COVID-19 shaking neoliberal system

By Peter Jaegeul Song
Staff Reporter at Asia N

SEOUL: Most countries expect negative growth as the global stock price and oil prices have plunged more than 30 percent due to the coronavirus infection (COVID-19). Investment bank Morgan Stanley expects the U.S. gross domestic product to fall more than 30 percent in the second quarter of this year. Concerns are also raised that companies may default on their debts.

The U.S. announced its fiscal policy, including the provision of 1.24 million won in basic disaster allowances to the entire nation. It announced unlimited quantitative easing as the market did not stabilize despite the 840 trillion won quantitative easing. Twenty major European countries are considering providing additional aid following the 4,000 trillion won stimulus package related to Corona 19. These are all policies against neoliberalism, which criticizes the market intervention of state power and values the functions of the market and the free activities of the private sector.

The U.S. as well as central banks around the world are lowering their interest rates by 1 percent at a time, which has become a zero-interest rate (0 to 0.25 percent). It supports the wages of workers on leave and increases government borrowing, signs a currency swap with the U.S. Federal Reserve System and buys financial assets. This is proof that the coronavirus incident has made economic management at the national level inevitable.

Countries that adopted neoliberalism as their economic ideology have achieved stellar economic growth since the 1980s. Neoliberalism has emerged as a global economic system. The neoliberalism system faced a crisis in 2008 when the subprime mortgage crisis began with a series of bankruptcies of large U.S. mortgage lenders. Experts predict that the economic crisis caused by the corona crisis will be more serious than the global financial crisis.

The International Labor Organization (ILO) predicted that the number of unemployed could rise by up to 24.7 million due to the coronavirus crisis. During the global financial crisis, 22 million people were unemployed. It also predicted that workers’ income from the decline in employment will fall by at least 860 billion to 3.4 trillion dollars by the end of this year. The International Labour Organization said, “In particular, low-wage workers, women, and migrants will be more affected by the job crisis,” and pointed out, “COVID-19 is a crisis in the labor market and economy beyond the global health crisis.”

Social distance is almost the only way to manage the COVID-19 crisis, including the development of vaccines that can catch the coronavirus. Ironically, however, the measure is a factor that worsens the economy. This is because the production and distribution of goods and services will inevitably fall sharply.

The COVID-19 incident is tearing down the neo-liberalism structure, an economic system that the world has believed to be the most successful form so far. Public anger over U.S. health insurance is soaring, and essentials such as masks are managed by the state. The need for universal welfare, such as a new economic system and public health care for the entire nation, is emerging.