People and jobs? Or wealth? The government has to decide which to prioritise, and there is only one right answer — Richard Murphy

Important.

What this will mean is that companies working with reduced efficiency and increased costs in markets where demand will be reduced will be under enormous stress. They will, absolutely inevitably, suffer reduced profitability from their trading activities, but will nonetheless be facing fixed financial obligations created in an entirely different era and market and, quite crucially, legally these obligations are not re-negotiable in most cases.

It does not take a financial genius to realise that this is a situation that literally cannot work....

Like Michael Hudson has been saying.

The choice the government has to make

In that case it is also true that in the economy to come some fairly stark decisions have to be made if it is the plan of the government that we survive this crisis. Of these the most important (as ever when the reality of these situations is faced) is whose interests are to be prioritised?

Is it labour, and the need to preserve jobs, that has the highest priority?

Or is it enterprise, meaning that the preservation of trading entities becomes the core goal?

Alternatively, assuming that this can be done, is banking to be pre-eminent to prevent a crash? In other words, is capital preserved?

Finally, might instead the interests of landlords feature most highly?

To go right back to this most basic of economic questions, which factor of production is to have priority? Unavoidably, that question does, of course, have implicit class connotations attached to it.

Right now it seems quite clear that the government is setting its priorities in the reverse ordering of the above list.

Of course, the challenge is to harmonize the factors. That can only be accomplished with accepting tradeoffs and compromise. But the rich and powerful are generally not wont to do that, and governments so far are not gearing up for this approach.

The social and individual pain correlating to the economic pain this involves will likely result in scapegoating both within countries and internationally. The US leadership is already attempting to put the blame on China for political purposes. This means that the crisis has not only economic consequences but also social and political consequences that affect the whole world and will shape the coming years, which are going to be difficult enough owing the emerging effects of climate change. War would only complicate this.

On the other hand, we could be looking at a "V" recovery when the lockdown is lifts and things return to normal before the crisis.

Tax Research UK
People and jobs? Or wealth? The government has to decide which to prioritise, and there is only one right answer
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum

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