A Four Week Lockdown?

If the government really is intending the latest lockdown to last until 2nd December, why has it extended the furlough scheme to the end of March? The government is actually sending out a coded message here. On the one hand, its trying to make the gullible go along with yet another idiotic lockdown for a few more weeks, whilst it holds out the prospect to them, like Mr. Micawber, that, somehow, miraculously, during that time, some other solution will present itself, something will turn up. Like Trump, they give hints that a vaccine is imminent, or that large scale testing and tracing will enable infections to be brought under control. But, to all those businesses on the brink of collapse, what this message says is, “The lockdown is here for months, so if you were thinking of shutting your doors, now is the time.” 

Why has it sent this coded message? The government has no plan B to its idiotic lockdown strategy. The only feasible solution is the focused protection strategy set out in The Great Barrington Declaration. However, the government cannot simply switch to it, because if it did it would be tantamount to saying the strategy it has followed, and that its hand-picked scientific advisors suggested, has been a complete disaster that caused the deaths of tens of thousands of people, whilst causing what the Bank of England describes as the worst economic crisis on record. Moreover, the same moral panic whipped up by a sensationalist media that demanded quick, big, bold, headline catching responses, in the first place, is itself still committed to the strategy it encouraged government to adopt. So, too is the Labour opposition that has simply acted in purely opportunistic fashion throughout, failing to analyse the reality of the situation, or to draw up any kind of independent working-class position on it, but instead to simply carp from the sidelines, complaining – as with Brexit – only that the government was not pressing ahead with a disastrous policy fast enough, or efficiently enough! 

The government, therefore, has no option but to continue down the same rut of lockdown that it has been stuck in for the last eight months. No vaccine is in sight, on a safe and widespread scale, for another six months, and test and trace is a mirage that will never work, given that 90% of infections are more or less asymptomatic, and so those infected are never tested, so that those they have been in contact with are also never traced. Test and trace is simply an example of smoke and mirrors, sleight of hand to distract the public from the reality of the situation, mush as is the ridiculous claims about the R number, which amount to nothing more than vague guesses, presented with scientific, decimal point precision. The first lockdown, lasting months, did not work, so a lockdown for just a month, at this time of year, is clearly not going to work. The government knows that if lockdown is the only tool in its box, then that lockdown is here for months, not weeks. 

But, that means the government has another problem, because it was desperate to get out of the furlough scheme. It had cost the government tens of billions of Pounds. The government was losing tens of billions more in lost taxes, and other payments. The government's spending to cover all this unproductive consumption, meant that it had to borrow on an astronomical scale. The UK's debt to GDP has soared above 100%, and is set to soar much higher yet, as it has to cover further furlough payments, loss of taxes, payments of additional benefits, even before we get to the government having to shell out hundreds of billions to bail-out core industries such as airports, airlines, aircraft production and so on. But, no one was going to accept a lockdown to next March, and beyond, without the furlough scheme also being extended, so the government had to announce that it would do that, even though it can't afford it, and were it to pay out again on that scale, it amounts to effectively bankrupting the economy. 

The government has basically sent a coded message to businesses saying, if you can survive until at least March with furlough payments, carry on, but, if you have other major costs, now is the time to shut up shop. The government will hope that many businesses do the latter, because then it does not have to make furlough payments to them, saving the government's coffers. Many of the workers that businesses will lay off, may not even be entitled to unemployment benefits, given all of the restrictions that have been introduced, before anyone can claim. But, even if they can, those miserly benefits will be a fraction of the amount the government is paying out as furlough scheme payments, which also amounts to payments to people to not work or produce. The government will take a hit for unemployment rising to around 4 million, and higher, but it will blame it on COVID, just as it is blaming the NHS crisis, the care home crisis and so on on COVID, even though everyone knows that the NHS has been on the verge of collapse for years, and suffers a severe beds crisis every single Winter! It isn't COVID that has caused there to be 100,000 nursing vacancies, for example. 

The truth is that the economic damage from this current lockdown is going to be much worse than from the first, even though it may not appear that way in the GDP data. GDP only measures the amount of new value created, i.e. the amount of new labour undertaken. It does not measure the value created by labour undertaken in previous years that is congealed in all of the raw materials, components, and wear and tear of fixed capital, which is transferred to current production, and would normally be reproduced out of it directly. So, a lockdown of current production simply measures this fact that less labour is being undertaken, less new value is being created. Provided all of that raw material, components and machinery can simply be mothballed, it can be used as soon as production restarts, and with market prices for many goods and services rising, it may even produce higher money profits, and higher rate of profit. That is why, when lockdowns were lifted, GDP figures rose sharply to reverse the contractions seen in the previous quarters. 

However, an example, shows what happens when lockdowns last longer, or are re-imposed quickly. The government is closing pubs and restaurants. It makes furlough payments for their workers. But, the pubs buy beer from breweries. The breweries are not being shut down by government, and are not getting furlough payments. But, without the pubs being open, the breweries cannot sell the cask beers they have produced. All of the beer they currently have in the process of fermentation cannot be sold. In this context, the beer is like raw material processed by the pub – not an accurate description, because the pub is actually the seller of the beer, but it will serve for the purpose of illustration. So, breweries are now saying that a lot of the beer they have produced is essentially worthless. It will have to be thrown away. All of the labour involved in its production, all of its value, is destroyed along with its use value, i.e . its physical existence. 

You can see this with a whole host of industries, and of production. Its most apparent with perishable goods, such as foodstuffs, and other agricultural products. For example, many, many years ago, I worked in a small business that produced protective clothing. We had to store material as well as yarn. Using these materials quickly was required, because mice always ran around the factory. I came back from holiday on one occasion to find that one had set up a nest in sample cloths in my office. But, even without this kind of damage from vermin, cloth undergoes deterioration simply from being left stored for several weeks. It loses use value, and as it loses use value, it also loses value. This is not like a fall in GDP, representing a fall in the amount of new value being created, it is a destruction of existing value, of value already created in previous years, and congealed in these materials, machines and so on. This is a destruction of capital itself. 

Marx distinguishes between this kind of physical destruction of capital, as against the destruction of only the exchange-value of capital. A destruction of the latter, which arises due to moral depreciation is positive. It creates a release of capital, and increase in the rate of profit, but the former is destructive. To replace the capital physically destroyed, i.e. capital loss, additional capital must be employed, a tie-up of capital, which causes the rate of profit to fall. 

“When speaking of the destruction of capital through crises, one must distinguish between two factors.” (TOSV2 p 495) 

One is the form of physical destruction described above, but it is the second form that is beneficial for capital. 

“A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction.” 

(Theories of Surplus Value 2 p 496) 

Instead, here, what we see is a destruction of the use value rather than the exchange-value, the exchange-value is only destroyed as a consequence of the former. 

Think about the brewer, or the case of the clothing manufacturer, and the effect of this loss of capital becomes obvious. Both must now use additional capital simply to replace what they have physically lost, and whose value they have not been able to recover. If they are lucky, they can use some of their profits, which would have otherwise been used to accumulate additional capital, and employ additional labour, to replace the capital they have lost. But, in conditions where many have already made no profits, because of the lockdown, they would have to introduce additional capital, by borrowing from the bank, or in the case of a larger company in the capital markets. Either way, this represents an actual shrinkage of the economy, a reduction in its capital, as against just a reduction in the anticipated amount of new value created, which is all the GDP figure indicates. The physical loss of capital, represents a capital loss, and a consequent tie-up of capital to replace it. If this loss is greater than the net investment – capital accumulation, less wear and tear of capital – then there will be negative net investment, and less labour will be employed, meaning also that less new value will be created, resulting also in a reduction in GDP as well as a reduction in total output value. This is the situation that lockdowns lasting months further into the New Year present. 

That means that the economic consequences of this current lockdown will be more severe than the last one, even if that does not appear immediately in the GDP data. Think of it like someone with a million pounds in the bank. Suppose they get 10% interest, or £100,000 a year. They also have other income of £100,000, and this covers their expenses. But, this second income declines to £50,000, and to compensate they start to withdraw £50,000 from their savings. On the face of it, their income appears the same. They still have £200,000 a year to spend. However, they are only doing so by destroying their capital. Each year, their savings drop by £50,000, and so the amount of interest they produce declines accordingly, which means they have to draw an increasing amount of capital from their savings, which in turn reduces the amount of interest they earn. After ten years, they would have reduced their capital by more than 50%, so that it was producing less than £50,000 of interest per year, so that they could now, not even make up the loss of income by further drawing on their capital. This is what pension funds have done over the last thirty years, as they undermined the capital base of the funds, in order to compensate for ever falling yields. 

But, its not just perishable goods that can be physically destroyed in this way. If other businesses cannot operate, then the physical capital they also employ becomes useless and worthless. All of the value it represents, all of the labour that went into its production, becomes unwanted and wasted. That can be seen in something as simple as a shop, and the shop fittings inside it, if the shop closes. On a larger scale it applies to factories, and so on. Only if these things remain usable, by other capitalists are they rescued from physical destruction, whilst the reduction in their value, becomes a boon to their new owners. In conditions of prolonged contraction and stagnation, that does not happen. With calls now for schools also to close, despite the fact that children are unaffected by the virus, an increasing number of businesses would have to shut down, as parents would not be able to work. 

The reality is that many businesses cannot continue even with furlough payments, because the other costs of keeping a business in existence – rents, rates, interest payments, energy costs, insurance an so on – cannot be sustained when the business has no turnover. Already a quarter of all businesses were zombie companies, this is a process of killing off the living dead. And, when unemployment has risen, expect the government to also begin chipping away at benefit levels, so that it can reduce its own expenditures further. 

This has been a wholly avoidable economic crisis caused by the implementation of idiotic lockdowns. Some that have proposed it undoubtedly have seen it as a means of undermining a Tory government. Others are catastrophists who have a perverted view that only as a result of economic crises will workers be torn away from capitalism and overnight converted to Socialism. But, the reality is the opposite. The stagnation in the US rustbelt led to the increase in the social weight of the petty-bourgeoisie, and all of the reactionary ideas that go with it, resulting in Trump; in Britain, the decaying, stagnating towns resulted in the BNP, UKIP, Brexit, and the rise of the reactionary Tory Right; in the 1930's it led to Hitler. 

The arguments in favour of lockdowns are idiotic, but also some of the motivations behind the calls for lockdown are equally idiotic, and dangerous.