In his Spring Statement delivered on 23 March, Rishi Sunak presented himself as a tax-cutting, small-state conservative, in the grand tradition of Margaret Thatcher. While he offered scarcely anything to help people deal with the cost of living crisis, he dangled the promise of a future income tax cut as the sole benefit of his policy agenda. Sunak has political reasons to present himself as a traditional neoliberal, but the brute reality is that circumstances offer him little opportunity to make good on this. Regardless of what Sunak says, the political economy of the Johnson administration has been and will remain shaped by the confluence of Brexit and Covid-19. We would do well to pay more attention to what has emerged over the last two years, than to focus too much on what Sunak would like us to believe.
It is widely accepted that a likely consequence of the pandemic is a growth in the size of many states, relative to the rest of their economies. In the UK, the size of the state had fallen steadily in the decade leading up to the pandemic thanks to austerity measures, with cuts to public spending concentrated especially in local government and the benefits system – something that played a demonstrable role in the country’s catastrophic mortality rate over 2020-21. Covid-19 caused public spending to immediately leap from around 35 percent to over 45 percent of GDP, and is likely to leave it at over 40 percent for the foreseeable future. But these sorts of headline indicators conceal questions of power: what kind of state, what sources of profit and what types of exploitation are under way?
By rewarding, empowering and amplifying key centres of economic power, Covid-19 has helped coalesce a certain model of capitalism that we term “rentier nationalism”. This seeks to capture the reassertion of the nation as an economic unit and “imagined community”, but also to specify the main beneficiaries of this mutation: asset-owning households, financial elites, platforms, and outsourcing contractors. A distinctive type of national capitalism is emerging, based around a larger state, with higher levels of public borrowing and spending, especially on healthcare; an electoral base made up of older homeowners and ultra-high-net-worth donors; para-governmental industries of public service providers and digital platforms; and an unstable combination of labour market “flexibility” and tight immigration control.
The growth of the state, which was already becoming ideologically mandated in certain corners of the political right prior to 2020, does not automatically imply reduced power or autonomy for capital, as if in some zero-sum game between “public” and “private”. On the contrary, it is – as the health crisis has made clear – a huge opportunity for certain forms of capital and certain sectors to expand and profit. Political scientists first began to describe the hollowing out of the state and the rise of public-private centres of “governance” in the early 1990s, with the UK a pioneer of many techniques of privatisation and “new public management”.. Outsourcing in the UK has gathered pace ever since. But the post-2020 version of public-private collaboration adds several distinguishing features that characterise rentier nationalism.
First, the relationship between the state and private businesses has become even more intimate, as the ideological veneer of “competition” and of “the market” for contracts is all but abandoned. The greater willingness of the state to deploy the full potential of its sovereign balance sheet has also produced more money to be diverted towards Serco, G4S and others. Rising public debts once produced fear of inflation, leading interest rates to be increased in response. But the indebtedness of the contemporary state has led primarily to inflation of asset prices, including house prices, which is politically celebrated. Few would argue that the consumer price inflation that has afflicted Britain since the economy was “reopened” is a consequence of monetary policy. Meanwhile, the emergency procurement practices of 2020 onwards frequently discarded all pretence of competitive tendering or due process, at little political or electoral cost. The proximity of certain wealthy individuals or firms to the Conservative Party and the state translated into contracts, something that is typically viewed as a hallmark of illiberal regimes.
The first priority of the state in an economy based around the extraction of rents is to defend the sanctity of property rights and contracts, which are the sole basis of revenue where firms and individuals are dedicated to controlling assets, rather than production. The second priority is to do whatever is possible to prop up the value of assets. Quantitative easing has contributed greatly to this internationally, and especially during the pandemic, but the UK Treasury threw further petrol on the fire in 2020 by announcing a stamp duty holiday for property transactions, which then got extended repeatedly out of fear that ending it would prompt a housing crash.
Second, rhetorical and symbolic appeals to the nation have become increasingly integral to state legitimacy claims. The dawn of the pandemic coincided with numerous “culture war” interventions against universities, charities, the BBC and museums, which have been routinely accused of censorship, wokeness or rewriting the past. In the field of education, which has featured a familiar pattern of cultural conflicts between left and right since at least the 1960s, there were heated battles during 2020 and 2021 over free speech, curriculum content and fidelity to British values. Coinciding with rising media panic surrounding asylum-seekers crossing the English Channel, this rhetorical agenda contributed to a nationalistic mood which presented Britain and its values as under threat from various internal and external sources.
While these appeals to nationhood and territory tend to be made in cultural and ethnic terms, they too have economic implications. They contribute to keeping certain forms of work “cheap”, either because it is expected that they are performed for the greater national good, or because they have been performed disproportionately by migrants, or both. It may be that a combination of Brexit and a generalised care crisis have led the UK to the limit of its “flexible” labour market model. Yet the rhetoric of nation and “protection” of an indigenous population works to conceal how society is actually sustained, and whose work is actually indispensable. In education and the cultural sector, this rhetoric also ostracises centres of professional expertise who are perceived to be disloyal or woke, such as teachers, academics and curators, hastening the ascendency of private platform-based alternatives to traditional schools, campuses and cultural institutions.
Covid-19 has also elevated the significance of the platform business model to new heights, meaning that the extraction of data is often just as significant to business strategies as the extraction of profit. In aiding this data extraction, states wield crucial economic power. Governments, after all, are often still needed to unlock access to populations, especially in sensitive areas such as health. The kinds of partnership that exist between central government and data-hungry firms such as Palantir and Google produce networks of demographic control, in which the state helps to break down or disregard privacy barriers or other regulatory constraints, while the contractor helps to algorithmically sift, distinguish and rank populations. The NHS becomes a financial resource, but not one that necessarily requires privatisation or marketisation to be realised as such. Instead, it becomes the entry point to a vast treasure trove of medical, behavioural and social data. Similarly, schools, which were far more platform-based by the autumn of 2021 than they had been two years earlier, provide a mine of behavioural data for EdTech firms to scrutinise, and then potentially sell their findings back to the Department for Education.
National population therefore becomes a type of national asset that exists as a kind of property of the sovereign state, and is made available to private firms to mine for both intelligence and profit. Covid-19 could signal the beginning of a whole new era of public-private partnerships, in which states and platforms strike deals over access to different forms of population data. In a recent list of “10 Tech priorities”, the government makes the ambiguous claim that “we aim to become the world’s number one data destination”. This also represents the dawn of a new era of demographic government, in which nurturing and analysing population – in pursuit of security, biosecurity and human capital appreciation – is a constant concern, which also shapes migration policies. The intellectual historian Quinn Slobodian coined the term “volk capital” to capture a conservative view of population as both ethnic community and financial asset. In the contemporary UK, the state does not necessarily seek to upgrade this capital through public investment, but the Johnson administration has committed to creating new routes for technological elites and “global talent” to live and work in the UK, while at the same time making it even harder to claim asylum.
At the same time, lockdowns prompted a range of radical and heterodox policy decisions that would have been politically unimaginable only months earlier. The original justification was that the health emergency would be brief. And while the circumstances of these decisions were obviously crucial and sometimes fleeting, they had certain irreversible consequences in terms of how problems of policy would be framed in future.
The science of economics and the idea of the market economy are both implicitly reliant on two deep wells of debt that typically remain concealed and unacknowledged. The first is the balance sheet of the sovereign state and central bank; the second is the unpaid and underpaid commitments of care in the household and community. What changed thanks to Covid-19 was partly the scale of the commitments that were made between sovereign and bondholders, and between care providers and those in need. But there was also a new visibility about these basic preconditions of economic life, which holds great political potential. The idea of “the market” as a separate and self-sustaining entity, so long criticised by political economists on the left, became ideologically untenable.
In the case of sovereign debt, Covid-19 signalled the final death of the austerity logic that stipulated some arbitrary limit to the size of government debt, an idea that caused such terrible social harm over the decade prior to Covid-19. The sharp rise in debt over 2020 and 2021 was not accompanied by any increase in the cost of borrowing, greatly widening economic possibilities. For the left, this confirmed the once-heterodox notion that governments could seize the possibilities of cheap credit to pursue social and environmental goals to the maximum of their capacity. Of course, there is no reason to assume that the evaporation of austerity logic necessarily leads to more socially and environmentally progressive outcomes, or that certain morally mandated austerity measures – for example, continued cuts in areas such as welfare and education – will not continue. Nevertheless, the heterodox became orthodox.
Second, the politics of work and the labour market were dramatically overhauled in 2020 out of necessity. The state flipped from a role of seeking to push people into work to one of seeking the opposite. The most dramatic feature of this was the furlough scheme, the success of which may have enduring effects on expectations for government intervention in the labour market, at least in future economic crises. The assumption that the government would offer a form of furlough every time there is economic turbulence would run fundamentally against the flexible labour market model that is so firmly entrenched.
Then there was a range of other measures in which the political and economic orthodoxy of the previous 40 years was abandoned. A ban on the eviction of commercial tenants was introduced in March 2020, which lasted until May 2021. Even after that date, tenants were granted more time to make up their rent arrears, before landlords were permitted to use bailiffs. The Everyone In initiative introduced in March 2020, which sought to get homeless people off the streets, initially aimed to get 5,000 people into emergency accommodation. Yet by March 2021, 37,500 people had been helped, not only off the streets, but away from unsuitable housing into Covid-secure units. This was an entirely unprecedented and unexpected success story showing how concerted action – especially involving coordination between central and local government – could alleviate unnecessary social distress, if the political will was there.
In education, 35 years of creeping centralisation of audit, testing and curriculum were instantly undone when the first lockdowns were introduced. Ofsted inspections were cancelled straightaway, and SATs, GCSEs and A-levels soon after. With the Department for Education struggling to achieve any coherent strategy, schools and teachers found themselves with more autonomy and social responsibility than they had done in a generation. While this was a stressful experience for teachers, pupils and parents alike, it also confirmed what teachers and unions had long argued: that schools and teachers retain an informal role in the social health of their local communities that is irreplaceable, but devalued under regimes of quantitative audit. Whether in the sustaining of a curriculum or in the awarding of A-levels and GCSEs, policymakers were forced to trust the judgement and duty of care of a profession that had frequently been viewed with suspicion, as ideological and obstructive. The anxiety this must have generated among conservative educationalists, whose central purpose had been to wrest power away from the local level, must have been acute, and goes some way to explaining why the pandemic coincided with such frivolous new mandates in England on the singing of patriotic songs and banning in schools materials produced by “anti-capitalist” organisations.
What did these various policy heterodoxies have in common? If there was one thing that Covid-19 forced policymakers to accept, against everything that had been argued since the ascendency of the “New Right” in the 1980s, it was that people were not responsible for the circumstances that had befallen them. People’s ability to work, raise a family, pay their rent, meet public sector targets, and so on, was periodically undermined by circumstances that left them in need of support. In a country such as the UK that had developed a steady current of media hatred towards dependency, Covid-19 resulted in an extraordinary cultural and psychological volte face. A discernible shift arose in relation to social and labour market policy of suddenly seeing the needy individual for what they were – that is, as a victim of circumstance. Public sector workers, meanwhile, were suddenly assumed by default to be motivated by altruism and professionalism and not by self-interest, as the governing ideology had once presupposed. It remains to be seen what kind of residue this aspect change may leave, but it is possible that, having seen the world from a different angle, voters and policymakers could more easily do so again in future.
Unprecedented: How Covid-19 Revealed the Politics of our Economy, co-authored by Will Davies, Sahil Dutta, Nick Taylor and Martina Tazzioli, is published in April.
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