COVID-19 and the failure of the neoliberal regulatory state

We are delighted and very grateful to receive the 2022 AIPEN Richard Higgott Prize for our article “COVID-19 and the failure of the neoliberal regulatory state,” published in the journal, Review of International Political Economy. It is getting harder to remember just how extraordinary, and extraordinarily awful, the response to COVID-19 was in so many countries, and the sense of shock and disbelief that accompanied every step towards lockdowns and closed borders in the early months of 2020. This article documents our real-time effort, through the ‘fog of war’ of the pandemic’s first year and in the darkness of lockdown, to make sense of a reality that we were living through that seemed to make little sense: How come the world’s richest societies, governed by states rated by international technocrats and scientists as being among the best prepared for a pandemic, failed so abysmally to respond to a challenge they had notionally been anticipating for many years? In short, how did we end up in this mess?

That a paper submitted to the Review of International Political Economy in its final form in January 2021 has stood the test of time after everything that has happened over the past two years is a testament to the strength of the state-theoretical framework we used to answer this question. This is the same basic approach, drawing on ideas pioneered by Antonio Gramsci and subsequently developed by Marxist theorists Nicos Poulantzas and Bob Jessop, that we have used in our other work, which focuses mainly on East Asia. We turned this lens on to our own societies – Britain in the case of this article, and Australia, in a subsequent article and forthcoming book that Shahar has co-authored with Tom Chodor. What we found was not pretty.

Our basic argument in this article is that this failure had been in the making for many years. It reflects the pathologies baked into the state via the shift from ‘government’ to ‘governance’.  Government denotes statecraft based on hierarchical, command-and-control systems that authoritatively mobilise resources and intervene directly to secure desired social and political outcomes. This was, broadly speaking, the system that prevailed in many Western societies, including Britain, in the decades after World War II, reflecting an underlying imperative of maintaining working class loyalty against the lure of communism. State capacity was deployed along broadly Keynesian-Fordist lines to reduce uneven development, both socially and spatially, through direct, positive interventions by government.

By the 1970s, however, a serious crisis hit most Western countries. Two decades of wage increases and welfare gains created rising social expectations of the state. Yet deep economic crisis – arising from the collapse of the gold standard and the oil shocks – meant that these expectations were no longer compatible with capitalist profitability. This set the scene for the return of open class struggle and political conflict. Elites blamed the crisis on the ‘overburdened’ state – democratic responsiveness was making societies ungovernable.

Their solution was to make the state less responsive to society and reduce popular expectations of the state. The shift to ‘governance’ must be seen in this light. It entailed well-known ideological and political shifts, manifesting in Britain in the rise of Thatcher’s ‘new right’ government. It also entailed a significant reconfiguration of state apparatuses to make them less responsive to popular demands. Authority and control over resources were extensively transferred from elected officials to unelected technocrats, independent regulators, quangos, public-private partnerships and indeed the private sector. Responsibilities were often also devolved to subnational governments. Central agencies retreated from ‘command-and-control’ interventions to ‘negative coordination’, using broad regulations to try to ‘steer’ these diverse actors in favoured directions: the ‘regulatory state’. States further retreated from direct responsibility over socioeconomic outcomes by establishing markets as key governance instruments, including within ostensibly public services. These changes allowed ruling elites to claim plausible deniability over policy decisions and their outcomes, evading political responsibility and neutering democracy. This, not ‘small state’ or ‘more markets’, is what the rise of neoliberalism has fundamentally been about.

The shift from government to governance did not come without a price, however. For one, the loss of popular faith in democratic institutions is well-documented, as is the retreat of society from political participation. Political parties are no longer deeply rooted in society and represent clear constituencies. In the words of Peter Mair, they are ‘cartel parties’, ‘ruling the void’. The fragmented nature of the regulatory state also means that it is often dysfunctional in terms of organisational coherence and performance. Consequently, its capacity to secure desired policy outcomes has been severely hollowed out. The regulatory state involves shifting the implementation and compliance burden away from state agencies towards the entities being regulated. Thus, for instance, a regulatory state is less likely to employ inspectors to enforce laws than to set out regulations and reporting mechanisms, with companies expected to develop internal enforcement capacities. In practice, however, this often reduces governance to a ‘box-ticking’ exercise, designed more to demonstrate compliance with technocratic benchmarking and audits than to change substantive outcomes. Consequently, governance often has an illusory quality. Reams of paperwork are being generated, giving the impression something is being done to address important issues. But, in reality, capacities are weak or non-existent, and no-one is really in charge. Additionally, the state’s reliance upon private-sector entities to carry out basic functions means that it is dependent on frequently inept private companies and consultants to develop and implement public policy, including during a crisis. This again weakens central agencies’ capacity to get things done.

These pathologies, common to many countries, had a grave impact on even ostensibly wealthy and powerful states’ capacity to manage COVID-19. In the article, we explore the British case in detail, including its inadequate pandemic planning and its government’s actions in the pandemic’s early months. We reject simplistic arguments that Britain’s supposedly ‘populist’ government was simply badly led, or should have locked down sooner. We show that the UK’s inability to manage the pandemic was ‘baked in’ as a result of prior state transformation, such that any government would have faced similar problems. Britain entered the pandemic with reams of regulatory planning, which cascaded down regulations emanating from the World Health Organisation (the subject of a different paper). But responsibilities were widely dispersed across a fragmented state, lacking the necessary capacities, which had been stripped back, outsourced and privatised. The system could only undertake five COVID tests per week, while even the stockpile of pandemic equipment had been privatised and left to expire on a French company’s warehouse shelves. The litany of failures makes for extraordinarily grim reading.

The paper makes abundantly clear that lockdown was not the appropriate policy response to COVID-19, but simply an expression of state failure, as an anxious public looked to the state for protection, and a panicked elite had nothing to offer them. As the current situation shows – with collapsing public services, high excess deaths, and economic stagnation – the long-term costs will be colossal, vastly outweighing any putative benefit in terms of lives saved. We briefly contrast the British experience to that of South Korea, where a more limited process of neoliberal transformation, coupled with substantial investments in the wake of earlier infectious disease outbreaks, allowed full lockdown to be avoided and enabled more orderly and successful management of COVID-19.

Although not discussed much in detail, the paper benefited a lot from Lee’s first-hand exposure to what governance failures meant on the ground. As the pandemic hit and the state visibly flailed, local communities started to organise themselves into mutual aid groups. Lee co-founded and ran one of these in his London borough and so through ‘participant observation’ could see the struggles of local government and non-governmental organisations to deal with the unfolding catastrophe. Beyond infection control, there were immediate problems of ensuring that millions of ‘shielding’ people would not starve to death in their homes. Food was simply dumped at NGO offices with no sense of where it should go, leaving volunteers to work out what to do and how to distribute it. Yet there was no lack of regulatory output, as national and local bureaucrats started to generate absurdly complex ‘guidelines’ that mirrored the byzantine structures generated by state transformation. But there was hardly anyone to actually distribute the food. Likewise, to gain recognition and cooperation from local authorities, the mutual aid group was compelled to develop its own regulations to prove that volunteers were ‘safe’ and reliable. As one exhausted NGO manager said to Lee, ‘everyone seems just to want to regulate everyone else’. There is an old joke about the mythical understanding of our planet as being a flat disk carried on the back of a giant space turtle. Someone asks what the turtle is standing on, and the answer is: it’s turtles all the way down. As Lee discovered first-hand, in the regulatory state, it’s regulation all the way down. He’d like to pay tribute to the front-line workers and volunteers who struggled on regardless.

We conclude the article by arguing for a return to states that are authoritative, not authoritarian: states that are able to mobilise people and resources thanks to strong democratic and institutional relationships with the societies they govern, and the associated retention of substantive state capacities. Neoliberal regulatory states may work well for large-scale, transnationally oriented sections of capital, but they have failed the rest of us miserably, as we learned during the pandemic. Unless we reconsider the neoliberal models of political economy and governance that produced the disaster of the response to COVID-19, we are doomed to repeat it in future crises.