Book Reviews

The COVID Crises (Plural)

By Diane Coyle

Tagged COVID-19economyFinancemonetary policyTrump Administration

Shutdown: How COVID Shook the World’s Economy By Adam Tooze • Viking • 2021 • 368 pages • $24.99

It is a bold project to write the history of the coronavirus pandemic, given that it is far from over. But if anybody can successfully capture the global experience since early 2020, it is Adam Tooze, a professor of history at Columbia University. He excels at synthesizing the complex and varied details of this recent history into a clear overarching narrative, succeeding in making some sense of a complex, extraordinary, and traumatic period. His previous book, Crashed, analyzed the Great Financial Crisis of 2008. Yet this latest global shock has been even more seismic. The introduction to Shutdown asks whether the experience of the past months amounts to a “polycrisis,” as the earlier financial crisis, followed by Brexit plus the refugee crisis, was dubbed in Europe. It concludes that this pandemic has in fact been something worse, as the present crises in different domains overlap, with health and economic outcomes exacerbating each other and spilling across continents.

The story begins in China in early 2019, not in a Wuhan virology lab or wet market, but with an account of an article by Chen Yixin, a protégé of Xi Jinping, that laid out the complex, connected risks facing the Chinese Communist Party as the country engaged increasingly with the rest of the world. The list of such risks reads as an uncannily accurate description of what ensued a year later, from the physical linkages that turned an epidemic in one country into a global pandemic, to the magnification through communications media of single events into major political trends and protests. The interaction of events in a complex, interlinked global system becomes the book’s analytical framework, as it goes on to recount the month-by-month developments around the globe (although with a focus mainly on the United States).

Tooze argues that, after the geopolitical and economic stability of the 1990s and early 2000s that led some to declare that the great questions of history were settled, history is back with a vengeance. The COVID-19 experience has crystallised pressing global challenges—pandemic risks, the costs and frailties of globalization, great power tensions—and at the same time laid bare the inadequacy of the world’s political and institutional responses. The book walks us through the period since early 2020, each month making all too plain how ill-suited both national and international decision-making processes have been in dealing with the unprecedented emergency, and it will not be a comfortable experience.

One strength of Shutdown lies in its particular insights into the economic and financial dimensions of the crisis. Tooze’s historical research focused on the economy of interwar and Nazi Germany, including the German statistical innovations that took place during that time. He is formidably well informed on the modern global financial system and on the ongoing economic debates over monetary and fiscal policy. He also holds a firm view about the source of its pathologies, reflected here in his diagnosis of the fundamental cause of the pandemic and its consequences: that the economic system is “systematically generating disease risk,” among the many other ills of capitalism. Like many political progressives, Tooze concludes that the current crisis is a turning point. Any prior orthodoxy about self-regulating markets and a stable global financial order lies in ashes after the extraordinary government interventions in daily economic and social activities that have proved necessary since March 2020 (Tooze prefers “shutdown” to “lockdown,” as so much of the withdrawal from previous pre-pandemic activity has been voluntary). “Doctrinaire” neoliberal policies are one more, generally unlamented, victim of COVID-19. “The story we will be tracing in this book is not that of a revival of class struggle or of a radical populist challenge,” he writes. “What did the damage was a plague unleashed by heedless global growth and the massive flywheel of financial accumulation.”

There are three disparate aspects of the crisis interwoven throughout the book. One is indeed the policy response by the federal authorities including a fascinating description of the way the U.S. Federal Reserve and other central banks again stepped in to do “whatever it takes” to prevent a general financial collapse. The book is worth reading for these sections alone, as it is a story not widely enough appreciated. The banking system had been sufficiently strengthened after the 2008 crisis that banks were able to cope well with the cessation of economic activity brought on by the pandemic. This time the pressure emerged in asset markets. As Tooze points out, the world was lucky that the Fed, as a “competent, high-functioning piece of the U.S. state apparatus,” had angered Donald Trump but in the end did not fall victim to his orgy of destruction of state capacity (so well described by Michael Lewis in his two most recent books).

This was not for want of trying by the Trump Administration, which attempted to limit the Fed’s autonomy to respond as necessary to the crisis. This was a bid to roll back its activism, perceived by some Republicans as having gone too far since its response to the earlier financial crisis. Luckily, Treasury Secretary Steven Mnuchin failed in a bid to hand control of central bank lending to the Republican-controlled Congress. The Fed was able to act as central bank, lender of last resort, to the world. With financial stability achieved in early 2020, just as the shock of the first lockdowns began to hit country after country, other governments were then able to borrow from the markets to support their extraordinary spending in order to prevent even greater economic distress. The book also highlights a longer-term aspect of the role the Fed and other central banks have played: “The significance of central banking… is that it is the one area of government in which the authorities have been forced to grasp the scale of the challenges facing us.” And yet, as he goes on to discuss, this demonstration of competence by central bankers could create a legitimacy deficit: While we might all be glad some unelected technocrats saved the economy, “independent” actions may stray into the undemocratic, certainly when the stakes are so high.

A second key strand in the book is the recognition of the central role of nature as the foundation of economic prosperity, with our handling of the environment and climate change being probably the biggest challenge of all. Perhaps even without the pandemic a succession of weather shocks such as the extraordinary temperatures in the Pacific Northwest (and other parts of the globe) this summer, or sights such as the blaze in the middle of the ocean in the Gulf of Mexico, would finally have brought home to all of us our fundamental reliance on climate, clean air and water, biodiversity, and minerals. But it is certain that there is much greater awareness now of the dangers of zoonotic diseases, or the impact of pollution on health and the grotesquely unequal damage it causes. The idea of a green recovery has taken hold almost everywhere, and central banks and financial regulators are taking the lead in forcing recognition of climate risks where it hurts, in profit and loss statements and on balance sheets. But it remains to be seen how the changes in everyday life required to attain climate targets will get refracted through post-pandemic politics.

The phrase “almost everywhere” above comes with one important exclusion. “By 2020 China emitted more carbon dioxide than the United States and Europe put together, and the gap was set to widen for at least another decade,” Tooze notes. Yet China has depended so much on conventional economic growth for the social legitimacy of its transformation, and of the Communist Party, that it is not yet clear how (and if) a transition to a green economy can be achieved there.

It remains to be seen how
the changes in everyday life required to attain climate targets will get refracted through post-pandemic politics.

And then there is the U.S. Republican Party. Its pathologies take us to the third strand of Shutdown, in which Tooze dissects the political order in the neoliberal West, the rise of populism, and the widespread suspicion of “expertise.” The pandemic has highlighted the fault line between the technocratic know-how needed to address the crisis and the popular consent needed for technical measures to be implemented. The long-term environmental disaster is one of the areas in which it becomes visible. A Green New Deal might sound reasonably uncontentious to many on the left, but like any major structural transition in the economic system, it will be costly, and it will have winners and losers. Will taxes have to rise to fund public investment? Will Exxon adjust its business uncomplainingly? Or Saudi Aramco? What about all the Americans whose housing, jobs, and family lives are built around the infrastructure of the internal combustion engine? The science could not be clearer, but the response of citizens’ and the politicians they elect has been to ignore the scientists.

A second fault line is seen in the role of the central banks, described so compellingly in Shutdown. The Fed saved the day in 2020 by resisting Republican political pressures. Central bankers (and many mainstream monetary economists) continue to insist on the importance of their independence from politics. Yet when monetary financing of expansionary fiscal policy is occurring at such scale as it is now, this insistence has a hollow ring. Perhaps there was a valid concern about the Fed’s actions, whatever one might think of the Trump Republicans?

For it was not only in the United States that there was some unease about central bank activism. Shutdown describes the shock Germany’s constitutional court caused in May 2020 by ruling that emergency asset purchases fell beyond the legal authority of the European Central Bank. As Tooze writes, the German judges “[G]ave voice to a real historical bewilderment. What were the central banks doing? Did they have a mandate? . . . . the vastly expanded role that central banks had taken on since 2008 exploded the paradigm of independent central banking that had been established in the 1990s.” This tension will only intensify as central bankers forge ahead on incorporating concerns about climate and biodiversity in their monetary playbooks. The idea that economic management is a purely technocratic exercise is reaching the end of the road. Central banks saved the day in early 2020, as in 2008, but only by stepping decisively into political territory.

Yet another tension between experts and “the people” is, of course, that between the science of the pandemic itself, and the initial expert response. As Tooze points out, the early days of the pandemic represented a “historic failure” for global technocracy: “On all sides February 2020 delivered a staggering demonstration of the collective inability of the global elite to grasp what it would actually mean to govern the deeply globalized and interconnected world they have created.” A number of economic experts, such as Ian Goldin of Oxford University, have long warned about the weakness of global governance and the potential of it being tested by a future health or climate emergency. The Cassandras were right. The WHO, the IMF, and the WTO have all played catch-up to decisions made within national capitals for nation-states, despite all the interconnections between countries through travel, trade, and finance that some assumed would make international, multilateral decision-making essential.

Yet within each nation, too, arguments have raged about what “the science” says about things like masking or distancing or shutting schools. Indeed, scientific advice often fell short early in the pandemic by ignoring behavioural and political aspects of decision-making. But more dangerously, anti-scientific beliefs have mushroomed through social media, from anti-vax campaigns to bizarre beliefs about 5G. This is not a matter of a small lunatic fringe; everybody has a brother-in-law or auntie who thinks there must be “something” in it. Whole states in the United States have been paying the price with reuptakes in COVID-19 infection rates. As the book observes, “[T]he coronavirus cruelly exposed the deep incapacity of most modern societies to cope with the kinds of challenges that the era of the Anthropocene will throw up with ever greater force.”

Tooze concludes that we are in for a period when the confrontation between expertise—so essential for tackling these challenges—and popular distrust of expertise and authority will inevitably shape politics. “2020 turned out to be History with a capital H,” he warns. We are living in what we might call “real historical time.”

This living through history is a strange thing. Over the past year, time itself has seemed to pass both slowly and quickly. It seems another era altogether when many of us of a certain generation watched the fall of the Berlin Wall in 1989, along with the other revolutions marking the collapse of communism. For Western Europeans and Americans, that was history, but safely viewed through our TV screens. However, during the intervening 30 or so years, with so much seeming certainty about the stability of the (neo)liberal order now evaporating, it feels at once like a long-gone past. As Shutdown demonstrates, it is time we updated the outmoded worldviews we’ve maintained for so long as we face down whatever future beyond-poly-crises are going to confront us; there is no remote viewing of what happens next.

Read more about COVID-19economyFinancemonetary policyTrump Administration

Diane Coyle is the Bennett Professor of Public Policy at the University of Cambridge.

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