[D66] The Coronavirus War Economy Will Change the World

[Antid Oto]

  The Coronavirus War Economy Will Change the World

By
Nicholas Mulder
foreignpolicy.com
13 min
View Original 
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An American propaganda poster from World War II. Jean Carlu/Office for 
Emergency Management, Division of Information/Galerie Bilderwelt/Getty 
Images An American propaganda poster from World War II. Jean 
Carlu/Office for Emergency Management, Division of Information/Galerie 
Bilderwelt/Getty Images

Is the world at war with the coronavirus? Last month, Xi Jinping 
<https://www.nytimes.com/2020/02/15/world/asia/xi-china-coronavirus.html> 
called the Chinese suppression effort a “people’s war”; in the past 
week, Donald Trump 
<https://www.politico.com/news/2020/03/18/trump-administration-self-swab-coronavirus-tests-135590> 
labeled himself a “wartime president,” while Emmanuel Macron 
<https://www.nytimes.com/2020/03/16/world/europe/coronavirus-france-macron-travel-ban.html> 
declared that France is “at war” with COVID-19. As the global response 
to the pandemic gathers steam, the rhetoric of wartime mobilization is 
everywhere. In Italy, the worst-affected country in Europe, the 
government’s anti-virus czar has called 
<https://www.ilfattoquotidiano.it/2020/03/17/coronavirus-la-diretta-i-contagi-sono-31-506-le-vittime-2-503-il-commissario-arcuri-attrezzarci-per-economia-di-guerra-mattarella-clima-di-difficolta-cittadini-siano-uniti-intorn/5739109/> 
for the country to “equip itself with a war economy” to confront the 
disease.

<https://foreignpolicy.com/projects/coronavirus-wuhan-china-pandemic-outbreak-guide-2020/>

During the 2008 global financial crisis 
<mailto:https://books.google.com/books?id=om2mDwAAQBAJ&pg=PA169&dq=%22big+bazookas%22+%22shock+and+awe%22&hl=en&newbks=1&newbks_redir=0&sa=X&ved=2ahUKEwiA2K3XgaroAhWRlHIEHUUDDUoQ6AEwAHoECAAQAg#v=onepage&q=%22big%20bazookas%22%20%22shock%20and%20awe>, 
policymakers became fond of using warlike language to describe their 
stabilization efforts, invoking “big bazookas” and “shock and awe.” But 
the total nature of the global response to the coronavirus makes the 
metaphor of wartime economics even more relevant today. Governments 
currently have to manage a public health emergency at the same time as 
central banks act to calm financial markets, armed forces are deployed 
to build hospitals, and citizens’ movements are restricted by social 
distancing.

But in what ways is the war economy a useful way to understand the fight 
against the coronavirus? The idea has been invoked to mean a variety of 
things: productivity, sacrifice, reform, solidarity, and 
resourcefulness. In some of these areas, war isn’t an appropriate way to 
think about the global pandemic. In other respects, however, it’s time 
for Western governments to go beyond merely using wartime rhetoric. The 
history of 20th-century war economies offers important lessons that 
policymakers should already be drawing on today.

------------------------------------------------------------------------
A World War II poster urges women to find a job to aid in the war 
effort. Minnesota Historical Society/Corbis via Getty Images A World War 
II poster urges women to find a job to aid in the war effort. Minnesota 
Historical Society/Corbis via Getty Images

Our campaign against the disease most clearly recalls wartime 
emergencies in the urgent need to expand production and care. As 
COVID-19 cases overwhelm intensive care units around the world, we need 
more test kits, hospital beds, ventilator machines, masks, and 
protective clothing—lots of them, fast. Expanded emergency care capacity 
is encountering supply bottlenecks, for instance of the chemical 
reagents used in testing, and the looming shortage of trained medical 
personnel. The U.S. government’s invocation 
<https://www.washingtonpost.com/politics/trump-says-he-will-invoke-defense-production-act-to-marshal-private-sector-in-response-to-coronavirus-pandemic/2020/03/18/617bff5e-6933-11ea-b199-3a9799c54512_story.html> 
last week of the Defense Production Act (DPA), a Cold War law allowing 
it to prioritize and allocate resources 
<mailto:https://www.insidegovernmentcontracts.com/2020/03/a-coronavirus-contractors-guide-to-the-defense-production-act/> 
to help expand private industries in strategic sectors, is a step on 
this road to constructing a larger medical mass-production base.

But as historian Tim Barker points out 
<https://www.dissentmagazine.org/online_articles/coronavirus-defense-production-act-industrial-policy>, 
the DPA is not the only model for such resource mobilization, or even 
the most effective one. There are models less reliant on the private 
sector than the DPA; one important peacetime predecessor is the New 
Deal-era Works Progress Administration. This sort of public scheme would 
be able to put to work the large numbers of workers who are facing 
unemployment in the coming weeks and months. Besides having positive 
economic side effects, such public employment expands state capacity and 
removes the need to rely on improvised exploitative labor practices, 
such as New York State’s use of prison labor 
<https://qz.com/1815496/ny-forces-prisoners-to-make-hand-sanitizer-to-fight-coronavirus/> 
to mass-produce hand sanitizer.

War-economic production is often conceived of as a national enterprise. 
But most war economies in the 20th century were deeply international in 
their supply lines. The medical mobilization against COVID-19 will have 
to be similarly global. There are currently about 173,000 ventilators 
<mailto:https://www.nytimes.com/2020/03/22/opinion/health/ventilator-shortage-coronavirus-solution.html> 
in the United States. In the short term, the increase in American needs 
alone will probably exceed the entire global annual production 
<mailto:https://www.huffpost.com/entry/coronavirus-ventilators-supply-manufacture_n_5e6dc4f7c5b6747ef11e8134> 
of 40,000 to 50,000 machines. Given the complex nature and high sanitary 
requirements 
<mailto:https://qz.com/1820705/the-challenges-of-non-medical-companies-making-coronavirus-supplies/> 
of ventilator assembly, even the DPA will only allow a small conversion 
of manufacturing plants for medical machine production. The shortage 
cannot be solved within national borders. East Asia, where the virus is 
under relative control, is where ventilators can be produced on a 
serious scale. Just as Lend-Lease and the Berlin airlift provided 
U.S.-produced war material for the rest of the world in the 1940s, so 
the realities of the global manufacturing base in 2020 suggest that mass 
airlifts of ventilators and machine parts from China will be needed to 
support adequate Western emergency care.

/[//Mapping the Coronavirus Outbreak:/ 
<https://foreignpolicy.com/2020/03/04/mapping-coronavirus-outbreak-infographic/>/Get 
daily updates on the pandemic and learn how it’s affecting countries 
around the world.]/

Beyond the immediate treatment of those infected with coronavirus, 
however, Western governments have almost universally shut down rather 
than ramped up production. As one financial analyst pointed out 
<https://www.ubs.com/global/en/wealth-management/chief-investment-office/about-us/meet-the-experts/paul-donovan/2020/lockdown-economics.html>, 
“lockdown economics” is in many ways the exact opposite of the wartime 
economics of total mobilization. During both world wars, economic 
mobilization enrolled unprecedentedly large groups of male and female 
workers in mass production. The coronavirus’s disruption of supply 
chains and the social distancing measures of today, however, are 
currently putting millions of employees in the manufacturing and service 
sectors out of work 
<https://www.wsj.com/articles/u-s-layoffs-likely-surged-to-unprecedented-level-this-past-week-11584728237>.

Despite the atomized nature of life under quarantine, it’s clear that 
the coronavirus resembles war in one crucial aspect: As a highly 
infectious virus with a significant mortality rate, it has the potential 
to cause mass death on a scale unseen in European societies since the 
1940s. Facing up to this reality is politically difficult but 
unavoidable. Italian Prime Minister Giuseppe Conte has asked 
<https://twitter.com/GiuseppeConteIT/status/1237863027254243333> his 
compatriots for “60 million small great sacrifices” as they weather the 
pandemic. Even those who would rightly avoid the language of war, such 
as German Chancellor Angela Merkel, acknowledge 
<https://www.youtube.com/watch?time_continue=4&v=F9ei40nxKDc&feature=emb_logo> 
that the coronavirus demands a level of collective action unseen since 
World War II.

Beyond the sick, wounded, and dead, war economies are based on other 
sacrifices, too. Under capitalist conditions, war economics raises the 
question of how many resources society is willing to set aside from 
profit-seeking ventures to protect itself. Both military power and 
health care fall into the category of expenditures that are essentially 
protective rather than productive in nature.

But beyond this, the analogy falters. Emergencies often present 
economies with real resource constraints. In early-20th-century war 
economics, the key dilemma was usually a choice between prioritizing 
defense or civilian production—guns or butter. The coronavirus forces us 
to think hard about how public health measures can be reconciled with 
economic production. But this is not a problem of prioritizing 
expenditures or limited resources. The issue is sustaining circulation. 
In the short run, the demands of disease prevention (quarantine 
measures) and care (hospitalization) will put the livelihood of those 
dependent on other forms of capitalist production at risk. Only massive 
government intervention to protect the channels of economic circulation 
can resolve this tension in a way that does not sacrifice the former for 
the latter. We might call this the “ventilation or butter” dilemma.

The inescapable need for state involvement helps explain why the war 
economy is a favorite metaphor of the technocratic imagination. Crises 
have always granted reformist policymakers powers to bypass legislative 
gridlock and entrenched interests. The coronavirus crisis is already 
allowing the implementation of ideas that would have been considered 
very radical just months ago. The speed with which U.S. legislators have 
embraced interventionist ideas 
<https://www.ft.com/content/e23b57f8-6a2c-11ea-800d-da70cff6e4d3?shareType=nongift> 
such as direct cash transfers, freezes on mortgage foreclosures, and 
government nationalization of distressed firms is a major intellectual 
vindication of the left. For a long time, the progressive left has 
highlighted the very problems that the virus has now exposed so starkly: 
precarious employment; galloping income and wealth inequality; the 
unaffordable cost of health care, housing and education for many; and 
the peril of personal indebtedness.

------------------------------------------------------------------------
A poster produced by British Railways during World War II to remind 
passengers of the company’s services to the war effort. A poster 
produced by British Railways during World War II to remind passengers of 
the company’s services to the war effort.

But successful crisis management is no guarantee of durable reform. War 
economies can be powerful incubators of political change. But 
technocracy cannot make its offspring survive through its own power 
alone. What renders these innovations durable is the emergence of 
political and electoral alliances.

In the case of the European welfare state, the real fruits of wartime 
crisis management were only reaped after the end of conflict. Policies 
meant to deal with the damage of the Great Depression and the world wars 
created new constituencies. Despite being framed as exceptional wartime 
or postwar measures, many provisions rapidly became entrenched. In 
interwar Britain, France, and Germany, it was financial support for “war 
victims 
<mailto:https://encyclopedia.1914-1918-online.net/article/post-war_welfare_policies>”—veterans 
and those left widowed, orphaned, and disabled by the war—that created 
the foundations for later universal pensions and child care. If the 
emergency response measures to COVID-19 grow to encompass a large enough 
group—for example, the millions of service workers being laid off—this, 
too, may coagulate into a new semi-organized group with a future 
political role.

Precisely because of their reliance on state action, war economies are 
deeply political systems. War economies do not suspend politics; they 
raise the stakes. As opportunities for empowerment and enrichment 
abound, novel distributions of benefits and burdens arise in which some 
groups acquire power and resources not just in excess but at the expense 
of others. Short-lived emergencies can temporarily bracket 
distributional questions from political debate, for instance over wages. 
But the longer warlike exceptions last, the greater the opportunities 
for subordinate groups to leverage their power. In the early 20th 
century, war production made labor unions more powerful in Britain, 
France, Germany, Italy, Japan, the United States, and elsewhere. Even 
when organized labor negotiated pacts of national unity with government 
and business interests, it put its power on display in the immediate 
postwar periods of 1918-1921 and 1945-1948, which witnessed the largest 
strike waves of the 20th century.

In this respect, the coronavirus lockdowns present a deeply lopsided 
situation. After decades of falling unionization, Western economies are 
confining much of their workforce to their homes while enormously 
increasing their reliance on a vital set of workers in the care, 
logistics, and retail sectors. Doctors, nurses, delivery people, postal 
and transport workers, grocery store employees, shelf stockers, 
sanitation workers and janitors, mechanics and tech employees, and farm 
hands are now, very clearly, the indispensable foundation of a 
functioning society. There is no precedent for the asymmetric mix of 
mobilization and demobilization of labor that we are witnessing right 
now. And as anyone currently working from home with children knows, the 
realms of office work, child care, and other forms of domestic labor are 
colliding as never before.


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Invoking warlike sacrifice heightens the need for governments to balance 
rewards across boundaries of class, race, region, and age. The history 
of war economies offers lessons in the management of solidarity under 
such circumstances. Beyond pioneering forms of economic planning, 
resource mobilization, and industrial policy, war economies spearheaded 
many initiatives that directly promoted solidarity in the face of 
sacrifice. As millions volunteered to fight while civilians on “the 
homefront” manned factories, schools, and hospitals, states were able to 
create a new moral economy. Its central object of contempt was the 
figure of the war profiteer. Every society at war between 1914 and 1945 
reserved a special hatred for individuals who reaped massive profits 
while others risked their lives and offered their labor.

The first tool against war-induced rent-seeking was excess profits 
taxation. Between 1915 and 1918, every major belligerent in World War I 
taxed the profits of private individuals and corporations. Wisconsin 
Sen. Robert La Follette denounced war profiteers as “the enemies of 
democracy in the homeland.” Excess profits taxation was even higher in 
the next war; by 1943, U.S. firms were taxed at a rate of 95 percent for 
every dollar they earned above an 8 percent rate of return on capital. 
President Franklin D. Roosevelt put it simply: “I don’t want to see a 
single war millionaire created in the United States as a result of this 
world disaster.”

Wartime economics didn’t only recast what counted as legitimately earned 
income. As historian Mark Wilson has emphasized 
<mailto:https://www.politico.com/news/magazine/2020/03/19/coronavirus-defense-production-world-war-two-lessons-135814>, 
one legal innovation created by wartime arms spending was the U.S. 
government’s development of the power of “statutory renegotiation 
<https://www.jstor.org/stable/25701107%3Fseq=1%23metadata_info_tab_contents>.” 
This allowed the government to revisit fulfilled private contracts, 
demanding lower prices in cases where it had been overcharged by private 
suppliers. Although these “clawbacks” were widely despised by 
industrialists, they allowed the government to avoid wasting public 
money because of price-gouging by contractors. In urban planning and 
city politics, landlords came under scrutiny as possible residential war 
profiteers. World War I did more than anything in the 20th century to 
make rent control a widespread practice in capitalist democracies. As 
growing numbers of people worked and lived in cities, the cost of living 
had to be kept within reach of the average worker’s income. Minimum-wage 
laws served the same function, ensuring workers got their fair share of 
the gains of the wartime boon.

These war-economic mechanisms of solidarity offer valuable ideas about 
how to address the current pandemic “world disaster.” Pharmaceutical 
corporations and health care middlemen can have their excess profits 
taxed to ensure they do not reap the exclusive benefit of the common 
fight against the virus. /The Economist /estimates that U.S. health care 
providers make excess profits 
<https://www.economist.com/business/2018/03/15/which-firms-profit-most-from-americas-health-care-system> 
of $65 billion a year. This is enough to produce 1.3 million ICU 
ventilators 
<https://www.washingtonpost.com/health/2020/03/18/ventilator-shortage-hospital-icu-coronavirus/> 
at $50,000 a piece or to fund the hospital stays 
<https://www.businessinsider.com/most-expensive-health-conditions-hospital-costs-2018-2> 
of millions of people who will require urgent treatment for COVID-19. 
Congress should also investigate reinstating 
<https://www.gao.gov/assets/110/100235.pdf> the Renegotiation Act of 
1951 to revisit medical supply contracts resulting in excessive profits 
for the private sector. Rent caps and minimum-wage floors should be 
instituted to ease pressures on the balance sheets of households.

Economic and financial measures alone are not enough, and major 
interventions in housing and utilities are also needed. The initiatives 
<https://www.citylab.com/equity/2020/03/covid-19-housing-security-eviction-utility-shut-off-mortgage/607951/> 
of states like California and New York and such cities as Los Angeles, 
Miami, Orlando, and Seattle to freeze evictions and postpone utility 
shut-offs should be expanded nationwide. (Detroit has even restored 
water access 
<https://www.theguardian.com/us-news/2020/mar/12/detroit-water-shutoffs-unpaid-bills-coronavirus> 
to those previously cut off.) The U.S. government can use eminent domain 
law to take over empty private residences, hotels, parks, and other 
spaces needed to expand the capacity of emergency health care. As James 
Galbraith has suggested 
<https://www.thenation.com/article/economy/economy-mobilization-coronavirus-market/>, 
large logistical corporations such as Amazon, Walmart, and FedEx can be 
employed as public utilities, with underemployed Uber drivers filling in 
as additional delivery staff.

------------------------------------------------------------------------
A propaganda poster from World War II shows Americans of different 
national origins assembling a Sherman tank with a quotation against 
discrimination by President Franklin D. Roosevelt. War Manpower 
Commission/U.S. Government Printing Office./Galerie Bilderwelt/Getty 
Images A propaganda poster from World War II shows Americans of 
different national origins assembling a Sherman tank with a quotation 
against discrimination by President Franklin D. Roosevelt. War Manpower 
Commission/U.S. Government Printing Office./Galerie Bilderwelt/Getty Images

War economics emerged around the turn of the 20th century as a field 
that mixed careful analysis with fearful speculation. Could mass 
societies based on industrial production and globalized supply routes 
survive modern wars?

The question was pressing, since wars are by their very nature 
open-ended clashes whose duration cannot be predicted. Early war 
economists such as Polish businessman Ivan Bloch and Austrian scientist 
Otto Neurath examined how large and small states—Germany and Russia as 
well as Japan and Serbia—would fare if they had to wage war for extended 
periods of time. Bloch predicted that the overburdening of markets would 
result in major “convulsions in the social order.” Neurath argued that 
the proper organization of material supply would be a stronger 
foundation of national survival than financial wealth.

What both of them agreed on was that the most resilient war economies 
were those that did the most with limited resources. Rationing was one 
way of doing this, but so was technological invention. Being isolated 
from the rest of the world economy—either by economic crisis or by enemy 
armies or blockades—was a powerful stimulus to such invention, which 
brought about the development of synthetic forms of polymer, fabrics, 
fuel, and fertilizer during the world wars.

Such resourcefulness holds an important lesson for the present. It is 
certainly within the material and financial means of the United States 
and the European Union to overcome the virus and the social and economic 
dislocation caused by it. Moreover, although the death toll will likely 
be high, we know that the pandemic will eventually end. But beyond the 
resolution of the COVID-19 crisis looms another problem: climate change. 
Will an emergency response to the disease send us out of the frying pan 
of the virus, into the fire of climate breakdown? The challenge we 
currently face is to mobilize unused labor and resources in certain 
sectors while protecting lives in the rest of the economy—including 
future lives that depend on winding down the fossil fuel industry. Here 
the global effects of the virus, which has lowered carbon emissions, 
saved lives by reducing air pollution 
<mailto:http://www.g-feed.com/2020/03/covid-19-reduces-economic-activity.html>, 
and paused much of our ordinary carbon-intensive lifestyles, create 
opportunities for a turn to green policy 
<mailto:https://medium.com/@green_stimulus_now/a-green-stimulus-to-rebuild-our-economy-1e7030a1d9ee> 
across the board.

The resourcefulness of wartime economies offers a useful template for 
thinking about the broader context of the coronavirus crisis. Mounting a 
serious campaign to mitigate climate change demands a response so large 
that many of the virus response measures are just a start. Despite calls 
for a return to normality, it is difficult to imagine the post-pandemic 
world economy, whatever it looks like, as a restoration of any sort. 
Even if the virus subsides in several months or years from now, the 
larger state of exception in policymaking and collective action to which 
it already belongs is unlikely to end.

Twentieth-century war economies played an important role in allowing the 
peacetime economies that followed them to flourish. The key now will be 
to draw on their lessons of solidarity and inventiveness as the 
coronavirus confronts the 21st-century world economy with a new kind of 
warlike hazard.

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