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The Imminent Crisis and the Economics of Panic

By: Artemis Désobiy

Just when we think things can’t possibly get worse, we’re hit with 2020, the year that like most of its predecessors threatens to disrupt our fragile state of human affairs. Because the 2008 crisis didn’t impoverish us enough, the Ebola outbreak of 2014 didn’t traumafy us enough and the insane weather conditions of 2019 didn’t freeze or straight up scorch us enough, we now find ourselves in the midst of a pandemic that is following the same trajectory of the Black Death and has a higher mortality rate than the Spanish flu. As the world plummets into the depth of an ever-recurring cycle of despair, we’re left like Tyler and Marla at the end of Fight Club, watching the world burn to the ground: Love in the Time of the Coronavirus. But, is this panic justified? What’s driving it? Who’s benefiting? Who’s suffering its dire consequences? What in the ever-loving-holy-heck is going on and what should we do?

Panic is not unusual, it’s not infrequent and it’s not natural. Despite the fact that we’ve witnessed numerous panics over our own personal lifespans, not to mention over the entire course of human history, whenever it occurs (or recurs to be more accurate) it is positioned as strange, rare and a natural human reaction to surrounding circumstances. And if it’s natural, it can’t possibly be controlled. We’re not here to preach conspiracy theories, even though some are pretty juicy and ripe for the picking, especially given the leaps in biological technology in recent years that have rendered outlandish dystopian fiction downright feasible. Conspiracy is interesting, but difficult to validate and ultimately a distraction best pursued as a personal hobby. In the midst of this shitstorm of biblical proportions (I mean, we have collected all Four Horsemen cards from the Revelations Collection Set), the best we can do is try to ask the right questions, venture some educated guesses and work together on refining our collective result so we can get to a commonly agreed upon plane of thinking. If we can just think together, maybe we can get the rest of our act together as well.

Who’s Benefiting? (short answer: the ruling class)

While supermarkets shelves are getting manically cleared out and toilet paper has caused a social hysteria that would be extremely funny, if it wasn’t so extremely sad, who exactly is benefiting from this form of social panic? Well, Amazon just announced that it “plans to hire 100,000 new workers for warehouses and delivery service in the U.S. as more people turn to online shopping for supplies as they’re isolated at home during the coronavirus outbreak” and a facial recognition firm in China just announced that it developed a “’multi-channel’ recognition system that uses ‘multiple surveillance cameras’…(and can) identify everyone in a crowd of up to 30 people within a second” with a recognition rate of 95% with people wearing masks and 99.5% with those without, so it would seem that this panic is not coming at the same cost for all parties involved.

On the private front, there will be many businesses witnessing immense sales and growth, those that falter will be provided with a sweet package of government fiscal measures to help support the economy as it braces for the worst. On the public front, the state will be given expanding powers to lay long-lasting legislation that further bolsters its authority and control, which ultimately reinforces the economic system in place.

The private domain, however, is more complicated because as stocks plunge across the world and only grim economic outlooks are predicted, it may appear that private interests are diminishing and business and industry are collapsing. That appearance is in and of itself both true and false. The system is collapsing, but not all private interests are depleting, in fact, they are exuberantly increasing in various sectors. The ruling capitalist system is not a unified monolithic block, to borrow from that guy that you keep hearing about a lot these days, Marx. The ruling class is more like an army that has internal divisions and conflicts, much like the working class. So, while the “autocracy of the finance aristocracy” may be feeling the burn, and their markets are turning bearish, there will be several intensifications in industry and manufacturing, as well as, the commercial/services markets. In the end though, the pronounced victor of the internal battle will take the lead to rectify the market once more in order to continue in the expanding cycle of exploitation that is the capitalist system. So, bail outs for all.

In Egypt, this translates to ‘emergency economic rescue’ measures including taxes on EGX transactions getting slashed to support equity investors with stamp tax cuts (reduced rate of 0.125% instead of 0.15%), capital gains taxes getting postponed for two years (which have already been postponed several times over the past five years) and tax dividends getting cut in half (from 10% to 5%). There will also be a real estate tax holiday for companies operating in the industrial and tourism sectors, lower energy costs for factories (25% cut for cement companies and 18% cut for metallurgy and ceramic manufacturers) and the price of electricity per kWh lowered by 10 piasters for medium, high and ultra-high voltages, and frozen for the next 3-5 years.

To identify all the various benefactors would be a task too daunting for this article, but it would be interesting to keep track of who’s reaping the reward of this panic from a consumer spending perspective. When we’re quarantined at home, what are we spending on? Off the top of one’s mind, you can count the streaming industry as we consume media to pass the time, several sectors within the retail industry as we stockpile food, drink and other essentials, the healthcare/Pharma industry, etc. But the stock markets are crashing and we stand on the cusp of a global recession. That is because the system is indeed collapsing, but it has been collapsing since its inception (with increasing speed and intensity). Every time a crisis occurs, as the natural effect of the system’s design, it is rectified in an effort of self-preservation. The system is collapsing, it just keeps propping itself up until it is no longer able to do so or prevented from doing so. The former marks our mutual destruction, the latter our potential freedom, but will require our collective will.

The public domain, while not as seemingly complicated, is also benefiting while appearing to be helpless and at a loss. A panicked society is at once defiant, but more so and ultimately, complacent and obedient. Under the auspices of a global pandemic and an imminent economic crisis, all bets are off. Emergency rule and law prevails. Ridiculously increased surveillance is accepted (and sometimes, masochistically requested). Legislation that encroaches on civil and political rights and liberties are passed and atrocities of political savagery—as is happening in KSA—can go unnoticed amongst the panic of the pandemic. Panic provides both the impetus for draconian laws and cover under which autocrats can impose their illegitimate authority against their citizens; it provides both the sword and shield for the state, which in turn is the sword and shield for the ruling economic system.

In Egypt, this means the fast tracking of legislation that will carry long term impact on our lives (like that 3-5 year frozen lowered electricity price for ultra-high voltage users). Currently the state is rushing the SMEs Act and the amendments to the Real Estate Tax Act, as well as the auto incentives strategy. The House SMEs committee is currently expected to finish its review of the SMEs Act this month, and the real estate tax amendments were approved by the cabinet in January. The cabinet last week approved the auto strategy despite the fact that its contents remain largely a mystery to the general public. This is, of course, in addition to the other measures that are being taken, but not being covered by the country’s stifled press, such the current measures being taken against prisoners (whether criminal or political) and its direct infringement on due process, where visitation/phone calls and court hearing have been suspended for two weeks until further notice. Meaning families of prisoners, for instance, have no idea how their loved-ones are doing, while the prisoners themselves have to endure arbitrary and unspecified extensions of time served (which is adding insult to injury for the many, many wrongly imprisoned to begin with).

Who suffers? (short answer: the working class)

Just like the ruling class with its divisions and internal conflicts, the working class is an intricate composition of all ultimately, but not as equally exploited people. The thing that unites us is our generally shared exploitation by another class that owns and dictates the means and mode of production respectively. Some of us may be getting by and not feeling the excoriating pang of poverty, but on varying levels, we are all bearing the brunt of every crisis, while aiding and abiding the panic that feeds its fires.

Some companies might take a hit, others might shut down altogether, but in the grand scheme of the capitalist system, the real victims of any economic crisis are never the CEOs that have diversified investment portfolios to fall back on before catching the next opportunity to make more money through the exploitation of their new workforce. The working class is the one that carries that heavy burden, but in varying degrees. Whether it’s the blue collar, white collar or no collar, we all suffer the impact of this crisis and every other crisis prior.

For the workers of the world, this panic will mean potential loss of employment, increasing debt, decreased purchasing power all while dealing with a disease that might render them at the mercy of a decrepit healthcare system more likely to kill them than care for them. And if they do get healthcare and survive, their financial battle with the insurance companies begins.

The suffering may range in intensity, but even the whitest of white collars will find themselves struggling through these times of panic; facing very similar threats to blue collar workers; not sure if their job is secure or if they’ll be able to continue paying their bills next month. They are exposed to the same virus and will likely have to go to the same hospitals. In the whirlpool of a pandemic and looming economic crisis, these shared adversities can be lost on the minds of people fueled by panic. Instead of aligning efforts in a show of strength and solidarity, they instead tear each other apart fighting over the last roll of toilet paper. Panic serves to divide and conquer.

The most at risk segment of the working class, however, would have to be the no collars, those belonging to the informal economy with its varying shades of gray (and it can get real dark); the most exploited of the working class. They have no union to join to demand paid sick leave should they contract the virus, so if they don’t die of the disease, they will surely die of the hunger.

The economy of panic strikes the working class with ruthless aggression ranging from economic debilitation to political violence. The jobless become homeless and the homeless become criminal. Mass, unbridled abuse and extreme exploitation reign supreme when panic over toilet paper steals the headlines.

Pattern of a Crisis 

A crisis leads to panic and panic accelerates the crisis. This is not new. Crisis are recurring phenomenon and yet they are treated as isolated incidences and anyone that tries to connect the systemic dots is labeled a radical. Crisis are an effect of the fundamental flaw of the capitalist economic system: the tendency of the rate of profit to fall. The current economic system is based on the accumulation of capital. This chaotic, unchecked accumulation is intensified through the aggressive competition of the supposed ‘free market’. This cut throat competition (powered by technology) will always lead to a decrease of surplus value relative to the value of production leading to the rate of profit tending to fall over time, reaching a critical point, or crisis. As a recurring phenomenon, crisis follow a pattern and this one is no different.

Before a crisis becomes a crisis, we read some terrific economic headlines, including the projected increase in global growth and the revival of investor trust in not only developed, but also emerging—and when the times are really great, even frontier—markets. The unbridled concentration of capital during these times is purely chaotic. It grows to simply grow. This is when we hear that the number of ultra-high net worth individuals (UNHWI) in Egypt grew some 3% between 2014-2019 and the number of high net worth individuals (HNWI)—those with a net worth of USD 1 mn or more—grew 29% over the same period, making Egypt the country with the second largest concentration of both HNWIs and UHNWIs in Africa.

This chaotic economy grows out of control and only requires a slight change in variables (whether natural or human-made) to be completely thrown out of whack into a full blown crisis. When the money system gorges itself and then explodes or deteriorating climate conditions cause crop disruptions or a pandemic hits, the system in place is hurled into a crisis because its purpose is not to prepare for such times, but only to grow and keep growing. When speaking about the relief the stimulus package would provide the travel and tourism industry in the US, Trump stated the following:

Well, we’re going to help.  They need help. Look, let’s face it.  You know, they go from having record-breaking years — this is the third year of record-breaking years — travel and tourism, airlines, everything.  They were doing record numbers, ordering new planes, building new hotels. Everything was really hunky-dory.”

Hunky-dory indeed. Never have dumber words held such immense meaning. Three years of record breaking profits and yet the industry must be bailed out with government money. Why not use some of those record-breaking profits as a cushion for the turbulence ahead? Because you ordered new planes and hotels, you say. But, why did you? The majority of the world’s population can’t even afford air travel or leisure hotel stays. Even the additional 3% of UNHWIs can’t possibly fill those orders.

So, while the concentration of capital and wealth are occurring on the side of the ruling class, on the other end of the spectrum, we see reports that Egypt’s poverty rate has risen to 32.5% in FY2017-2018, up from an estimated 27.8% in 2015. The concentration of capital and the intensification of poverty are like two trains headed directly towards each other, in painstakingly slow motion and we’re all caught completely off-guard when they do eventually collide.

Economy of Panic’s Triple Bottom-line

For the working class that is the absolute victim of this pandemic and global economic crisis, the consequential bottom-line of this chaotic economy of crisis and panic also follows a pattern:

  1. Historically and more relevant to our case, prior to this specific pandemic and looming economic crisis, the working class agonizingly births and nurtures the system that grows to brutally devour it. Accumulation of capital presupposes accumulation of labor. We endured the austerity measures they implemented when their economy needed a kick start to reach their “record-breaking years” and while their UHNWIs rates increased, so did our poverty rates.
  2. Currently, we find ourselves at the mercy of a dilapidated healthcare system, one run by an economy that only strives for profits and not human welfare and supported by a government that sacrifices funding of low profit-yielding branches of very necessary social services on the altar of the big business lobby machine and does so brazenly and without the slightest hint of concern, remorse or regret. Many of us will also find ourselves out of a job because the company that turned over billions of profits last year, can’t channel some of that disproportionate wealth to its rightful owners (the ones that created it through their labor power). This will be our current state for a long time: sick and poor.
  3. When the dust has settled and it’s back to business as usual, we will still continue to pay for a crisis that we did not create by bailing out the companies that did create it. We’ll be expected to continue to compete in a very uncertain labor market in order to earn a wage a part of which goes to stimulus packages for the companies that are either not employing us or doing so at the most unfair rates of wages.

The consequences of these times of crisis that we live in and will continue to endure are not random or erratic. Surrounded by panic, they appear a natural phenomenon. Something we could never have prepared for and certainly couldn’t have avoided. That is absolutely not true. If our economic system was planned in a manner that served our communal needs and interests, our healthcare system would have been much more useful to us. We would not have to add global recession and impending depression to our list of concerns; we wouldn’t have to worry about debt when we should be worried about life and health.

We may not have a planned economy, but we do have the opportunity to dismantle the capitalist narrative. To expose the human cost at which big business is growing. The economics of panic serve the ruling class to further exploit the working class. Understanding this can help us challenge an economic system that has proven time and again that it has no method to its madness. An unconstrained behemoth trampling wildly on and feeding off of the working class. This is a system that must be changed. And we should strive for real change through revolution, but can begrudgingly settle for radical reform for the time being. So, for every fiscal incentive given to companies, an equally proportionate incentive should be given to the people. EGP 500 to each seasonal worker as compensation for income lost as a result of covid-19 is not proportionate to the EGP 6 bn for the electricity price cuts alone that will be given to industries, not to mention the US stimulus package which is “ballooning into trillion-dollar territory.”

As responsible citizens of the world, we should expose the current flaws of the system and demand change. We can do that while remaining socially distant and hygienic, but our priority should not just be to ride out the storm, but to make sure it doesn’t hit again.