The collapse of the Soviet Union, the long-term apparent ideological adversary, spurred on the triumphant progress of free market philosophies in the West, which had won the battle and had won the argument forever.
The 90s and 00s were a big party in the West, things going faster and faster, bigger and bigger, numbers with unimagined strings of zeros were being found for the expanse, an intense celebrity culture emerged to celebrate it all. Colossal amounts of money were being bandied around. That it all seemed to be funded on debt seemed to be noticed from time to time. The richest country in the world was borrowing something like $100 million a day at one point, mostly from China, growing prodigiously and taking on the world’s manufacturing, apparently poisoning herself and wrecking her land in the process.
It’s as if the rich world sleepwalked into the persuasive illusion of perpetual inexorable growth. An idea of the weightless economy was current, a mirage that the entire economy actually was weightless, not connected to anything solid, it was all just about financial systems and electronic numbers whizzing from computer to computer and it wasn’t made of anything.
There was a writer (Francis Fukuyama) who was talking about the End of History, all arguments were settled forever. The world was going to get so rich that there would be nothing left to argue about. There were confident projections being made by some that in 30 years’ time the world would be 50 or 150 times richer, a tide of wealth that would lift all boats. Make the whole world a happy shopping mall.
The proportion of wealth that went to the highest earners in Western societies was stable through the post-war years. From the 1970s onwards, it starts to climb. Over the years it gained momentum, exponentially increasing, ratios stretching. The top earner in a business had been earning something like 24 times the lowest paid worker, that proportion started growing massively, becoming 100 times, 500 times, beyond, beyond. The top strata of society was increasing its share of the pie inexorably. And global finance, once restrictions on money transfer were deregulated, were able to devise ways of increasing its share of the global pie. Eventually, a point would be reached where the very toppermost strata are hoovering up all new economic growth.
Turbo-Capitalism kept going up through the gears, shedding values and principles and rights in its wake. The state continued to develop on both sides of the Atlantic, and now that all ideological arguments were considered over, started becoming all the more enmeshed with the interests of business. In the US, there had developed a continuous revolving door between corporations and government, and a hugely powerful lobby system richly laden with corporate money kept corporate interests at the top of governmental agendas, to say the least.
In the UK, the Labour Party, following the turmoils and confusions of the 1970s, and the political impotence that followed in the face of a wave of fast money, were desperate to be elected again after a long time in opposition. A makeover was felt to be needed. The adherence to the standing ideals of the Labour Party had to be discarded to make it all credible again, and the quest for utopian destiny was exchanged for a general idea of making things better.
In the early days of the Labour Party, Clause IV of the Labour Party Constitution, drafted by Sidney Webb in 1917, had signposted the destination:
To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.
There is no mention of the just and rightful claim to common ownership of the land and the bounty of nature; but making a claim for common ownership of the means of production, distribution and exchange. Here is the divide in ideas. Here is where the opening is for state power to grow and feel the need to shepherd and control individual people, where the macro will be all important and the micro nothing.
That Sidney Webb’s Clause IV neglects to mention land and resources at all demonstrates how quickly the neoclassical paradigm had been completely swallowed by everyone. Clause IV calls for common ownership of the wrong things, everyone completely misses the point, even though there were millions of readers of Progress and Poverty around. For us, this beggars belief, and is as extraordinary a fact as the 2-3 million of international sales that Progress and Poverty made in the first place. Sidney Webb, an early Fabian along with George Bernard Shaw (and years before had been present when Henry George had addressed the Fabian Society) had surely read it!
If only Clause IV could not have said something more like:
To secure for everyone their full natural rights, and the least and most popular administration of public affairs.
Or not a clause, for there would be no need for clauses, just this simple statement, and that would have delivered the dreams of the socialists (and the capitalists.)
The common ownership of Webb’s Clause IV became expressed in Britain in the 20th Century as state nationalisation and, after WWII, nearly all of the UK’s strategic heavy industries and public utilities were taken into public ownership.
The advantages of this served the country well, but during the 1970s, as mentioned, as a new economic chill befell the industrial world, the disadvantages inherent in this became more visible. The Labour Party felt it had become associated with an era of strife, of militant unionism dictating party policy and exercising disproportionate, disabling and unrepresentative power over national affairs. A fresh new approach was demanded, a break with this past, a re-branding, a modernisation; and Clause IV was felt to be central to this.
In 1995, its form was substantially changed on the insistence of the new leader, Tony Blair, and it now reads:
The Labour Party is a democratic socialist party. It believes that by the strength of our common endeavour we achieve more than we achieve alone, so as to create for each of us the means to realise our true potential and for all of us a community in which power, wealth and opportunity are in the hands of the many, not the few, where the rights we enjoy reflect the duties we owe, and where we live together, freely, in a spirit of solidarity, tolerance and respect.
So, quite a change. Though now defining the Labour Party as a democratic socialist party, it’s very general thereafter; no specific means, just a general belief in being stronger together, and of creating some means or other by which power, wealth and opportunity are in the hands of the many, not the few.
But how many? The statement seems to accept that there will always be people excluded from wealth and opportunity (and why should there be power?) The many might mean not that many, it might mean a bigger few. All very different to most equitable distribution, and common ownership, and the historical commitment of the party to full employment. Clause IV Mark II takes democratic socialist and then defines it as some wishy-washy sort of thing to try and make things a bit better for many.
In this moment, old Labour became New Labour. The word new again; New Labour, that is, not Labour, as in the one that wanted the state to take over all the means of production and distribution in the name of the people. There was going to be a new, fresh, empowering way of doing things, with the state locking business into social programmes, with a new enlightened intervention. It was a time of great optimism, and at least it wasn’t called Neosocialism.
It was to be an era of what’s called realpolitik rather than principles. The term Realpolitik came originally from a German writer and politician, Ludwig von Rochau, who, in 1853, described its meaning so:
The study of the powers that shape, maintain and alter the state is the basis of all political insight and leads to the understanding that the law of power governs the world of states just as the law of gravity governs the physical world.
The understanding that there just is power, and it is just to be accepted, not challenged, not recognised as the proceeds of monopoly, but accepted and accommodated; it just is. It’s just the way it is.
The party leadership embraced this understanding, and of the new economic orthodoxies which had established themselves in the world. They set out to improve life for the country, and to do it within a neoliberal reality. There was to be no questioning of who has what power and why or challenging anything.
The idea was that we’re in a global race, in a fast changing world, the only reality to be faced was to make ourselves attractive to international capital, to be flexible, employable. So, education, education, education – the soundbite which underlined the practical simplicity of the key betterments and the typical manner of communicating these key promises - was a key commitment, so that the nation’s children could compete in this global race.
There were a lot of leaky classrooms and crumbling hospitals and traditional infrastructure rebuilding to be done, and public expenditure on the scale necessary wasn’t an option anymore. The new ways were public-private partnerships and private finance initiatives. Attracting private money to fund social infrastructure, and trying to get best value for public money from these arrangements. These deals have been controversial and will probably continue to be as they mature. Long-term deals were made with businesses and banks to fund a huge programme of hospital building and renewal, which was really great to see.
Unfortunately, there seem to have been those in the business and banking world who saw them coming, and what really happened there is starting to unravel now, and maybe will keep on unravelling, as there’s already been some disturbing revelations and effects. It’s clear already that those years have placed an enormous financial burden on the NHS for a generation and more.
In this post-70s period, around the world, competitive tenders between state employees of a public service and a private company competing for the business always were skewed towards the private company, arcane accountancy included adjustments for risk and other factors which didn’t seem founded on reality. The desired result was nearly always arrived at.
Instead of hospitals employing cleaners, private companies took this over. To accountants, this looked more efficient, and it’s accountants that count. It seems questionable with hindsight whether or not this was more efficient, as huge costs were subsequently incurred fighting infections that historically weren’t there. We own that this may be an ignorant and unfair comment, it depends what accounting system is used. At any other level, say, a football club, who employed directly their own cleaners, who took ownership of their jobs and were paid a certain rate for it, were persuaded that should hive the whole business off to a management company, who would provide cheaper cleaners. They maybe then had a poorer result, with lots of different cleaners coming and going. Remote accountancy became the ultimate arbiter.
There may well be very good reasons why it’s better for private businesses to run public services, but what actually happens is often a sham. What tends to happens in the practice of private tendering is that this free and open competition is between maybe two or three large companies, barely competing between themselves. Having won the contract, they then run it to squeeze all costs out of it at all levels, and inefficiency and shoddiness soon creep in, often resulting in a worse service than was being provided in-house. It doesn’t then happen that such companies would then lose that contract, because there’s often a considerable expense involved in effecting this.
There is no real evidence either way to support the best efficiency of public versus private ownership. But there certainly is now an entrenched and immutable political orthodoxy cemented in these years that privatisation is always best. Best for who?
This process of privatising services continued under New Labour. The great business strategy companies generally use to deliver the more competitive and efficient package is by employing less labour and paying labour less money to do the same job. In the UK, working tax credits then topped these low wages up to a reasonable living wage. In a way, it’s like taxpayer’s money is used to subsidise private profit, accrued in providing a service that’s supposed to save taxpayer’s money and very often doesn’t. And when it all goes wrong when privateers milk a public service, as it not uncommonly does, the taxpayer picks up the bill for that.
This is a contortion of the writhing state, struggling against nature, frantically trying to force some jigsaw pieces into place while, all the while, what’s actually happening is more public money flowing into private hands. Generally, if public work can be directed into private hands, this always seems to be what must happen. Sometimes huge amounts of public money were used fattening up a public asset that are then passed into private hands. All serves the process of funnelling wealth upwards, pulled towards a shrinking centre.
In George Monbiot’s article The Self-Attribution Fallacy in November 2011, he presented some figures which, as he said, need to be tattooed on our minds:
Between 1947 and 1979, productivity in the US rose by 119%, while the income of the bottom fifth of the population rose by 122%. But between 1979 and 2009, productivity rose by 80% , while the income of the bottom fifth fell by 4%. In roughly the same period, the income of the top 1% rose by 270%.
In the UK, the money earned by the poorest tenth fell by 12% between 1999 and 2009, while the money made by the richest 10th rose by 37%.
Peter Mandelson talked about New Labour being intensely relaxed about people getting stinking rich. At first glance, it’s a surreal turnaround, that a Labour politician would be relaxed about people getting stinking rich in the context of the fact that nearly everything is going to a tiny proportion of society and inequality was racing away on New Labour’s watch. This graphic from the New Economics Foundation showed that in 2012 we’d reached this extent of inequality in property wealth.
And that’s roughly where economic growth probably goes now. The House of Have and the House of Want are ever accelerating away from each other like an expanding universe. The former systematically depleting the latter with its gravity. And all the while, as unseen as cold dark matter, is Land, and all that goes with it, and centuries of uncollected economic rent.
Maybe Mandelson was talking about people getting rich, rather than being rich because they can’t fail to be rich (as Winston Churchill was pointing out earlier.) Maybe he just didn’t know all this. Suffice to say, this generation of Labour politicians, unlike the founders of the party, would be like anyone else and would likely have never heard of Henry George.
Everywhere there is the apparent operation of a reverse socialism, as public money is redistributed to the already wealthy. Agricultural subsidies, the Common Agricultural Policy, what is that about? George Monbiot says here:
Farm subsidies are the 21st century equivalent of feudal aid: the taxes medieval vassals were forced to pay their lords for the privilege of being sat upon.
£50bn a year, (or whatever now) raised from EU taxpayers, is given to European farmers. Where exactly the money goes is not published, but when it’s rooted out, plenty of it seems to be going to multinational corporations. The rationale of the whole thing is complex, only experts could understand what look like bizarre rationales behind the funding streams.
We often hear how farmers get beaten up by the supermarkets over the price of their produce. To a non-expert, it’s almost as if what’s happening is: we pay taxes to keep farmers living so that they then can provide cheap produce to the supermarkets. When supermarkets offer two for the price of one, is it actually one for the price of two?
That’s very probably rubbish, but just that it’s so hard to see connections, so complicated are the channels of the world now, so insulated are we from actual events, so divorced is everything from true effects, along long chains of transfer. That some of the food on the shelves has been, in some part, subsidised by people’s income tax, and some of it has come from the land of malnourished countries held in thrall by debt to Western banks, isn’t at all clear. Maybe these things should be put on the labels, as well as information about fat and salt.
Let’s hear from the very quotable Leo Tolstoy again:
Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal - that there is no human relation between master and slave.
(Much more about money to say later. We really had no idea at this point about money, though the quote is definitely apposite here.)
What is very clear, and many notice this, is that whatever the weather, and at ever increasing rate, wealth flows upwards from the actual producers of wealth to a tiny few. We’ve noticed of late an increasing use of the term rent-seeking (surely an echo from classical economics) which seems to acknowledge this.
Investopedia define rent-seeking as:
When a company, organization or individual uses their resources to obtain an economic gain from others without reciprocating any benefits back to society through wealth creation.
Joseph Stiglitz, talking in the USA, has said recently:
The people at the top are not the people who made the most contributions to our society. Some of them are. But a very large proportion (are) simply people I describe as rent-seekers – people who have been successful in getting a larger share of the pie rather than increasing the size of the pie …… We don’t understand the extent to which our economy has really become a rent-seeking economy.
Indeed, in the UK, the buoyant housing market is assisted by building societies, founded by and for the common person, lending to investors buying property to rent it out to people who can’t afford to buy it because the price has been pushed so high. This is the scandal of the age. Combined with employment figures boosted by the growth of zero hero contracts, it’s a very illusory kind of economic health. It is more upward redistribution and consolidation of wealth.
Governments just seem to facilitate this upward migration of wealth. Every stone you look under, there seems to be some flow of public money being fed to big business, or the public taking on risk on behalf of private profit-making businesses. In all sorts of ways, owners of wealth seem to be rewarded for being wealthy in the first place (in the USA, blatantly so.) In particular, the most perverse twist, land ownership is heavily rewarded by wage-earners.