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<h1 class="css-19v093x">The Coronavirus War Economy Will
Change the World</h1>
<div class="css-1x1jxeu">
<div class="css-7kp13n">By</div>
<div class="css-7ol5x1"><span class="css-1q5ec3n">Nicholas
Mulder</span></div>
<div class="css-8rl9b7">foreignpolicy.com</div>
<div class="css-zskk6u">13 min</div>
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src="https://pocket-image-cache.com//filters:no_upscale()/https%3A%2F%2Fforeignpolicy.com%2Fwp-content%2Fuploads%2F2020%2F03%2Fwwii-economy-wartime-GettyImages-163381665.jpg%3Fw%3D1024%26h%3D683%26quality%3D90"
alt="An American propaganda poster from
World War II. Jean Carlu/Office for
Emergency Management, Division of
Information/Galerie Bilderwelt/Getty
Images" width="632" height="421"> <figcaption>An
American propaganda poster from World
War II. Jean Carlu/Office for Emergency
Management, Division of
Information/Galerie Bilderwelt/Getty
Images</figcaption> </figure>
</div>
<p>Is the world at war with the coronavirus?
Last month, <a
href="https://www.nytimes.com/2020/02/15/world/asia/xi-china-coronavirus.html">Xi
Jinping</a> called the Chinese suppression
effort a “people’s war”; in the past week, <a
href="https://www.politico.com/news/2020/03/18/trump-administration-self-swab-coronavirus-tests-135590">Donald
Trump</a> labeled himself a “wartime
president,” while <a
href="https://www.nytimes.com/2020/03/16/world/europe/coronavirus-france-macron-travel-ban.html">Emmanuel
Macron</a> 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 <a
href="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/">called</a>
for the country to “equip itself with a war
economy” to confront the disease.</p>
<div><a
href="https://foreignpolicy.com/projects/coronavirus-wuhan-china-pandemic-outbreak-guide-2020/">
<span> </span> </a></div>
<p>During the <a
href="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">2008
global financial crisis</a>, 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.</p>
<p>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.</p>
<hr>
<div class="RIL_IMG" id="RIL_IMG_2">
<figure> <img
src="https://pocket-image-cache.com//filters:no_upscale()/https%3A%2F%2Fforeignpolicy.com%2Fwp-content%2Fuploads%2F2020%2F03%2Fwwii-economy-wartime-GettyImages-576827168.jpg"
alt="A World War II poster urges women
to find a job to aid in the war effort.
Minnesota Historical Society/Corbis via
Getty Images" width="646" height="473">
<figcaption>A World War II poster urges
women to find a job to aid in the war
effort. Minnesota Historical
Society/Corbis via Getty Images</figcaption>
</figure>
</div>
<div>
<p>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 <a
href="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">invocation</a>
last week of the Defense Production Act
(DPA), a Cold War law allowing it to <a
href="mailto:https://www.insidegovernmentcontracts.com/2020/03/a-coronavirus-contractors-guide-to-the-defense-production-act/">prioritize
and allocate resources</a> to help
expand private industries in strategic
sectors, is a step on this road to
constructing a larger medical
mass-production base.</p>
</div>
<p>But as historian Tim Barker <a
href="https://www.dissentmagazine.org/online_articles/coronavirus-defense-production-act-industrial-policy">points
out</a>, 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 <a
href="https://qz.com/1815496/ny-forces-prisoners-to-make-hand-sanitizer-to-fight-coronavirus/">prison
labor</a> to mass-produce hand sanitizer.</p>
<p>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 <a
href="mailto:https://www.nytimes.com/2020/03/22/opinion/health/ventilator-shortage-coronavirus-solution.html">173,000
ventilators</a> in the United States. In
the short term, the increase in American
needs alone will probably exceed the entire
<a
href="mailto:https://www.huffpost.com/entry/coronavirus-ventilators-supply-manufacture_n_5e6dc4f7c5b6747ef11e8134">global
annual production</a> of 40,000 to 50,000
machines. Given the <a
href="mailto:https://qz.com/1820705/the-challenges-of-non-medical-companies-making-coronavirus-supplies/">complex
nature and high sanitary requirements</a>
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.</p>
<p><em>[</em><a
href="https://foreignpolicy.com/2020/03/04/mapping-coronavirus-outbreak-infographic/"><em>Mapping
the Coronavirus Outbreak:</em></a><em>
Get daily updates on the pandemic and
learn how it’s affecting countries around
the world.]</em></p>
<p>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 <a
href="https://www.ubs.com/global/en/wealth-management/chief-investment-office/about-us/meet-the-experts/paul-donovan/2020/lockdown-economics.html">pointed
out</a>, “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 <a
href="https://www.wsj.com/articles/u-s-layoffs-likely-surged-to-unprecedented-level-this-past-week-11584728237">out
of work</a>.</p>
<p>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 <a
href="https://twitter.com/GiuseppeConteIT/status/1237863027254243333">asked</a>
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, <a
href="https://www.youtube.com/watch?time_continue=4&v=F9ei40nxKDc&feature=emb_logo">acknowledge</a>
that the coronavirus demands a level of
collective action unseen since World War II.</p>
<p>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.</p>
<p>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.</p>
<p>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 <a
href="https://www.ft.com/content/e23b57f8-6a2c-11ea-800d-da70cff6e4d3?shareType=nongift">interventionist
ideas</a> 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.</p>
<hr>
<div>
<div class="RIL_IMG" id="RIL_IMG_3">
<figure> <img
src="https://pocket-image-cache.com//filters:no_upscale()/https%3A%2F%2Fforeignpolicy.com%2Fwp-content%2Fuploads%2F2020%2F03%2Fwwii-economy-wartime-GettyImages-90741420.jpg"
alt="A poster produced by British
Railways during World War II to remind
passengers of the company’s services
to the war effort." width="679"
height="539"> <figcaption>A poster
produced by British Railways during
World War II to remind passengers of
the company’s services to the war
effort.</figcaption> </figure>
</div>
</div>
<div>
<p>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.</p>
</div>
<p>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 “<a
href="mailto:https://encyclopedia.1914-1918-online.net/article/post-war_welfare_policies">war
victims</a>”—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.</p>
<p>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.</p>
<p>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.</p>
<div>
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<p>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.</p>
<p>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.”</p>
<p>Wartime economics didn’t only recast what
counted as legitimately earned income. As
historian Mark Wilson has <a
href="mailto:https://www.politico.com/news/magazine/2020/03/19/coronavirus-defense-production-world-war-two-lessons-135814">emphasized</a>,
one legal innovation created by wartime arms
spending was the U.S. government’s
development of the power of “<a
href="https://www.jstor.org/stable/25701107%3Fseq=1%23metadata_info_tab_contents">statutory
renegotiation</a>.” 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.</p>
<p>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. <em>The Economist </em>estimates
that U.S. health care providers make <a
href="https://www.economist.com/business/2018/03/15/which-firms-profit-most-from-americas-health-care-system">excess
profits</a> of $65 billion a year. This is
enough to produce 1.3 million ICU <a
href="https://www.washingtonpost.com/health/2020/03/18/ventilator-shortage-hospital-icu-coronavirus/">ventilators</a>
at $50,000 a piece or to fund the <a
href="https://www.businessinsider.com/most-expensive-health-conditions-hospital-costs-2018-2">hospital
stays</a> of millions of people who will
require urgent treatment for COVID-19.
Congress should also investigate <a
href="https://www.gao.gov/assets/110/100235.pdf">reinstating</a>
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.</p>
<p>Economic and financial measures alone are
not enough, and major interventions in
housing and utilities are also needed. The <a
href="https://www.citylab.com/equity/2020/03/covid-19-housing-security-eviction-utility-shut-off-mortgage/607951/">initiatives</a>
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 <a
href="https://www.theguardian.com/us-news/2020/mar/12/detroit-water-shutoffs-unpaid-bills-coronavirus">restored
water access</a> 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 <a
href="https://www.thenation.com/article/economy/economy-mobilization-coronavirus-market/">suggested</a>,
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.</p>
<hr>
<div class="RIL_IMG" id="RIL_IMG_6">
<figure> <img
src="https://pocket-image-cache.com//filters:no_upscale()/https%3A%2F%2Fforeignpolicy.com%2Fwp-content%2Fuploads%2F2020%2F03%2Fwwii-economy-wartime-GettyImages-163380489.jpg"
alt="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" width="583"
height="423"> <figcaption>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</figcaption> </figure>
</div>
<div>
<p>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?</p>
</div>
<p>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.</p>
<p>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.</p>
<p>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 <a
href="mailto:http://www.g-feed.com/2020/03/covid-19-reduces-economic-activity.html">reducing
air pollution</a>, and paused much of our
ordinary carbon-intensive lifestyles, create
opportunities for a turn to <a
href="mailto:https://medium.com/@green_stimulus_now/a-green-stimulus-to-rebuild-our-economy-1e7030a1d9ee">green
policy</a> across the board.</p>
<p>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.</p>
<p>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.</p>
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