature is reclaiming its space.

As one US celebrity who was infected said in his interview it is nature’s way of hitting back at what humanity has done to it. We were supposed to be the guardian and trustee of this earth but we abused it.

Deforestation and the destruction of natural habitat has reduced the space between humans and wild life opening more chances for new forms of virus and contamination. Epidemiologists have warned for decades the potential and dangers of new epidemic but they went unheeded. This is the most serious but, unfortunately, it may not be the last.

Michael Heng

Since the 2008 Global Financial Crisis, there was a nascent effort to move away from the obsession with GDP growth as the measurement of a society’s welfare and wellbeing.

The small nation of Bhutan spearheaded the alternative concept of Gross National Happiness. But these movements were muted and side lined. This crisis offers us the opportunity to bring it to the fore. Prime Minister Ardern of New Zealand recently said she would prioritise her people’s wellbeing over growth.

Karl Polanyi 70 years ago published the Great Transformation. His great contribution was that markets has existed for thousands of years before the rise of industrial capitalism in 18th century. Markets, where goods and services are exchanged to meet social needs, were subordinated to social, political and cultural norms. But this arrangement was overturned when market was deified to become the only organizing principle in society. Markets in society became the market society.

Polanyi presciently predicted that policies inspired by market liberalism, if unchecked, would result in the destruction of human society, the natural environment, and even productive forces.

Classical market liberalism convulsed in the 1930s with the abandonment of the Gold Standard. But fifty years later, it was resurrected in the form of neoliberalism which has formed the basis of the government policies in many countries since late 1970s.

This crisis lays bare the myth of the invincibility of the market. Market has broken down in a big way and the state is asked to step in to solve this crisis – from bail out of companies, to paying wages of workers, to cutting interest rates, soft and loans to small business guaranteed by the state etc.

There are calls in the US for the President to invoke emergency authority to direct companies to produce vital health equipment needed to fight the epidemic. Once this is over, we should not be going back to business as usual.

Markets will continue to exist and play a part in the economy. But it must be subordinated to society, to be regulated by the state to serve a greater good. For market to function well as a public good, it must not only be free but also fair. Both attributes are equally important, like the two wings of birds. The new economy must prioritise people’s as well as nature’s wellbeing over profit making for a few.

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By Mah Hui Lim and Michael Heng
PENANG and SINGAPORE, Apr 1 2020 (IPS)

The Covid-19 pandemic, erupting in the background of lethargic global economy, could turn out to be the singular biggest crisis in a century. First reported in Wuhan, China, the corona virus has reached almost all countries. It has infected close to 1 million persons and caused over 40,000 deaths at time of writing; and the figures keep climbing. It is a health catastrophe which if not checked in its track would be the most serious since the Spanish Flu of 1918 that killed over 50 million people.

Mah Hui Lim

It is a crisis much more serious than the 2007-8 crisis, for three reasons. What started as a health crisis has morphed into an economic and possibly financial crisis.

First, it erupted in economic and financial environments more vulnerable than those of 2008. After the GFC of 2008, major central banks pumped trillions of liquidity to resuscitate the world economy. Unfortunately, much of this was misspent on financial shenanigans such as stock buybacks and mergers and acquisitions while global investments languished. Global debt was pushed to all time high of over 300% of world GDP compared to under 200% in 2008. In the last few years, economists and business analysts have been warning of an impending financial typhoon on the horizon. The gigantic typhoon has made its landfall triggered by an invisible and humble bug.

Second, this is a double-whammy crisis with both supply shock and demand destruction. Shops and factories close down, planes and trains stop operating, global supply chains are broken. Except for essential goods, demand has evaporated. Usual consumer spending nosedives as incomes dry up and many people are confined to homes. Such conditions hit at the core of real economy.

Michael Heng

The once-in-a-century crisis has jolted policy makers out of their comfort zone. What has been considered a taboo is now followed without much disagreement across the board.

Helicopter money has now come into vogue. It means literally throwing money at the entire population for them to spend. The problem is if the population is locked down and most businesses remain shut, putting money in the hands of people will not restart business. In the last global financial crisis, there was nowhere to hide for the investor. Today, we are faced with a crisis of nowhere to spend.

There are three lessons to draw from this crisis.

First, the pandemic exposes the flaws of neoliberalism which deifies the free market and vilifies the state. This crisis shows that small government and big market are unable to cope with a crisis of this order. In fact, neoliberalism and market fundamentalism have damaged society considerably, resulting what the Karl Polanyi and later Michael Sandel call market society. Under this scenario, risks are socialized while profits are privatized. It weakens the capacity and readiness of society to respond to unanticipated nation-wide crisis.

Second, had the rich western countries cast off their ideological blinkers and used the opportunities after the GFC to invest in infrastructure, research and development, public goods, reduction of huge inequalities and other form of capital development, the whole world would have been in better conditions to deal with the unfolding situation.

Third, the crisis underscores the interdependence resulting from systematic integration over the past several decades. It is a cliché now to say that pathogen respects no border. It took only a few weeks for the virus to travel worldwide. A global solidarity is needed to tackle problem of this nature which unfortunately is not being displayed. Each country is frantically fighting its own fire with the rich countries pouring trillions while poor countries are left to fend on their own. But as Ably Ahmad, the Prime Minister of Ethiopia, rightly said, health is a global public good and requires global design and solidarity. He warned that if Covid-19 is not beaten in Africa it will come to haunt the rest of the world.

The world has to act in a concerted action. We are all in the same boat; a leak in one part will sink the boat no matter where the source.

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