Photo: Stock brokers panic at the New York Stock Exchange as coronavirus fears cause stock values to plummet
By Mike Talavera
The New York Stock Exchange (NYSE) has had its worst week since the Great Recession of 2008. Traders have been frantically selling off their shares, causing values to plummet, out of fear of that the coronavirus is on the verge of becoming a pandemic. While media coverage has centered on the health danger of the virus to individuals, an economic crisis triggered by the corresponding panic could have far greater and calamitous consequences.
There have now been over 83,000 confirmed cases of COVID-19 (the name of this novel strain of coronavirus) worldwide, crossing at least 58 countries. The vast majority (over 78,000 confirmed) have been in China, where the virus originated around the city of Wuhan at the end of last year, but this past week was the first time that the number of new confirmed cases outside of China exceeded those from within.
These numbers, while staggering, still only make up a tiny fraction of the world’s population, and yet the downturn in the NYSE is just one sign of how the coronavirus has thrown a wrench into the status quo of the global economy. Oil prices are dropping, supply chains have been disrupted, and federal interest rates are lowering; and these are only the immediate ripple effects.
The impact of the blow to China’s economy, which plays a major manufacturing role in world markets, is only beginning to be felt. Chinese factories responsible for more than 90% of exports have either been shut down or forced to use skeleton crews since the outbreak. Multinational firms that typically send executives or personnel to China on a daily basis have suspended travel, while shipments for products ranging from fossil fuels to electronics have also been cancelled on a mass scale.
The reason such a relatively concentrated epidemic (at least for now) can totally undermine the economy on a global level is directly related to capitalism’s foundation on private ownership and markets, where the economy is not planned but, at its core, a chaotic competition.
Even when economic conditions are more stable, any given capitalist in any given industry does not know exactly how many goods (produced by the workers they are exploiting) will end up being bought by consumers or other capitalists. When fears of contamination are added to that equation, consumer spending is even less predictable, and overproduction becomes more likely and economic crisis more certain.
Under imperialism, the highest stage of capitalism primarily characterized by monopoly, this vulnerability to crisis is even more dire. The world economy is now dependent on massive loans from monopolist banks, but with greater uncertainty in the markets due to the coronavirus, loans will not be as readily given due to the higher risks.
Associations of monopoly firms and banks dominate entire industries under imperialism, which have streamlined and socialized production to an unprecedented degree. These monopoly associations have also made imperialist operations into a massive house of cards, where a problem anywhere in the hierarchy can lead to total collapse.
While little is known about how COVID-19’s fatality rate compares to other strains of coronavirus (like the 2002 SARS outbreak), its threat to society at large is greater because of imperialism’s further development and worsening crises. As one example, China’s economic output during the SARS epidemic made up only 4% of global Gross World Product (GWP) – now it makes up 16%. The more interconnected the world capitalist economy becomes, the more monopolies seek to dominate those networks, and the more these shocks to the system resonate and affect a greater number of people.
The economic tremors caused by the coronavirus are only one illustration of the fundamental fragility of the imperialist world economy. The imperialist states which enforce this mode of production and distribution (primarily US imperialism) have already begun to take repressive measures against the masses in the wake of the coronavirus outbreak as they do during all political or economic crises. Revolutionaries must educate people on how the effects of the coronavirus show the contradictions of capitalism and lead the struggle against the forces of reaction.