‘It’s a war,’ said President Trump, when describing the fight against the Coronavirus, labelling himself a ‘war-time President’. Sure enough, with a state of emergency declared and a huge national effort underway, the similarities with war are striking. The war analogy has understandably been used by President Macron of France, the UK’s Boris Johnson and several other world leaders. But while leaders invoke images of armed conflict, the reaction of the populations have been less warrior like. Across the western world, people have shown little willingness to sacrifice but have instead asked for a handout. On some level, this makes sense. When politicians lock down society, those who suffer under the draconian measures feel entitled to compensation. But this is one beggar asking another for charity. Western governments are broke and should be unable to bail anyone out.
Of course, this is not how it works. Despite staggering levels of debt, governments have decided to borrow more to finance the fight against Coronavirus. And in the era of quantitative easing, they can. Across the world, central banks have committed to unlimited support, meaning unlimited purchase of government bonds for freshly printed cash, allowing the state to borrow whatever it wants without risking a spike in interest rates. And while QE programmes were originally meant to be temporary, few still believe that an orderly exit is possible. QE is nothing more than financing of government deficits via the printing press. Governments can seemingly borrow with impunity and use it to attempt to shield their electorates from the consequences of shutting down the economy, pretending that it can be done without devastating economic consequences because ‘the state is paying’.
War has always required spending. But there is a difference. During World War 2, instead of bailing out their citizens the US government increased taxes and borrowed from them via the so-called ‘War Bonds’ to finance the campaign. In Britain, taxes similarly went up dramatically. The US, along with Canada, also lent large sums to Britain and the debt was the old-fashioned kind that had to be paid back. The last payments on the WW2 debt were finally made by the UK in 2006.
Today, most people have forgotten the meaning of sacrifice. They believe that society owes them a living and are conditioned to ask for a handout as soon as clouds gather on the horizon. The idea that more consumption today means less in the future has long been forgotten. Politicians play along, pretending that paper money, not resources is what matters. Central banks have facilitated an explosion in debt and governments have been leading by example, solving every problem with more spending and more borrowing without addressing how, or if, the money will be paid back. Politicians and central bankers routinely pretend that the concept of economic scarcity has been abolished. The fantastical sums the governments are now throwing at the Corona crisis only serve to strengthen the false argument that whatever ‘austerity’ has been implemented to cover the bill for the Great Recession has been a political choice, not an economic necessity – several leftwing politicians, including Jeremy Corbyn, are already making this dangerous point.
When the leaders of nations behave so irresponsibly, it is hardly surprising that ordinary people do too. For years, the welfare state has impressed on people that personal responsibility and self reliance is a choice and that inequality of economic outcomes is due to structural inequities, not innate talent or hard work. The state has been presented as a panacea, an inexhaustible source of benevolence at someone else’s expense. In such a climate, it is hardly surprising people react to hard times not by hunkering down but by putting their hands forward. The political response to the corona virus will destroy the worldwide economy, balloon the government debt bubble, increase dependency on the state and intensify the degeneration of the moral fabric of society. The repercussions will be felt long after the last Covid-19 patient leaves hospital.