This time, by contrast, it is the foundations that are collapsing – because all economic life in a capitalist system is based on compelling people to go to work and spend their wages. In the 2008 financial crisis, it looked like the “roof” – the finance system – had collapsed onto the main structure which, though it was damaged, stood firm and we eventually rebuilt the roof. To understand why that is over-optimistic, let us use the metaphor of a building. Politicians are busy reassuring voters that it will be a “ V-shaped recession ” – a sharp slump followed by a bounce-back, because the “real economy”, they claim, is sound. Introduced as a panic measure in 2008, it seems quantitative easing could be with us for decades. Just as after the last global financial crisis in 2008, they will create new money to buy up government debt – but this time, it is not going to be gradual, or focused on the safest government bonds. Meanwhile, the central banks have switched to a new and aggressive form of quantitative easing. The US government will inject two trillion dollars into the economy – through a mixture of direct payments to citizens and loans to business – more than half of what it collects in taxes in a year. In response, states have launched economic rescue packages so massive that most people have not yet got their heads around the implications. Meanwhile, the solvency of airlines, airports and hotel chains is in doubt. Third, an immediate slump in consumer spending across all major economies which is certain to provoke the deepest recession in living memory: share prices have already collapsed and this, in turn, hurts middle-class families whose pension funds have to invest in shares. Second, significant damage to the reputations of governments and political elites who either denied the seriousness of the crisis, or in the initial stages proved incapable of mobilising their healthcare systems to meet it. Let us consider the massive changes the pandemic has already forced.įirst, the partial shutdown of daily life in large parts of China, India, most of Europe and numerous states in America. Though the COVID-19 virus may kill between 1 percent and 4 percent of those who catch it, it is about to have an impact on a much more complex economy than the one that existed back in the 1340s – one with a much more fragile geopolitical order, and on a society already gripped with foreboding over climate change. Today, capitalism faces its own plague nightmare. That, in turn, started a process of economic change that brought an end to the feudal system and, some argue, triggered the rise of capitalism. That is a short history of the Black Death, a bubonic plague pandemic caused by the bacterium, Yersinia pestis, which spread from Mongolia to Western Europe in the 1340s.īecause the economy then was based on local agriculture and crafts, ordinary life bounced back relatively quickly.īut, by radically reducing the number of workers, it gave the survivors increased bargaining power, which soon translated into new concepts of liberty among the population of medieval cities. When it is all over, revolts begin, cherished institutions fall, and the entire economic system has to be reconfigured. The pandemic begins in Asia, rips through the capital cities of Europe and wipes out at least a third of all human beings in its way.