The massive expansion of state intervention in response to the COVID-19 pandemic – in particular, to underwrite wages for workers and loans for small and medium-sized businesses – may at first sight seem to be progressive.
However, whether this is really the case depends on how these interventions ultimately affect the balance of wealth and power in the economy. This analysis suggests that in fact the crisis will exacerbate inequalities between the working poor and the asset-owning wealthy.
Without a drastic change of approach, the crisis is likely to significantly exacerbate existing structural inequalities – insulating creditors and asset-owners from the worst effects of the pandemic while driving many of the most financially vulnerable deeper into debt. The economists call for short-term measures to ensure that banks, landlords and the well-off also take their share of the burden, including:
- Cap interest rates on the state-backed portion of new business loans at 0 per cent or 0.5 per cent, as in Switzerland
- Consider bans on dividends and share buybacks so that government support for large businesses does not indirectly subsidise shareholders and highly-paid executives
- End "no fault" evictions urgently as the first step in a wider package of reforms to boost renters' rights
- Explore the possibility of a freeze on rent, debts and bills for some struggling households, without new debts accruing, within current legal frameworks