Can’t, won’t and what’s the point? Explaining the U.K. public’s muted response to austerity

Since 2010, the government has undertaken extensive spending cuts, subsequently linked with rising poverty, food bank use, and serious health issues. Kate Harrison identifies key factors that explain why the public’s response to austerity has been relatively muted.

Since 2010, successive governments have instigated round after round of spending cuts, reducing or closing many public services. However, the government’s 2020 budget, followed by the spending necessitated by the COVID-19 crisis, appear to have brought an end to cuts, at least in the short term. Many, though, now faced with unemployment, are being forced to turn to government support such as Universal Credit. They have been met by a benefits system depleted by long-term underinvestment and face the reality of living on £94 per week, or less. Many who previously were shielded from austerity’s worst effects must now face the reality of it.

Under austerity, the UK has seen cuts to spending disproportionately spread across the country, with deprived areas typically facing the highest cuts to services. Over the last decade, child poverty has risen, foodbank referrals have more than doubled and health inequalities have widened. Those who are most in need have borne the brunt of the cuts: people with the most severe disabilities have faced a burden of cuts 19 times higher than the rest of the population.

Despite this, the public response to austerity has been relatively muted, with a spate of protests in the initial years of the coalition government and relatively little political activism since. My research looks at why there hasn’t been a stronger public response to these measures. Some argue that Brexit could have been a protest vote against the cuts and their consequences for many people. The evidence on this is so far limited, but it is still worth noting that if austerity did play a role in the UK’s vote to leave the EU, this is an indirect and nonspecific way of protesting the cuts. As such, it is important to understand why people are not taking more conventional approaches to opposing austerity.

Across many forms of political participation, including voting and protesting, it is typically those with low wealth, income, and education who are least likely to take part. Given that it is these groups who are suffering the most under austerity, without their voices being heard the political establishment are given no reason to change their policies. This maintenance of the status quo then allows the most powerful members of society to preserve their position of privilege.

The key question is therefore why are more people not expressing opposition to austerity? Research suggests that people need time, money and civic skills to participate. However, when there is an economic shock like the financial crisis of 2008, there can be a spike in protest behaviour as people express their grievances, such as a demonstrating against rising unemployment.

This theory of grievances as motivation for protest can explain the early protests the UK saw, such as Occupy London and student protests against rising tuition fees. Nevertheless, what this doesn’t explain is why these protests didn’t continue, as austerity deepened and public services were reduced or closed. This suggests the picture is more complex.

Building on the two theories mentioned above, I propose a four-fold explanation for the relatively low levels of political activity seen in response to austerity. The starting point will be the argument that resources like time and money are needed for political participation. Under austerity, those from disadvantaged and minority groups have lost out the most, meaning that those who already had the least time, money, and resilience have fewer resources now than they did before. As such, participating in politics is even less accessible for those with disabilities, on benefits, and low incomes than it was before the cuts began.

But what about those more fortunate, who had more resources and haven’t lost out in the same way? The theory of grievances suggests that those who have experienced an economic or political struggle will engage in political participation. For those whose experience of austerity has been less extreme and less personal, there is little cause for mobilisation. Indeed, following the introduction of harsh austerity measures in Spain, the participants in the wave of strikes and demonstrations that took place were disproportionately those affected. For the population as a whole, political engagement actually declined, on average, after the introduction of cuts.

There are two further factors that are important to consider for a more nuanced understanding of low political participation. Firstly, the government chose to talk about the cuts in a way that made them seem both necessary and unavoidable. They made arguments such as ‘we are not doing this because we want to, driven by theory or ideology. We are doing this because we have to’. Despite some arguing that austerity is, in fact, an ideological choice and not the only solution, the British public largely accepted the narrative that there is no alternative. This may have led to a sense that participation is futile, because the lack of a viable alternative means that political action is unlikely to result in change.

Also, for those most affected by the cuts, the government’s choice to evoke a ‘blitz spirit’ narrative of ‘sticking together as a country’ is likely to have come across as insensitive, if not insulting. The highly unequal way that cuts have been implemented is likely to exacerbate distrust in politicians who try to claim that we are in it together.

The final consideration in understanding the impact of austerity is the broader picture of participation. There is evidence that trust in politicians has been declining while discontent with democracy grows. The distrust in politicians and lack of political efficacy fostered by the government’s austerity narrative is therefore likely to exacerbate more general recent trends of declining political participation.

In combination, these factors will typically lead to lack of political participation through two possible avenues, shown in the figure below. Generalised dissatisfaction with politics forms a backdrop for all, undermining participation even before austerity began. For those significantly affected by austerity, opportunities to engage in politics are diminished by the loss of resources to participate caused by spending cuts. The ‘in it together’ rhetoric then fosters alienation from the government, further exacerbating the disinclination to participate.

Figure 1: Theoretical model to illustrate low political participation in response to austerity.

Meanwhile, for those on higher incomes and less dependent on public services, the low personal impact of austerity produces no significant grievance to communicate, resulting in little motivation to act. Additionally, the rhetoric of austerity as necessary and unavoidable fosters the belief that nothing would change if they were to act. While general participation levels are already falling, more provocation is needed for political participation.

This theory demonstrates the complex ways in which people can become silenced by austerity, which is deeply problematic because those who are most dependent upon the state face the most challenges in engaging with politics. Those on low incomes, with disabilities or otherwise marginalised have lost out the most and, with their influence further diminished, are only likely to lose out more.


Note: the above draws on the author’s published work in Representation.

About the Author

Kate Harrison is a PhD Researcher at the University of Southampton

LSE blog

Florence Nightingale would have recognised the challenges associated with COVID-19

Andrew Street outlines four reasons why it is apt that the temporary hospitals set up in response to COVID-19 are named after nursing pioneer Florence Nightingale. He explains how some of the key challenges currently facing UK healthcare professionals are similar to those Nightingale had to deal with.

It is fitting that the exhibition and convention centres rapidly equipped in the UK to house those suffering coronavirus are named Nightingale hospitals. This year marks the 200th anniversary of Florence Nightingale´s birth on 12 May 1820, and there are several echoes from her career to the current crisis.

Counting deaths

For starters, take the controversy in trying to establish how many people have died from coronavirus. Most countries are still counting only those who died in hospital having tested positive for COVID-19, not those dying in care homes or elsewhere. And there remain questions about whether a positive test for COVID-19 should be considered the cause of death or just a contributory factor.

Nightingale faced a similar problem in her role as superintendent of the female nursing team working in the English general military hospitals in Turkey. On arrival in Scutari in November 1854, she found three separate registers of those dying in hospital: the Adjutant’s daily head-roll of soldiers’ burials, the Medical Officers’ Return, and the Orderly Room return, all of which gave a different account of the number of deaths. She soon set about rectifying this ‘statistical carelessness‘ in order to record accurately how many soldiers had died. Unfortunately, we are still a long way from being able to compare meaningfully the death toll from coronavirus between one country and another.

Classifying diseases

On returning to England in 1856, Nightingale realised that each hospital had its own approach to recording information about its patients. So she created Model Hospital Statistical Forms which were recommended for widespread adoption in 1860 at the London meeting of the International Statistical Congress.

Nightingale had the forms printed and hospitals started using them. Guy´s Hospital published details of its cases from 1854 to 1861, including a table reporting 15 Classes of Diseases and another reporting Causes of Accidents, categorised into 22 groups. Group 21, for example, records all those hospitalised having suffered ‘Bites of animals, 7 dogs, 2 adders, monkey, horse, rat, elephant, and woman’, revealing a somewhat surprising assortment of assailants on the streets of London back then or indeed whenever.

From 1862, hospitals in London began to publish their data annually in the Journal of the Statistical Society of London. By 1866, the fifth and final year that the series was published, the statistics covered 29 hospitals across England. Publication ceased after a committee formed by the Royal College of Surgeons ‘reported adversely upon Miss Nightingale’s Forms‘ claiming it was too costly to collect the data and to make valid comparisons.

Nightingale´s ideas were eventually resurrected by Jacques Bertillon whose system was adopted in 1900 as the first International Classification of Causes of Death. In June 2018, the World Health Organisation launched the 11th revision, now known as the International Classification of Diseases and, on 25 March 2020, issued emergency ICD-10 and ICD-11 disease and cause of death codes for COVID-19.

Protecting staff

Nightingale herself used data about those who suffered disease and died to push for improvements in care – both for patients and staff. In 1858, one of her papers with William Farr was presented at the Liverpool meeting of the National Association for the Promotion of Social Science comparing mortality rates of hospital nurses with civilian women of a similar age. She identified a higher mortality rate among nurses, demonstrating that they had greater exposure to fever and cholera. She used the data to maintain her pressure on hospitals to improve hygiene and to provide better protection of staff.

She also urged hospitals to keep a register to support a superannuation fund for nurses. If adopted, her nursing register would have recorded the name, age, employment dates, reason for and state of health upon leaving the service, and date and cause of death for those dying in service. Surprisingly even today, this information is not always readily available: on 2 April 2020, the chief executive of the Royal College of Nursing complained to the Secretary of State for Health and Social Care about the difficulty of getting data about the number of nurses dying from COVID-19. Nightingale would have shared the chief executive’s indignation, stating that ‘money cannot replace … the loss of a well-trained nurse by preventable disease‘. An unforgivable failure by governments the world over in dealing with coronavirus has been that health workers have been inadequately protected from contagion.

Building hospitals

Perhaps the most compelling reason for naming the new coronavirus hospitals after Nightingale is because she ‘revolutionalised ideas of hospital construction‘. Her collected Notes on Hospitals, published in 1863, contained a detailed critique of defects in the construction and layouts of various hospitals in England, France, and Scotland and proposals that addressed these defects.

Nightingale’s ideas on hospital design meant that her advice was sought about the building of civic hospitals throughout the country and ‘upon the construction of military hospitals—whether general or attached to particular barracks—Miss Nightingale was consulted constantly and as a matter of course’. Given how much of her lifetime’s work was devoted to improving conditions for soldiers in the British Army, it is appropriate that military personnel have played such a key role in fitting out the coronavirus hospitals named in Nightingale´s honour.

Florence Nightingale devoted herself to evidence-based analysis of disease and health care ‘for the surer advance of medical knowledge and in the interests of good administration‘. Thanks in no small part to her efforts, our understanding of disease has improved enormously in the 200 years since Nightingale’s birth, as has our knowledge of how to provide effective care in safe environments. Even so, the corononavirus crisis has demonstrated the limits of our ability to combat new threats and that health and care systems still need strengthening to meet the demands being placed upon them.


About the Author

Andrew Street (@andrewdstreet) is Professor of Health Economics in the Department of Health Policy at the London School of Economics and Political Science.

LSE blog

COVID-19 and free speech: ‘gagging’ NHS staff is not proportionate and lawful

George Letsas and Virginia Mantouvalou explain why any blanket restriction on NHS workers’ freedom of speech in the light of the pandemic is unlikely to pass the legal test of proportionality, or fit the image of a democracy that values transparency and accountability. 

‘I never thought I lived in a country where freedom of speech is discouraged’, wrote an NHS doctor to The Lancet. The journal receives many messages from front-line health workers who are being threatened with disciplinary action if they raise concerns about their safety at work. According to The Guardian, some NHS staff are altogether forbidden from speaking out publicly about the coronavirus. Intimidation techniques reportedly include threatening emails, monitoring of social media and disciplinary action.

This unprecedented restriction takes place against the background of secrecy surrounding the government’s response to the pandemic. There has so far been limited information both on the situation in hospitals and on the scientific evidence upon which the government acts. With Parliament in recess, the need for public scrutiny is even more pressing.

What is more, wars and pandemics have a substantial degree of a so-called ‘chilling effect’ on free speech: people typically rally behind their leaders and feel reluctant to voice their criticisms, adopting a stance of self-censorship. Even in the absence of any legal restrictions, a pandemic is therefore likely to result in suppression of information and decreased levels of accountability.

NHS workers’ freedom of expression

Governments’ response to the pandemic across Europe, and the rest of the world, has been accompanied by unprecedented restrictions on freedom of movement and assembly. Such restrictions are in principle justified in a context of a public health emergency. Yet they cannot go unchecked. The Council of Europe released guidance to its 47 Member States on how to respond to the pandemic while respecting human rights.

The right to free speech is protected in Article 10 of the European Convention on Human Rights (ECHR). In Handyside v UK, the European Court of Human Rights said that its ‘supervisory functions oblige it to pay the utmost attention to the principles characterising a “democratic society”. Freedom of expression constitutes one of the essential foundations of such a society, one of the basic conditions for its progress and for the development of every man’. In Lingens v Austriathe Court stressed that the press has a right ‘to impart information and ideas on political issues just as on those in other areas of public interest. Not only does the press have the task of imparting such information and ideas: the public also has a right to receive them.’

NHS workers, like all workers, have a right to free speech. Restrictions on their rights through intimidation, monitoring of their social media, and disciplinary action may violate the ECHR directly, since the NHS is a public sector institution. Their right is protected strongly both when they speak to mainstream media and when using social media. It can be limited only if there is a legitimate aim (such as public safety and public health) and insofar as the limitation is proportionate. When applying the test of proportionality in assessing violations of the Convention, the European Court of Human Rights (ECtHR) has accepted that the special nature of some professions must be taken into account.

While certain restrictions on the right to free speech may legitimately be grounded on a duty of loyalty of the worker towards the employer, other restrictions are illegitimate. This is best exemplified by the strong protection of whistleblowers, in the UK Public Interest Disclosure Act 1998, the case law of the ECtHR and the Council of Europe Recommendation CM/Rec2014(7). The information that whistleblowers share has to reveal a threat or harm to the public interest. The recent guidance of the Council of Europe explicitly states that ‘the pandemic should not be used to silence whistleblowers’. Workers’ speech that reveals information on a harm to public interest is afforded maximum legal protection.

But what about NHS workers who simply share stories of the situation as they experience it, without seeking to make a public interest disclosure? The guidance accepts that free speech during the pandemic may be limited. It gives the following example: ‘exceptional circumstances may compel responsible journalists to refrain from disclosing government-held information intended for restricted use – such as, for example, information on future measures to implement a stricter isolation policy’. Here, a restriction on press freedom is justified because it prevents imminent harm. If journalists disclosed such information, then many people would try to make the most of the last few days or hours before the measures, spreading the virus and putting lives at risk.

Is the restriction proportionate to a legitimate aim? 

By contrast to the example above, there is no necessary link to harm in allowing NHS staff to share their day-to-day experiences. In fact, there is a lot to be gained: any shortcomings in the government’s approach (such as shortage of protective equipment) will come to light, putting it under pressure to correct them. It may also mobilise civil society to help the NHS effort. Finally and crucially, it will contribute towards holding the authorities into account. Pluralism is crucial not just for a democratic society, but also for a healthy society.

As there has been no official justification for why restricting the free speech of NHS staff is necessary, we can only hypothesise about the rationale. The Guardian article suggests that the aim is to ‘stop scaremongering when communications departments are overloaded with work at a busy time’. While this is legitimate, there is little reason to think that NHS staff can exaggerate the scale of the situation, not least because we know hospitals around the world are being tested to their limits. The issue countries face, including the UK, goes in the opposite direction: several people do not take the threat of the virus seriously enough, flouting the lockdown measures.

Another possible rationale is the protection of patients’ privacy. This is obviously legitimate, but NHS staff are well aware that they should not reveal patients’ identities. Sharing their accounts about their overall experience in the pandemic, however, does not necessarily involve revealing individual patients’ information.

But perhaps the real rationale behind gagging is this: if NHS workers start sharing their horrific experiences, this will undermine the public’s morale and trust in the NHS, and may even lead to social unrest. This rationale is very old, going back to the heavy restrictions on reporting during wartime.

Yet are not really at war and the analogy is problematic on many levels. It suggests that criticisms of the government’s approach are unpatriotic, because we all have to be united against an external threat. But the coronavirus is not a foreign enemy who will take advantage of any publicly available information about the shortcomings of the government. On the contrary, more information leads to increased scrutiny which, in turn, strengthens – rather than weakens – our ability to fight the epidemic.

As to the argument that sharing information about the situation in hospitals will undermine morale, it is deeply paternalistic. It assumes that the nation is not mature enough to understand that even the most advanced and prepared healthcare systems will be stretched by this horrible pandemic and that even the most professional and committed health workers will be challenged, physically and mentally, to treat all the patients. There is nothing unpatriotic about letting healthcare workers share their experiences, horrific as they might be, with the public, whose health they are desperately trying to protect.

It is legitimate, of course, to worry about the danger of civil unrest. If the government is perceived – in the eyes of the public – to be wholly incompetent to deal with the pandemic, we could conceivably be led to instances of unrest, violence or riots. But legal principles here are clear: there must be evidence of a clear and present danger before any drastic measures are taken to limit free speech and no such evidence exists at the moment. And the ban on some NHS staff speaking out appears to be indiscriminate: it does not only apply to images or reporting that may shock or outrage the public. It applies to any comment some NHS staff might want to make about their experiences in hospital. According to well-established human rights case law, indiscriminate and blanket restrictions on human rights are likely to be disproportionate, even if the aim is legitimate.

NHS workers need to be open about the challenges they face. Powerful testimonies help citizens understand the seriousness of the situation and emphasise the immeasurable contribution of NHS workers; they also help NHS staff themselves, many of whom are faced with a risk of post-traumatic stress disorder.

Even assuming that there is a legitimate aim, then, we are not convinced that gagging NHS workers passes the legal test of proportionality. The ban does not fit the image of a democracy that values freedom, transparency, and accountability. The chilling effect that the reported intimidations and threats of disciplinary action has on NHS workers’ speech has to be recognized and alarm us all. It raises questions about how open the government is to accountability and how much it values people’s lives.


LSE blog

Note: a longer version of the above was first published on the UK Labour Law Blog.

About the Authors

George Letsas is Professor of the Philosophy of Law at UCL.

Virginia Mantouvalou is Professor of Human Rights and Labour Law at UCL.

Care home deaths: the untold and largely unrecorded tragedy of COVID-19

Deaths from Covid-19 among residents of care homes show a tenfold increase in the two weeks to 3 April, yet even this may be a considerable underestimate. Melanie Henwood explains that, while there will likely be an overall under-reporting of deaths during the pandemic, this is particularly marked with deaths that occur outside hospitals.

The grim accounting of the daily death total from Covid-19 continues. On 10 April, the daily UK figure climbed to 980 – the highest to-date – surpassing the highest daily deaths experienced in Italy and Spain which had been seen as the most severely impacted European countries. There has been some decline in daily deaths since, but it may be too soon to take any comfort from this or to see it as the start of a plateau.

However, the officially recorded Covid-19 deaths reported each day are only part of the picture as they are deaths that occur in hospital, and do not include any in the community or those in residential and nursing homes. There is growing concern that not only do the overall figures underestimate the actual deaths, but that they do so because they ignore the plight of people living and dying with the condition outside hospitals. It is important to know the full picture, not least because deaths in the community are both under the radar and have the potential to rapidly escalate. But it is also vital to address these wider deaths because they disproportionately impact on the oldest and frailest people, and to ignore them devalues the significance of those lives.

Evidence has been accumulating through social media commentary, but also through expert reporting, that the situation in care homes should be a matter of huge concern. In part the circumstances reflect the wider issues afflicting social care practice, particularly the shortages of Personal Protection Equipment (PPE), that have been widely identified. If care staff working in the community and in care homes have inadequate PPE, the potential for the infection to spread between people is enormous. Official reporting of the numbers of people dying in care homes from Covid-19 is increasingly being seen as a significant underestimate, and we may be looking at just the tip of the iceberg.

The data reported by Chris Whitty, the Chief Medical Adviser, on 13 April stated that there had been outbreaks of Covid-19 infection in one in seven care homes in England, and there were 237 deaths in care homes in England and Wales in the two weeks up to 3 April. But data from major providers of residential care paints a much worse picture: HC-One and MHA together operate 3% of care homes nationally, but have documented deaths of 521 residents in recent weeks.

This is not to argue that there is a conspiracy of silence or deliberate covering up of the evidence, although those views will become increasingly prevalent if the situation is not addressed. Yet it is apparent that the data collection and reporting are inadequate and likely to give false assurance that numbers are significantly lower than the reality. The Office for National Statistics (ONS) publishes provisional weekly registered deaths in England and Wales, but these figures are published 11 days after the week ends. Data up to 3 April 3 was released on 14 April and includes a breakdown of the numbers of deaths “where Covid-19 or suspected Covid-19 was mentioned anywhere on the death certificate, including in combination with other health conditions.” Between 20 March and 3 April in England and Wales, the number of Covid-19 deaths recorded in care homes rose from 20 to 217, a tenfold increase; deaths associated with Covid-19 occurring in hospices rose from two to 33; and those at home in the community from 15 to 136. Over the same period, those Covid-19 deaths recorded in hospital increased from 501 to 3,716. The total deaths from all causes recorded in that week – 16,387 – show an ‘excess mortality’ of more than 6,000 above what would normally be expected for this week of the year. Some 3,475 are directly associated with Covid-19 (according to death certificates), but in reality, many more may be.

There are good reasons to conclude that the numbers of Covid-19 deaths being recorded outside of hospitals are considerably underestimating the actual figures. International evidence is beginning to emerge, and analysis by the International Long-Term Care Policy Network across five European countries indicates that “care home residents have so far accounted for between 42% and 57% of all deaths related to Covid-19.”  If there is inadequate testing of both staff and care home residents for infection, it is obvious that recorded deaths will also underestimate the true figures. Care England (the representative body of independent care providers) has estimated that the number of care home deaths already is nearer to 1,000; around five times higher than the official ONS figure.

It is not just deaths that are important here, it is also about the care and conditions for people who are dying in the community. Increasingly, it is being reported that GPs are not visiting care homes and that residents who become infected (or suspected as being infected) will not be taken to hospital. With PPE shortages not only does this increase the risks that infection will sweep through residents, but that people will die in homes that may lack the expertise and experience to support people dying in respiratory distress. The experience for residents, and the associated trauma of staff trying to support them, are awful to contemplate. An open letter sent to the Secretary of State for Health and Social Care by the Alzheimer’s Society, Marie Curie, Age UK, Care England and Independent Age sets out the issue:

We’re seeing people [in care homes] being abandoned to the worst that coronavirus can do. (…) they are told they cannot go to hospital, routinely asked to sign Do Not Resuscitate Orders, and cut off from their families when they need them most.

This issue is about the numbers – about the transparency, completeness, and reliability of the data recording deaths associated with Covid-19, and where those deaths are happening. But more than this, the big issue is what the data – and who decides what is measured and reported – tells us about how the incidence and experience of death from Covid-19 is regarded. All deaths matter; deaths of the frailest and most vulnerable citizens should be viewed as equally sad. The argument that people have ‘lived their life’ or ‘would have died anyway’ is poor comfort for those dying alone, afraid, and in considerable distress. Deaths in hospital from this epidemic are shocking; those occurring behind the closed doors of care homes, hospices, and in people’s own bedrooms, are the untold and apparently largely unrecorded tragedy.

About the Author

Melanie Henwood is an independent health and social care research consultant.

LSE Blog

We must not return to the folly of right-wing economics after the coronavirus pandemic. Prem Sikka

Neoliberals will soon forget their hour of need and will want a return to the past. People must organise to obstruct that return.

Neoliberalism has been the dominant ideology of the western world for the last 40-50 years. Its proponents sought the destruction of the state and limit its capacity to do their bidding, which included deregulation and cuts in hard-won social rights for people.

For neoliberals, markets, privatisation and commodification of everything was the answer rather than building a just society to enable everyone to live a fulfilling life. They portrayed public services as a burden on taxpayers rather than a social investment. Since 2010, a much lower proportion of the gross domestic product has gone to the National Health Service. Thousands of nursing vacancies remained unfilled. The government imposed wage freezes on public sector workers to give tax cuts to corporations and the rich. The government policies made a few people rich but most people struggled to make ends meet.

The light-touch regulation reduced HMRC’s resources. Banks, accountancy and law firms excelled at devising complex tax avoidance schemes. Billionaire Sir Philip Green’s BHS used intragroup transactions and a labyrinth of opaque offshore companies to returns to shareholders. The major shareholder in BHS was Monaco resident Lady Green and she was not liable to any tax upon dividends and other income from BHS. Green was not alone. Sir Richard Branson, resident in British Virgin Islands, operates through a maze of offshore trusts and corporate structures. He is a self-confessed ‘tax exile’ and his businesses such as Virgin Healthcare have paid no tax. The above are just the tip of an iceberg which has depleted the public purse and possibilities of investment in social infrastructure. Every year HMRC fails to collect around £34bn-£35bn of taxes due to avoidance, evasion and errors. Other studies estimate the amounts to be between £58.6bn and £122bn a year.

The folly of the above haunts the UK. The government imposed a lockdown to control the spread of the deadly virus and most business activity came to a halt. Markets and tax havens have not bailed out anyone. The richest 1% of people in the UK owns the same wealth as 80% of the population, or 53 million people, but the rich have not bailed out anyone. Only the state is providing support for employees, the self-employed and businesses. Billionaires such as Sir Philip Green and tax exile Sir Richard Branson head the queue seeking taxpayer funded bailouts for their business empires. Only the hollowed-out state, underfunded public services and public purse now stands between neoliberals and economic oblivion.

Rich neoliberals are holed-up in their big mansions and private islands, but the daily risks of providing essential services are being borne by some of the most poorly paid people. These include nurses, paramedics, midwives, radiographers, care assistants, shop workers, refuse workers, delivery drivers, and postmen. Some of the lowest-paid public sector workers at HMRC and the Department of Work and Pensions are trying to get aid to people.

Neoliberals have long regarded anyone claiming social security benefits as scroungers. They have been content to see Statutory Sick Pay fixed at derisory £94.25 per week. We all remember how Ian Duncan Smith, former leader of the Conservative Party, boasted that he could live on £53 a week in benefits. With the spread of coronavirus, many middle-class neoliberals are facing the possibility of living of £94.25 a week and they don’t like it.

Some 42% of the UK adults survive on an annual income of less than £12,500 and draw little sympathy from neoliberals. The current national minimum wage for workers aged 25 and over is £8.72 an hour, which translates as £1,500 a month and the Institute for Fiscal Studies thinks it is too high. The government has responded to middle-class anxieties by fixing the wage subsidy, from the public purse, at maximum of £2,500 a month. This begs the question why the national minimum wage is set well below that level. If £2,500 a month, or £30,000 per annum is required for a decent life, how can society condemn a large proportion of the population to live on amounts less than that.

The UK is estimated to have around 320,000 homeless and successive governments have done little about it. With concerns about the spread of coronavirus infections, central and local government agencies have managed to house all of them. It just goes to show what can be done.

Neoliberals will soon forget their hour of need and will want a return to the past. People must organise to obstruct that return. The state needs to be mobilised to ensure that homeless people are never again thrown out on the street. Investment in public services and healthcare must be seen as a public good. Inequalities need to be reduced by checking tax avoidance and taxing wealth and redistributing the proceeds. Everyone needs a decent minimum income and the current minimum wage and social security benefits are not enough. A universal basic income, much derived by neoliberals, needs to be considered.

Prem Sikka is Professor of Accounting at University of Sheffield and Emeritus Professor of Accounting at University of Essex.

Coronavirus embarrassed Trump and Bolsonaro. But the global right will fight back.

Science and welfare are at the heart of this crisis – which is bad for right-wing populists. But they won’t be wrongfooted for long

The populist right has built their electoral strength on boisterousness and arrogant self-confidence. Yet, amid the coronavirus pandemic, figures such as Donald Trump, Boris Johnson and Jair Bolsonaro seem to be confounded. They are either desperately clinging to a narrative of normality (it’s just a flu), or have already been forced to make embarrassing U-turns acknowledging the gravity of the crisis.
Boris Johnson had to abandon the government’s “herd immunity” strategy when new scientific evidence made apparent its horrific human cost. He recently tested positive for the virus and is now accused of complacency and lack of leadership. In Italy, Matteo Salvini, leader of the far-right League party and former deputy prime minister, appears downbeat, unable to wear the robes of the responsible statesman this emergency calls for; his unabashed criticism of government has even earned him the label “unpatriotic”. In France, Marine Le Pen seems to have vanished altogether from the media, while Bolsonaro’s persistence in denying the crisis is leaving him increasingly isolated.
Will the coronavirus ‘kill populism’? Don’t count on it | Cas Mudde
In the US, Trump’s strategy has been zigzagging. After downplaying the significance of the virus for weeks, he was forced to declare a national emergency. Having backtracked last week, asserting that the lockdown would end by Easter to avoid damaging the economy, he has now conceded it will have to last until the end of April. It is true that his approval ratings have gone up, paralleling what happened with George W Bush after September 11. But Trump is clearly worried about the electoral consequences of a massive death toll and a recession that could see unemployment of over 20%.
The difficulties experienced by national populists are unsurprising given they are no friends of the issues at the heart of this crisis: health, welfare and science. On the health front, the crisis reveals the folly of decades of underfunding and privatisation of the health system. Trump, Johnson and Salvini have embarrassing questions to answer in regard to their record as enemies of public healthcare. Furthermore, the crisis calls for a sea change in economic policy that is at odds with the ideological premises of national populism, which combines chauvinism on the cultural front and ultra-neoliberal policies on the economic front.
The glaring need for state protection of strategic national industries, starting with health equipment and pharmaceuticals, is no anathema for national-populists who have already embraced trade protectionism. But the populist right has strongly opposed welfare measures that are becoming a matter of necessity to avoid social catastrophe. Having repeatedly branded these policies as “dangerous” and “anti-patriotic”, these politicians find themselves in the embarrassing situation of having to espouse them.
Another skeleton in the closet is national-populists’ disparagement of science. The coronavirus emergency confronts us with a threat that is best understood and measured through the lens of science. Epidemiologists and virologists have acquired media prominence and the public has been diligently following their recommendations. It is not clear whether this will lead to greater public trust in science and an erosion of the anti-science attitudes that national populist leaders have toyed with. However, it can be expected that citizens will take more heed of the risks flagged by scientists, including the climate emergency, which is also bound to exacerbate the spread of diseases.
National-populists are well known for stoking people’s fears. But the fears now prevalent are not of the kind these leaders are best positioned to exploit. Due to the urgency of health and economic worries, migration – the populist right’s main enemy – has fallen in the list of priorities. Travel bans, and the fact that Europe and the US are the present focus of the pandemic, are leading to a drop in migration to these regions. In fact, we are now witnessing a historic reversal, with Mexico aiming to block the border with the US and African countries suspending flights from Europe, while UK farmers are organising charter planes to fly in farm workers from eastern Europe to prevent fruit and vegetables being left unpicked. However, if the global economic crisis results in a new wave of migration like that of 2015, this scenario could drastically change – national-populists will try to validate their narrative of cosmopolitan globalisation as a dangerous vector of all sorts of ills.
If the coronavirus crisis has momentarily disoriented the populist right, this does not mean it is vanquished. It would be misguided for the left to believe that this crisis will work out in its favour. The health crisis is bound to be followed by a deep economic crisis, more similar to the Great Depression than to the 2008 financial crisis, and the populist right has already demonstrated its ability to prey on popular despair and find social scapegoats for economic ills. It can be expected that it will go down the same road, if anything becoming even more vicious.
The authoritarian measures implemented on Monday by Viktor Orbán in Hungary, with the suspension of parliament and the introduction of government by decree, may be the shape of things to come. In Italy, Salvini had no qualms about applauding Orbán’s move. We are also likely to see an exacerbation of anti-Chinese rhetoric. Trump made no apologies for calling Covid-19 “the Chinese virus”, while Steve Bannon argued that Covid-19 is a “Chinese Communist Party virus”. Salvini has proposed that “if the Chinese government knew [about the virus] and didn’t tell it publicly, it committed a crime against humanity”, and allies in Brazil and Spain are adopting a similar line.
Given the ties among national-populists, including their botched attempt to establish a “nationalist international” under the auspices of Bannon’s Movement, this synchrony should not be taken as accidental. It has all the look of a coordinated strategy to channel the rage and despair caused by the crisis’s brutal human and economic toll towards a racial and ideological enemy conveniently identified in the Chinese government. Along with self-proclaimed socialists, all opponents are likely to be smeared as “Chinese collaborationists”: centrist US presidential candidate Joe Biden has already been termed “China’s choice for president” by the conservative National Review.
What may be in store is thus something much worse than the populist right of the 2010s: an extreme right using the whole arsenal of the red scare and rightwing authoritarianism to intimidate opponents and defend its interests from demands for meaningful economic redistribution. Though it has been confounded by this crisis, the populist right has not been suppressed. It is just mutating.
• Paolo Gerbaudo is a political theorist and the director of the Centre for Digital Culture at King’s College London

Link to Guardian

COVID-19: how the UK’s economic model contributes towards a mismanagement of the crisis

Carolina Alves and Farwa Sial discuss the efficiency of the UK’s economic response to the COVID-19 crisis and explain why it does not directly support households but companies.

The global market gyrations since February 2020 have fed on a simultaneous supply and demand shock as well as crude oil price war. This is not a 2007-8 style financial crisis and there is no doubt that its impact is directly linked to disturbances in the circulation of capital: the stock market crash, rise in corporate debt, decline of the aviation and tourism industries, and the blow to the retail industry being some manifestations. However, the morbidity is not simply linked to the virus and the forced break in economies around the world, but to a multifaceted and contradictory historical process of how regulation escaped capitalism in the 21st century.

Since the 1970s, capitalism has undergone significant changes regarding production and distribution of value. Despite different and often contested approaches looking into these changes, a more prominent role for capital gains, fee incomes and, more broadly, rent-seeking behaviour is hardly denied. This shift has been described through various dimensions including heightened speculation in the finance, insurance, and real estate sectors, financialisation of non-financial spheres, and the emergence of new rentier classes. At the heart of this process we saw predatory value extraction and increase in inequality, which in turn has been enabled by the reinforcement of market fundamentalism and mechanisms that have led to the hollowing of states and institutions.

Although many regulations were implemented and redesigned since the 2007-8 crisis, aggressive risk-taking and moral hazard, which marked the foundations of the crisis, did not simply evaporate but have been extended and socialised in many different ways. Late capitalism rests on the ease to transcend institutions because the checks and balances which regulated profit accumulation during the post-WWII era are no longer in place. The hollowing of state has been accompanied by both allegedly neutral ‘technocratic bureaucracies’ and an absence of development indicators such as class mobility and welfarism.

Within this context, the expertise of epidemiologists to contain the virus may be more successful if accompanied by systemic reforms to address the imbalances resulting from the current structure of rentier extraction that, explicitly or implicitly, hinder policies aimed at common good.

Let’s consider, for example, the surge in demand for some products due to reasons including hoarding on an individual and corporate level. The supply side of this story may be facing input price rise, like pharmaceutical companies raising prices on essential drugs citing a halt in the import of raw materials from India and China. However, the current context may also give rise to exploitative practices. Either way, the most financially vulnerable will feel this cost in a time of illness, and their perception may exacerbate surges in demand (including hoarding) – especially in a system which is not prepared to challenge unexpected increases in production costs.

The Competition and Markets Authority issued a statement to ensure that companies should not engage in exploitative practices at the expense of customers. Yet this statement is effectively no better than a non-legally binding code of conduct, with no punitive consequences for unscrupulous market participants. This state of affairs is representative of a wider trend across UK regulatory and supervisory authorities, which short of litigation, have tended to merely deal with failures in consumer protections with toothless platitudes.

Rescue economic packages: how efficient?

The gravity of the current crisis has led governments to implement ambitious stimulus packages to revive the economy. Economists and policymakers have intensely scrutinised these packages. A very peculiar point cutting across some of these criticisms, however, lies within the need to focus on households and workers. In the case of the UK, the rescue package does not empower or directly support households but companies. Its measure for the most part expressly targets businesses with VAT and other tax holidays or deferrals, interest rates cuts, and various other kinds of operational assistance. Even when the approach deals with the workforce – for example, the scheme offering up to 80% of an employee’s wage – it has been geared towards the objective of business continuity, with no focus or conditionalities aiming at precluding a class of zero-hours contract employees to follow, keeping employed as many workers as possible, and enabling them to make productive contributions.

Part of the intention behind this scheme, recently extended to the self-employed, is both to prevent a lapse in consumption and stave off the attendant insolvencies, company voluntary arrangements, and business failures that might originate thereof. In this respect, this scheme is comparable to an extent with the approaches following the 2008 crisis, where a number of financial innovations and measures were introduced with the specific aim to improve the supply of credit to the real economy. But, as history showed us, the availability of such credit did not translate to the expected ‘trickle down’ to either consumers or businesses, as the recipient institutions remained averse to lending (even to each other), protecting themselves. With a faith on businesses rather than financial institutions, in the current case, the wage scheme is to be sought from the government by the employer rather than by the employee, with no explicit mechanism to either avoid firms acting solely for their own benefit (for example, Virgin Atlantic upon seeking a £7.5bn bailout from the government are simultaneously demanding that their employees should forego remuneration for eight weeks) or ensure binding regulation to guarantee employment (see, for example, Wetherspoons which laid off 43,000 workers).

It can’t be emphasised enough that the current pandemic is neither simply a crisis of supply or demand, but a disruption of labour supply followed by unusual shock slowing down demand for some services and goods even when most of the people are still holding their jobs or being monetarily compensated for not being at work. For this reason, although households within economic analysis are usually understood from the lenses of consumption, it seems that now stimulus or reform packages have to be tailored to not only spur demand (at the right moment) and keep businesses alive, but ensure that a complete breakdown of the system due to the need to ‘de-mobilise’ the economy is avoidable.

In this sense, much more needs to be done assuming a more central role in the economic analysis for households. We ought to include measures that look into issues ranging from childcare and elderly care, direct and quick monetary transfers to levels of debt and precarity of employment. This focus is particularly important considering that the weakening of the state in the UK has been accompanied by the austerity policies and misallocation of resources resulting from the privatisation of healthcare.

While alternative measures such as universal income and ‘helicopter money‘ have been criticised on the basis of the amount of money transfer and duration of uncertainty linked to the crisis, the efficacy of both proposals lies in protecting households. This protection, whatever its format, is what we need now, and it should be followed by radical changes in a way we see, understand, and perceive inequality, vulnerability, and class – in the same way that the implementation of the welfare state in the 1940s followed both a radical change in how poverty was perceived after WWII and the acknowledgment of the need for a comprehensive welfare system as a duty of the state. If we will use the war analogy to understand and solve the COVID-19 crisis, this is definitely the main (and perhaps the only) reason to do so.

So, what next?

As others have advocated, a reform/stimulus package has to be a comprehensive intervention which ensures protection for ordinary people. In the absence of a vaccine, the ‘economic contagion’ needed to keep the economy afloat can only work if people are both immobilized and financially secure. The current model of capitalism and its response to crisis is not only inadequate, it continues to fail in protecting the most vulnerable and assuring safety for households. A systematic transformation, which leaves institutions better prepared to deal with crises, can only start with addressing the basic question of unequal distribution and reorienting economic policy from a common good perspective. The UK has a historic opportunity to rethink its economic model: regulation must be strengthened and transformed in favour of the public.

Note: the authors are grateful to Ingrid Harvold Kvangraven and Ilias Alami for helpful comments.

About the Authors

Carolina Alves (@cacrisalves) is Joan Robinson Research Fellow in Heterodox Economics at Girton College, University of Cambridge.

Farwa Sial (@farwasial) is a post-doctoral researcher working on the ESID Project at the Global Development Institute, University of Manchester.

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COVID-19: an overview of the government’s economic priorities so far

Paul Anand highlights the key economic policies announced in response to the ongoing pandemic and assesses their likely implications. He concludes that existential threats to economic systems seem not to be as rare as we believed, and so economists ought to be giving more thought to how we respond to them.

The novel coronavirus pandemic has seen policy-makers shift from pondering whether COVID-19 will have much economic impact to, within two or three weeks, scrabbling around to find policies that address existential threats to economic systems around the world. The economic priorities and problems that emerge are doing so on a daily basis, and it will now be clear to many that conventional policy actions simply do not apply, even if basic underlying principles do.


At the time of writing, the major economic challenges concern the likely effectiveness of a series of (fiscal) policies announced by the UK government. Initially, the government and the Bank of England seemed to be focussed on supporting businesses and announced a range of measures including loans to tide businesses over. But it is already becoming clear that the devil is in the detail.

There is still a huge amount of uncertainty about how long social distancing will last – perhaps it will be three weeks or three months; in the UK, emergency powers have been requested for two years. As a result, the massive £350bn package of support – which includes business loans – risks being substantially ineffective. Company directors are being asked to take out loans, but where companies have costs and close to zero revenues for several months, they could face the prospect of being without profits for two or three years. For these reasons, banks offering loans even with substantial underwriting by government will not able to easily judge whether and when many businesses will be clearly solvent.


I regularly collaborate with the UN and the World Bank, where the concept of human development is an important driver of economic thinking. The UN has an index which monitors health education and gender equality as well as national income, providing this war a focus for what economies need in a way that goes ‘beyond GDP’, a need that economists have increasingly recognised in recent years. From this perspective, COVID-19 is a human development crisis in the making which also demands immediate policy attention.

In the past few days, one UK charity food bank has reported a quadrupling in referrals over the space of a week. At the same time, other food banks and organisations trying to arrange food deliveries for the most vulnerable have reported thefts of food. Supermarkets have been addressing some of the challenges by creating particular times when older people or front-line workers can shop. These latter initiatives are welcome, but local government does need to be empowered to address the issues of hunger that some families are already facing.

There are also huge short- and long-term implications for education and labour markets. The closure of schools challenges both children’s learning and schools’ abilities to offer learning online. But it also throws into sharp relief the extent to which businesses depend on schools for childcare and we should expect the losses of national income to be significant if closures carry on for several months.

Furthermore, there is evidence that those who find it difficult to enter the labour market for the first time because of economic recessions are scarred and achieve poorer economic outcomes over the longer term. This is yet another source of inequality that we should try to combat.


In terms of health and health services, shortages of protective equipment in the NHS are contributing to staff shortages, as doctors and nurses self-isolate or go sick. Matt Hancock has suggested this reflects a logistics problem but whatever the reason, this is a serious constraint on the country’s response and one that makes understandable the reason thousands of NHS staff have complained about the lack of appropriate masks and gowns.

Currently, medics are also suggesting that by early April there will be a need to make decisions about who gets access to a ventilator. The government has, for several weeks, said that it will purchase all the ventilators that suppliers can produce but there are limits to how quickly their production can be ramped up. The fact that doctors and nurses are being invited out of retirement and back into work is an indication of just how dramatic the demands on the service are expected to be and highlights also the fact that other aspects of healthcare will suffer.


The pandemic has created unexpected calls for economic policy responses. Over the course of three budgets in nine days, Chancellor Rishi Sunak has acknowledged that this is not just another recession and this is not a time for ideology. Rather, he has shifted to a position where he is listening and responding to the existential risks to large numbers of jobs, to whole industrial sectors, and to vulnerable groups within society. The offer to underwrite 80% of worker salaries up to £2,500 per month is a potentially sizeable and welcome signal that livelihoods should be the focus of economic policy because they support workers and businesses at the same time. In normal times, policies for both seem to be siloed and disconnected – but we cannot afford to think like that right now.

That said, support for the self-employed and those in the gig economy on zero-hours contracts has been slower to work out. There are some five million workers classed as self-employed in the UK and another million working on zero-hours contracts; these cover a diverse set of groups – from high-paid celebrities to working mums and taxi drivers. When they stop work, currently many are entitled to £94.25 per week, a figure that Matt Hancock accepted that he could not live on.

The issue caused some confusion, particularly in the construction industry where many workers have wondered if they should carry on working on the grounds they cannot work from home and need to put food on the table. As a result, the London underground, supposed to be running for emergency workers with passengers keeping two meters apart, has been crowded and remained a hotspot for transmission that undermined the first days of the three-week lockdown.

Following the initialy delay, on March 26 the Chancellor announced a scheme that would give such workers 80% of normal earnings up to £2,500 per month and subject to a means test of no more than £50,000 per year to ensure benefits are targeted to those in greatest need.

Rents and mortgages

There are also issues concerning rents and mortgage repayments that affect most of society. The agreement between the government and the banks that those paying rent or repaying mortgages would be able to have a three-month holiday was welcome a couple of weeks ago. But it now looks certain that those living on low incomes in high-cost cities like London will need much more help if we are to avoid a rise in evictions further down the line.

The COVID-19 pandemic created a twin economic and human development crisis that standard economic thinking is not well-suited to. The Chancellor is to be applauded for moving quickly and dramatically in the right direction but there is still much evidence of what behavioural economists call anchoring and adjustment – that is, failing to adjust enough because our actions are often based on small incremental steps from where we start. The signs from China suggest severe measures can be effective over a three-month period and it remains to be seen whether Johnson’s libertarian inclinations will allow him to pursue the strategy, even though it seems to be supported by most. Existential threats to economic systems are not commonplace, of course, but experience of the financial crisis, the climate crisis, HIV and AIDS, as well as war is beginning to suggest that economists should give more thought to policies and analysis of such situations, which are perhaps less rare and unusual than we might have thought.

About the Author

Paul Anand is a Professor of Economics at the Open University and Research Associate at Oxford University and London School of Economics.

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COVID-19 and economic lessons from previous pandemics

Looking at past pandemics, Costas Milas expects the economic downturn caused by the novel coronavirus to be significant but temporary. He also explains why some wages rise during such episodes and why unemployment benefits must rise as well.

Diseases cause panic and take a significant social and economic toll. The Black Death, for instance, which lasted between 1348 and 1350, killed between 75 million and 200 million people worldwide and about half of the population in England. It also contributed to a dramatic cumulative GDP fall of 29% and to a ‘flight-to-safety’ increase in the price of gold by 8% between 1348 and 1351. Nevertheless, as a consequence of the scarcity of labour, real farm wages in England went up (cumulatively) by 116.2% whereas real wages of building craftsmen went up by ‘only’ 42.6%, which makes sense if we consider that avoiding a disruption in farm production was a priority. At the same time, flight from cities led to a downward pressure on rents and, therefore, the incomes of the upper class. Last, but not least, the English Parliament was prorogued several times in 1349 and only met again in 1351.

Some of the above observations were repeated during the 1918-1919 Spanish flu pandemic, estimated to have killed 40 million people worldwide. It is difficult to separate the economic effects of the Spanish flu from those of World War I because wartime production arguably put upward pressure on wages as a result of rising labour demand. Nevertheless, research has found that US manufacturing wages increased; indeed, US cities that had greater influenza mortalities experienced higher real wage increases. Data from the UK suggests that the real wages of building labourers in London went up (cumulatively) by 34.2% in 1918-1919, whereas real GDP in the country fell by 6%. On the other hand, house prices increased (cumulatively) by 20.3% in 1918-1919. In Sweden, which was not involved in World War I and so more clear-cut references can be made about the economic consequences of the Spanish flu, the pandemic affected incomes from stocks and rents negatively, whereas wage rates were not affected. Last, but not least, the price of gold increased (cumulatively) by 6.1% in 1918-1919.

Notice some parallels with today’s economic situation. As stock markets drop on fears of a coronavirus-related economic slump, the flight-to-safety investment strategy repeats itself. Indeed, the price of gold hit a seven-year high before dropping again as investors sold gold to cover their losses elsewhere, which serves as a reminder that although gold is a flight-to-safety investment strategy, there are periods in time that it loses, at least temporarily, its safe haven status.

With Britain’s public becoming increasingly anxious about the novel coronavirus outbreak and both monetary and fiscal authorities responding to address the looming recession, it makes sense to explore how rising financial stress impacts on the economy. As can be seen from Figure 1, there is an adverse relationship between financial stress and economic growth. The financial stress indicator pools information from the volatility of the exchange rate, the volatility of the equity market, the volatility of the bond market and the risk premium that investors demand to hold UK corporate bonds rather than the less risky UK government bonds.

Figure 1: UK GDP growth and financial stress, 1970-2019

Financial stress is a good predictor of future movements in real GDP growth. From a historical point of view, a rise in financial stress signals a slowdown in UK growth between one and three quarters prior to growth turning negative. Although data for the first quarter of 2020 is not yet published, we know that financial volatility is on the rise which suggests a significant hit to the economy.

Nevertheless, it is important to look beyond the negative impact of financial stress on the economy and pay particular attention to those who will lose their jobs or take an income hit if they are quarantined. This is really pressing because unemployment benefits in the UK are much lower than those in other countries or the OECD average. Indeed, unemployment benefits in the UK account for 34% of previous incomes for the first two months. On the other hand, unemployment benefits in the US account for 57% of previous incomes for the first two months. Unemployment benefits rise to 60% of previous incomes in the case of Germany and rise further to 64% of previous incomes for the OECD average.

Many will feel uncomfortable at the prospect of central banks taking additional quantitative easing measures to support the economy. Quantitative easing, or large-scale asset purchases, refers to monetary policy actions whereby central banks purchase predetermined amounts of government and corporate bonds in an attempt to inject money directly into the economy. There is pressing need for policy-related action because economic policy uncertainty, both in the UK and worldwide, is on the rise. This halts investment planning and undermines productivity. At the same time, the confidence of our business leaders in the economy is being affected.

Still, with current government bond yields at extremely low levels, it is questionable whether further quantitative easing is an effective way of suppressing sovereign interest rates further and reviving the economy in terms of injecting additional liquidity. In fact, Chris Martin and I have recently shown that quantitative easing loses its effectiveness at very low interest rates. Notice, however, that sovereign interest rates dictate, to a large extent, corporate interest rates within a particular sovereign. Mid-March saw, at least temporarily, an increase in government yields and an even sharper increase in corporate yields. This forced the Bank of England and other central banks to intervene by authorising additional quantitative easing which, in effect, acted as a ‘catalyst’ in driving (again) government bond yields down. Whether this translates also into lower corporate yields remains to be seen. This is because firms are currently operating in (dangerously) sliding supply and demand conditions which makes it more likely than not that they will have to lay off workers even if they secure temporary government support. This is why, as I mentioned above, unemployment benefits need to rise.

Looking at the history of pandemics, there is hope that some wages will have to rise. This should definitely apply, as a matter of urgency, to those who are currently on the front line, such as nurses, whose starting salaries took a hit in real terms after the last financial crisis.

There is another lesson from the economic effects of past pandemics and earlier recessions. As the Economics Editor of the Sunday Times recently noted, recessions tend to be short-lived. If history were to repeat itself, the chances are that we will witness a deep economic downturn. Forecasters predict that the looming economic downturn will be a ‘V-shaped’ rather than a ‘U-shaped’ one. In other words, the downturn should be significant but temporary. To what extent history will repeat itself remains to be seen.

About the Author

Costas Milas is Professor of Finance, University of Liverpool.

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European health systems and COVID-19: Some early lessons

COVID-19 is putting unprecedented pressure on European healthcare systems. Tamara Popic draws together some early lessons, arguing that the crisis should prompt a rethink of the direction of healthcare policies across Europe, and that the principle of solidarity must now move to the forefront as countries seek to mitigate the impact of the outbreak.

The spread of COVID-19 has put new pressures on already strained national health systems across Europe. In Italy, the country reporting the highest number of deaths linked to the virus in Europe so far, hospitals are facing severe crises trying to deliver the necessary care, while doctors are making heart-breaking decisions on how to distribute scarce resources. The usual stereotypes of Italian dysfunctionality notwithstanding, the 2018 Bloomberg ranking of the countries with the most efficient healthcare systems around the world places Italy fourth. The Italian population also ranks as the second healthiest population in the world. As one of the most efficient health systems and one of the healthiest populations in the world is struggling under the pressure, there are at least two lessons that could already be learned from the present crisis.

All that glitters is not gold

First, European governments should re-think the direction they have pursued with their healthcare policies over recent decades. A breakdown of coronavirus risk by demographic factors shows that those most likely to die are the old and the sick, population groups most dependent on the public healthcare system. Yet, European health systems in 2020 are less public than they were 30 or even 10 years ago. The logic behind these developments, guided by the New Public Management approach, has been that scaling down of the public sector would make health systems more efficient and responsive to the population’s needs.

The consequence of this approach has been a slow but steady reduction of public spending for healthcare. OECD Health Data show that since 1990 public spending as a share of the total spending for healthcare has decreased in most European countries. In some countries in Eastern Europe the decline has been even higher than 30 per cent.

While this trend has produced a variety of effects, a reduction of hospital capacity is one of the most important. As hospitals deliver costly specialised care and as European hospitals are still predominantly public hospitals, one of the key cost-containment measures has been to reduce the number of hospital beds. The figure below shows there has been a significant decline in curative hospital beds since 1990 across the whole of Europe (with the notable exception of Finland). In Italy, the number of beds per 1,000 people declined from 7 in 1990 to 2.6 in 2015. The tragedy is that these beds are now among the most needed elements of healthcare system capacity in the context of the present crisis.

Figure: Curative (acute) hospital beds per 1,000 of the population (1990-2015)

Source: OECD Health Data 2019

A call for solidarity

Second, the current crisis underscores the key principle of public healthcare – solidarity. A reduction of public spending for healthcare across Europe was paralleled with a series of policy measures that involved privatisation and the introduction of market-like instruments in the provision of medical care. In the hospital sector, these measures involved the privatisation of hospital beds and changes in the model of hospital ownership, including transformation of public hospitals into private-for-profit hospitals and joint-stock companies. The logic, similar to the one applied to reductions in public funding, has been that replacement of the public sector led by the state with private and competitive, market-oriented care provision would make health systems more efficient and responsive.

However, research shows that these types of policy changes have contributed to the creation of two-tiered healthcare systems. In this kind of system, access to necessary care is dependent on one’s capacity to pay for it and solidarity granted by the public system is eroded. And this is happening at a time when the general trend in inequality has spared neither our health nor our health systems, as countries face persistent inequalities in health and in access to healthcare services.

If these developments were not worrying enough, then the current health crisis caused by the coronavirus demonstrates that solidarity matters now more than ever. A quick look at the United States reminds us that having universal access to care is key in responding to the present crisis. News that the UK’s NHS will use private beds for virus sufferers may have seemed encouraging at first, but the subsequent announcement that private hospitals will be charging the NHS £300 per bed suggests that solidarity risks disappearing at the time when it’s most needed. Having resilient, well-funded public health systems with universal access to healthcare is key not only for solidarity, but also for national if not global salvation. It’s time to come together.

Note: This article was first published on LSE EUROPP. Featured image credit: Marcelo Leal on Unsplash.

About the Author

Tamara Popic is a Research Fellow at the Max Weber Programme of the European University Institute.

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