Neoliberalism Made the Pandemic Worse

March 11th, 2021

Since the start of the pandemic, over one-hundred million people have been infected by the novel coronavirus, and over two-and-a-half million have died from it. Things did not have to be this bad. The capitalist system left the world poorly prepared to deal with a pandemic. The neoliberal version of capitalism in particular is especially vulnerable to pandemics; its widespread adoption made the pandemic worse. Neoliberalism led governments and business leaders to put profits over people, weakened healthcare systems, made it easier for the virus to spread, established supply chains that are more vulnerable to disruption, and is retarding the global manufacture & distribution of vaccines.

By neoliberalism I mean the free-market capitalist economic policies that swept the world in the late twentieth century and largely still dominate the globe. Under neoliberalism the state privatizes and deregulates all of or most of the economy, largely allowing property owners to do as they wish with their property in a market economy. For-profit businesses dominate production and distribution of goods and services, and employ the majority of the workforce. The state does the basic things needed to have capitalism, such as enforcing private property and running the military, but otherwise leaves the economy to the market. The welfare state is small or non-existent. Neoliberalism was first implemented in South America in the 1970s, but spread to North American and Western Europe in the 1980s and was embraced worldwide after the fall of the Soviet Union in the 1990s.

Managers of companies are compelled to pursue profits over other priorities. If they do not they will be out-competed by other businesses and will be disciplined by their investors, eventually resulting in either their removal or being run out of business by rival companies that do prioritize profit. Companies that spend less on their workers tend to be more profitable than more generous companies, assuming everything else is the same. Consequently, neoliberalism results in higher levels of economic inequality as companies are compelled by the market to keep labor costs to a minimum and deliver maximum value to investors and managers.

That inequality compels workers to continue working even if they are in a job where doing so increases the likelihood they will catch Covid and/or spread it to others. Neoliberalism means much of the population has little in the way of savings and must continue working to pay for rent, food, and other bills even if it would be better for public health if they stayed home. True, an individual worker can attempt to find a different job that allows working from home, or is otherwise safer, but even even before the pandemic sent unemployment through the roof finding a better job was not easy. And even if one or two workers do find different jobs, their former employer will simply hire new people to replace them, making Covid more likely to spread.

The need to generate profits compels many companies to stay open even when doing so makes the pandemic worse. Staying open during a pandemic is not just the whim of individual greedy bosses, but something compelled by the market. If one company closes but its competitors do not, it will lose customers and management will be penalized by investors. The same pressure for profits encourages management to skimp on health and safety measures, making the company more profitable while making it easier for Covid to spread. Businesses that are visibly unsafe can potentially drive away customers, so often they will implement safety standards that make the company look safe without necessarily actually making it safe. In some cases employers don’t even tell their employees if a worker or manager has caught Covid. The free market compels bosses to prioritize profit over lives.

In practice, neoliberal states pursue the interests of the business elite and do so even when those interests clash with neoliberal ideology. Neoliberalism gives the wealthy most of the wealth and they use that wealth to get the government to pursue policies that benefit them. Since businesses control the economy, if the state does something that threatens their profits they will withdraw their investments and crash the economy. Neoliberal states therefore pursue policies that help their profits. Most of the time that simply reinforces the state’s commitment to neoliberalism – the free market is often profitable. In the rare case where its not, neoliberal states will make an exception to their ideological commitments to buttress corporate profits.

Bank bailouts are the best known example. Although neoliberal ideology opposes bailouts, governments that were otherwise strongly committed to neoliberalism have nonetheless still handed them out. This is no mere aberration, but was the case from the start. The first political leaders committed to reviving laissez-faire capitalism also signed off on bailouts, such as Ronald Reagan’s 1987 Savings & Loan bailout and Augusto Pinochet’s 1982 financial bailouts.

If governments consistently followed neoliberal ideology they would do little or nothing to stop the novel coronavirus. They would simply leave things to the magic of the marketplace and hope the private sector would stop the virus. Simply letting the virus spread would actually undercut profits, however, as excessive deaths and a rapidly spreading out-of-control virus has a disruptive effect on the economy. States have therefore partially broken with neoliberal ideology and imposed a variety of temporary measures to mitigate the virus, including compulsory lockdowns, paying people to stay home, and national testing programs. From the perspective of saving lives these measures have often been done in a manner that appears incomplete or insufficient. However, the real aim is not to save lives per se, but to preserve profits.

Governments have been committed to neoliberalism for so long that it has often been difficult for them to pivot and institute other policies even when doing so is necessary to preserve profits. For example, thanks to neoliberalism, the US’s unemployment insurance programs have had such tight budgets over the last forty years that they still use outdated computer programs written in Cobol and have difficulty coping with the drastic increase in unemployment caused by lockdowns. It’s so dilapidated that it inhibited policymakers’ decisions, only allowing them to boost unemployment payments by a fixed amount not as a percentage of income. Politicians have spent forty years making it increasingly difficult to to apply for and receive unemployment assistance, which meant the program was unprepared to pay millions of people to stay home during a pandemic.

In some cases politicians rationalize their inadequate policies by downplaying the severity of Covid-19, or even engaging in full-on denialism. They keep lockdowns limited and offer meagre financial aid. Infamous cases of politicians in this category include Bolsonaro, Trump, Johnson, and Lopez Obrador.

In other cases politicians purport to be taking the pandemic seriously and engaging in extensive actions to fight it, but in practice their policies are not as different as they might seem. They offer financial aid, but give most of it to businesses. They declare lockdowns, but exempt so many businesses from them that it undermines their effectiveness. Or they harshly enforce lockdowns when it comes to the poor, while de-facto exempting businesses, the wealthy, and politically-connected individuals.

For example, in Greece the government sent the police to coercively enforce lockdowns in poor and minority neighborhoods, but did little enforcement in wealthy neighborhoods. In the Philippines, the police brutally enforced lockdowns and the President declared he would “shoot dead” anyone who violated it, but they turned a blind eye towards violations of lockdown orders by the wealthy, politically connected, and the police themselves. In much of Europe (and parts of the United States) many of the same politicians who ordered lockdowns and social distancing measures have been caught violating their own orders. During New York’s lockdown, the state designated “orange zones” where activities that do not turn a profit, like church attendance, were forbidden while for-profit businesses were allowed to open with no attendance limit.

Neoliberal policies have imposed multiple waves of austerity and privatization on most healthcare systems over the last forty years, leaving them poorly equipped to respond to the pandemic. In Italy, years of budget cuts reduced the number of hospital beds from 7 per 1,000 people in 1990 to 2.6 per 1,000 in 2017. When the pandemic hit they needed every bed they could get, and were left wanting. In the United States, health insurance is almost entirely private and usually tied to employment. When the virus surges and millions lose their jobs, many also lose their health insurance at precisely the point when it is most important to have it.

Neoliberal policies also lead many healthcare facilities to scale back their ability to cope with a sudden increase in the number of patients. A hospital capable of handling more patients than it usually has costs more money. For privately-run institutions, the market pressured management to scale back that excess capacity in order to save money, remain competitive, and increase profits. In countries where state-owned healthcare facilities still exist, neoliberal governments have spent decades requiring them to adopt similar practices so the funds saved can be used on tax cuts for the wealthy (or in some countries for bailouts, wars, and/or more police). This was all done in the name of efficiency, small government, and the magic of the marketplace but it had the effect of hobbling the ability of healthcare facilities to respond to sudden catastrophes.

The international version of neoliberalism – free trade – makes the spread of disease across the world more common and more damaging to the economy. Constantly shipping goods from one part of the world to another makes it easier for viruses to spread around the globe, as does sending businessmen to meetings around the world. Free trade allows companies to locate production in countries where it is most profitable (which is usually where they can pay workers the least) and then export goods to the rest of the world. Consequently, production of many goods is concentrated in a handful of countries, rather than spread out evenly around the globe. If disease, or another catastrophe, strikes those countries it results in a global shortage of those goods. For instance, Europe and the US relied heavily on imported ventilators and faced significant shortages in the pandemic’s first wave. Furthermore, if free market principles are consistently adhered to, a shortage means the few companies that still have that product for sale can increase the price as drastically as they want because the shortage means they can still make the sale even at a high price.

The novel coronavirus pandemic started in China and China happened to manufacture about half the world’s face masks – leading to an international shortage of masks at the very moment they were needed the most. Health leaders outside of China in many cases responded to the shortage by lying about their effectiveness – falsely claiming masks did not help reduce the spread of the virus. They wanted to insure that healthcare workers got masks first, and feared if they told the truth everyone would rush to get a mask, leaving healthcare workers unprotected. Lying to the public had the side effect of making people more susceptible to misinformation and conspiracy theories. Since the authorities lied to us about masks, many people reasonably concluded they may also be lying to us about other things, which makes it easier to doubt effective health advice or fall for quack treatments.

Low wages and economic inequality caused by neoliberalism also has the effect of exacerbating the pandemic. As a consequence of low wages, the poor often often have to make do with cramped housing, living with numerous roommates or extended families. Overcrowding makes it easier for the virus to spread compared to living alone, or with a smaller number of people, allowing the virus to infect more people. Low-wage workers are also more likely to be employed as essential workers (and thus to catch the virus), exacerbating the problem. In countries that charge for medical care, low wages deter the poor from seeking treatment. Workers with jobs that do not provide sick days (which are usually also jobs that pay poorly) often go to work anyway if they are sick as they cannot afford to take time off, spreading the virus to their coworkers.

Economic inequality on an international scale has similar effects, and is slowing the roll-out of vaccines. In February the head of the United Nations complained that the 130 poorest countries had not vaccinated anyone at all, while the wealthiest ten nations hogged 75% of vaccines. Waiting to provide vaccines to poor countries prolongs the pandemic, gives the virus more time to evolve new variants, and increases the number of deaths. Prioritizing healthcare workers and those most vulnerable to severe Covid worldwide, rather than giving the vaccine to everyone in wealthy countries before letting poor countries get a shot, would cut down on deaths.

Strong intellectual property rights, pushed by neoliberalism, are inhibiting the rapid manufacture of vaccines and thereby prolonging the pandemic. Even though vaccine development was heavily subsidized by the state, the patents are still owned by pharmaceutical companies, each of which has a monopoly on their particular vaccine. Consequently, it is illegal for anyone to simply start making more of the vaccine – they must either purchase it from the patent owner or get a license from them. The impact is particularly dramatic in poor countries, which could just manufacture their own vaccine but are forbidden from doing so. As a result, they are at the mercy of foreign for-profit companies, some of which have made extreme demands. Pfizer demanded Argentina give it immunity from lawsuits for fraud, negligence, & malice and use embassy buildings & military bases as collateral. Intellectual property rights, including for medication, is enforced by neoliberal institutions like the World Trade Organization and are written into the text of many free trade agreements as well as domestic free-market reform legislation.

Neoliberal ideology often blames individuals for its failures, and that pattern has resurfaced in the pandemic. Just as many neoliberals blame lazy individuals for low wages, and debtors’ decisions for economic instability, some blame individuals for bad decisions that endanger public health, such as going on airplane flights, not wearing masks, or going to restaurants. This kind of individual shaming shifts blame away from the failures of neoliberalism and treats the matter as simply one of individual choice, sidestepping the importance of policy and social structure.

Bad behavior is a byproduct of bad policy. When restaurants and airlines stay open in order to safeguard profits, and advertise that they are safe, it should not be surprising that some people conclude going to restaurants and airports is safe. When the state decrees lockdowns, but enforces them unequally and allows exemptions for businesses that are sufficiently wealthy or politically connected, it should not be surprising that some people stop taking them seriously. When the state consistently prioritizes profits over lives we should not be surprised when some people notice it, become skeptical of the state, and sometimes go too far and become anti-vaxxers or conspiracy theorists. Neoliberal policies, and capitalism in general, are the real culprit, not individuals.

The popularity of neoliberalism has been in decline since the financial crisis of 2008, and its failure to cope with the pandemic has only accelerated that trend. If the pandemic were more severe and longer lasting it would likely force a permanent transition back to state capitalism, as the only way to maintain profits. The development of new vaccines in record time will enable something of a return to normality and likely allow elements of neoliberalism to limp on a little longer. The aftermath of the pandemic may see a partial rejection of some aspects of neoliberalism and a mild form of state capitalism. Neoliberalism has had a difficult time maintaining corporate profits during the pandemic, and much of the business elite will want safeguards to protect their interests from the next plague. State capitalism is still capitalism, though, and still puts profits ahead of lives; it just relies more on the state and less on free markets to do it. Sufficiently large rebellions and social movements can potentially force elites to make concessions and sacrifice profits for lives, but that itself does not get to the root cause of the problem. The only solution is to abolish capitalism and establish a completely different social system.