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17 March 2021

After lockdown: why Labour must embrace the politics of adaptation

The party should emphasise the need for long-term resilience to novel diseases and other symptoms of environmental decay.

By James Meadway

The shadow health secretary Jonathan Ashworth’s speech to the Institute for Public Policy Research on 9 March indicates Labour might at last be taking a more proactive and forward-thinking approach to the Covid-19 crisis – and what the virus portends for our future. By tying the increased risk of pandemics to environmental degradation, Ashworth drew the necessary political conclusions about the need for increased surveillance and health- and social-care capacity in the future. Alongside Rachel Reeves’s recent intervention in the New Statesman, which provided a solid critique of Britain’s “extractive” economy, framed around the resultant problem of “resilience”, the purely reactive mode Labour’s front bench has clung to over the past year might finally be on its way out.

It could have come sooner. Since at least September 2020, when the Chancellor, Rishi Sunak, first warned parliament of “permanent adjustments” to the economy due to the virus, the government has understood that Covid is a long-term problem, rather than a short, sharp “shock”. The consensus among epidemiologists is clear: the world is facing the emergence of an endemic disease, but one that we can manage to the point where it is no longer the overwhelming threat it is now. This could be a decades-long process, even with vaccination programmes in operation globally. The primary problem for economic policy, then, is managing this transition from crisis to endemic disease management.

The easiest part of Covid’s economic impact to understand and predict is the hangover from the lockdowns: significant unemployment, shuttered shops and businesses pushed into failure. These are familiar from previous recessions, and we have well-understood mechanisms for dealing with them. Most of the discussion about stimulus packages has focused on this, citing the need to prop up demand via “Keynesian” deficit spending, and for ongoing business support and retraining for workers. 

Far harder to deal with are the issues that Ashworth raised. Even with a vaccine, and promising early results on reduced hospitalisation from its roll-out, life is going to remain significantly dislocated by Covid. The threat of future global pandemics, however, is very real and rising. Building in a level of resilience to novel diseases and other symptoms of environmental decay, from food shortages to extreme weather, should be considered fundamental to any recovery programme.

[See also: Paul Mason on the Texas power crisis]

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A recent paper by the Brookings Institution provides some guidance for the US as to what this might mean for investment spending, suggesting that 10 per cent of the Biden administration’s Build Back Better spending on infrastructure should be set aside for adaptation measures. This isn’t about simply increasing GDP – something both Ashworth and Reeves correctly say should not be the sole aim of economic policy. It means building a degree of redundancy into the infrastructure we rely on: an apparent “inefficiency” in conventional terms, but a necessary one, as the power outages in Texas demonstrated. Exceptionally cold weather there led to supply failures at the same time as demand for energy spiked, but with tight margins on supplies of energy, electricity regulators were forced to implement blackouts across the state.

Thinking in terms of future environmental risks starts to move us outside the range of problems that economics, and especially political discussion of economics, is used to dealing with. But it is these adaptation challenges that are likely to become most apparent over the next few years, just as the UK approaches the next general election.

The challenge for Labour is managing the short-term politics of this longer-term transition. The danger is that the boost the government has received from the vaccination programme becomes locked in place as a prolonged phase of rebuilding while Covid continues to circulate begins. After the 2008 recession, the Tory-led coalition government exploited the political space opened up by crisis to introduce austerity. After this crisis, the government will be free to shape the recovery in its own image and to its own advantage – which, via interventions like the Towns Fund, which appears to be skewed towards Tory marginals, it is already doing.

To meet this challenge, Labour will need to ditch much of the conventional economic thinking it is beholden to. This includes the questionable, supposedly “Keynesian” justifications that were offered for opposing the government’s corporation tax hike. More so than after the 2008 crisis, this period of recovery will mean the politics is leading the economics. We know from last summer that the easing of lockdown will deliver some recovery: the relevant political question, even in the short term, is about the kind of recovery we want – who benefits from this transition period, and who pays for it? – not the economic question of which combination of policies can ensure it occurs.

If Labour is thinking about Keynes, it needs to be the Keynes of the long-term, as Mathew Lawrence has described, concerned to manage an uncertain future: arguing, as Keynes did, for the “socialisation of investment” and sufficient redistribution to allow everyone to work less if they wish. The demands on public spending from building in resilience of the kind Ashworth talked about will be high: better to make clear in advance where the costs will land by discussing tax rises now than to invite attacks in a future election campaign.

[See also: Dave Keating and Justin Gerdes on Joe Biden’s climate plans]