Post-COVID Capitalism: Promote and protect communities, not profit 

Benefits of public investment, wealth-friendly tax laws, financial havens and loopholes are extracted by the rich while the poor remain poor, largely because they were born poor

 Post-COVID Capitalism: Promote and protect communities, not profit 
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Govind Bhattacharjee

Ever since the pandemic had started wreaking havoc on the economy and destroying people’s lives and livelihood, governments across the world have injected billions of dollars in the form of stimulus packages and handouts according to their capacities for reviving consumption, demand and growth.

In India, almost 90 percent of the stimulus came as additional liquidity in a market where credit demand was very low under the lockdown, and much of it probably found their way into the stock market, which explains why in an economy under severe contraction the Sensex has been rising continuously.

In an essay, “Capitalism after the Pandemic: Getting the Recovery Right”, the Italian economist Mariana Mazzucato compares the current pandemic-inflicted economic crisis with the 2008 global meltdown to argue that even then, governments across the world had injected over $3 trillion into the global financial system, but instead of supporting the real economy to boost the production of actual goods and services, the money had mostly ended up in the financial sector, bailing out the same companies which had precipitated the crisis in the first place.

Once the crisis blew away, these companies reaped the benefits at the cost of the exchequer, which led to public anger showing up movements like Occupy Wall Street. The crisis had offered a precious opportunity to correct the imbalances and reshape the market but was wasted, and the same will happen now again unless we decisively act together.

As Mazzucato says, finance is again financing itself, “eroding the foundation of long-term growth” with the financial sector’s profits being recycled back into finance instead of into infrastructure or innovation – further fuelling a debt-driven system that blows the speculative bubbles till they burst. When that happens, governments will again be forced to bail out the culprits and taxpayers will finance such bailouts, without deriving any benefits for themselves. And thus, as always, the risks will be socialised and rewards privatised in our capitalist model characterised by an imbalance between the public and the private sector.

Mazzucato cites the example of Gilead that was given $70.5 million support for developing its COVID-19 drug, remdesivir, for which it is charging the Americans a huge cost of $3,120, beyond the affordability of most, for a treatment course. It is the same story with most giant technology companies like Google that built its search algorithm on the research done by National Science Foundation or Uber that used the GPS technology developed by US Navy.

The companies are reluctant to pay even a fraction of the taxpayers’ money that financed such research as taxes. They violate people’s privacy with impunity, using the data they get free for their commercial purposes.

Apple, one of the richest companies of the world headquartered in Cupertino, California, went to set up a subsidiary in Reno, Nevada, to benefit from Nevada’s zero percent corporate tax rate, thus evading an enormous amount of tax revenues otherwise due to California.


While the exchequer took the risks and costs of research using public investment, infrastructure and institutions, these private companies solely reaped the benefits without sharing any of the costs which were thus socialised while rewards were privatised. This is not the kind of equitable social contract that assumes that the private sector should be rewarded for its investments in innovation and technology and for their risk taking.

Of immediate concern is public health in a world being torn apart by the pandemic, to combat which the scientists are in a mad rush to develop effective and safe vaccines. If and when these are developed, the challenge would be to produce and distribute the vaccines equitably so that the whole world and not only the rich nations can get their benefits.

But the companies which are spearheading such research would be loath to share the know-how by sacrificing the prospect of earning windfall profits. The governments all over the world have a duty to intervene to allow knowledge, data, and technology to flow freely around the world so that the vaccines are available equally to all nations, rich and poor alike.

The unprecedented and worldwide lockdown has mutilated lives, destroyed livelihoods and devastated economies – especially those working in informal sectors without any social security, healthcare, sick leave in a crisis like this.

Loss of income has triggered a vicious spiral of decreasing demand, decreased consumption and ever decreasing revenues resulting in both the national and corporate debt to swell. As always, an unequal world impacts the poor disproportionately more than the rich – whether it is about income and jobs, social security or insurance, healthcare or education, environmental degradation of natural calamities.

these areas are extracted mostly by the rich than by the poor who are doomed to remain poor all their lives, mostly because they were born poor. Only by active and thoughtful state interventions can we prevent such exploitation.

Mazzucato cites the example of Denmark which subsidised 75 percent of the payroll costs of its firms if they restrained from laying off their employees during the pandemic, while refusing to bail out the companies registered in tax havens; it also prohibited the use of relief funds for dividend payments and share buybacks


Whenever a private entity benefits from public investment, government have a duty to increase equality and ensure social justice in similar ways. Following the same logic, intellectual properties or technical know-hows developed with public funds should be made free to encourage innovation and entrepreneurship in order to socialise capitalistic profits in any public private partnership.

Governments can also pool a share of the wealth created with public investments from which a “citizen’s dividend” - something like a universal basic income can be paid, rewarding citizens “with a share of the wealth they have created.” Many do this, like Alaska or Norway.

The pandemic, whenever it is controlled, will nevertheless leave several painful legacies – high public debt, large fiscal deficits, high inflation, job losses and consequent erosion of people’s savings. It would leave many vital sectors permanently crippled and reconfigure the way we worked and enjoyed our leisure or interacted.

As Joseph Stiglitz has pointed out, “While the pandemic has revealed the enormous cleavages across the countries of the world, the pandemic itself is likely to increase disparities, leaving long-lasting scars, unless there is a greater demonstration of global and national solidarity.”

It would also make the priorities clear for all governments: universal public healthcare, universal vaccination at affordable cost, universal environmental protection and universal social security. Firms, small businesses and vulnerable groups will need repeated fiscal stimulus. To finance all these, tax compliance has to improve and the superrich individuals and firms must share a heavier tax burden.

The pre-crisis profit-maximising economic growth model would no longer work in the post-crisis world - the “invisible hand” of the market having already outlived its useful life in a world marked by ubiquitous inequality and pervasive exploitation of the disadvantaged.

A capitalism that thrives on profit without responsibility in which the sole purpose of a firm is to make profit is now passé. It is about time companies learn that their long-term interests lay in turning their focus away from the ‘bottom-line’ and treat profit not as the ultimate objective but only a constraint to be satisfied to serve larger societal needs.

The corrosive force of the market has progressively undermined the family, the firm and the state – “the organising structures of collective life”, as the British economist Paul Collier writes in his book The Future of Capitalism: Facing the New Anxieties. Capitalism today is making people lead “anxious lives” in divided societies which have lost their moral compass, yet it is “the only economic system that has proved to be capable of generating mass prosperity.”

The pandemic has given capitalism an opportunity to redeem itself – an opportunity it has wasted after 2008 - to restore balance. The world probably needed a cataclysmic event like COVID-19 to prepare to reset itself to the moral balance it has lost in the cannibalizing dystopia of unfettered greed and spiralling inequality which has driven the world move perpetually from one crisis into another. It must not let this crisis be wasted as well.


The COVID-19 crisis has given the state a dictatorial authority over individuals’ lives and liberties which was perhaps necessary to deal with the pandemic, but the state would be unlikely to give up these powers once the crisis is over. It needs to be restrained and both the state and capitalism need to reset their goals to usher in a happier society based on more equality as well as ethics and morality. How to achieve this would be the task of all governments together, because peace and prosperity will not come in piecemeal, separately for each country, but for all countries together. It calls for a cooperation amongst nations in a scale never seen before.

The enforced lockdown has taught us how little we need to survive. It has taught us that consumption is incidental and not elemental to our happiness. In our suffering and feeling of helplessness before a tiny virus, it has taught us the importance of empathy as much as the transience and meaninglessness of our wealth and possessions.

The post-COVID world must find its balance in a new social contract whose defining features would be inclusiveness, equality and care for climate and environment, which has to be the fulfilling objectives of life as well as of business, much more than products, profits, possessions and wealth.

(Author is a former Director General at the Office of the Comptroller & Auditor General of India and an academic)

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