This resolution was adopted unanimously by the membership of the Socialist Equality Party in the United States at its Sixth National Congress, which was held online from July 19 to July 24, 2020.
Part 2 - December 2019–March 27, 2020: The outbreak of the pandemic, the suppression of information and the rescue of the corporate-financial elite
13. The first stage began with the initial outbreak of the virus in China, in December 2019, and its international transmission through Europe and into North America, and lasted until March 27, 2020, when President Donald Trump signed the so-called CARES Act. It was during these critical months that the Trump administration and congressional leaders of both capitalist parties—acting on the instructions of the corporate-financial elite—made the socially catastrophic decisions that prioritized the rescue of the banks, large corporations and powerful Wall Street investors, over preventing the spread of the pandemic and saving lives.
14. By early January 2020, the trained epidemiologists of the World Health Organization and the Centers for Disease Control realized that the coronavirus had the potential to develop into a major global health care disaster. The previous experiences with the Swine Flu and Ebola outbreaks had provided the medical community with data that left little doubt about the consequences of a pandemic. As far back as 2005, pandemic specialist Laurie Garrett warned, in an article published in Foreign Affairs, of the dangers posed by the H5N1 avian influenza:
If the relentlessly evolving virus becomes capable of human-to-human transmission, develops a power of contagion typical of human influenzas, and maintains its extraordinary virulence, humanity could well face a pandemic unlike any ever witnessed.
Garrett provided a chilling description of the American and international consequences of a viral pandemic transmittable from human to human. The United States, she wrote, “could be looking at 16 million deaths and unimaginable economic costs.” Garrett continued:
The entire world would experience similar levels of viral carnage, and those areas ravaged by HIV and home to millions of immunocompromised individuals might witness even greater death tolls. In response, some countries might impose useless but highly disruptive quarantines, or close borders and airports, perhaps for months. Such closures would disrupt trade, travel, and productivity. No doubt the world’s stock markets would teeter and perhaps fall precipitously.
15. Clearly, the United States government and its intelligence-gathering agencies understood by the first days of 2020—and, in all likelihood, by the second half of December—that the world stood on the very brink of a health care disaster. Whatever the precise timetable of the United States’ gathering of information, reports of the danger began to seep into the global press during January. The World Socialist Web Site provided its first detailed account of the coronavirus on January 24, 2020. Just four days later, the WSWS explained:
[W]hile the governments of the world, particularly the United States, have made meticulous plans for large-scale war during the past quarter-century, no such resources or forethought have been devoted to combating the rash of epidemics that have plagued the planet over the same period.
16. Despite the extreme health danger posed by the spread of the pandemic, the ruling class was virtually exclusively concentrated on the economic impact of a pandemic, that is, how the disease would impact the stock market and the personal wealth of the richest one to five percent of society. The capitalist oligarchy feared, first of all, that unambiguous public acknowledgement of the danger would lead to a financial panic, causing the markets “to teeter and perhaps fall precipitously.”
17. Its concerns were not unfounded. The US Federal Reserve Bank had responded to the historic financial crash of 2008–2009 by flooding Wall Street banks and investment firms with hundreds of billions of dollars. The 2008–09 crisis was itself the outcome of a protracted decay of capitalism, which found its most noxious expression in the process known as financialization, that is, the ever more extreme separation of the accumulation of wealth by the corporate-financial elite from the process of production. This unprecedented financial bailout, known as “quantitative easing,” had provided the corporate financial elite with ultra-low interest loans—”free money”—which were used to orchestrate share “buy backs” that inflated the value of equities and other speculative assets.
18. Even before the pandemic struck, it was becoming increasingly clear that the US and world economy were perched on a mountain of debt (fictitious capital), whose volume far exceeded the productive and profit generating capacity of the real economy. The spread of the pandemic threatened an economic shutdown that would cut off the flow of revenues required to service massive levels of debt. As the Bank of International Settlements explained, in a report issued in April 2020:
The COVID-19 shock is placing enormous strains on corporate cash buffers. Corporate financial statements from 2019 suggest that 50% of firms do not have sufficient cash to cover total servicing costs over the coming year.
19. The report continued:
No other recession in modern times has hit the corporate sector as badly as the COVID-19 shock. Firms are now facing unprecedentedly large declines in revenues as nation-wide lockdowns are imposed to safeguard public health. The ability of firms to withstand these exceptional circumstances will determine whether the COVID-19 recession leaves a lasting scar on economic activity through widespread corporate bankruptcies.
20. In this situation, the financial interests of the corporate-financial elite were incompatible with and hostile to all public health measures that restricted the inflow of revenues. While a massive corporate-financial bailout was being prepared behind the scenes, between January and March, the Trump administration repeatedly claimed that the pandemic would miraculously disappear, with little impact on lives. Federal and state governments, run by both the Democrats and Republicans, refused to take any action to shut down non-essential production.
21. On February 28, the ICFI issued a statement calling for a “globally coordinated emergency response” to the pandemic. With the number of cases approaching 100,000 (compared with more than 12 million today), the ICFI warned, “the danger cannot be overstated.” The statement called for an international mobilization of scientists to develop countermeasures to contain, cure and ultimately eradicate the virus; a massive allocation of resources for health care and treatment; and the redistribution of wealth to support all those impacted by the virus.
22. The WSWS defined the deliberate inaction of governments as “malign neglect.” The attitude of indifference on the part of governments to the virus was conditioned by concerns over its impact on the markets. The ruling class was well aware that the economic consequences for businesses would require a bailout that would far exceed what was provided following the 2008 crisis.
23. Rather than taking measures to stop the virus and save lives, the ruling class used the months of February and March to prepare and implement a multi-trillion-dollar bailout of Wall Street. The scale of the intervention testified to the desperation of the economic situation. Between February 19 and March 23, as it became impossible to conceal from the public the danger posed by the pandemic, the S&P 500 index lost one third of its value.
24. In opposition to the ruling class’ policy of “malign neglect,” the working class began taking action to protect itself against the pandemic. Walkouts and protest actions were organized by workers employed by Instacart, Amazon and Whole Foods. Auto workers in the United States and Canada carried out a series of wildcat actions, which coincided with a wave of strikes and protests in Europe. Articles published on the WSWS and statements by the SEP, including the March 14 statement, “Shut down the auto industry to halt the spread of the coronavirus!,” were read and shared by tens of thousands of workers. Under growing pressure from the working class and with the bailout legislation still in preparation, the federal, state and local governments were compelled to accede to a lockdown of the economy.
25. In late March, Congress passed, with a nearly unanimous vote, the CARES Act, which gave hundreds of billions to corporations and sanctioned the multi-trillion-dollar bailout of Wall Street by the US Federal Reserve. In a matter of weeks, the balance sheet of the Fed grew from $4 trillion to more than $7 trillion, as it bought up assets and debt from banks and major corporations.
26. The passage of the CARES Act brought the first stage of the crisis to a conclusion. In a letter dated March 28, to Nick Beams, a leading member of the Socialist Equality Party in Australia, US SEP National Chairman David North assessed the events of the first three months of 2020 in the context of the historic crisis of the capitalist system.
Not surprisingly, the bourgeois media has attributed the staggering fall in the global markets entirely to the pandemic. But this is not sufficient. Before the coronavirus began to spread, it was apparent that the wild rise in share values had assumed a malignant character, fueled by the limitless availability of QE funding and the historically unprecedented suppression of interest rates by the Fed and central banks in Europe. There even emerged the phenomenon of negative interest rates. The mountain of fictitious capital made possible the innumerable gimmicks employed by the ruling class to drive shares ever higher (such as share buybacks) and enrich itself.
The most striking feature of the market sell-off of the last three weeks (notwithstanding the three day “dead cat’s bounce”) was its astonishing speed. Trillions were lopped off share values in a matter of days—faster than any other decline in modern history. The velocity of the collapse was determined by the unreal character of the previous magical levitation of share values. This is what led immediately to hysterical demands for the multi-trillion-dollar bailout. The passage of the bailout—with a few crumbs to hold back a social explosion for a few months—is the continuation, on a new and even more gigantic scale, of the creation of fictitious capital, i.e., the conjuring up of value independent of production. The bourgeoisie knows full well that this gigantic economic Ponzi scheme cannot last. And, for this reason, the pandemic becomes a real problem. It is one thing to expand debt levels when production is taking place. It is quite another to do so when production is seizing up all over the globe. The disparity between the expansion of debt and the massive decline in the production of value through the labor process (in all the forms in which it is manifested) cannot be concealed. And this gives rise to the demands from Trump and the capitalist oligarchs for a speedy resumption of work. “The cure to the pandemic cannot be worse than the disease.”
We are approaching a critical stage in the historical crisis of capitalism. Confronted with bankruptcy as a result of the collapse triggered by the pandemic, the ruling class is demanding that its state place at its disposal trillions of dollars to stave off bankruptcy. At the same time, it is preparing to employ the same state to launch, as soon as it has completed the necessary political and logistical preparations, a ruthless attack on the working class.