States have assumed the key role in the fight against the coronavirus pandemic. The dominant position of the state comes at a price, one that the Asian societies seem ready to pay. Has the era come of universal state capitalism?
At the start of the year, when the coronavirus was but a dark cloud on the distant horizon, the issue of the secure provision with drugs came up in the media. The production of drug ingredients, a business with low margins, has been shifted to countries such as India and China in the context of globalization.
As global supply chains were broken over the past months, the provision with drugs in Switzerland was jeopardized, a trend that may continue as India battles to contain its own crisis.
The State and the «Too Big To Fail»-Question
The issue of a secure provision with essential goods such as drugs in a future crisis is on the agenda for after the current crisis. It is of course not too unlike the discussion about the «too big to fail»-regulation in the financial sector.
After the financial crisis, the banking industry was ordered by the state to put aside plenty of capital to prepare for the worst in a future crisis. The big banks, in particular, were also told to put in place a structure that shielded the Swiss business from the international unit in case of an emergency, safeguarding the financial services for Switzerland.
The Strong State in Times of Crises
The principal question which arose at the time, and which is coming up again, is about the role the state should play in the economy. Or to put it in a different way: are we witnessing the global takeover of the state capitalist system? What should we think about U.S. President Donald Trump's order, instructing a big carmaker to start producing ventilators?
What does it entail if the Swiss state stands in as guarantor for emergency loans taken out by tens of thousands of Swiss companies? Or the Swedish Finance Minister Magdalena Andersson, who promised to link potential state aid to major firms with taking a stake in those companies? Or Italy that has taken over the ailing Alitalia airline?
Exclusive Right to Print Money
All the measures in themselves are logical and understandable as part of a broader answer by society to an external threat. But the trend seems clear: people expect a decisive answer by the state in times of crisis. And not just in respect to health, infrastructure, education, and military. No, the state is taking responsibility for the economic consequences as well, as a function of its right to print money.
The state capitalist system is closely linked with a «guided democracy» (aka dictatorship). The world has seen some Asian nations become pretty wealthy through the application of such a system. So the idea in principle has been rather successful – the takeover of Switzerland's Syngenta by a Chinese firm was a good example of the change in the global economic balance that took place in recent years.
In this system of state capitalism, companies are required to pursue specific goals set by the state, or society. In our times of a pandemic, this goal, for instance, is the production of ventilators.
An App That Vouches for Your Good Health
Another goal set is the power over big data, a fight between giant firms that is currently heating up as the 5G infrastructure is developed across the world. The cooperation between tech corporations and state actors are a proven fact. The technological features produced by those firms are giving us splendid new tools to fight a pandemic – for instance applications that you need to display upon request in public that prove your well-being.
The guided economy, the guided democracy, has an array of tools available to fight a crisis. And that is why this system is so attractive for many in our complicated world.
The Temptation to Direct
The old world, if we can define it in this way, is feeling the crunch from two directions. Containing the pandemic is tough enough as it is. But countries such as Switzerland, Germany or the U.S. have the means to fight a virus such as corona. We will develop a vaccine and drugs against the symptoms. Hospitals have received a fast makeover to treat all the patients and even the military has been put to work in this crisis.
But of course, many processes seem a little slower than in a state capitalist systems. Hence the temptation to direct, a political instinct not so popular in our regions for many years, has risen significantly.
The Measures Tend to Stay in Place
It seems fairly easy to put in place measures that constrain our freedoms, even in Switzerland. The interventions have a tendency to stick. An example: recently, more than a decade after the financial crisis, the Swiss financial regulator Finma finally released a regime for small banks. This after it had realized that the tough measures adopted so long ago weren't adequate for all banks, large and small.
Another, immeasurably worse example of how difficult it is even in democratic systems to cancel an intervention, is the U.S. Patriot Act. Designed after 9/11 to fight the menace of terrorism, the act gave the government far-reaching powers to invade the privacy of citizens. They weren't ever retracted.
In recent days, Switzerland has seen first signs of a democratic discussion emerge about how and when the country can return to its normal way of life. This is a good thing. The struggle for the best political answer to our problems will include a discussion about the role of the state in the economy – and it won't come too soon after the biggest intervention by the state since World War II.
