Photo by: Money Knack

The staggering effects of the COVID-19 benefits at the outset of the pandemic have produced a traumatizing blot in the neoliberal vision. The Left should emphasize the traumatic character of pandemic stimulus for the sake of the future. 

An interview has been circulating online from the Apple TV+ show The Problem With Jon Stewart, where Jon Stewart has former secretary of the Treasury Larry Summers on to talk about the state of the economy. Stewart challenged Summers on the reasoning behind the Federal Reserve’s interest rate hikes as a tool for combating inflation. Summers was a broken record: interest rates have gone up because workers have had it too good in the last couple years.

“What basically happened to us was we had massive stimulus and an economy that could only produce so much. We had huge levels of demand, and those huge levels of demand kept pushing up prices and pushing up wages,” said Summers in the interview.

The only solution, then, according to Summers’ view, was to raise interest rates to discourage spending despite the unemployment trade-off. 

In fact, just a week after the interview went up on the Internet the U.S. Federal Reserve raised the benchmark interest rate by another 25 points. 

However, Stewart was quick to correct the record, “but the San Francisco Fed says that is [sic], demand is maybe 30 to 35 per cent of the inflation. Wages are really around 20 per cent of the inflation. There’s a huge corporate profit aspect to it, there’s a huge supply chain aspect to it. But our method for controlling it seems really much more focused on wages and employment… Stock market assets have gone up 150 per cent. CEO pay has gone up 1,500 per cent. Workers’ wages haven’t gone up at all.” 

Summers’ response consisted of an analogy between the limits of the Fed and the way a doctor treats a sickness with the best tools available. Summers implicitly concedes that the Fed can only use the hammer of interest and Stewart points out that this is actually a sleight of hand for a solution of corporate easing. 

There’s good reason to use the COVID-19 stimulus as a scapegoat for disciplining labour: it was extremely effective in shifting the power balance between worker and corporate power. A staggering statistic to demonstrate this shift is that child poverty rates in the United States dropped a near 60 per cent since 2019 which rivalled the gains seen in Lyndon B. Johnson’s Great Society initiatives against poverty in the 1960s. Even in Canada, COVID-19 benefits significantly dropped child poverty rates. 

What we are experiencing with interest rate increases in the aftermath of the COVID-19 stimulus is a microcosm of what happened in the shift from Johnson and Nixon’s social safety net policies to the cutting of taxes, and by extension those very policies, alongside the increasing of corporate power with the following administrations of Carter, Reagan and Bush. 

In the 1960s and early ‘70s, the elite classes understood how the tides turning in favor of the public was unacceptable. Cheap college, inexpensive housing and strong wages correlated with the civil rights movement, public interest lawyers winning civil suits for the disempowered as seen in the work of the ACLU, not to mention the global student revolts of the mid ‘60s. The lesson of the neoliberal turn was that when the pendulum swings back against labour, it invariably swings back hard. That’s what the interest rate increases and their ad hoc justifications serve to represent. 

The Left should keep pushing forward the success of the COVID-19 benefits and how the rhetoric of “market forces” as a necessary corrective has been nothing short of a conjured reasoning for disempowering labour, especially as banks like Silicon Valley Bank and Credit Suisse are failing.