After Coronavirus We Need a New Social Contract

The scale of the coronavirus crisis means it's very unlikely the economy will just return to 'normal' – it's time for the Left to propose new rules for how it should operate, before our opponents do.

Covid-19 is having devastating effects on work, both in the UK and globally, with decreased employment and rising unemployment. In the UK, the state Job Retention Scheme is the only thing protecting many millions from unemployment. The government pays employers 80% of workers’ wages (up to a £2,500 monthly maximum) if they retain employees. But various loopholes in the JRS exist, notably problems with universal coverage – the most precarious atypical or agency contracts are excluded.

Despite its flaws, the JRS shows how important trade unions remain as collective institutions representing working people. European-style wage subsidies were advocated by the Trades Union Congress (TUC) in tripartite talks between the government and employers’ groups. Other European countries have been doing tripartite bargaining for decades, most recently in response to Covid-19. 

But what happens to work in the UK after Covid-19 subsides? While understandably pre-occupied dealing with Covid-19, policy-makers need to consider what the future might look like as well – particularly if we are entering a period of profound economic slump.

Most working people today have no alternative to what is called the wage-effort bargain today – effectively renting yourself out to a boss to survive. It is a grim situation that leaves some polls estimating that a majority of workers are unhappy in their workplaces. But it doesn’t have to be that way, it is possible to imagine an economy based on very different principles.

Ditching Neoliberalism

Moving beyond neoliberalism is the starting point. Forty years of lionising individual freedom have atrophied collective social institutions like the NHS, the welfare state, and trade unions. In The Great Transformation Karl Polanyi criticised the destructive impacts of self-regulating markets disembedded from society. This, he argued, would result in the separation of the political from the economic and result in the “subordination the substance of society itself to the laws of the market.”

The last decade saw a renewed drive towards market fundamentalism as austerity hawks used the 2008 crash to hollow out the welfare state and public services necessary for society to flourish. More recent times have seen some pushback against this – but there is every likelihood that a renewed drive to cutback, privatise and marketise will follow this latest economic downturn.

History tells us that when capitalist economies slump, the state has to intervene because private sector business confidence and activity retrenches. The Covid-19 crisis has compelled the UK’s most prominent champions of the free-market, the Conservative Party, to temporarily nationalise the labour market and act as employer of last resort in order to protect jobs. This is not something Tories would countenance in normal times, but these are not normal times.

After Covid-19, the Left must argue that state intervention in the economy becomes more permanent – and that it plays a more redistributive role to narrow inequalities in work and wider society. In doing so, policies considered taboo, even socialist, by Conservatives especially, need to be on the agenda to progressively reform post-crisis working lives. 

The Job Retention Scheme was negotiated in a tripartite process with trade unions and business – why shouldn’t sectoral collective bargaining now become a regular part of Britain’s industrial relations culture? And shouldn’t the key workers who have kept the country running in recent months be guaranteed a right to strike over their pay and conditions once it’s over?

The European Union also has to reconsider its labour policies and strengthen its employment and social rights dimension if it is to repel populist nationalism. For too long, EU politics have been hostage to ruinous austerian price stability rather than even attempting to create full employment for its citizens.

Foundational Economy

In the UK context, Covid-19 has showcased the importance of a “moral economy” and essential work of social value by “real key workers”, including NHS and social care staff, supermarket workers, cleaners, refuse workers and many others.

This is at odds with the logic of market competition, greed and extraction by the British corporate welfare state. The ethic of our national economic model in recent times has been to reward big business with large state handouts while allowing for the evasion of social responsibility and tax. This is part of a shift in financialised capitalism to rewarding value extraction instead of value creation.

There are no political excuses for not rebuilding the welfare state (a new social contract), rewarding real key workers, and contemplating new welfare provisions like minimum income guarantees. Nye Bevan’s In Place of Fear should be revisited as a lesson in the importance of meeting great challenges with economic planning, and also to remind us of the political case for reversing rising health inequalities that blight our society.

Stronger employment and trade union rights for all workers (especially atypical, zero hour and gig economy workers) are required. Redistributing working hours, a shorter working week, and reducing underemployment, should be considered. All workers should be entitled to living hours, combined with at least a real living wage.

The Labour Party have stated that there must be no return to ‘business as usual’ on workers’ rights when we emerge from the coronavirus crisis, and have backed the TUC’s call to establish a new tripartite National Council for Reconstruction and Recovery.

Moreover, a new jobs strategy is urgently needed placing job quality centre stage, and repairing socially damaged communities. Covid-19 demonstrates the importance of essential workers in the foundational economy. State job strategy should focus on depressed regions to guarantee better jobs grounded in ‘foundational’ local community necessities such as health and social care, housing, transport, food production, and green projects.

As Eleanor Salter has argued in Tribune recently, reviving the economy after this pandemic is likely to require a policy as ambitious as the Green New Deal. This would be important for any national jobs strategy too. For example, green jobs could be created by a national reforestation and rewilding plan, which would also benefit the environment and eco-tourism.

Foundational economy policies could be combined with a Job Guarantee scheme similar to proposals advocated by democratic socialists in the US. A Job Guarantee could initially be piloted in the most disadvantaged places. This should be part of a new framework for building more cohesive communities through employment. New procurement rules could embed social responsibilities like good-quality secure jobs guaranteeing a real living wage, training, trade union representation.

Bold Ideas

Mainstream media and economists will likely ask, how are you going to pay for this?

A wealth tax and preventing tax evasion could ensure the wealthiest pay more to society. It can also be funded through borrowing. Governments and central banks like The Bank of England can print money, and borrow at ultra-low interest rates.

Interesting new economic thinking is occurring in the US around Modern Monetary Theory (MMT). It proposes governments that control their own currency can spend freely, as they can always create more money to pay off debts in their own currency. This frames the economy as a series of political decisions rather than simple arithmetic equations.

But policies designed to empower working people will inevitably encounter opposition from the powerful. There will likely be renewed calls for belt-tightening and austerity (imposed on working people) from the political right and representatives of finance capital. Yet, there is no such opposition when the state bails out banks and spends on corporate welfare.

One thing is clear on both sides of the Atlantic: socialists, Democrats and other progressives need to propose bold ideas that can form the basis of a new social contract after this latest crisis. We can’t afford to be afraid of proposals like a foundational economy, a Green New Deal and a Job Guarantee. Our opponents certainly won’t be shy in putting forward their own visions – and recent years have shown us just how disastrous they can be.