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19 March 2020updated 30 Aug 2021 1:10pm

The coronavirus crisis shows the era of big government is back

As the world contends with multiple threats, only the much-maligned state can guarantee prosperity and security. 

By George Eaton

“The era of big government is over,” declared Bill Clinton in his 1996 State of the Union Address. Over the years that followed, this belief was accepted as an incontrovertible truth by Western parties of both the centre left and the centre right. The state would still fund essential public services, but it would no longer direct the economy in any meaningful sense. In most respects, the private sector was deemed inherently superior. The end of the era of big government meant an end to public ownership, high marginal tax rates, strong trade unions and intrusive regulation.

Clinton’s declaration was a product of the heady mood that followed the fall of the Berlin Wall in 1989, with grandiose talk of “the end of history” and capitalism’s irreversible triumph. Even the left was not immune to this sense of finality. The late cultural theorist Mark Fisher coined the term “capitalist realism” to describe the pervasive sense that “not only is capitalism the only viable political and economic system, but also that it is now impossible even to imagine a coherent alternative to it”. In a landmark New Left Review editorial in 2000, Perry Anderson wrote: “The only starting point for a realistic left today is a lucid registration of historical defeat. Capital has comprehensively beaten back all threats to its rule.”

As the global economy enjoyed one of the longest expansions on record, it appeared that Clinton’s wager had paid off. But history would have its revenge. In the wake of the 2008 financial crisis, the state was forced to intervene to save capitalism from itself. The Brown government performed an act that would have been unthinkable only years before: the nationalisation of swathes of the banking sector (including 81 per cent of the Royal Bank of Scotland and 43 per cent of Lloyds). 

Yet even at this early stage, the threat posed to capitalism by coronavirus far exceeds that of the financial crisis. The overriding feature of the dominant economic system – the creation of profit through workers in privately-owned industries – is colliding with the imperative to save lives. Across the Western world, states are being forced to intervene in a manner unseen since the command economies of the Second World War. 

In the UK, the Conservative Party, defined for decades by its adherence to the free market, has assumed emergency economic powers, offered £330bn in loan guarantees to businesses, and banned rent evictions. As the inadequacy of this response becomes clearer, still more radical measures will follow. The Overton Window – the spectrum of policies deemed acceptable by voters and the political class – is widening by the day as even Tory MPs advocate mass nationalisation

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In France, the dirigiste state has leapt into action, vowing that no company will go bankrupt (failure previously being an essential feature of capitalism). In Denmark, the government has offered to pay workers 75 per cent of their salaries; in Sweden, the state has guaranteed that laid-off employees will receive 90 per cent of their wages. In the US, the pre-eminent capitalist economy, the Trump administration has promised cash payments of at least $1,000 to American citizens and the purchase of up to $1bn corporate bonds. To echo Mark Twain, rumours of the death of big government have been greatly exaggerated.

The notion the state would irrevocably shrink – former chancellor George Osborne pined for public spending to make up just 35 per cent of GDP – was always a fantasy. Even before the coronavirus pandemic, the world was awash with challenges that require ever greater government intervention: the climate crisis, ageing populations, wage stagnation and antimicrobial resistance. As demonstrated by the Second World War, which helped lay the foundation for postwar Keynesian social democracy, crisis measures shape the economic order that follows. 

Covid-19 will not be the last malady that forces the suspension of normal economic life. As the world grasps this truth, the indispensability of the state will become ever clearer.

Big government is not an invariably progressive force. Political movements of all kinds – conservative, socialist, fascist, communist – have deployed it at various times. Healthy and balanced economies and societies depend upon a plurality of forms: co-operatives, mutuals , trusts, public benefit companies and innovative businesses. But in this new era of crisis, prosperity and security can only be guaranteed by that most maligned of actors: the state. 

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