In the second quarter of this year, just 14% of Britain’s retailers paid their rent on time. Across all commercial tenancies that figure rose to 18%, a fall from the one-in-four figure for payment day in March.
These dramatic figures were released on 24 June. Less than two weeks later, on 4 July, Britain’s pubs, hairdressers and restaurants joined non-essential shops in re-opening. Before the end of this month, gyms, leisure centres and indoor swimming pools are all poised to welcome customers once more.
If you want figures to explain this sequence of events – despite a clear absence of the necessary infrastructure to exit lockdown safely – an informal rent strike by businesses is the best place to start. Already a crisis of corporate debt is a very real prospect, with one estimate claiming this could rise to £100bn by next spring – £40bn of which would be held by small businesses. Continuing lockdown would mean unemployment invariably spirals, but so too would public, corporate and household debt. To add austerity to this, as some are already arguing for, would create a depression without historic precedent.
There are, as Donald Rumsfeld once fatefully put it, “known knowns” and “known unknowns”. If unemployment, falling economic activity and rising deficits are the former, the latter looks like mortgage defaults and a deluge of bad debt cascading through the financial system. At this point we would see an inversion of the 2008 crisis, with a collapse of the real economy leading to a disintegration of balance sheets for the financial sector, particularly with collateralised loan obligations (CLOs) and collateralised debt obligations (CDOs), before this once more feeds through to high streets and businesses being unable to access credit. Indeed, there are signs this is already happening: last week saw the biggest monthly jump for mortgage-backed securities in 16 years.
This is not feeding through to the stock market because of historically interventionist measures taken by central banks. The Federal Reserve has pledged unlimited financial asset purchases to maintain liquidity, almost doubling its balance sheet from $4.2tn in February to $7tn today. This has left the US in a quite bizarre situation where, according to Andrew Brenner, “Covid-19 is now inversely related to the markets. The worse that Covid-19 gets, the better the markets do because the Fed will bring in stimulus.”
Not since the US left the gold standard in 1971 has new ground been broken like this in dealing with a crisis – and nobody, however desperate they are to appear worldly-wise, really knows how it will end.
This means that as economic activity restarts, we are entering the early stages of a giant human trial – an experiment not only in epidemiology, but political consent and the emotional regulation of what is meant to matter to the public. It appears the government has no real idea of how quickly the virus might spread once more, but, for now, such considerations are secondary. This is something that few, including the opposition, are willing to openly say.
Short of socialising much of the economy, ending the lockdown – for the reasons outlined above – was inevitable. Yet the manner in which it has been accelerated, with even the most elementary measures remaining absent, is shocking. Just as galling is the spectre of leading politicians failing to set any kind of example. If there is a second wave in the coming months, the image of Rishi Sunak serving food, wearing no gloves or mask, will feel like the brass band playing as the Titanic sank in a freezing Atlantic.
Compare all of this to Vietnam, a low-income country of almost 100 million people which enjoys a 1,400 kilometre border with China. There not a single death has been recorded as a result of the coronavirus, a figure corroborated by a researcher from Oxford University. This has been achieved through extensive – and labour-intensive – contact tracing, combined with an onerous quarantine system, clear and consistent government messaging and broader social attitudes which, by virtue of recent history, are cautious regarding the perils of pandemics.
Then there is Cuba, a country which – while far poorer than the US and subject to crippling sanctions – enjoys a superior life expectancy to its more prosperous neighbour. Cubans are now 24 times less likely to catch the virus than Dominicans, 27 times less likely to catch it than Mexicans, and more than 70 times less likely to be infected than Brazilians. Despite the western hemisphere’s present status as global epicentre of the virus, the island has experienced just 83 deaths – fewer than the state of Florida last Thursday alone. Kerala, a poor state in the south of India with a population roughly equivalent to that of Spain, has endured the loss of 168 lives.
Elsewhere, Japan and South Korea offer a model response to the virus among high GDP countries, the former seeing fewer than 1,000 deaths, the latter less than 300. Between these countries, as well as Cuba, Kerala and Vietnam, Anglo-America has no excuses.
Yet any lessons which could be taken from these examples are being fastidiously rejected. In Britain quarantine has largely been dispensed with as a result of lobbying by the tourism and aviation industries, and even where it is being applied it is in ‘self-isolation’ rather than being administered by the state. Meanwhile, the government’s ‘test and trace’ app, apparently so central to saving hundreds of thousands of lives only a few months ago, has been sidelined, with the government aiming to release “something” by “the winter” – although this “isn’t the priority at the moment”. Perhaps most shocking of all, the present track-and-trace system is only reaching 70% of infected people’s contacts and asking them to self-isolate, significantly below the threshold experts say is necessary to be effective.
As Britain feigns a return to normality, it’s increasingly clear that while the economy matters more than human life, the government’s approach will fail on both counts. We aren’t exiting lockdown because it’s safe, but because our economic system – and what it prioritises – has no alternative. Yet the way in which this is happening is about more than capitalism. It is an intensified variant of it – embraced most eagerly in Britain and the US – which sees politics as nothing more than the administration of economic activity.
The miserable failure of Anglo-America compared to Cuba, Vietnam and Kerala will be remembered as a singular moment in the demise of an economic orthodoxy. Pretending lockdown is ending for any other reason than the imminent collapse of an already broken economic system – and this being defended across the political and media class – suggests the moral collapse goes even deeper.
Aaron Bastani is a Novara Media contributing editor and co-founder.