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Has Covid-19 defeated neoliberalism?

„The pandemic brought a huge change to our lives. For many Poles, certainly for those under the age of 40, it was the first moment when the world stopped heading for the better. Up to that point, it may have seemed as though things would only get better, more prosperous and more comfortable with each passing year, when suddenly all of that disappeared in a matter of days. Our jobs and places of study were shut down. It was impossible to meet up with friends because, firstly, it was forbidden, and secondly, there was nowhere to meet as all the cafes and restaurants were closed. In this way, the pandemic challenged the existing order, which seemed inviolable to us, and introduced a great deal of certainty about what the future would bring, which became the perfect ground for all kinds of futuristic predictions. It’s time to see what has really changed and in what way,” says – says Andrzej Kohut, CAKJ international affairs expert.

„Since the Reagan administration, we’ve become accustomed to the view that the state should be minimal, should tax as little as possible, give as little regulation as possible, not impose high tariffs so as not to restrict trade, not give too much welfare so as not to discourage people from being economically active and encourage entrepreneurship. This prescription of a minimum state did not come out of nowhere. Its source was the crisis of the 1970s, which resulted from the state going too far and becoming too welfare. However, Reagan’s reforms were not the first time the state went into a minimum-state mode. It turns out that the degree of state intervention in the economy changes in a pendulum cycle. Before World War II, the state was very withdrawn. The situation changed after the Great Depression, to which the first elements of the welfare state appeared in response. Then after World War II came the need to rebuild from the devastation of war, which again brought back the need for a strong welfare state. This model had its flaws, which led to the crisis of the 1970s. So again there was a rebound in the form of Ronald Reagan’s policies. But this model also had flaws that are probably accumulating before our eyes and perhaps the pendulum will swing back to the more interventionist side again,” comments the expert.

„The pandemic basically stopped the neoliberal order. On the one hand, free trade has been significantly reduced as borders have closed. The authorities curtailed civil liberties and freedoms in more than enough ways. On the other hand, the states decided to intervene in the economy to a very large extent, going into debt on a scale never seen before and pumping in money to sustain economic life. States have also decided to help their citizens in a very big way. Even Donald Trump’s United States paid out something like an unconditional basic income. Citizens soon discovered that the state could take care of them on a larger scale, and the states themselves discovered that they had plenty of new tools with which to regulate economic life in their area. Of course, all of this would not have been possible had it not been for the gradual shift away from neoliberal dogma after the 2008 crisis, when it became clear that all those previous ways, such as limits on government intervention and austerity plans, were really only fostering a deepening of the crisis,” Kohut believes.

„Today we still don’t know how this war-time economic mode will translate into what the next years will bring. In his book Pandenomics, Piotr Arak draws three possible scenarios. According to the first, it was premature to predict a revolution, and our longing for things to be as they were will result in neoliberalism undergoing some changes, but the system in principle will not change. Second, it is also possible for what the author calls nativist populism, or simply protectionism couched in populist rhetoric, as exemplified by Donald Trump. The third scenario Arak calls pragmatic. Well, many of the neoliberal assumptions have proven to be ineffective. One of them was the belief that making the state rich lifts all boats. In short, let the most ambitious get richer, because if they get richer, everyone else in society will get richer too, because they will get something out of it. This thesis has turned out to be radically false, for example in the U.S., where the top 0.1% of the wealthiest Americans have become extremely wealthy, but at the same time 90% of Americans have either become minimally wealthy or even impoverished. Therefore, Arak suggests that after the pandemic may come the time of what is effective – less dogmatic approach to the economy and more guided by what is confirmed in action,” says the expert.