Shutdown: How Covid-19 may bring about radical change in the global economy

Shutdown: How Covid Shook the World’s Economy

Author: Adam Tooze

ISBN-13: 978-0241485873

Publisher: Allen Lane

Guideline Price: £25

I never imagined a world in which I could not shake hands. A greeting or a farewell always felt more definite with the contact of palms. This was always important to me as a politician as I attempted to disarm apathy or kindle support with the offer of a handshake.

If the exit of this ritual was dramatic then the potential return has been confusing. Do I offer an elbow, pump a fist or shake a hand?

This is the smallest of the changes that we confronted. As public health restrictions are eased, severe disruption and change in the future feels like a repetition of our recent past.

But what if we are wrong in that assumption? What if we are not ending but beginning a period of change? That is the message of history. Pandemics tend to inaugurate periods of upheaval, not mark their end.

The democracy of ancient Athens was unable to cope with a mysterious plague, contributing to its defeat by Sparta. The Black Death of 1347 to 1350 fundamentally changed the power of medieval labourers and laid the seeds for the Renaissance. The Spanish Flu of 1918 fundamentally changed our understanding of public health and contributed to the Roaring Twenties.

This moment is even more latent with possibilities for change. We are in the early phase of the climate crisis. Quantum computing and artificial intelligence will change our lives and the possibilities for humanity.

Multiple inflection moments are happening together. The pace of change may ebb year to year, but the broader flow will be of accelerating and exponential change. The concluding chapter of Shutdown by Adam Tooze is the best summary of this challenge that I have yet read.

It argues that our recent experience was “an exceptional and transient crisis, no doubt, but also a way station on an ascending curve of radical change”. This is because “none of the forces that had come together to make 2020 a moment of global crisis had exhausted themselves. Far from it.”

Shutdown offers an incisive analysis of these forces. The global balance of power is changing as the economic and security power of China strengthens. Economic growth delivered inadequate levels of inclusivity and benefit in too many democracies.

The author locates the development of the pandemic in the wider ecological change under way on our planet. The changing use of land, the steady erosion of the global wilderness and the growth of mass farming has created an interdependence of vulnerability between humanity and nature.

This is the first crisis of the Anthropocene age, an “era defined by the blowback from our unbalanced relationship to nature”. The epidemic globally challenged the political legitimacy of governments. Could the most basic elements of the social contract be maintained?

Western politics

Tooze is eminently qualified to address these questions. A British historian, his earlier works include Crashed, a magisterial analysis of the global financial crisis. A theme of that work was a recognition of the value of the technical abilities of some of the political and economic leaders during that crisis.

However, he argues, that generation of leaders failed to effectively respond to that crisis. This failure changed the course of Western politics.

Similar themes are developed in Lockdown. Central bankers emerge as the heroes. Their willingness to print money and support governments averted an even greater economic catastrophe.

Tooze initially wonders whether a positive evaluation of the economic response is possible, whether “a team of veterans, conditioned by the experience of 2008….responded to a crisis of confidence that was threatening to become existential in the way that such a crisis demands: with maximum force”.

This is not the final conclusion of Lockdown. The resilience of developing economies and their policy response is acknowledged. However the author still argues that wealthier economies were not sufficiently co-ordinated, that they were too dependent on central banks and private finance and still not sufficiently focused on the heightened risks of inequality.

This is a very exacting judgement. Many economies have now returned to pre-pandemic levels of employment. Income for many was protected during the pandemic. Wage subsidy schemes and higher levels of unemployment benefit prevented sharp increases in unemployment and poverty.

Global perspective

Much of this book focuses on efforts to contain the consequences of the pandemic. A global perspective, with due focus on the pandemic in China, brings freshness to recent events.

If Tooze provides the first draft of history, then his drafts will stand the passing of time. Yet a much more powerful and challenging book is hinted at within these pages. The analysis of the Chinese response, the framing of the pandemic within an ecological framework and his ability to relate arcane economic policies to the use of sheer power are all exceptional qualities of this narrative. They deserve, even demand, fuller elaboration. A sequel awaits.

Paschal Donohoe is the Minister for Finance and president of the Eurogroup