Bunuel’s corrosive film ends with the main characters striding down a country road leading to …? The air of superficial confidence reflected in their faces belies the antics we have watched in the body of the production. Drug dealing, murder, corruption, abuse of diplomatic privilege, along with the usual carnal cavorting, all these run of the mill activities conducted with a smile on the face and more than a touch of soap opera, have dominated the earlier proceedings. Now they are out of the way, everyone can engage in “going forward”.
COVID 19, phase one, has now been more or less officially declared “over”. Depending on who you are, and what you want, you are being told to “move on” (la fuite en avant), that there is no return to earlier “normality”, and that things will never be the same again (save that America will be even greater, especially now that it has surpassed the Trumpian prophecy of 100,000 dead). Slick phrases they are, good for a tweet to the receptive online audience. But phase one contained a lot more than daily death totals, frenetic markets in personal protective equipment (PPE), civil wars among scientists, and even more examples that many countries are living in kakistocracies. Beneath the surface, and there is no need to go very far down, a great deal of standard behavior was going on. And it set the tone for what is coming.
One of the more robust of lessons from history is that a major crisis will either reinforce the financial and economic power of those who already possessed it, or create the conditions for a different group to concentrate that power (plus its political dimension) into their hands. Which way things go seems to depend mainly on the conditions in the country prior to the crisis, the extent of chaos wrought by the crisis, and the organizational capacities of the main operators. Today the “move on” messengers are those who want to double down on their pre COVID mantras and pursue still more aggressively their earlier routes. Examples abound. From very early on in phase one, Orban in Hungary seized the time to further his centralizing agenda and rule by decree. He has been so successful that hardly anyone even asks whether COVID 19 has caused much damage in the country. Singapore was able to use its extremely well oiled machinery for social control to establish a reputation as an early front runner in the race to quell the virus. Unfortunately, since that machinery has always been less adroit in supervising the conditions in which the large number of migrant workers live, there have been more recent signs that the record is less good. Trump and Johnson are latter day, but highly enthusiastic, exponents of the fuite en avant school. The former has his eyes firmly set on his re-election (probably the only thing on which he has a fixed position), while the latter now focuses on appeasing his Brexit junkies and keeping enough room for Cummings to carry out his vision of technological nirvana.
But it would be short sighted in the extreme to look only at the political goings on. Potentially far more significant are the developments in business, with their consequences for employment, social situations and livelihoods. From a starting position of severe concentration of market power prior to COVID 19, where in particular the world’s leading informatics and telecomm companies had already shattered the structures of “traditional” activities, concentration levels have almost certainly increased since the virus gained hold. Takeovers abound, with informatics based companies and private equity firms at the front of the buyers list. The fact that governments are also seeking to prop up any number of firms and sectors, through capital participation, subsidies and the rest, is ideal for the buyers. Why? Because once the short term corporate survival period is finished (5 years is the common reckoning), governments will sell out. No prizes for guessing who will be the takers. All this trading in stocks and corporate control is of course driven by profit prospects. And the latter arise from not only the increased market power, but also the reorganization of production and value chains. That reorganization nearly always involves employment reductions, hitting hard not only in OECD countries but perhaps even harder (certainly in absolute job numbers) in sub- contracting enterprises located beyond the OECD.
Higher concentration of corporate control and accentuated axes of inequality have thus been proceeding quickly during phase one of COVID 19. This flies in the face of the discourse saying “there can be no return to the past” (NRP). That argument points to the numerous problems that past patterns of growth have bequeathed and urges a real shift of direction. That shift in essence calls for: “greening of production”; greater respect for human rights; more localization of production chains; more localization of political decision-making; and enhanced international cooperation on decision making with respect to global problems. To be sure, there is no shortage of cosmetic efforts to demonstrate that everybody is in fact saying the same thing. A profusion of “Voluntary Codes of Conduct” (VCC) purport to show that firms will respect the goals enunciated by NRP advocates. Contrary to what is commonly believed, namely that the VCC wave started with the Ruggie stuff of 2011, the tactic has been widely used for at least half a century. It is a perfect foil for following the “Lampedusa Lesson” (set out in “Il Gattopardo”), to wit, things have to appear to change, so that they can stay the same.
It is not purely at corporate level that the NRP advocacy meets serious obstacles. In Europe, Germany and France have shown in recent days just how committed they are to their well- known “national champions”. Lufthansa has received massive support from the Federal Government, while in France President Macron has very publicly stressed that the auto industry is a jewel in the Republic’s crown. Likewise in France, Sanofi has been reminded of its national responsibilities in the pharmaceutical sphere. In Germany, where Chancellor Merkel has often been criticized for not being positive enough with regard to environmental action (in 2017, “Die Zeit” had published very detailed criticism of her record), there is now fierce discussion over Datteln-4, the new coal fired energy plant which the Federal Government has supported. The problem for governments is that they are squeezed into actions which essentially conform to existing power structures. Those structures are very strong in productive enterprises and the financial sector. Any sharp change of direction is likely to meet strong resistance.
In the European context, the “two directions debate” has to be conducted against the enormous backdrop of the austerity program (the Schaeuble Virus) which has so damaged economies and poisoned political relations over the past decade. As these lines are written (the day following President Van der Leyen’s presentation of a proposed financial frame for the next 7 years – the MFF – and a recovery program potentially extending to 2050), there is a heady atmosphere believing that austerity may be over. That optimism needs to be tempered, and for important reasons. While everyone agrees that prickly details about the combination of grants and loans, the degrees of conditionality, and so on, still have to be settled, that is not, in my view, where the real problem lies. The underlying worry of the “frugal four” (Austria, Netherlands, Denmark and Sweden – recall that the last two do not use the Euro, though their national currencies track its movements very closely indeed) is almost certainly about what reform and recovery really mean. That question looms largest in relation to Italy. Why?
There are three key concerns, in addition to it being by far the largest of the economies at risk of implosion. First, the country is severely split in economic terms (a product to no small degree of the history and geography of the various territories). “National” policies are not easily agreed, let alone applied, across regions. Second, the grave weaknesses of the public administration. Third, the still prevalent corruption, which often leads to unholy alliances among powerful criminal groups, the public administration and political groupings, all buttressed by dubious behavior from the legal profession and others. These are major challenges, requiring very long term actions that have to be driven from within the country. This is not something which can be resolved by “more Europe”. The worries of the frugal four may well stem from these concerns. That said, however, it is difficult to imagine that relatively small differences of finance between grants and loans will contribute to solving systemic difficulties.
The road on which Bunuel’s characters walked was portrayed as one where bright sunshine shone onto a pleasant landscape, and the walkers were all in step and harmony. Differences had been resolved, and the future looked promising. Yet none of the cast had any clear idea where they were heading. Was it more of the same, or something distinctly new? Europe right now is facing a similar question. Despite many brave words and pious wishes about “solidarity”, “a new awareness”, “the need to tackle inequalities” and other highly desirable aims, it is difficult to avoid an uneasy feeling that the next phases will not be so bright. With or without “le charme discret”, those who hold the resources have every chance of shaping future change.
Peter O’Brien, Brussels, 28 May 2020
