Wednesday, 6 February 2008

The Death of 'Democratic' Capitalism

Many people would argue that capitalist economies by definition are exploitative. That they rely on comparatively cheap labour to produce items to sell to consumers who are generally the cheap labour themselves and their pay is kept at a level which is only sufficient to allow them to buy those things in the long-run and not to advance through accumulating their own wealth so they can establish their own exploitative businesses. However, for most of the 20th century and certainly following the Second World War, there was a gradual movement away from that crude form of capitalism towards something more tempered. Most visibly we saw the evolution of welfare states across Europe which meant that by the 1960s most people were guaranteed housing, schooling, health care, public transport, etc. which allowed them to accumulate enough to allow them to enjoy things like holidays and consumer goods. This in turn boosted the consumer industry and capitalists found it was quite a good idea to keep this going especially as heavy industry began to decline in the 1970s and the service industry sector boomed. In the UK it is now sustained by credit rather than decent salaries, so is pretty fragile, but elsewhere in Europe and other industrialised parts of the world it is still roughly in place. The Communist states provided the basics for their people but had very little to offer in consumer items and with the fall of Communism they gave up the basics in return for opportunity to have access to such consumer items, and even more sharply than in the West, those who could get access did well, those who could not (the majority) were worse off, hence the continuing popularity of the Communists in the post-Communist countries as after the First World War.

As the Italian historian Donald Sassoon (see 'One Hundred Years of Socialism: The West European Left in the Twentieth Century' (1998)) who has spent his life looking at Socialism, has argued, actually more things that Socialists aim for such as health care, education, care of the elderly, decent salaries and working conditions, etc. are not achieved when capitalism is in crisis but when it is booming. I have termed this 'democratic capitalism' in that while consumers and workers are still effectively exploited, they also receive protection from the worst fluctations of the capitalist economies. In addition, there is an element in this 'democracy' which tends to get overlooked. The workers and the big capitalists are the usual focus of commentary on our economies, but I would argue, that those who make the jump and stop working for someone else and begin running their own business are also a characteristic of that democratic element. In the same way one would contrast say a monarchy in which only members of the royal family could run the country with a democracy where, in theory, anyone can be elected prime minister, and also take up many other lower positions locally, regionally and nationally to which they would have no access in a monarchy or a dictatorship. In the UK small business people gained this right gradually from the the 18th century onwards and while it took time for such people to be accorded anything like the access to influence that big businesses (especially those based on land) had, by the 20th century they had clearly won it. Thus, I see the ability of people to turn from workers to running small businesses as a further element of the democratic capitalism we once had. Of course many business go bust and these people return to the workers, but like someone who loses an election, generally they can try again.

So, you might be thinking, well this is a common example of capitalism with big business, small business and employees, with protection for those people who need it. However, I am arguing that such a form of capitalism is now dead and that we have almost reverted to the unfettered capitalism of the mid-19th century which meant the rich were immensely wealthy and the bulk of the population lived vicariously; in addition, the rich shaped all governmental policy and behaviour and anyone beneath them had no power. In addition, the ability to make the jump from worker to small business person is being crushed by the all encompassing corporations. In 1996 Michael Heseltine when Deputy Prime Minister (1995-7; he had been Secretary for Trade & Industry 1992-5) advised large companies effectively not to settle their bills to small businesses knowing that once they collapsed they would not be liable for the debt. This came from a leading Conservative and the party was supposed to be the one that backed business people whatever their size. Heseltine of course had become a millionaire at the age of 30 in 1963 so could be scathing of those struggling with small businesses. What this seemed to mark was a shift in the UK from backing any capitalism to backing the capitalism of the super-rich (or turbo-rich as they seem to be being called now). This was aided through the Thatcher years (1979-91) by selling off utilities which became very profitable businesses. On the surface this seemed to benefit small investors, but of course by the 1990s all their shares had been bought up by the big investment companies. Similarly encouragement to allow people to buy their council houses seem to be the democratisation of house ownership, but in fact with the slump of 1990-3 engineered by Thatcher's government and that of her successor John Major (1991-7) they lost control of these to the hands of multi-property owning landlords who rose to be millionaires too. Thus, the 1980s and 1990s saw the squeeze put on those people who would normally have been rising capitalists in favour of the richer.

Of course, Thatcher also ran through the welfare state stripping it of funds, making people feel guilty about using it and blaming anyone who did (which is one reason why millions of pounds of benefits go unclaimed each year), banning councils from building social housing, wrecking union rights, forcing public sector jobs to go to private companies paying the lowest wages, not allowing pensions to rise with inflation and so on. She did a very good job of stripping away so much of the safety net that had taken decades to construct. This is why the UK saw the rise of the underclass who have dropped out of society that no longer makes an effort to support them. Pressure on ordinary people came from many directions. I have noted how invidious the utility companies are and just today are reports about the percentage of poor families with children who cannot afford to heat their homes properly. Due to the use of metered utilities poor people actually have to pay more for their fuel than rich people, the same goes for food as they cannot access out-of-town stores that have the cheaper food; they cannot get bank loans and even legitimate loan companies can charge quite legally many times as much interest as those richer people can access. Thus, the system is engineered in the UK that once you have fallen into the poor category you are never going to get out. Increasingly, nor are your children, as schools become more selective, and as I have noted in previous posts even intelligent poor children fall quickly behind at school, they are condemned to live the same lives as their parents, however hard they might work. Due to the attitudes fostered in the 1980s such people are made to fill guilty and portrayed to the rest of us as lazy and deserving of their situation. Every class has lazy people in it, but poverty is an incredible motivator and I believe the greatest scroungers are among the rich.

So, for over twenty years, Britain has been moving to a less democratic capitalism, in which those who have least ability to pay are paying more. This was shown most sharply by the so-called Community Charge (better known as the Poll Tax) introduced to Scotland in 1989 and to the rest of the UK in 1990 and scrapped in 1993 following some of the most severe civil unrest the UK had seen for almost a decade. This tax was deemed 'fair' because everyone in a district no matter what they earnt paid the same amount to live in a house or flat in that district no matter how scummy or luxurious the property was or if they just rented one room in a house or had a whole mansion to themselves. About 1 million people disappeared from records overnight as they sought to avoid being stung by this tax which made up much more of your outgoings if you were poor or if you were rich. Even now in a borough like Tower Hamlets (small but densely populated, in East London) there are 60,000 (out of a population of over 200,000 people) fewer on the census register than registered with local doctors, because of the lingering fear of being found, despite the shift to the Council Tax which is based on property size.

Despite this steady erosion democratic capitalism it has now entered a new phase going beyond even the rich of the past. Even they are weak in the new set-up. This has been highlighted in a new book 'Who Runs Britain? How the Super-Rich are Changing Our Lives' by Robert Peston (2008) which though apparently flawed, highlights how that the people who run the UK are these so-called 'turbo-rich', going beyond the plutocrats of the past in their wealth and power. Of course Thatcher laid the ground for this by scrapping restrictions on taking capital generated in the UK out of the country, though this was simply jumping the gun as the EU insisted on it for all member states by 1990. Now, if a wealthy individual dislikes the government's policies they can simply threaten to shift some of their wealth elsewhere. Apparently, according to Peston the 1000 most wealthy people in the UK (out of a population of 62,000,000) owns £360,000,000,000 (€496 billion; US$716 billion) equivalent to 50 times the economy of Uruguay; roughly the same as the economy of Taiwan or Indonesia (which are the 20th and 21st richest countries in the world; about £10 billion more than even oil-rich Saudi Arabia in 22nd place). Beneath this 1000 must be many more billions owned and think of this replicated across the USA, Germany and Japan. In past postings I have referred to a map which showed the percentage of people living in various parts of the UK who were wealthy enough to be exempt from the norms of social behaviour. These 1000 people are rich enough to be exempt from the norms of government behaviour. They can murder people, make them disappear, drive them out of their homes and business and no-one can stop them.

You may say, well there have always been the rich. What is worsening the situation is the permitting of things like equity funds which simply buy up successful businesses and then load them with debt like a parasite draining their host rather than allowing that business to grow, pay better wages and employ more people. The richer you are the smaller a percentage of your income goes on tax. Multi-national companies learned this as early as the 1910s with oil companies leading the way. Peston claims that the tax 'efficiencies' of the super-rich deprive the government of equivalent to the rest of us paying 5p in the £ (i.e. a 5% tax rate) and so equivalent to hundreds of schools, hospitals, houses, battleships, space rockets, whatever you want to spend it on. This is just what we lose through their tax fiddles. They have distorted the economy of the whole South-East of England as I have noted before, pushing the cost of housing out of the reach of the bulk of even well-off people, and because their friends in the Thatcher regime smashed social housing, people cannot fall back on that as they would do in the past. It is almost as if these super-rich want to rub our noses in the muck to show how deprived we actually are. They are further pushing into health care, prisons, the Post Office, all the utilities, places where we previous got a bit of leeway if were not that rich, or in fact just comfortable. It is as if it is not only their greed wishing to earn more than whole states, it is that they feel they have to get us back for the 20th century when they were pressed a little bit to contribute to the rest of the population who actually power the businesses that they suck money from. Now we are being told, you stepped out of line, accept your station, here is the whipping to remind you not to get cocky again, not to ask for a welfare system, but to fight with each other for health and a house and an education so that you have no strength and we can pay you as low as we like to.

This is what the New Right agenda of the mid-1970s was working to. It was put into action in the 1980s and 1990s in the UK and the USA effectively forcing other more reluctant countries to follow suit (now with Sarkozy in France even the last outpost of a welfare society is being dismantled) and the countries coming out of Communism to rush blindly down the same path. As I have noted before Bush has favoured the super-rich as his core constituency and has engineered wars on their behalf (I think they fear fundamentalist Islam because it does not support consumerism and Iraq was just about the oil supply and business opportunities anyway). In Britain Blair was too enamoured of the Thatcher image to challenge it and even courted the super-rich. Maybe a Labour victory in 1992 was the last chance to reverse it, maybe it was too late by then, it certainly is now.

So what is our future? Well, probably by 2030 we will look very much like 1830. The welfare state is crumbling so fast in the UK that free at point of need dentistry is all but gone and health care will follow. Schooling is increasingly segregated and opportunities increasingly limited. There will always be a few people who will break out, but increasingly it will be because they win the lottery or a talent show than through hard work. Optimism will be sapped from us, the sense that we can achieve, especially through establishing our own businesses, will be taken from us. We are returning to a kind of feudal society in which we remain in our place in society and the bulk of us get the basics we need to surivive at the sufferance of our suppliers. Once we become old or no longer useful we are discarded. I think if even Winston Churchill, the Conservative prime minister (1940-5; 1951-5) let alone the ministers of Clement Attlee's Labour governments (1945-51) would look in utter horror at beggars so numerous on Britain's streets. We are charging back to the Victorian era with the plutocrats farther reaching and more powerful than ever before.

Suddenly while writing this a quote came back to me which I managed to track down and now it seems eerily prescient. It was made in 1983 by Neil Kinnock warning the audience about what would happen if Margaret Thatcher won the election (which she did with a large majority). He was Shadow Cabinet spokesman on education at the time but went on to lead the Labour Party to defeat in 1987 and 1992. He was condemned as a 'windbag' but actually was more a old school speaker who used rhetoric in the way Welsh politicians of the past like Aneurin Bevan and David Lloyd George did, so was increasingly out of step with the 'sound bite' era rising in the 1980s. This, I think seems a classic and it may weaken my argument to refer back so far for a comment and to someone unsuccessful, but I do not think it weakens the warning which is probably even truer now than it was 25 years ago.

"... I warn you.

I warn you that you will have pain — when healing and relief depend upon payment.

I warn you that you will have ignorance — when talents are untended and wits are wasted, when learning is a privilege and not a right.

I warn you that you will have poverty — when pensions slip and benefits are whittled away by a government that won’t pay in an economy that can’t pay.

I warn you that you will be cold — when fuel charges are used as a tax system that the rich don’t notice and the poor can’t afford.

I warn you that you must not expect work — when many cannot spend, more will not be able to earn. When they don’t earn, they don’t spend. When they don’t spend, work dies.

I warn you not to go into the streets alone after dark or into the streets in large crowds of protest in the light.

I warn you that you will be quiet — when the curfew of fear and the gibbet of unemployment make you obedient.

I warn you that you will have defence of a sort — with a risk and at a price that passes all understanding.

I warn you that you will be home-bound — when fares and transport bills kill leisure and lock you up.

I warn you that you will borrow less — when credit, loans, mortgages and easy payments are refused to people on your melting income.

— I warn you not to be ordinary
— I warn you not to be young
— I warn you not to fall ill
— I warn you not to get old."

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