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What really happens when a global crisis hits us

‘Most people are decent,’ is the central thesis of Rutger Bregman's new book ‘Humankind: A Hopeful History’. The prominent Dutch historian believes that if we embrace this positive image of humanity, the corona crisis will herald the end of the neoliberal era. Financial economist Thomas Bollen wonders whether this is really true: we talk about solidarity, but in the meantime social inequality is growing.

This article was originally published in Dutch on 4 June. 

‘The neoliberal era is ending,’ Rutger Bregman wrote on the online news platform The Correspondent. The Dutch historian and author rose to prominence at last year’s World Economic Forum in Davos with his outspoken call for the wealthy to pay more ‘taxes, taxes, taxes’. Bregman believes that the corona pandemic will accelerate a fundamental change: ‘Now a space has opened up for a different, more realistic view of human nature: that humankind has evolved to cooperate.' 

Bregman’s joyful message connects seamlessly with his latest book Humankind: A Hopeful History. A chapter about six boys from Tonga who end up on an uninhabited island in the Pacific Ocean, was published in The Guardian. It gained so much attention that a dozen of filmmakers wanted the story and Hollywood studio New Regency eventually bought the movie rights. 

For Bregman, the boys refute the gloomy image of humanity in William Golding's 1954 classic Lord of the Flies. There, a group of British schoolboys is stranded on a desert island. Initially they work together under the democratic leadership of one of their number, Ralph, but this is short lived. The boys are afraid of an imaginary beast that stalks the island at night, and Jack Merridew exploits this fear for his own ends. He promises protection for the younger boys, the littluns’, and says he and fellow ‘biguns’ will kill the animal. 

The group disintegrates into two camps. The boys engage in barbaric rituals, draw charcoal stripes on their faces, and turn into beasts themselves. They give free rein to their violent tendencies, and when they are finally rescued half the island is ablaze and three boys are dead.

Lord of the Flies sold tens of millions of copies. Even though Golding made up the entire story, the idea that there is a beast in each of us was regarded by many, including the Nobel Prize committee, as 'realistic narrative art'. Bregman doubted this, went in search of a real-life Lord of the Flies, and tracked down the Tongan boys. Instead of smashing one another’s brains out, they managed to survive by cooperating peacefully until they were rescued over a year later. 

Bregman incorporated this inspiring example of brotherhood into an essay: 'What really happens when children are stranded on a desert island'. And in Humankind: A Hopeful History, he paints a positive picture with a succession of examples like this: man is not inherently evil, but 'evolved to cooperate'.

The real Jack Merridew

Meanwhile, what is happening in the grown-up world? In the United States, heavily armed police officers are clashing with protesters, most of them peaceful, some of them violent. A curfew has been imposed, and shoot at sight orders have been given. People in other cities around the world are demonstrating in sympathy. The direct cause is the murder of the African American George Floyd, but there is much more going on underneath: thirty-five million Americans have lost their jobs in recent months, and the majority were in low-paid, low-skilled employment. People simply can't make ends meet. The figures show coronavirus is killing disproportionately large numbers of black and Hispanic Americans, and there is structural inequality.

‘The rules!’ shouted Ralph, ‘you're breaking the rules!’

‘Who cares?’ 

Ralph summoned his wits. ‘Because the rules are the only thing we've got!’ 

But Jack was shouting against him. ‘Bollocks to the rules! We're strong, we hunt! If there's a beast, we'll hunt it down! We'll close in and beat and beat and beat!

‘When the looting starts, the shooting starts,’ tweeted President Trump. He was quoting Miami police chief Walter Headle, who used the phrase in 1967 with reference to crime and disorder in black neighbourhoods. Two hours later, Twitter hid the tweet because it appeared to glorify violence. The president of the land of the free reacted like a real Jack Merridew: We're strong – we hunt! But unlike Jack, Donald has the power of the U.S. army behind him, and lashes out like a savage at demonstrators, mayors who disagree with him, and of course the press. As he put it in another tweet, 'The Lamestream Media is doing everything in their power to foment hatred and anarchy.’ 

 But unlike Jack, Donald has the power of the U.S. Army behind him

Journalists are also beaten and shot at by the police. Just as in Golding’s story, there are two camps: you’re either with the demonstrators or the Trump government: ‘We have our military ready, willing and able.’

Grub first, then ethics 

In the Netherlands, the government prefers Bregman’s human ideal to Golding’s. ‘We must all do this together,' Dutch Prime Minister Mark Rutte said in a TV speech at the start of the crisis. Solidarity became the weapon of choice against the coronavirus. Sigrid Kaag, the minister of foreign trade and development cooperation, said it even more eloquently on 5 May, Dutch Liberation Day: 'The pandemic is encouraging us to see the world's population as one society, forcing us to realise that individual choices have consequences for everyone.' 

But words don’t always translate into actions. On 22 April the UN World Food Programme warned of 'multiple famines of biblical proportions', threatening 135 million people in 55 countries and likely to claim far more victims than the coronavirus itself. At the same time, a billion kilos of potatoes are rotting away in the Netherlands as a result of coronavirus-related restaurant closures, and the country’s cold stores have run out of space for dead calves, cows, and pigs.

These food surpluses could be taken to war-torn Yemen or drought-stricken parts of Africa by airlines like Air France KLM, which before the pandemic operated 130,000 flights a year, taking businesspeople back and forth between Amsterdam and London, and holidaymakers to Bali and Mallorca. Today its planes are grounded, while its pilots are receiving up to €9,500 a month of their salaries from public funds. Air France KLM secured at least €9bn in loans from the Dutch and French governments. 

When jobs at KLM are in jeopardy, we forget that the aviation industry must downsize to combat climate change

Just like the American poor who are taking to the streets, war and climate refugees have little control over their destiny. The USA and Europe still supply arms to rogue regimes that have journalists chopped to pieces and oppress women. European weapons embargoes against Saudi Arabia were voted out last year because deals with Mohammad bin Salman al-Saud are supposedly good for employment at the Belgian arms manufacturer FN Herstal. When jobs at international airlines are in jeopardy, we tend to forget that the aviation industry needs to downsize in order to combat climate change.

People are so sensitive to the threat of job losses here and now that they overlook the connection with war crimes and pollution far away, and with the loss of biodiversity and global warming, whose effects lie mainly in the future. As German playwright Bertolt Brecht put it a century ago in The Threepenny Opera: ‘Grub first, then ethics.’

Market forces are the pig’s head

The play was an indictment of capitalism in the 1920s, ridiculing the rich who preach morality while profiting from the toil of the poor. Not much has changed since then, and this is also the danger with Bregman's moralism. ‘If there was one dogma that defined neoliberalism, it’s that most people are selfish,’ he writes. ‘And it’s from that cynical view of human nature that all the rest followed – the privatisation, the growing inequality, and the erosion of the public sphere.’ 

Bregman is well aware that growing inequality is a major problem. This is also the case in the Netherlands, although renowned for it social equality and welfare state, recent research by the Ministry of Finance shows that the wealth of the richest 1 percent is much larger  than previously estimated. Doesn't this simply confirm that people are egotists? Otherwise, why don’t they just give some of their money to the poor? 

The United States has shown that privatization of healthcare and education does not create an egalitarian society. But as researchers Merijn Oudenampsen and Bram Mellink wrote in The Correspondent: 'Neoliberalism has become the umbrella term for all the ills of our time – for the left at least.’ That is also how Bregman describes it: a cynical image of man and the ideology of free market forces being the source of all evil. 

However, Oudenampsen and Mellink explain that neo-liberalism is fundamentally different from leaving everything to the market. In the 1940s and 1950s the original neoliberalists opposed the principle of laissez-faire, and pointed out the state’s important role in driving the market by combating monopolies and cartels. Oudenampsen and Mellink say: 'If we dismiss neoliberals as market fundamentalists, we are playing into their hands.’

The government does not drive the market, but keeps too-big-to- fail companies afloat at the expense of healthy competition

That's what Bregman does. Contemporary neoliberalism is very much like a religion but, contrary to its usual depiction, it is the opposite of a belief in market forces. Tech billionaire and Trump advisor Peter Thiel, who bought a refuge in the prepper mecca of New Zealand for when trouble breaks out, explains this in detail in his book Zero to One: ‘Monopoly is the condition of every successful business’ and ‘All failed companies are the same: they failed to escape competition.'

Worshipping market forces is simply window dressing, the pig's head that Jack in Lord of the flies puts on a stick to frighten the other boys. The beast seems to come alive when the flies crawl out, but that is only an illusion. The real aim of neoliberalism is to form oligopolies and monopolies, and government is often an ally in this scheme. Instead of driving the market, it keeps oligopolies of too-big-to-fail companies afloat at the expense of healthy competition. Being able to choose between a few identical health insurance companies or banks, is not a free market. That is the appearance of market forces, allowing a few large companies to profit at the expense of proper healthcare for all and a banking sector that serves the economy.

Globalisation and trade policy

Bregman expects the corona crisis, in contrast to the credit crisis of 2008, to be the moment when radical ideas are brought to the centre of power. But is that really the case? 

Take these words from Dutch minister of foreign trade Sigrid Kaag, on 5 May: 'Globalisation has vulnerabilities and risks. I fully acknowledge these.' She was referring to the rapid spread of the virus by international air traffic, and to global production chains with minimal stocks and just-in-time delivery that had made tests, facemasks and ventilators scarce. Our dependence on a handful of oligopolists prevented a rapid scaling-up of healthcare capacity because they could no longer cope with the demand. 

However, Kaag did not learn any lessons from this. 'I oppose those who turn against international cooperation and trade, and point to the virus to advocate what they have always advocated: more nationalism, autarchy, and protectionism. That's just too easy for me.'

Shell and Heineken promised developing countries the moon, but often brought exploitation and destruction of nature

She portrays nationalism and autarchy as the dark counterparts of globalisation, international cooperation and trade. In reality Western governments have for decades exploited nationalist sentiment to push through their trade policies. Companies such as Shell and Heineken have repeatedly used the Dutch government as a pawn to land projects in developing countries. They have promised the local people the moon, but often brought exploitation and destruction of nature. 

KLM stands for Koninklijke Luchtvaart Maatschappij, Royal Airline. The word ‘royal’ gives it connotations of national cachet, and infrastructure minister Cora van Nieuwenhuizen described the airline as 'our blue pride' in order to make the billions in government guarantees digestible for the Dutch people. But there is little sign of national pride on the part of those multinationals themselves. They often have several nationalities, and move their head offices in the blink of an eye. Shell is just as British as it is Dutch, and in recent years has spent more on bribing corrupt politicians in Nigeria than corporation tax in the Netherlands.

‘You're breaking the rules’

The pandemic could stimulate a return to more local economies and production chains. But even if future ministers were to break with the policies of their predecessors, it would be a difficult job. On 18 May, the Brussels lobbying watchdog Corporate Europe Observatory published a report on law firms willing to act for international investors against lockdown measures. They do this through investor-state dispute settlement (ISDS) tribunals, supranational courts that allow multinationals and their investors to sue governments for damages.

'The rules are the only thing we've got!’ 

But is that also the case when the rules are no longer benefiting the population? Multinationals can challenge policies that lead to higher taxes and lower subsidies, make it more difficult to export products, affect their prices, or require them to make medical goods and pharmaceutical recipes more widely available. 

This is already happening. Because better hygiene and simple handwashing prevents the spread of viruses, the government of El Salvador has excused families affected by Covid-19 from paying their water bills. The poorest people in Peru have temporarily been exempted from road tolls. While governments try to help the poor and keep their economies on track, foreign investors in privatised water companies and the owners of toll roads are already preparing claims for damages. Taxpayers in those countries will eventually foot the bill.

Capital multiplies like a virus

Many people in emerging economies are already struggling. The collapse in raw material prices and the tourism industry is hitting less developed countries disproportionately hard. In India, 112 million people have lost their incomes, and McKinsey finds that the jobs of 150 million Africans, one third of the labour force, are on the line. 

Developing countries in particular suffer from the forces of external big money

What's more, developing countries in particular suffer from the forces of external big money. Capital can move freely around the world, multiplying like a virus and searching for the cheapest labour. It is invested in places where there are no obstacles to profit maximisation, such as social structures to protect workers. And it uses modern forms of slavery, workers standing on the factory floor for 80 hours a week and living like medieval serfs in containers. Investors grow rich; workers become burned out and are left to their fate when they have nothing more to offer. In response to the pandemic, international investors withdrew a record $83 billion from emerging markets in March alone, just when those people badly needed the money to weather the storm.

Former hedge fund trader Jonathan Tepper describes this in his 2019 book The Myth of Capitalism: 'Until the fruits of the economy are shared with workers, the benefits of markets will only go to CEOs, managers and the very wealthy.' 

This happens not only in developing countries, but also in the US and Europe: when capital leaves, factories close, mass redundancies occur, and workers lose their social protection and bargaining position. McKinsey's research shows that the share of global GDP paid in wages has been declining since 1980. 

The hardest hit are those who were in precarious employment before the crisis. This is especially the case in the USA, where millions of people were fired. But it’s also true for the Netherlands: contract and self-employed workers who are at home as a result of the lockdown receive only basic support, while the government reimburses up to 90 percent of the salaries of permanent employees, including holiday pay and pension contributions, up to €9,500 a month. 

When two Dutch political parties asked social affairs and employment minister Wouter Koolmees to 'combat the exploitation, poor working conditions and wretched housing of migrant workers,' he replied on 4 May: 'Any form of protection, partitioning of national markets or sheltering of national companies is very damaging to the Netherlands.' The free movement of capital, goods and persons may not be affected, even if it means poor working conditions. In the meantime, the coronavirus was raging in the vans that each day brought migrant workers from eastern Europe, packed closely together, to Dutch meat companies. As in Lord of the Flies, the voices of the littluns are not heard, and they are at the mercy of the biguns.

The reluctance to make structural changes is a result of an equation in which international trade and corporate survival outweigh employee welfare. Reforms and redundancies are inevitable in a changing world. According to the innovation principle of creative destruction, companies need to come and go. But governments seem to be less interested in innovation, reform and entrepreneurship than in maintaining the status quo. In the Netherlands the major shipbuilder Royal IHC, which already had problems before the coronavirus, and KLM, which is ripe for structural reforms, were bailed out by the government. American businesses have already received at least half a trillion dollars from the American public, but the Trump government is refusing to disclose which companies are getting the money. ‘Small businesses, meanwhile, say they have struggled to gain access to the loans,’ The Guardian reports.

An increasing proportion of workers will see their bargaining position and working conditions further eroded

The biguns rule the roost, and only the big tech companies are really taking advantage of the corona crisis to bring about change. Amazon is doing well, with Jeff Bezos determined to consolidate his profits from last-mile delivery, by permanently bypassing local resellers that were closed down due to corona.

Twitter and Facebook have announced that working from home and videoconferencing are the new normal. Closing offices saves costs, and sounds attractive on the face of it, since less travel means fewer CO2 emissions and traffic jams. But spending all day in your lonely garret rather than socializing with office colleagues may be a less than alluring prospect. 

An increasing number of employees will see their negotiating power and terms of employment further eroded. This has already happened to drivers for platform companies like Uber and Deliveroo, who have no certainties to fall back on in this crisis. Uber recently sacked thousands of people in the most efficient way possible, with a Zoom call lasting just minutes.

Taxes, taxes, taxes

In his recent essay on neoliberalism for The Correspondent, Bregman drew on the work of economists Thomas Piketty, Branko Milanović and Gabriel Zucman, all of whom demonstrate that inequality within and between countries has increased enormously in recent years. Bregman's solution: introduce an annual, progressive wealth tax for all multimillionaires.

On the face of it, this is hard to disagree with. Redistribution of extreme wealth would be good for the economy. The rich spend a much smaller proportion of their money on goods and services that create jobs and income for others. Michael Pettis, professor of finance at the University of Beijing, and Matthew C. Klein, economics commentator at Barron's, calculate that the 90 percent of households that earn the least save less than 5 percent of their income, while the 1 percent of top earners save 40 percent. After all, you can only spend so many millions a year drinking champagne on your yacht.

The Dutch government’s most important tax increase was on food, books and water

Calling for ‘taxes, taxes, taxes’, as Bregman did at Davos, is easier than introducing them. Bregman reported that he is donating his income from the film rights to the Tongan community where the shipwrecked boys came from. But that kind of generosity is the exception rather than the rule. Today's wealthy people are just as reluctant to give away their money as the dukes and counts of yesteryear. Trump's tax cuts have made it possible that the 400 richest families of the USA now pay a lower tax rate than the bottom half of households. The most important tax increase of the Dutch government was on food, books and water. A corporate profit tax rate cut is still scheduled for next year, and if it hadn't met with so much resistance, the dividend tax would have been abolished all together last year. 

Furthermore, higher tax rates do not automatically change the system. Unbridled globalization and financialization have created an unbalanced world in which the distribution of wealth between labour and capital has grown increasingly unequal. Redistribution alone does not tackle the underlying problem of extreme inequalities in the primary income of different classes; it’s like trying to fill a bucket that’s full of holes. So more needs to be done.

Consuming on credit

‘The richest on earth and the companies they control have increased their share of the global income at the expense of everyone else,’ Pettis and Klein write. They explain how the wealthy have profited massively from disparities between exporting and importing countries. This is particularly disastrous for countries with large trade deficits, such as Spain and Greece, which had unemployment rates of 14 and 16.5 percent even before the pandemic. 

At the other end of the spectrum are net exporters like China, Germany and the Netherlands. But despite record low unemployment of 3 percent early in 2020, the disposable income of Dutch households has stood still for more than 40 years. Instead of benefiting the littluns, the gains have been skimmed off by the owners of capital. At the end of the 1980s, households were still saving a lot, but from 2000 onwards trade surpluses largely ended up in the coffers of multinationals.

But if the rich spend only a small part of their money on consumer goods, and ordinary people’s incomes have remained flat, who bought those German cars and Dutch tomatoes and steaks? And more importantly, where did the money come from? After all, our economy is consumption driven. When demand falls away, products rot in warehouses, companies go bankrupt, people lose their jobs, and even rich people’s shares and bonds lose their value.

While money for the creditworthy is virtually free, it’s nearly impossible for everyone else to access capital

To prevent demand from falling, the rich have lent their money to companies, individuals and states. That kept the economy going, but also increased the global debt mountain to more than $250 trillion over the last decade, more than 320 percent of global GDP. So we have all borrowed more than three times as much as we produce in a year. 

High debt exacerbates the inequality problem. The more you owe, the higher the interest you pay and the more of your income is diverted to lenders, making it even more necessary to borrow in order to keep the consumer economy going.

American billionaire Ray Dalio said it aptly at the end of last year: ‘At the same time as money is essentially free for those who have money and creditworthiness, it is essentially unavailable to those who don’t have money and creditworthiness, which contributes to the rising wealth, opportunity, and political gaps.’

This vicious circle is also at the root of increasing tensions between European nations. Employees in export countries such as the Netherlands and Germany feel they are working for the benefit of impoverished southern Europeans, while young Spaniards and Greeks are suffering at the hands of public austerity and a dire labour market. The Dutch, Germans, Spaniards and Greeks are victims of the same mechanism, but this is much less visible: the capital flows behind international trade, and the role of debt, receive little attention from politicians or the media.

The imbalance between risk and reward

The coronavirus exposes the imbalance between the risk premiums paid out to the financial sector and the actual bearing of the risk by our societies. Because part of the economy is at a standstill, the incomes of countless companies have dried up. Governments have ordered banks to be lenient in chasing loan interest and repayments, but in the end entrepreneurs still have to pay the interest on their debt.

The most vulnerable got a sticking plaster for a gaping wound: banks have lowered debit interest rates from 14 to 10 percent

Those most vulnerable have been given a sticking plaster for a gaping wound: Dutch banks lowered debit interest rates from 14 to 10 percent. Finance minister Wopke Hoekstra is engaging in the same gesture politics: on 19 May he lowered the legal maximum hire purchase interest rate from 14 to 10 percent, saying: 'If you have to replace a broken fridge or washing machine, you can borrow money at a slightly lower rate.' All the littluns get is crumbs.

The coronavirus once again shows us where the loyalties of the wealthy really lie. The European Central Bank is printing €7 billion a month to lend to multinationals at rock-bottom rates, sometimes below 1 percent. The supposedly politically independent Federal Reserve has created trillions of dollars to support the financial markets. While 35 million Americans have filed for unemployment, the Nasdaq, including tech companies like Amazon, Google and Facebook, reached a record high. 

The financial markets are out of touch with reality.

'The rules are the only thing we've got!’ 

But what if the rules of capitalism apply only when money is earned, and not when capital owners have to take their losses?

The corona crisis will not create a new type of altruistic human, and nor will it end inequality

“If you think people were upset about bailing out banks where the CEOs were making $50m a year, how are they going to feel about bailing out private equity firms where the CEOs make $500m a year?” That’s the question that American ex-banker and author Nomi Prins tweeted on 10 April. A month and a half later, that anger erupted in the US, with cars being set on fire and department stores looted. 

‘The buildings don't just burn for George Floyd,' said activist Tamika Mallory in a powerful speech. ‘Enough is enough. We are not responsible for the mental illness that has been inflicted upon our people by the American government, institutions and those people who are in positions of power. I don’t give a damn that they burned down Target (ed. large American retail corporation), because Target should be on the streets with us, calling for the justice that our people deserve.’ Mallory reminds us of another harrowing history: ‘Don’t talk to us about looting! Y’all are the looters! America has looted black people. America has looted the native Americans when they first came here so looting is what we do, we learned it from you! We learned violence from you!’

Stories about shipwrecked children working together are inspiring, but the real world is not a desert island. It’s wishful thinking to imagine that ‘the ideas that are lying around’ will reach the centres of power and change will simply occur by embracing a more positive image of mankind. The coronavirus will not create a new type of altruistic person, and nor will it end inequality. Multinationals will happily go through the motions of window dressing, greenwashing, and PR campaigns on human rights, as long as they can get through the crisis and their taxes remain low. In the Netherlands, prime minister Rutte has gained in popularity as a result of the pandemic, with polls showing his party, the ‘bigun’ VVD, winning up to 46 seats. 

Let Lord of the Flies be a warning. It is an alarming reminder of the terrible things people are capable of in order to maintain power. There are peaceful leaders like Ralph, and aggressive ones like Jack. Even real people have two sides: they can work together with others, but they can also be violent. Those who pursue change do not deny one of those two sides, but take action to demand transformation. As Tamika Mallory puts it at the end of her speech: ‘We learned violence from you… So if you want us to do better, then dammit, you do better.’

This article was originally published in Dutch on 4 June.