Recovering More Than Profits
Sidney Rothstein is Assistant Professor of Political Science at Williams College. Rothstein studies the political economy of wealthy democracies in comparative perspective, focusing on Europe and the United States, and his current research examines the politics of digital transformation. He is co-editor (with Tobias Schulze-Cleven) of Imbalance: Germany’s Political Economy after the Social Democratic Century (Routledge, 2021), author of Recoding Power: Tactics for Mobilizing Tech Workers (Oxford University Press, 2022), and his research has appeared in the British Journal of Industrial Relations, German Politics, Perspectives on Politics, Review of International Political Economy, Socio-Economic Review, and Studies in American Political Development. Rothstein holds a BA in Political Science from Reed College and a PhD in Political Science from the University of Pennsylvania.
According to the usual statistics, the United States is leading the pack out of the pandemic. Already by the end of 2021, GDP was 5 percent higher than at the beginning of 2020, while comparable countries like Germany have seen real GDP growth of 0 percent. But who has recovered? Studies show that from 2019 – 2020, rates of anxiety and depression in the United States increased fourfold, to more than 40 percent of the adult population. Among those between 18 and 24, the numbers are even more striking, with 56 percent reporting symptoms of anxiety or depression. If recovery is going so smoothly, why do we all feel so terrible?
In their response to the COVID-19 pandemic, policymakers in the United States followed the same orientation as policymakers in many other countries. According to this view, the pandemic posed an existential threat to society, but only if left untreated. As long as policymakers could keep the economy afloat until a vaccine was found and case numbers receded, then the fundamental economic infrastructure would be left intact, and we could pick up where we left off. Following this logic, policymakers passed more extensive social policies than would have been remotely politically feasible before the pandemic, putting into place direct cash payments to citizens, bolstered unemployment compensation, child tax credits, suspended student loan payments, as well as support for tenants to pay rent, all in addition to a raft of other policies to keep businesses and local governments solvent and hundreds of workers on payroll. By April 2021, these policies had cost the United States 27.1 percent of its GDP.
The United States was not the only country pouring massive amounts of money into their COVID response. Germany spent 20.3 percent of its GDP by April 2021 on its own version of social policies designed to preserve its economy. In contrast to the United States, Germany may have needed to spend less because it already had significant social policies in place when the pandemic struck, but policymakers similarly embraced a spirit of generosity previously unknown. Freelancers and artists received cash payments, families received increased benefits, unemployment benefits were no longer means-tested, and, repeating the playbook from the 2008 – 2009 crisis, policymakers committed a massive amount of funding for short-time work policies in order to ensure that workers’ employment relationships survived the pandemic. In addition, these social policies were further bolstered by extensive help for firms and local governments.
In both the United States and Germany, policymakers’ responses to the pandemic have been guided by a mixture of reality and myth, hinted at by President Biden’s plan to “build back better.” The reality is that we cannot return to the world we came from. The myth is that the policies put forward are sufficient for building a better one.
Like all myths, this one is based loosely on history, but it requires overlooking some inconvenient facts, particularly those about the last recovery. After the financial crisis, the United States also led the pack out of the recession. But who led? Between 2009 and 2019, the top quintile of earners saw their incomes increase by nearly 25 percent, and no other quintile gained nearly so much. The bottom quintile of earners saw their incomes rise by only 10.8% in this period. Similarly, before the pandemic, the overall poverty rate had been decreasing in the United States, with 2019 marking the lowest poverty rate for African-Americans recorded since 1959. Still, 18.8 percent of African-Americans were in poverty, while only 7.3 percent of whites were.
In Germany, the last recovery was similarly unequal. Economic inequality has been growing even more quickly than in the United States, especially on the high-end of the income distribution. What was long considered the most stable capitalist economy appears to be careening toward the imbalances we would more readily attribute to free-market countries like the United States. Indeed, the sheer magnitude of the resources that governments in both countries felt compelled to mobilize, and the way in which policies in both countries broke established norms, illustrates how the ruling class may be beginning to recognize the challenges it faces.
Looking at the U.S. economic performance since COVID, one might be tempted to think that the government successfully bought its way out of another crisis, just as it did in 2009. The $4.6 trillion that has been committed to recovery efforts is a lot of money. However, it looks a bit smaller when placed next to the net worth of the ten richest people in the US, which stood at $1.3 trillion in early 2022. These were the people who “recovered” best from the last crisis, and so far, they’re the ones who have recovered best from this one.
If there’s one group who is aware of the failures of the last recovery, it’s those who are 18 – 24 years old today. Born around the year 2000, they were about 10 when their parents were frantically trying to figure out how to keep making mortgage payments. They are perhaps one of the last generations who have been told that college is necessary for success but that getting a degree will require taking on crushing debt and wading through mind-boggling financial traps. This is the generation in which – unsurprisingly and through no fault of their own – 56 percent report symptoms of anxiety or depression.
During the pandemic, governments around the world showed us what is possible. In the recovery, they have reminded us what is probable. Policymakers in the United States passed transformative social policy, such as child tax credits and eviction protections, only to let them expire. German policymakers have continued to extend a number of social policies, such as short-time work policies, but it is unclear how long this commitment will last. With Chancellor Scholz’s Zeitenwende and the embrace of war spending, funds that once went to the people may now flow to arms manufacturers. Without an upswell of popular pressure, this recovery will unfold just like the last one: as a recovery of profits for the few.
Unlike the last recovery, however, this one is marked by a surge of labor militancy, at least in the United States. Workers at Starbucks have filed for union elections at more than 200 locations across the country, and have already won many in unanimous votes. At Amazon, workers recently won a massive union election at the company’s Staten Island facility in New York. Many of the workers leading these efforts are young and wracked by student debt, and many are immigrants. At both companies, workers are facing off against well-funded and illegal opposition from management. And, at both companies, the choice is clear. According to one worker at Amazon: “What if your grandkids have to work here? What if your children have to?” This recovery does not need to go like the last one. These workers are showing us how.
Organizing is really hard, but workers at Starbucks and Amazon are showing why it is so important. At both companies, workers are demanding material improvements: higher pay, better benefits, more humane working conditions, and a voice in the workplace. And, at both companies, workers have found that organizing has already made a big difference in their everyday lives, as it has been the basis for building the kind of community previously lacking at work and beyond. Workers at Amazon organized around shared meals, and developed support networks, sometimes just lending an ear to their colleagues’ concerns and sometimes lending real material help, such as filling a gap when they couldn’t pay their bills at the end of the month.
The connections that workers form through organizing enable them to build an incredible degree of power even where it is most unlikely. Another way to describe those connections is solidarity. That solidarity can anchor a broader social movement that extends far beyond the workplace. If there is a lesson to be drawn from this recovery, it is that the path to a society and economy that serves human needs rather than profits runs through the workplace.
This article is part of the AICGS project “The Importance of the Transatlantic Partnership in Times of Global Crises” and is generously funded by the Transatlantic Program of the Federal Republic of Germany, funded by the European Recovery Program (ERP) of the Federal Ministry for Economic Affairs and Climate Action (BMWK).