Shutdown: How Covid Shook the World's Economy by Adam Tooze

Published September 2021. Too soon? Not at all!

Columbia University historian Adam Tooze has become a phenomenon. In addition to writing what I'm tempted to call an "instant history" in this book (not intending any derogation of his effort), he writes regularly about current events in a variety of respected publications (NYT, The Guardian, The Wall Street Journal Foreign Policy, etc.) And he now publishes his Chartbook, which addresses topics of current concern, sometimes in-depth, and at other times by simply making note of miscellanies. (Subscribe. It's well worth your dime and time.) And, oh, yes, he recently inaugurated a weekly podcast in partnership with Foreign Policy, Ones and Tooze. So am I impressed with the man's work ethic? Yes, I wonder when he sleeps. But of much greater significance is the quality of his analysis. Information is easy--especially with the internet--but knowledge is hard. Information floods us; knowledge--making sense of the information available to us--provides (or constructs) a rescue boat, a way through the flood of information. Such rescue boats are all-too-hard to find these days. With Tooze at the helm, I have a sense that we can reach safer shores. 

This book is an extraordinary work of history, although its timeliness begs the question of whether it's journalism or history; in short, how soon can what we can legitimately call "history" be written. There were no dusty archives explored here; mostly contemporary postings on the internet were utilized to gather facts. I'll return to this topic at a later time because Tooze has some interesting things to say about this topic. 

But before getting to the gist of the book, let me give you a tip. If you're too busy (really?), or if you're not sure that this instant history isn't too soon or too real to re-hash now, let me suggest this: at least read Tooze's "Introduction" and "Conclusion." Neither of these two sections is very long. Indeed, most of the reflections and observations that I will share below will come from either the "Introduction" or the "Conclusion." The well-documented and selected evidence, the proof of his case, comes in between these two sections and is (of course) vital to the arguments of the book. But the middle section isn't where I found the most intriguing insights that I want to discuss below. Like a capable trial lawyer, Tooze's "Introduction" serves as an opening statement that lays out the case he's about to make; and his closing argument, his "Conclusion," sums up his case based on facts that he's provided his reader. In his "Conclusion" he marshalls and argues the judgments that he proposes. However, this being history and not the law, he acknowledges that the judgments are never final, and perhaps, in this case, because of the recency of the events (and thus the lack of time for deeper investigation and discovery), all the more suspect. Tooze fully acknowledges the tenuous nature of his enterprise and the inevitable revisions to come, but he argues--and I agree--that the project is justified.   

Tooze begins by acknowledging the magnitude of the Covid-driven experience we've lived (and are living) through: "It [the Covid shutdown of the economy] was not just by far the sharpest economic recession experienced since World War II, it was qualitatively unique."

(Location 137).   But the virus was only the latest development that has marked seismic changes in our world. Some believed that the end of the Cold War ushered in the "end of history" (although I argue that the most prominent author associated with this perspective, Francis Fukuyama, was not as naive as some have later claimed). But we then suffered 9/11, 11/9, 7/7 and other significant terrorist shocks and resulting wars; then we experienced the crash of 2008 (about which Tooze published his highly regarded preceding book, Crashed: How a Decade of Financial Crisis Changed the World (2018) and the following economic crisis in Europe; and then we saw the rise of populist revolts and the adoption of Brexit and the elections of Donald Trump. In the meantime, all of these events are occurring while the climate crisis continued to escalate essentially unabated. (Often simply ignored by elites and the masses.) And, in geopolitics, we saw the determined and consistent growth of China continue. Since the reforms of 1989, China has become an economic juggernaut intent upon returning to its place of prominence on the world stage. Thus, Tooze notes 

The pervasive sense of risk and anxiety that hung around the world economy was a remarkable reversal. Not so long before, the West’s apparent triumph in the Cold War, the rise of market finance, the miracles of information technology, and the widening orbit of economic growth all together appeared to cement the capitalist economy as the all-conquering driver of modern history.

(Location 163)

Tooze, in both the "Introduction" and "Conclusion," explores the fact that that these trends and events were indicators of what the Europeans have dubbed a "polycrisis," the convergence of many crises at once. The Chinese, as Tooze explores, have a similar perspective less succinctly rendered. The Americans (well, the Biden administration) realized the situation as a pragmatic reality without a theoretical tag--they were stepping into power and responsibility amid ongoing crises. But while the term "polycrisis" is neat and tidy, the Chinese, as Tooze describes their analysis, have provided the most considered understanding of the phenomena. It's worth quoting Tooze at length here because he and the Chinese are on to something that we'd all to well to think through: 

Polycrisis neatly captures the coincidence of different crises but it doesn’t tell us much about how they interact. In January 2019, China’s president Xi Jinping gave a widely remarked speech on the duty of Chinese Communist Party (CCP) cadres to anticipate both black swan and gray rhino risks. That summer, Study Times and Qiushi, the two journals through which the CCP communicates doctrinal statements to its more intellectual cadres, published an essay by Chen Yixin that elaborated on Xi’s aphoristic observations. Chen is a protégé of Xi Jinping and would be chosen during the coronavirus crisis to lead the party’s cleanup operation in Hubei province. In his 2019 essay Chen put the question: How did risks combine? How did economic and financial risks morph into political and social risks? How did “cyberspace risks” brew up to become “actual social risks”? How did external risks become internalized?

To understand how polycrises develop, Chen suggested that China’s security officials should focus on six major effects. 

As China moved to the center of the world stage they should guard against “backflow” from interactions with the outside world. 

At the same time, they should be alert to the convergence of what might appear to be superficially distinct threats into a single new threat. Differences between inside and outside and between new and old could easily become blurred. 

Apart from convergence, one also had to contend with the “layering effect,” in which “interest group demands from different communities overlap with one another to create layered social problems: current problems with historical problems, tangible interest problems with ideological problems, political problems with nonpolitical problems; all intersecting and interfering with one another.” 

As communication was becoming easier around the world, “linkage effects” could result. Communities could “call out to one another across distances, and mutually reinforce one another. . . .” 

The internet did not just enable backflow and linkage, it also enabled the sudden amplification of news. The CCP had to reckon, Chen warned, with the “magnifier effect” in which “any small thing can become a . . . whirlpool; a few rumors . . . can easily produce a ‘storm in a teacup’ and abruptly produce a real-life ‘tornado’ in society.” 

Finally, there was the “induction effect,” by which problems in one region indirectly incited sympathetic reaction and imitation in another region, often feeding off preexisting unresolved problems. 

Though presented in the wooden style of the Chinese Communist Party, Chen’s list has an uncanny fit with the experience of 2020. The virus was an example of backflow on a huge scale, from the Chinese countryside to the city of Wuhan, from Wuhan to the rest of the world. Politicians in the West, as much as in China, struggled with convergence, layering, and linkage. The Black Lives Matter protest movement was a giant demonstration of the power of magnification and induction, generating resonances around the globe. (pp. 6-7). 

All of this is a complex mouth-full, but as we untangle what the Chinese are thinking, it makes a lot of sense and suggests that they are a step ahead of the U.S. and other Western governments in ramping up the complexity of their thinking to address these mounting challenges  

Tooze notes that the arrival of a new infectious disease, specifically a respiratory virus, could come as no surprise. "The virus that would by January 2020 be labeled SARS-CoV-2 was not a black swan, a radically unexpected, unlikely event. It was a gray rhino, a risk that has become so taken for granted that it is underestimated. As it emerged from the shadows, the gray rhino SARS-CoV-2 had the look about it of a catastrophe foretold." (p.4). Indeed, its arrival was expected by many prudent observers. (See Michael Lewis's The Premonition: A Pandemic Story (2021) about expectations and anticipations of a new viral pandemic.). The virus originates in China (whatever the proximate source) and after making its presence felt, it moves out into the rest of the world. But China, unlike so much of the West and even some other nations in Asia, does perhaps the best job of overcoming the effects of the virus, thus adding to its claim for recognition as the new world leader. But still, as pandemic diseases go, this one isn't terribly lethal; for instance, it's nothing like the 1918-1919 flu pandemic in its deadliness, or even compared to more recent outbreaks in the 2000s (SARS, MERS). Tooze quotes Martin Wolf, writing in The Financial Times on this issue: 

Why . . . has the economic damage of such a comparatively mild pandemic been so huge? The answer is: because it could be. Prosperous people can easily dispense with a large proportion of their normal daily expenditures, while their governments can support affected people and businesses on a huge scale. . . . The response to the pandemic is a reflection of economic possibilities and social values today, at least in rich countries. (p. 8)

Thus, Tooze notes that while we've attempted to ignore or tempt Mother Nature to our peril, we have now the resources--at least in this instance--to ride out her wrath. This time. Could we do it again if a more severe outbreak occurred? Can we do so and deal with climate change and environmental degradation, now a runaway train that continues to build momentum while we continue to lollygag? We have become more concerned about the threats to our well-being and in some areas we're more sensitive to our plight. Yet, paradoxically, we all too consistently fail to act to anticipate the patent threats before us; the "grey rhinos," not the mentions the "black swans."  

Tooze further explores how the shutdown triggered reactions (pro and con) and how they reveal the current state of our society and values regarding risk: 

The widespread adoption of the term “lockdown” is an index of how contentious the politics of the virus would turn out to be. Societies, communities, families quarreled bitterly over face masks, social distancing, and quarantine. The stakes often seemed and sometimes were existential. It was hard to tell one from the other. The entire experience was an example on the grandest scale of what the German sociologist Ulrich Beck in the 1980s dubbed “risk society.” As a result of the development of modern society, we found ourselves collectively haunted by an unseen threat, visible only to science, a risk that remained abstract and immaterial until you fell sick and the unlucky ones found themselves slowly drowning in the fluid accumulating in their lungs.

One way to react to such a situation of risk is to retreat into denial. That may work. It would be naive to imagine otherwise. Many pervasive diseases and social ills, including many that cause loss of life on a large scale, are ignored and naturalized, treated as “facts of life.” With regard to the largest environmental risks, notably climate change, one might say that our normal mode of operation is denial and willful ignorance on a grand scale. Even urgent, life-and-death medical emergencies like pandemics are filtered by politics and power. Faced with the coronavirus, some would clearly have preferred a strategy of denial. That involves a gamble. It risks sudden, scandalous politicization. The pros and cons were weighed up over and over again. Often the advocates of “toughing it out” liked to proclaim themselves the defenders of common sense and realism, only to find that their sangfroid was more convincing in theory than in practice. (pp. 9-10). 

This quote caught my eye because of my longstanding interest in issues of negligence and tort law as a trial and appellate lawyer. While most of my work was on behalf of plaintiffs (the injured), and I'm more inclined toward that perspective, there were cases (not mine, of course!) where I thought that liability was adjudicated (or tacitly acknowledged by settlement) based upon standards of foreseeability and proximate cause that reached too far in attempting to protect individuals from risks. Or, to note a more widely discussed example of this phenomenon, the rise of helicopter parenting in the world today. As we have fewer children, those we have become more precious; ergo parents tend to be more protective of them. But there's a downside to being "overprotective."  It seems to me that this idea of a risk society applies at many different levels and raises fundamental issues throughout our lives. The pandemic triggered a wide variety of responses to this new risk, from outright denial to "grandpa and grandma need to take one for the economy" to the more cautious and considered responses, of which there were many variations based on diverse measures of the assessment of the nature and magnitude of the risks. 

The pandemic highlights the issues described above. Tooze writes 

Facing up to the pandemic was what the vast majority of people all over the world tried to do. But the problem, as Beck [the author of the "risk society" concept] pointed out, is that getting to grips with modern macro risks is easier said than done. It requires agreement on what the risk is, which entangles the science in our arguments and taxes the rest of us with the uncertainty of the science. It also requires self-reflexive critical engagement with our own behavior and with the social order to which it belongs. It requires a willingness to contend with political choices, choices about resource distribution and priorities at every level. That runs up against the prevalent desire of the last forty years to avoid precisely that, to depoliticize, to use markets or the law to avoid such decisions. This is the basic thrust behind what is known as neoliberalism, or the market revolution—to depoliticize distributional issues, including the very unequal consequences of societal risks, whether those be due to structural change in the global division of labor, environmental damage, or disease. (pp. 10-11).

. . .  

Coronavirus glaringly exposed our institutional lack of preparation, what Beck called our “organized irresponsibility.” It revealed the weakness of basic apparatuses of state administration, like up-to-date registers of citizens and government databases. To face the crisis, we needed a society that gave far greater priority to care. (Location 332) 

Consider the last sentence carefully: "To face the crisis, we needed a society that gave far greater priority to care." This strikes me as a bold statement--and coming from someone who considers himself an economist (of sorts) no less!  But he's correct. (I'm tempted to say "right" but that would conflict with his leftward-looking glance in this instance.) This insight is perhaps most true in the U.S., although I get the impression that the U.K. is not so far behind. At least since the Reagan "Revolution" beginning in 1980, Republicans have consistently denigrated government and its activities as an agent for the common good. And by the time of Donald Trump, we accepted brazen ignorance and ineptitude at the very pinnacle of power. We're learning that without government we have few other ways to address our collective action problems; the "magic of the market" doesn't cut it for this type of duty.

It is with these concerns in mind that Tooze examines the shutdown and its myriad effects: 

The aim of this book is to trace the interaction in the economic sphere between constrained choices being made under conditions of huge uncertainty at different levels all across the world, from main streets to central banks, from families to factories, from favelas to traders hunched frantically over improvised workstations in suburban basements. Decisions were driven by fear or by scientific predictions. They were required by government orders or social convention. But they could also be motivated by the movement of hundreds of billions of dollars impelled by tiny, flickering variations in interest rates.

Of course, Tooze's specialty concerns the last sentence, the machinations of those who act in the world of finance at the highest levels: governments, central banks, big banks, investment houses, hedge funds, sovereign wealth funds, and the uber-wealthy. (Have I missed anyone?) Whether we approve of these people and the system that they run, it is, to borrow a phrase from the emcee of Cabaret, "money that makes the world go round." Sometimes such operations can seem just a collection of dry numbers, but they're quite revealing, at least if read by knowing eyes, such as those of Tooze. (Let me hasten to add here that Tooze's writing and analysis is no snooze of statistics mixed with dry-as-dust prose. He's a very capable narrative writer, and he explains the system well enough for me to follow (and I'm no expert). Also, while he's an "economic historian," his political--especially geopolitical and strategic--insights are excellent and very well-honed. See his The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931 for another display of his narrative and analytical abilities applied to economic orders and to geopolitical and national politics.)

Here's one quote that stopped me in my tracks. Tooze writes: 

As John Maynard Keynes once reminded his readers in the midst of World War II: “Anything we can actually do we can afford.”(Location 368)

What could Keynes have met by this? Tooze continues 

The real challenge, the truly political question, was to agree what we wanted to do and to figure out how to do it. (Location 369)

In other words, money is an artifact that is only loosely tied to our abilities. This means that if we want to "Build Back Better" as Biden urges us to do the extent of trillions of dollars, it's not a number that should prevent this. Only the limits of our resources (mental, as in know-how) and physical (as in whether we have the materials and equipment available to accomplish any task). Thus, if we can do it, we can afford it. If we lack the materials and knowledge for any particular task or group of tasks, then we have to make choices. In monetary terms, this would mean inflation: one project effectively bidding against others to gain the required resources. What this means, if the Keynes-Tooze insight is correct is that many of the choices before us must be resolved as a matter of politics and not by "the market" and its financial system. Tooze sees the implication of this insight as a fundamental challenge to neoliberalism, or my preferred term, "market fundamentalism". (If I'm understanding Keynes-Tooze correctly, I've been aided by an enlightening interview of Tooze by Ezra Klein.)

Tooze writes

It was hard to avoid the sense that a turning point had been reached. Was this, finally, the death of the orthodoxy that had prevailed in economic policy since the 1980s? Was this the death knell of neoliberalism? As a coherent ideology of government, perhaps. The idea that the natural envelope of economic activity could be ignored or left to markets to regulate was clearly out of touch with reality. So too was the idea that markets could self-regulate in relation to all conceivable social and economic shocks. Even more urgently than in 2008, survival dictated interventions on a scale last seen in World War II. (Location 378)

. . .

The orthodox understanding of economic policy was always unrealistic. As a practice of power, neoliberalism had always been radically pragmatic. Its real history was that of a series of state interventions in the interests of capital accumulation, including the forceful deployment of state violence to bulldoze opposition. Whatever the doctrinal twists and turns, the social realities with which the market revolution had been entwined since the 1970s—the entrenched influence of wealth over politics, the law and the media, the disempowerment of workers—all perdured. And what historic force was it that was bursting the dikes of the neoliberal order? The story we will be tracing in this book is not that of a revival of class struggle or of a radical populist challenge. What did the damage was a plague unleashed by heedless global growth and the massive flywheel of financial accumulation. (Location 384)

Tooze isn't intent on leading us to the barricades; he sees the old order crumbling under the weight of its own limitations and the demands of those who inhabit it. I welcome this opportunity. As someone who describes himself as a "revolutionary Burkean" (or a "Burkean revolutionary," I'm not sure which exactly), I hope for dramatic changes in our politics, political economy, society, and culture. But not all at once. I'm more a fan of the American Evolution (slow & incomplete as it is) than the French Revolution(s). I've long believed that climate change will demand some revolutionary changes, forcing us beyond the current limitations of our outlook rooted in modernity--one hopes for the good of all. I find myself in a love-hate relationship with modernity, liberalism, and capitalism, and many other "isms;' I want to keep the baby while throwing out the bathwater. What I get from Tooze in this book is that the Covid virus has sped up some serious changes--at least potentially--in the operation of our financial system along with the potential, if it's not too fleeting, to also alter our political economy. Of course, here in the U.S., we don't know if Congress will adopt the significant changes that Biden is seeking. And we're still not acting nearly as decisively as we should about climate change. (Although Tooze doesn't explore this point in detail in this book, concern about the Anthropocene and our environmental peril runs as a thread throughout his analysis of our ongoing state of polycrisis.) Also, as Tooze suggests above, we will need to alter our politics, bringing back issues of justice, equality, and freedom that the market can't honestly adjudicate. Markets are great for widely distributed decisions about the allocation of goods and services, but they're ineffective in forming political decisions (or they tacitly impose such decisions). But some decisions require considerations of justice and ethics and their effects on individuals and communities. My one-man campaign is to return our understanding of "economics" (at least macroeconomics) to "political economics," which would certainly include addressing the means and standards of political decision-making.

Are my hopes idle dreams? Tooze (rightly, I think) suggests that they likely are:

This time (2020), not just individual banks but entire markets were declared too big to fail. To break that cycle of crisis and stabilizing and to make economic policy into a true exercise in democratic sovereignty would require root and branch reform. That would require a real power shift, and the odds were stacked against that. (Location 404)

But Tooze believes that some actors are spotting the opportunities brought on by the "polycrisis:

While the right wing played on powerful emotions, the strategic analysis offered by the advocates of the Green New Deal was on point, and intelligent centrists knew it. The leadership of the EU or the Democratic Party in the United States might not have the stomach for structural reform, but they grasped the interconnection between modernity, the environment, the unbalanced and unstable growth of the economy, and inequality. (Location 436)

. . .

The year 2020 exposed how dependent economic activity was on the stability of its natural environment. A tiny virus mutation in a microbe could threaten the entire world’s economy. It also exposed how in extremis, the entire monetary and financial system could be directed toward supporting markets and livelihoods, thus forcing the question of who was supported and how. Both shocks tore down partitions that were fundamental to the political economy of the last half century, lines that divided the economy from nature, economics from social policy and from politics per see. (Location 446) 

The final verdict is still out, and one must continue to push to see the "real power shift" occur. Tooze demonstrates, however, that our understanding of our predicament can be clearly stated

Seeing 2020 as a comprehensive crisis of the neoliberal era—with regard to its environmental envelope, its domestic social, economic, and political underpinnings, and the international order—helps us find our historical bearings. Seen in those terms, the coronavirus crisis marks the end of an arc whose origin is to be found in the 1970s. It might also be seen as the first comprehensive crisis of the age of the Anthropocene to come—an era defined by the blowback from our unbalanced relationship to nature.

(Location 546)

I'm passing over an immense amount of detailed consideration of pandemic, economic, social, and political analysis provided by Tooze (and well worth your time), and I'll proceed to his "Conclusion," his peroration.

Environmental historians speak of the “great acceleration” that has been driving the radical transformation in humanity’s relationship with our natural habitat. They date the moment of takeoff to 1945, with a further acceleration in the 1970s. Despite the signs of a return to something like normality in 2021, the great acceleration is the right historical frame within which to situate the 2020 moment: an exceptional and transient crisis, no doubt, but also a way station on an ascending curve of radical change. (Location 5588)  

Tooze goes on to conclude that

Given the limitation of our social, cultural, and political coping capacities, we depend ultimately on technoscientific fixes. Generating those depends on our willingness and ability actually to mobilize the scientific and technical resources at our disposal. (Location 5599) 

I doubt that by following the logic of neoliberalism (avoiding political questions) we can successfully address the most pressing of our challenges via "technoscientific fixes" alone. I'm not against "technoscientific" steps per se to deal with pandemics and climate change, but I don't believe that we can simply skip over our need to repair (or replace) our "social, cultural, and political coping capacities." We need a society, culture, and politics that can address the needs of the Anthropocene.  I don't think that Tooze would disagree with my contention. He writes

The future challenge laid down by 2020 seems clear. Either we find ways to turn the billions invested in research and development and futuristic technologies into trillions, either we take seriously the need to build more sustainable and resilient economies and societies and equip ourselves with the standing capacities necessary to meet fast-moving and unpredictable crises, or we will be overwhelmed by the blowback from our natural environment. These are the kinds of demands easily dismissed as unrealistic. But … .(Location 5604)

We can see the cost of inaction with increasing clarity.

There are many topics addressed in this book that I haven't raised here, such as the workings of financial markets; the role that U.S. treasury bonds in anchoring the world financial system; the sorry state of U.S. politics, and the metamorphosis of the Republican Party into an anti-government and increasing fascist-looking movement (but Tooze says definitely not there--yet); the rise and overall success in dealing with Covid displayed by China; China's continually changing role on the world stage; and last (but not least), Tooze's reflections on what he's attempting to do here as a historian and as a matter of history. (I hope to come back and look at this point further at some point.)

In summation, this book is essential reading for anyone interesting in knowing how the world works today. Don't say it's "too soon" because of a pre-conception of when history can be written or because of the unpleasant memories of a scary time. We need understanding, and Tooze provides that. We have his first draft of history, and it's one upon which we can build, both as history and as a guide for building our future.

Brief Sidenote on my form & intention in writing what I do

I want to interject a personal note. I normally have labeled blogs that I write about books that I've read as a "review" of the book at hand. But to the extent that I ever wrote something that would be accurately described as a "review," I now want to shift my aspiration. In fact, one can find a review of most works that I read, especially recent publications, in a variety of outlets that hire experienced, well-qualified reviewers whose work is approved by editors and whose length and format are carefully cultivated by the editors of those publications. (Indeed, here are reviews of Tooze's book here, here, and here (this last one by former Treasury Secretary Robert Rubin.) All well and good. But what I want to do here is share my take on the book, what I noticed, what intrigued me, what struck me, what I questioned, or what I applauded. I want to share a sense of what a book provides to me. The role model that pops to mind is that of a "reaction paper" that I was required to write for several books in a political theory class as an undergraduate. (Thank you, John S. Nelson of the University of Iowa.) If I read those offerings now, I'm sure I'd be embarrassed at my lack of acuity, but the concept seems worthwhile to serve as a model. I read books for what the trigger in me by way of reactions and thoughts. I also tend to quote liberally from many of the books that I post about. I'm attempting a dialogue with the author, of sorts. The author's contention sparks my thoughts and reactions. I use them as a springboard. This modus operandi makes for a longer post, but, at least in some cases, I hope that it's worth it.