In this first economic history of the 2020 COVID crisis, Columbia University historian Adam Tooze identifies some harbingers of the new world we have entered. Venerable retail stores went bust: Neiman–Marcus, J.Crew, Brooks Brothers. Kurzarbeit, the widely imitated German system of "smart" unemployment benefits in which government tops up income to keep people working, was extended to prostitutes. While big airlines withered, turning airports into empty Ozymandian mausoleums, travel on private jets continued almost uninterrupted.
It is power structures, not the texture of day-to-day relations, that really interest Tooze. He tells us almost nothing about the sudden emergence of the meeting app Zoom, the metastasis of Amazon, or the science of Operation Warp Speed. Instead, he focuses on the macro-economic engineers in Western central banks and treasuries who over the last decade have substituted themselves for elected lawmakers. When disaster strikes, they become a behind-the-scenes global government, for better or for worse.
Tooze would say for better. Someone had to manage the euro crisis of 2010. Someone must plot the strategy for facing a rising China. And, above all, someone must act to stop climate change. Using a term that global-warming activists apply to our increasingly mankind-impacted environment, Tooze counts the COVID economic crisis among the "shocks of the Anthropocene." Not all his readers will agree. Shock of the Corrupt-o-pocene is more like it.
As did the virus, Tooze's account begins in China. He is impressed with the Chinese national effort to suppress it: contact tracing through cell-phone tracking, closed highways, traffic lights set permanently on red, bans on painkiller sales (so sick people would not treat themselves at home), the erection almost overnight of COVID-dedicated field hospitals. And above all, the mobilization of hundreds of thousands of "grid workers," the state's eyes and ears in each village, city block, and high-rise. It was a zealous and detail-oriented national effort of the sort that the United States is no longer able to manage for disease-fighting or military evacuation—or indeed for anything, aside from censoring opinions about sex-change surgery and Black Lives Matter.
"Any suggestion that coronavirus would rock the legitimacy of the [Chinese Communist Party's] rule had proven wildly off the mark," writes Tooze. On this he brooks no disagreement. He admits, with some understatement, that the emergence of COVID from a Chinese laboratory is now "one of the more plausible alternative theories." But in his narrative, suspicion of China is the mark of contemptible yokels, like those Trump administration officials who allude to the "Wuhan virus" and blame "elite corporate liberals ... responsible since the era of Clinton for fostering the growth of Communist China, which had now unleashed the coronavirus on America." That the unleashing was likely the product of incompetence rather than malevolence is all the more reason that a book extolling Chinese proficiency should take it more seriously.
Tooze does not blame lockdowns for the calamitous decline in Western economic activity in the first weeks of COVID. Consumers retreated from the marketplace even before they were forced to. And as they retreated, a collapse in the market for Treasury bills—a secure asset on which the security of many others rests—created an incredible "disinhibition" among central bankers. The Federal Reserve felt it had to spend, and the CARES Act, passed by Congress in March 2020, gave the green light. The highlight of Tooze's book is his explanation of "quantitative easing," or QE, a tool devised to fight various depressions-in-the-making after the crash of 2008. Whereas central banks often buy bonds, QE involves massive purchases of a range of unconventional assets—hundreds of billions in mortgages in the 2008 crisis, trillions in corporate debt in 2020. You can say that QE has the same effect as "printing" money. You can say it "monetizes" debt. You can say that it creates a "merger of monetary and fiscal policy."
But whatever you call it, the result is a de-democratization. Policy gets made, and social and economic priorities get set, not by duly elected legislatures but on the whim of unelected financial administrators. And these are not neutral parties. Finance today is complicated stuff, and the number of people with a pragmatic understanding of it is small. Most contemporary regulators and central bankers have themselves made fortunes at the tippity-top of the investing world. Fed chair Jay Powell, who presides over this round of QE, started at Dillon, Read and moved on to the Carlyle Group. Barack Obama's Treasury secretary Tim Geithner, present at the creation of modern QE, is now president of the private equity firm Warburg Pincus. Mario Draghi, Italy's prime minister, spent a decade at Goldman Sachs between central-banking jobs. And so on.
Tooze lays out the problem quite clearly: Every time we "save the system" we do so by tilting it further in favor of rich people. And in Europe, especially, citizens have been the victims of a bait-and-switch. In the 1970s and '80s, policymakers urged giving their own central banks the same kind of independence from voter accountability that the Fed had. Only that way could governments resist, as Fed chairman Paul Volcker had done, middle-class political pressure to expand the money supply. Now that they have this independence, though, central bankers are even more expansive than their counterparts were in the '70s. The difference is that today we print all that money not for workers' benefits but for elite investment schemes—the "green-energy transition," for instance.
Although Tooze does not stress it, the problem is compounded by the role of nonprofit foundations in shaping and managing these projects. Updating the old adage about the Episcopal church, you might say the nonprofit sector is the finance industry at prayer. COVAX, the World Health Organization program for diverting a certain portion of vaccines to what used to be called the Third World, is a case in point. It is backed by the Global Alliance for Vaccines and Immunizations (founded by the Bill & Melinda Gates Foundation), the Coalition for Epidemic Preparedness Innovations (cofounded by the same), and the WHO itself (to which the Gates Foundation is the second-largest funder, behind only the United States government). COVAX does creditable work, of course, but there ought to be ways of doing that work that don't require a thumbs-up from the (until recently) richest man on earth.
While conscious of their democratic deficiencies, Tooze is ultimately on the side of central bankers and contemptuous of those who stand in their way. Someone has to do something. A German constitutional court decision questioning European Central Bank bond purchases is a "political dumpster fire," in his view. Mexican president Andrés Manuel López Obrador's refusal to borrow to fight COVID is "malign neglect." Populist movements of left, right, and center—Syriza in Greece in 2015, the two-party coalition that came to power in Italy in 2018—are a threat to the system.
The system is equipped to fight back. Tooze implies that Pfizer delayed until after the 2020 presidential election the tallying of clinical trials that would have shown its vaccine 95 percent effective. Tooze says this was to avoid being "trapped between Trump and the FDA," but his writing here is unusually opaque. Its implication is that Pfizer was colluding with the FDA to avoid giving Donald Trump a pre-election boost, requesting on October 29 (the Thursday before the election) that its threshold for reporting be made more difficult, permitting Pfizer to delay testing its samples until Election Day. Tooze calls it a "vindication of due process," and one can sympathize with the drug companies' predicament. But if the story is as Tooze relates it, then Trump's resentful characterization of Pfizer's conduct is well founded.
It is easy to guess Tooze's sympathies in American politics. For him the Republicans are a party that has refused to "affirm" the country as it has changed since the 1960s. But why should they affirm it? They are the party that represents those at whose expense the country has changed. The problem is not that the losers of this half-century-long transformation have misdiagnosed anything. It is that the transformation has produced so many losers—probably a majority of the country, if one puts together Trumpists and backers of Vermont senator Bernie Sanders.
Toward the end of this well-informed piece of financial journalism, Tooze asks whether our present system of government-by-crisis-management can somehow be democratized. He implies that, even if it cannot be, we have traveled too far to turn back. A more basic question thus arises: Whether our investment in globalization has been worth it in the first place. When a virus-borne disease can spread in a matter of days to every nation on the planet, requiring for its containment a wholesale dismantling of self-rule, perhaps we should acknowledge that our globalization-heavy portfolio could have been better hedged.
Christopher Caldwell is a contributing editor at the Claremont Review of Books.
Shutdown: How Covid Shook the World’s Economy
by Adam Tooze
Viking, 368 pp., $28