COVID-19 and Neoliberalism: Some Quick Thoughts

One of Neoliberalism’s key features is the supremacy of the financial system over the rest. Something to be considerate is the amount of money spent by the government in the last 40 years to save it from the crisis it created itself. The COVID-19 crisis has the potential to create a depression even worst than the 1930s if the governments don’t act. This is fuel to populists to destroy democracy. In 2008, the size of the casino part of the financial system was 10 times, yes, 10 times the size of the real economy. Politicians and central bankers have been saying there’s no money. The UK bailout for two or three banks in 2008-9 was roughly the equivalent to FIFTY times Latvia’s GDP. Fifty economic years. In other words, there’s money. Besides, in the last fifteen years it seems that increasing the monetary base by creating money hasn’t resulted in inflation. The problem is how the financial system is dependent on government’s money. It’s a type of perverse financial keynesianism which diverts money from education, health, science, culture, pensions, defense and results in deep wealth concentration and inequality. Worst, many times it impedes countries to develop their economy since it competes with the real sector for government resources. What’ll happen in the future depends of how the governments will react to the crisis. If it’ll do the same as in 2008-9, directing the money to the financial system we’re doomed. It is necessary to spend vast sums of money to provide minimum incoming for people, direct financing, no banks, for business to keep them alive, to invest in education, science, arts, culture, health, defense (to avoid conflict). Most importantly, it’s necessary to rethink the economy and its structures. In Latvia’s case, this could be a wonderful chance for developing more complex economic sectors. We’re small enough to redirect our economy towards high technology sectors. A simple example is to produce respirators. For us, it would be a big business. Maybe even a permanent one after the crisis. More important, it would give the opportunity to start developing clusters in certain areas of high complexity, resulting in a synergy that would push the economy up. Right now being small is a great opportunity. We shouldn’t ignore it.


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