Shutdown: How Covid Shook the World’s Economy

By Adam Tooze

Penguin Random House/September 2021

Reviewed by Keith Boag

September 19, 2021

You might have noticed we’re not thinking about money the way we used to. Small example: We just had an election ostensibly about nothing, even though Canada is wrestling with a godzilla of a budget deficit. In fact, if the election was about anything, it was about how to spend even more money.

That might be a symptom of the most important change required of us by the pandemic: a complete overhaul of the way we think about economics and the government’s role in mediating between its macro and micro applications. We may also want to start thinking more carefully about who the economy works for.

These are some of the thoughts provoked by historian Adam Tooze’s new book Shutdown: How COVID Shook the World’s Economy, a comprehensive “grand narrative” of the current crisis.

Tooze sorts through the many failures of the global response to the pandemic — political failures, societal failures, the whole mess — but the one thing he thinks we got right was the money: The unconstrained fiscal outlays of governments and monetary response of the Big Four central banks was appropriate to the enormity of the crisis. What’s more, that kind of spending will continue into the future, driven not by profligacy, but by urgency and common sense.

This is entirely different from what we thought after the global financial crisis of 2008. The extraordinary amounts of cash thrown at the money system then to keep it breathing were considered a one-time blowout for a one-time emergency.  Yet here we are, just over a decade later, taking even more dramatic steps to manage an even more threatening economic crisis, driven by a much deadlier contagion than a market meltdown.

And still, Tooze wants us to know, it’s just the beginning. His version of our future boils down to this: We are now fully in the anthropocene era — the era when human activity is the dominant influence on our planet — and that inevitably means global disasters, like pandemics and all the various consequences of climate change, will keep coming at us faster and faster.

How to cope? Tooze quotes from the Italian writer Giuseppe Thomas di Lampedusa’s novel The Leopard: “Everything must change so that everything remains the same.” If 2020 was a rehearsal for the kind of future Tooze says is coming, we’re going to have to think about money in exactly the way we’ve always been taught not to think about it:

“’Too big to fail’ has become a total systemic imperative. The effect is to underwrite successive rounds of escalating debt-fueled speculation and growth. Can it go on? There is no fundamental macroeconomic limit that anyone can discern.”

So, then: money for nothing.

Unlimited debt margin is one thing — albeit, one very big thing — but managing the politics of such a world is another thing entirely. If there really is no limit to money — to what we can afford — then what have the deficit hawks who tut-tutted us through the last forty years been keeping secret about how money works?

If the pandemic revealed that governments around the world can create trillions of dollars to support people forbidden from work and businesses barred from the marketplace — and if that’s going to be the rule when all the other global crises wash ashore — then why couldn’t we also have afforded exciting things like high-speed rail, smart things like affordable child care, or just basic things like real help for poor people?

Let me paraphrase one question I think is at the heart of Shutdown: Who is the economy for and on whose behalf do governments act when they intervene in it? This is not a new question.

And why is it that even in the self-induced recession of 2020 — an unprecedented economic contraction in 95 percent of the countries of the world — household net wealth in the US increased by 15 trillion dollars —overwhelmingly to the top 1 percent?

Let me paraphrase one question I think is at the heart of Shutdown: Who is the economy for and on whose behalf do governments act when they intervene in it?

This is not a new question.  It certainly wasn’t new when the protesters of Occupy Wall Street underlined it in New York City’s Zuccotti Park exactly ten years ago this week. It’s a fundamental question that naturally arises at times like these.

Because Shutdown is a “grand narrative” it threads through many events: “Occupy” was a reaction to the 2008 global financial crisis and the charity shown for the (very) rich people who caused it. In turn, it became a harbinger of Senator Bernie Sanders’ presidential campaigns and helped grease the skids for the most successful con in American history, Donald Trump’s presidency.

After Wall Street’s reckless investment losses were conveniently socialized in 2008, it was popular to say that “we’re all Keynesians now”, referring to the legendary John Maynard Keynes and his theory of government as a necessary stabilizing force in the economy. In Shutdown, Tooze goes a big step further and quotes the most radical Keynes — “Anything we can actually do, we can afford” — and considers a coming embrace of the new school of Modern Monetary Theory, which argues with a technical explanation for why limits to fiscal capacity are imaginary.

Naturally, there is resistance. Robert Rubin, the former Treasury secretary in the Bill Clinton Administration, has high praise for Shutdown because of its wide-ranging analysis of the lessons we are learning from the current crisis and because he seems to endorse its warnings about the inevitability of the next one(s). But the idea that there need be no day for reckoning with the costs of managing those multiple crises is just not on with Rubin.

“You don’t need to believe that a never-ending cycle of deficit-funded spending, offset by monetary intervention, is sustainable,” to adequately meet our enormous challenges, he wrote in a New York Times review, “You can just believe we need to pay for it.”

Predictable, yes, but the political question, it seems to me, is still a difficult one: After they’ve seen what can happen to cope with the pandemic, will ordinary people accept anymore that they have to pick up the tab.

We live in a time of obscene inequality. Again, even in the pandemic, the rich got a lot richer. It is a cold world misguided by phony “truths” about free markets and the dead hand of government. A world where a miniscule few can enjoy private joy rides in “low space” while tens of millions live hand-to-mouth.

So now, in our moment of crisis, with governments riding to the rescue, cash in hand — not merely millions or billions, but unimaginable trillions; great gobs of cash from nowhere — it might sound a little rich to start explaining to the 99 percent why they can’t have nice things too.

Keith Boag is a former Ottawa-based chief political correspondent for CBC national news and former Washington correspondent for the network