Posts Tagged ‘Economics’

Every 30 to 40 years, the prevailing political ideology, and it’s accompanying economic ideology, reaches the end of it’s useful life.

The introduction of neo-liberalism was 40 years ago now. It’s reached the end of it’s useful life, stagnated, and caused massive amounts of damage – just like Social Democracy did, back in 1975. We are now in a transitional period… still reliant on the old ways, but with an effective growing consensus that we need a new way forward.

The purpose of this neo-liberal Tory-led Government, however, is to use what time it has left to implement neo-liberal policies as deeply and strongly as possible, while it’s still in fact possible to do so.

It’s for that reason that we’re seeing the ultimate neo-liberal tool, as espoused by Milton Friedman…. the tool that ruined Chile and ultimately created Pinochet… Disaster Capitalism. It is their hope that by using this tool, neo-liberal ideology will become too far engrained to remove from society, and that they can continue to win elections. The fact that Labour are 8 points ahead in the polls in spite of this effort only goes to show that there is indeed a growing consensus against this ideology.

This is a zombie Government that doesn’t even know it’s dead yet, walking on the rotting legs of a zombie ideology that won’t have the muscles to move much longer, unless it infects everything it can touch as quickly as possible.

A recent article on the Huffington Post, by a Tory, dispelling the myths, and more accurately, lies, told by the current Tory-led Coalition Government on the subject of the economy, makes this point very clear.

This, folks, is ‘Disaster Capitalism’ at it’s finest.

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Every 40 or so years, the dominant ideology of society reaches the end of it’s useful life, right at a time when it has brought to bear a situation where direction is needed. It happened in the 1880’s, it was the case in the 1930’s, it was the case in the 1970’s and it is the case now.

We’re in a transitional period where the ‘old guard’ desperately clings to it’s interests, public anger and conflict rises, and nobody seems to have an answer. Uncertainty breeds instability, and the death knell sounds for the politics of what we know. The great challenge of these uncertain times is not party political clashes – the challenge is one of finding some manner of positive framework with which to change things.

The danger is that of something less than healthy taking hold as we grapple for any old answer that works. This is where autocrats and technocrats gain a foothold on their power. It’s also where revolutions are born, and where the seeds of a new and improved social contract can be sown.

We are living in a historic time of great change within our societies, both individually and collectively from the Arab Spring and Occupy movement to the machinations of the politics of our individual nations. Already, we even see two clear responses to the current climate – that of Iceland in the rejection of corporatism and the redrawing of its very constitution, and that of the austerity of a number of European nations. These two distinct approaches their selves are built upon different principles. In Iceland the people of the country have refused to bear the brunt of the financial crisis of 2008, whereas in a number of European nations austerity aims to place money back into the hands of banks. In those worst effected of such european countries technocrats have taken up powerful political positions in a trend that shows no signs of abating.

In these times of uncertainty there is only one thing that is certain: There must be, and will be change. The only question is over what form that change will take. We have taken a journey from the Laissez Faire economics of the turn of the 20th century, to the Keynesian social democracy of the middle of the 20th century which brought us fairer living standards and working conditions, but ultimately to neo-liberalism… and neo-liberalism has solved a number of the problems of social democracy only to bring us to runaway consumerism and ultimately, corporatism rather than the promise of the capitalist paradise it once offered.

Unfortunately, at this time of crisis as is the case at all such times, the ideologies of both left and right have been well trodden leaving the carpet utterly thread-bare. The search must now go on for a new way forward over a transition that could well take upwards of a decade. Historically, we’ve plumbed the depths of history books and the writings of philosophers and economists for this new way, often rehashing the same old social ideologies in new and interesting ways for different political ends. In the 1930’s it was Keynes with Social Democracy, and in the 80’s it was Hayek with Neo-Liberalism. What now?

In this day and age, we each have access to information that could not have been dreamt of in even the 1980’s. We no longer live under the shadow of the ‘experts’, nor in the trust in the benevolence and competence of our leaders. We live in an age where, if we so desire, we are able to think for ourselves and in many respects to chose for ourselves; and those individual ideas and decisions may now be uniquely well informed such that the whole of history has never quite seen before. This may be a watershed moment for individuals, nations and indeed the world, or it may go down in history at the time in which neo-liberal ideology came full circle and destroyed itself, making serfs and slaves of us all in the process. So potent are these times of uncertainty that we could even see the rise of some manner of neo-fascism.

The question is, given your access to knowledge and resources unique to any time in history, what kind of world would you like to see? If you could propose a new ideology for a new era, what would it be? It’s time to begin a public discourse on the ideas and aims of what we do from here. A discourse on what we believe in and what’s most important to us as human beings, both individually and collectively. The Occupy movement has been very clear in stating what it stands against – namely, Corporatism. We now need a discussion on what we’re all for, and most of us in developed nations now have access to all of the knowledge and information we could possibly need to have that discussion. Let’s have it!

For many years it’s been considered a vote winner to take a stab at the unemployed. Lately, it’s become fashionable to take a stab at the sick and disabled too: “How dare these people think that they can sit on their backsides all day and do nothing while the taxpayer funds their idle lifestyle! Anybody that can work, should work.” … albeit with even if it kills them as an added subtext.

It’s been 70 years since Sir William Beveridge, in June 1941, chaired a committee  just at the end of the London Blitz, which eventually went on to produce what’s become commonly known as the Beveridge report in 1942, which went on to found the welfare state in the UK briefly after. If ever there was a time when the country’s purse strings were tight, this was it. It’s worth remembering that the Report offered three guiding principles to its recommendations:

  1. Proposals for the future should not be limited by “sectional interests” in learning from experience and that a “revolutionary moment in the world’s history is a time for revolutions, not for patching”.
  2. Social insurance is only one part of a “comprehensive policy of social progress”. The five giants [or ‘ills’] on the road to reconstruction were Want, Disease, Ignorance, Squalor and Idleness.
  3. Policies of social security “must be achieved by co-operation between the State and the individual“, with the state securing the service and contributions. The state “should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family“.

These three principles tell us everything we really need to know about the axis and axioms upon which the welfare state continues to be debated today. While 70 years ago during a time of great crisis we were realising that a welfare state should be provided to help people, we are now being told that the welfare state is helping people too much and needs to be cut down. Before the welfare state all the way back to the Elizabethan Era, the Poor Laws and indeed the modern welfare state have been founded on principles of the deserving and undeserving poor, and yet it would appear now that we’re returning to a more Victorian idea of welfare recipients being largely of the undeserving sort.

The country is now, once more in a period of crisis. We are told that the benefits bill must be cut – indeed, of all cuts it’s the benefits bill that’s being cut the hardest. We are constantly reminded of the immorality of benefit fraud. We are told that those on unemployment benefit must find work (in a recession!) quickly or face the prospect of being forced to work simply for the receipt of their benefits. We are told that the sick and disabled have rested on their laurels for too long, and that most of them should be looking for jobs. We are told that vast swathes of the population live a lifestyle of leisure funded by benefit payments with no intention of ever working. We are told that in order to “make work pay” we should cut benefit payments to make them less comfortable to live on (in spite of being subsistence level payments to start with). We are told that those who need benefits to cover housing costs should have their benefits cut and should be forced to move to cheaper accommodation if they can no longer afford their homes. What went wrong?

If you ask those who say these various things, it’s the welfare state itself to blame. The welfare state, they say, has created a culture of dependency and entitlement which has led people to believe that they don’t need to work. They are quick to point out that even Beveridge his self objected to this kind of attitude in saying that in a social insurance system, the safety net is provided by those that pay their dues. Indeed, to Beveridge, idleness was one of the five great giants to be slain. There would be no honesty at all in saying that the number of people who choose to live on benefits rather than to work hasn’t risen significantly, and it’s also fair to say that in Beveridge’s time such people were not only fewer but also subject to greater social stigma by their peers. What these same people don’t ask, is why. They don’t need to – they blame the welfare state itself.

These same people forget something important; namely that “policies of social security “must be achieved by co-operation between the State and the individual“,  and that “The state “should not stifle incentive, opportunity, responsibility“. Beveridge clearly pointed out that social security is “only one part of a comprehensive policy of social progress”. Though there are those that choose to live on the benefits bread line instead of going to work, it would be ridiculous to claim that  they didn’t want to work in order to live more comfortable lives. The problem then, isn’t that a life on benefits is too comfortable, but that for many people the opportunities available to them in the labour market are either no better, or worse.

Is it moral to be expecting everybody else to keep you when you could be making a fair contribution yourself? The answer to that is clearly no… and yet, is it fair to expect somebody to work for effectively no gain over the very lowest standard of living the law says they should expect, or worse, into ill-health or the grave? The Victorians may have answered with a yes, but that’s what Beveridge was trying to change… to great accolade across the nation. Part of its aim was to help slay the giant of Want, that of Disease, and that of Squalor… yet fuel poverty is rising fast, slum landlords are once more on the rise, and we live in a society that’s almost defined by Want.

The state has broken its social contract – the very social contract on which the principles of social security depend. Much has been made of a culture of entitlement, or put in another way, a pervasive “something for nothing” attitude.  In fact, the opposite is true. People have learned and internalized that you DON’T get something for nothing, and are consequently unwilling or unhappy about working their lives away for basically nothing.

income inequality

The graph demonstrates income inequality over the duration of the life of the welfare state.

In Beveridge’s time, the gap between the rich and poor was considerably lower than it is today. It had fallen to that point in the wake of the Great Depression, and continued to fall through the Second World War as the country came together. It continued to fall through the impact of Keynesian economics (of which the welfare state is a part) right through to the mid 70’s… right through to the birth of neo-liberalism and the ideology of the ‘free market’ as king. In Beveridge’s time, you didn’t have to look so far to see your economic ‘betters’ above you, and work tended to at least pay a living wage, even if you had to do more of it; your work was rewarded. There was also a greater sense of community, meaning that there was a greater stigma to idleness than there would be today from your immediate peers. Finally, the rampant consumerist rat race which we all now come to accept as part of life would have been unthinkable at the time – keeping up with the Jones’ was an issue, but nothing on the scale of the issue it is now.

Contrast that with the modern-day, with the desire for the latest phones, the must have consoles and applications, the deluge of advertising purposely created to make us hunger for the latest and greatest thing. The use of memetics as a marketing tool to create pressure to buy the latest thing everybody else has. Increases in the price of utilities, food and petrol, housing as an investment leading to ever fewer available homes and ever rising rents. People are being priced out of university and even further education through the scrapping of EMA (which flies in the face of the slaying of another of Beveridge’s giants… Ignorance). Wages are being frozen, unemployment is rising fast. The banks are being bailed out while the taxpayers are paying the price and getting a raw deal in return, even as big business posts record profits and company directors reward their selves with 49% pay rises. Social class is no longer defined, as it was 70 years ago, by occupation and social standing, but by economic status and material wealth… and all but a few can even hope of achieving that kind of economic status.

At the same time, the greed of financiers and investment bankers along with the greed of soulless corporations and big business seeks an ever lower outlay on their labour costs, even as those expected to provide that labour get more and more of a comparatively raw deal.  Where is the value in this? Where are the ethics? There have always been those who will try to abuse any system, and that goes for the economic system as well as the welfare system. The number of those abusing the welfare system has surely risen in the last 30 years, but much of the apparent increase in people doing so can be put down to a society that expects them to work their backsides off  for no real gain…. and who can blame them? Human beings simply aren’t programmed to be slaves in this way. The population of the country is not a resource to be cheaply used and abused by the privileged and wealthy.

Welfare state costs

A chart demonstrating the cost of the welfare state as a percentage of Gross National Product since 1950 onwards

Debt vs Welfare

The national debt as %GDP was drastically higher when the welfare state was founded, and is actually only 10% higher than it was in the 1980s. The cost of the welfare state has not risen in line with the debt.

Meanwhile, we continue to be told that benefits are too comfortable, the welfare bill is rising, and they need to be cut. Take a look at the graphs in this post. They show the gap between rich and poor over the last 70 years (clearly demonstrating the effects of the onset of neo-liberalism from the late 70’s), they show the actual cost of the benefits bill as a percentage of GDP from 1950 to the present day, and they show the public debt compared to the benefits bill as a percentage of  GDP from 1945 onwards. The claims that continue to be iterated to us over and over again are quite clearly distortions of the truth – it’s right there in the graphs. While the numbers have without a doubt risen, the proportion of spending compared to the amount of wealth produced by the nation has not – in fact, it’s the same as it was the very year the welfare state was finalised, and considerably lower than it was just 30 years ago – and this is in spite of a significant population increase – not to mention an ageing population with ever increasing pension costs. When the numbers are added up, they simply do not equal the claims being made.

The thing is, this is the way it has to be in order to continue on this path of free market and consumerist greed. In order for the richest to maintain their wealth – a wealth that gives them extraordinary power in politics as they lobby our government – this little con trick of demonizing the sick, the unemployed and the employed but impoverished rather than looking at why a benefits culture might even exist in the first place must continue. In asking why a benefits culture might exist, it is not possible to answer the question honestly and genuinely without taking a look at the raw deal people are getting, whether they’re in receipt of benefits or not. Sadly, those with vested interests and political power are unlikely to want to do so, both out of their own interests, and the inequality of experiences and understandings they hold by virtue of their standing. Instead, they blame the welfare state, as though vast and ever-growing swathes of the UK population had suddenly decided to become bone idle.

These days, if you’re on benefits, you’re a target. In order to avoid tackling the difficult issues involved in overcoming vested interests and financial power, people must be demonized, and welfare recipients are an easy target. Likewise, any opposition must be presented as absurd, and so protesters and dissenters must be characterised too… take for example Cameron’s comments, at a time where people are standing against corporate greed and power in over a 1000 cities worldwide, that while protest is a right it doesn’t mean the right to camp in the street… or the Mayor of London’s comment that the OccupyLSX protesters had made their point and should now go (clue: if he feels that that’s the case and things should carry on as normal, he’s missed the point.)

If you feel that the use of the term ‘demonized’ is rank hyperbole, consider that since the government welfare reform agenda, attacks on even the disabled have increased, on an assumption that they must be benefit claimants. Consider that the ability to protest is continually being eroded by an ever-increasing police presence. It used to be the long-term workless… then it became single mothers. Then it became alcoholics and drug addicts (both medical conditions). Then it became the Obese, and then it became the disabled. This is where the sentiments of the “first they came for the jews” statement begin to ring true… and while we’re not at the point of fascism yet, we’re certainly on the authoritarian path. Consider the possible meanings of our prime-ministers on-record comments at a Conservative party conference: “To those who oppose us, my message is this: Take your arguments down to the job centre“. This so-called benefits culture is increasingly used as a tool to target dissent and discredit disagreement – it is now not uncommon for protests to be criticised as being comprised of the workless, workshy and students as if all of these people are effectively ‘dole scroungers’. At the same time, benefit recipients (who make up a minority of the welfare state’s costs) are the scapegoats, alongside increasing nationalistic overtones. While not fascism, it’s certainly a strong play to emotion in what’s effectively a negative propaganda campaign, and it’s not what should be expected from a liberal, progressive civilised democracy.

It’s certainly true that we need, in this country, to “make work pay”. The answer to that however is to make work pay – a meaningful and living wage, perhaps funded by a cut in the excesses of those at the top of the crowd and walking all over everybody else. Quite clearly, the answer isn’t the cutting of benefits.