Sunday, 10 April 2022

Living in the Past – The Prison of Political Time Lags

Back in the 1960s, J.B. Priestley noted the widely unappreciated feature of time lags in society. There is an unerring tendency, he observed, to associate any era with “its newest and more original ideas”. But this is a mistake.  Very likely, only a few pioneers actually held these notions, while ordinary people – and self-styled intellectuals – remained steeped in mentalities that simply regurgitated insights from decades or even centuries before.

“It is precisely the ‘hard-headed and realistic’ who all too often exist in cages made out of largely discredited hypotheses,” said Priestley. “We must expect time lags of various lengths.”

Priestley was writing about scientific ideas, specifically concepts of time. Einstein, for example, started publishing about relativity at the start of the last century but, to all intents and purposes, for decades afterwards most people lived by intuitive notions of Newtonian physics. In all likelihood they still do.

But the concept of time lags can equally well be applied to politics. In fact paradoxically – as British politics now demonstrates – political cultures can become more ensconced in the past as the real past recedes into the distance.

The Brexit Right personifies this shying away from the painful realities of the present in favour of the (fictional) comforts of the past. In this dreamscape, the Second World War – in which Britain “stood alone” (not counting the Empire of course) safeguarding freedom against a totalitarian threat from Europe – is the rock around which everything else is arranged. It’s no accident that Nigel Farage urged everyone to see Dunkirk.

Less appreciated is that liberal and centrists are equally affected by nostalgia. But in this case the time frame is different. The defining period is the post-1992 era of the single market, ‘social Europe’ and the Blair-led Labour governments. This is seen as a time of expanding public spending, worker protections and a liberal attitude to social policy. Blotted out are the decidedly illiberal stances of both Labour and the EU to ‘illegal’ immigrants, sadistic policies towards the unemployed and the disabled and the imposition of austerity and privatisation.

Sometimes the two meet in a kind of paroxysm of denial. The Tories will, for example, regularly engage in the time-honoured trick of attacking the BBC for being biased and left-wing, prompting it to become even more accommodating to the Right in its news coverage. Liberal and centrists will impulsively leap to the BBC’s defence as a paragon of balanced reporting and civilised values.

The last time the BBC could be described as left-wing whilst maintaining a straight face was in the 1980s before Thatcher-appointee Marmaduke Hussey sacked Director-General Alastair Milne (Seamus’s father) in 1987. Even then, that reputation relied on little more than isolated outbursts of independence from government, which proved unacceptable. But the current surreal dance between conservatives and liberals manages to entirely erase the events of the intervening period. The appointment of the neoliberal John Birt as director-general, minute control over editorial content, outsourcing of programme-making, concerted moves towards more business-friendly coverage, reliance on establishment figures to interpret wars and financial crises, the courting of hard-right figures like Andrew Neil to anchor political reporting,  all that – the last 30 years in other words – simply doesn’t exist.

“The calendar is lying when it reads the present time”. It’s not 2022 at all, it’s still 1985.

However, it’s in the current post-Corbyn period that the wish to live in the past is being taken to new heights of absurdity. We are blessed with a Conservative government, still mesmerized by Thatcher’s epoch-changing landslide of 1983, ‘opposed’ in Parliament by the 1997 Re-enactment Society.

Thus we have the spectacle of Sir Keith Stalin calling for a “windfall tax” on oil and gas companies while Alexander Boris de Pfeffel ‘Pass the Port’ Johnson protests this would result in higher prices. They’re showing nothing but repeats on TV these days aren’t they?

There was such a thing a Windfall Tax, introduced by Tony Blair in 1997 to allegedly compensate the public for the fact that utilities such as gas and electricity were undervalued when privatised and the floated companies, like British Gas, were making “excess” profits. But that was more than three decades ago! The current excess profits of all participants – and they certainly are excessive, British Gas profits have nearly doubled in the past year – do not result from any initial undervaluation in the era of Roland Rat but from the way the system is set up to work. This is a natural monopoly, dominated by big energy supply corporations and a plethora of distribution companies with a business model that doesn’t work anymore, taking advantage of captive consumers whose freedom to choose between them is entirely hollow. The resultant profits are simply a form of disguised taxation. Except that the proceeds go to shareholders, not the government.

A windfall tax is an anachronistic and patently inadequate response to a crisis that calls for public ownership. But public ownership of utilities is one of the “sacred cows of Corbynism” ripe for slaughtering. It’s a dilemma for these ‘modernizers’ I know.

We live in a time of urgent problems. The climate emergency, capitalist failure, falling living standards, declining life expectancy, and food and fuel poverty all call for clear thinking, compassion and a willingness to discard the shibboleths of our Thatcherite political economy. In spite of this, or probably because of it, our politics is entrenching itself in the past.

How long will our political time lag last? Perhaps until it’s too late.

Thursday, 24 March 2022

The Billionaires' World

 Putin’s invasion of Ukraine has, almost inevitably, dredged up the only historical analogy most people are capable of making – that of the appeasement of Adolf Hitler before World War Two. Sun columnist Piers Morgan – who according to the adverts ‘says out loud what most people are thinking’ – has dutifully obliged with the Neville Chamberlain vibe. But according to many American politicians it’s just like 1938 all over again …. again.

Actually, and more worryingly, the most apt historical echo is not the Second World War but the First, when a group of states who had, ideologically much in common, slogged it out for four long years over a cause few could remember, resulting the deaths of around 20 million people.

On the eve of the 21st century, the Italian historian Domenico Losurdo recalled the 1910 funeral of Edward VII of England. It was, he wrote, “the occasion for a splendid procession which saw kings, hereditary princes and dukes, united by ties of kinship and common mourning, parade on horseback. Time seemed not to have made the least dent in the power and prestige of the European aristocracy. Nine monarchs, all descendants of William the Silent, occupied the stage …”

Yet a little over four years later, these same countries were dragged by a series of alliances into, at the time, the most destructive war in world history. These were resolutely capitalist nations – often officially led by people related to each other – that had, over the previous 30 years, taken possession of over 8.6 million square miles of Africa and Asia in the name of progress and trade. They were, on the surface, united by racial, economic, political and familial ties. Nonetheless these countries were plunged into insane nationalistic fervour and a seemingly endless fight to the death.

Of course certain ideological differences were stressed. Britain, France and, latterly, America – the Entente – were presented as bastions of liberalism in contrast to the militarism of the other side (Germany, Austro-Hungary and the Ottoman Empire). But the Entente was also allied with Tsarist Russia, an absolute monarchy, police state and profoundly anti-Semitic regime.

Likewise today, Patriarch Kirill,  the head of the Russian Orthodox Church, has backed Putin’s invasion on the grounds that it is a “metaphysical” struggle against immoral Western values (such as LGBT rights and same-sex marriage). At the same time, however, Boris Johnson has scuttled off to Saudi Arabia to beg for more oil from that erstwhile British ally, which happens to be an absolute monarchy and beheaded 81 people prior to his arrival. And which, in addition to visiting hell upon neighbouring Yemen, is also probably the most anti-Semitic regime on earth. Such does history rhyme.

In the current world the ties that don’t bind are not based on monarchy, aristocracy or Empire. Rather the common denominator across liberal, conservative and authoritarian countries is the dominance and ubiquitous presence of the ultra-rich. In 2021, there were 2,755 billionaires in the world, 660 more than the previous year. During 2020, a new billionaire was created every 17 hours. Billionaires are, collectively, worth $13.1 trillion, up from $8 trillion just 12 months previously and less than $3 trillion in 2006. To give a sense of perspective, a billion is a thousand million.

Their mere presence inevitably dominates and skews the societies they inhabit – be it the U.S, Britain or Russia. It is widely known, for example, that Russian billionaires – the infamous oligarchs – were created after the collapse of communism through the process of “voucher privatisation” which enabled a small group of people to acquire former state assets and amass stupendous wealth. But the number of Russian billionaires has, in common with the rest of world, dramatically increased in the 21st century; from several to over 100. They are taxed at just 2 per cent more than the rest of the population (and this increase was introduced in 2020!), while the rest of the country is subjected to austerity.

Venerated Ukrainian war leader, Volodymyr Zelenskiy, posed as an anti-oligarch in order to be elected president in 2019. But his campaign was launched on the TV channel of billionaire Igor Kolomoyskyi. And his putative hostility to oligarchs hasn’t stopped him, together with the partners in his TV company, owning a network of offshore companies registered in the British Virgin Islands, Cyprus and Belize. Repressing the Left and gutting labour rights, which Zelenskiy has done in the middle of a war, is strangely in tune with the interests of the mega rich.

Controlling the state, and using it to amass and protect great wealth, has become almost customary in the 21st century. Ba’athism emerged in the 1940s and 50s as a pan-Arab, quasi-socialist ideology, though one which was brutally repressive of leftists. But under Assad in Syria, Ba’athism has simply become the means through which a small elite have enriched themselves through privatisation and neoliberal ‘reforms’ – a process which has notably intensified since the turn of the millennium. In China, the official communist ideology and an interventionist state has proved no impediment to the leadership and company managers accruing huge fortunes. The Panama Papers, for example, named the families of eight current or former members of China’s politburo. Levels of inequality are similar to those of South Africa, peasants are regularly stripped of their land and turned into proletarians and super exploitation of workers occurs.

The liberal heartlands of America and Britain – despite their ostensibly democratic institutions – exhibit the identical thumbprints of billionaire domination, manifested in the gravy train of privatisation, quantitative easing, political funding and control of the media. Oligarchs in Britain, George Monbiot said in 2020, “use their economic power and translate it into political power, which is what oligarchs do the world over”. And given that billionaires (oligarchs) have hugely increased in number in the first two decades of this century, the process will only get more explicit.

It may be objected, plausibly, that the interests of billionaires lie in a strong state that protects them and ensures the conditions for their continued accumulation of capital, but that they definitely don’t lie in the division of the world into warring blocs that impose sanctions on each other and confiscate wealth. This is undoubtedly true. But it was also the case that the so-called liberal ‘golden age’ of capitalism (1870-1913) degenerated into the internecine carnage of World War One despite it being in no-one’s interest that it do so. The pre-WW1 era and our own are remarkably similar in many ways. The resemblances include a commitment to a globalised economy, few cross border restrictions on the movement of goods, capital and people, and a belief in balanced government budgets. But the liberal age of capitalism can to an abrupt and brutal end in 1914. Ours can too.

Those old enough to remember the 1990s will recall the air of triumphalism around the collapse of Communism and the fervent belief that, now the world was entering an era of globalisation, free trade and liberal capitalism, countries would regard war as irrational and anachronistic. No two countries with a McDonalds’ franchise have ever gone to war with each other, it was said. Well Russia has – or had – McDonalds.

The question which now inserts itself is whether nationalism, racism, authoritarianism and war are the inevitable shadows of liberal capitalism and market fundamentalism. That despite many in the global elite not wanting a world of war and division, the world is inevitably predisposed to such a disaster because of the inequality and suppressed conflict inherent in a  global economy designed exclusively around the needs of the rich.

If you ignore the noise about Hitler and appeasement, you can hear those chimes of history ringing now.

 

 

 

 

 

 

 

 

 

 

Friday, 11 February 2022

The Economy the Rich Won

The two-part BBC documentary, The Decade the Rich Won, which concluded last week, made for interesting viewing. It told “the little understood story of our times” – how through the policy of Quantitative Easing (QE), the fabulously wealthy became even more fabulously wealthy and the rest of us had to make do with austerity and falling wages. But it did beg certain questions:

Why didn’t anyone say so at the time? “Full disclosure” said hedge fund manager Paul Marshall. Since the 2008 crash the world’s largest central banks (US Federal Reserve, Bank of England, European Central Bank and Bank of Japan) have created around $20 trillion which has basically gone into the already cavernous pockets of banks and wealthy individuals (like Paul Marshall’s).

In the words of Andrew Huszar, who was QE Program Manager at the Federal Reserve (and thus in charge of the entire process): “over the last 12 years, we’re talking about unprecedented amounts of money being printed and funnelled into the markets, banks being showered with trillions upon trillions upon trillions of dollars, ultimately benefiting the most privileged in our societies.” Only a fraction of the ‘stimulus’ he admits, “was actually getting out and making a difference in the lives of everyday people”.

But these mea culpas are strictly retroactive. When QE was first happening, not only politicians and central bankers – who you might expect to parrot the official line – but also media organisations like the BBC uncritically rehearsed the story that QE was providing  a lifeline to the ‘real economy’.  In 2009, the BBC likened QE to putting “imaginary petrol” in your car. 

And this isn’t of purely historical interest. The Covid shut down saw governments quickly turn to the “unconventional” (now used so much it must be thoroughly conventional) technique of QE. In Britain, the Bank of England increased QE from £495 billion to £895 billion. And the BBC was on hand to explain how this pumping of money into the economy would “help it to recover”.

So much like a war, when the controversy in question has to be implemented unscathed, critical voices are sidelined. But in the aftermath, when it doesn’t much matter anymore, they are allowed airtime and what actually went on can be safely revealed. That’s how much freedom we’re allowed.

If the economy wasn’t saved, what was? All the old familiar faces protested that they had no choice but to implement QE. It was a no brainer. “We kept the economy going,” said Alastair Darling (Chancellor in 2008). “People who’d otherwise have lost their jobs didn’t”. Former Bank of England Governor Mervyn King attested that the first tranche of QE prevented a re-run of the Great Depression. Transient Tory PM Theresa May called QE “emergency medicine”.

But if only a small amount of the QE trillions actually escaped into the ‘real economy’ – in the US mortgage lending actually went down after QE was introduced – it can’t have been the actual economy, the economy of people exchanging goods and services, that was saved. The “emergency medicine” has to have been for the conduit through which QE was implemented, the financial system. And only by QE preventing the implosion of the financial system, was the real economy rescued from oblivion.

The real question is therefore how did QE save the financial system? This is something the documentary didn’t try to explain but is actually the crux of the whole story. One means was simply by pumping huge amounts of money into the system. Thus hugely indebted banks and other companies escaped their natural free market fate.

But QE did more than supplying, in Huszar’s words, “the greatest Wall Street bailout of all time”. It also works by ensuring an ultra-low interest rate and by increasing the price and reducing the yield on government bonds, incentivising investors to shift into other assets, such as shares.

In this way, zombie companies – firms that do nothing more than survive by meeting the interest payments on their debt and paying wages – are permitted to live on. And the stock market as a whole receives a purely artificial boost. Under ‘normal’ market conditions, shares prices reflect investors’ expectations that profits will be high or low in the future. But not under QE. Thus a company such as car rental firm Hertz can file for bankruptcy and see its share price soar at the same time.

This is nothing like a free market system. More accurately it should be called a state capitalist system.

You can’t artificially hold down energy prices but you can, apparently, artificially raise share prices. Ex-banker and hedge fund manager Rishi Sunak lectured us last week on the futility of the state trying to hold down the natural, market prices of gas and electricity. But strangely this King Canute style impotence does not apply to share prices – or house prices – which through QE can be synthetically raised for years.

But what happens, you might wonder, when this outside ‘stimulus’ is taken away? When “the shot of adrenalin”– in Alastair Darling’s phrase – has done its work and we can get back to normal.  Will there be a massive market correction towards ‘natural’ share prices, precipitating widespread company bankruptcies? In 2018, US Federal Reserve started selling the bonds it had acquired under QE – a practice called Quantitative Tightening – but it had to abandon the policy after a few months owing to a negative reaction from markets.

In Britain, authorities have reached for the “unconventional” policy of QE on three separate occasions in the last decade. Currently central banks around the world are reducing the amount of QE but not stopping it altogether or reversing it which should happen under a free market system.

The documentary only nibbled at this question. “In a way markets are addicted”, said hedge funder Marshall, “and central banks have become very nervous indeed about removing the drug.”

But if QE has become a near permanent part of the economic landscape what are the consequences? Does its very existence – and the huge amount of money involved – mean that it is always accompanied by the shadow of austerity?

Or can QE be redirected to pay for essential public services like the NHS? If you can save the financial system by injecting huge amounts of money why can’t you do the same for public services millions of people depend on? This is essentially the argument of Modern Monetary Theory – that public services can be fully funded through nothing more elaborate than hitting keys on a computer. The need to amass taxpayer funds to pay for everything is a myth. Austerity is a political choice, not an economic necessity. The only constraint – MMTers argue – is inflation.

However, lack of inflation is the one sure sign that QE didn’t diffuse through the real economy, rather staying within the financial system. The classic explanation of inflation is that it is caused by too much money chasing too few goods. And the simple fact that inflation didn’t rise exponentially is a pretty strong indication that the QE trillions didn’t filter through the financial system. Inflation is rising now unquestionably, probably caused by supply chain disruptions and Covid relief spending. The Bank of England predicts it will hit 7.25% in the spring. But this is not the level of inflation that QE, if the theory is right, should generate.

However, if QE is redirected to pay for public services, all the ingredients for spiralling inflation are there. This is because the money in its entirety will enter the real economy – through spending by consumers and suppliers. And the mere existence of more money, if accompanied by rising prices, does not translate into greater value or purchasing power.

It’s also the case that QE, notwithstanding the public pronouncements, is intended to have financial effects. Through buying bonds from banks and other companies, these institutions are suddenly awash with cash which they will inevitably use to buy assets, such as shares, thus inflating their price. It is also meant to reduce interest rates on debt for vastly overleveraged companies. QE “for the people” cannot, I would suggest, use the same conduits without having similar effects which pointedly don’t benefit the people.

But the establishment’s faith in QE is unshaken. The BBC doc did reveal a certain buyer’s remorse on the part of some. Ex-Bank of England governor Mervyn King admitted, “if you’ve had the biggest monetary policy stimulus the world has ever seen and you still haven’t had adequate economic growth, maybe the answer is not yet more monetary policy stimulus.”

But there no indication that those at the helm would, in retrospect, have done anything different or, indeed, would do anything different today. Even in conditions resembling 1970s’ “stagflation” – negligible economic growth and rising inflation – alternative means of stimulus are not seriously entertained. “Helicopter Money”, for example, the crediting of ordinary people’s bank accounts with cash in the expectation they will spend it, contravenes a core principle of our political settlement, that only the financial system deserves bailing out and everyone else – especially the bottom 30% — must be kept on a firm leash.

The QE/Austerity duopoly thus reigns supreme and is, if anything, more entrenched than ever given that it is longer a leap in the dark but tried and tested policy. The Chancellor of the Exchequer, for example, hails from the finance system and has faithfully imbued its self-interested mores. The personally very wealthy Rishi Sunak used to work for Goldman Sachs and a hedge fund – the precise ‘sector’ of the economy that Paul Marshall says has “made out like bandits” because of QE.

And if that isn’t guarantee enough, Sunak’s opposite number – Shadow Chancellor Rachel Reeves – used to work for the Bank of England and is an expert – mercifully! – on QE.

So despite the enormous pile of evidence that QE just makes the rich richer and has no impact on economic growth, the establishment faith in the practice remains undimmed. The bandits have taken over the asylum.

QE’s impact on inequality is astonishing. A statistic flashed on the screen at the end of the documentary revealed just how well the bandits have done. UK billionaires (individuals who own assets of more than a thousand million pounds) are worth 310% more than in 2010. But the effect is not limited to this blessed island. According to rich peoples’ magazine Forbes, in 2021 there were 2,755 billionaires in the world, an increase of 660 from just a year earlier. “Altogether these billionaires are worth $13.1 trillion, up from $8 trillion in 2020,” says Forbes. In 2006 – just two years before the QE era began in Euro-America – there were less than 1,000 billionaires globally with a collective net worth of under $3 trillion. What explains the huge increase in a period of insipid economic growth?

Objecting to this is not just a case of the “politics of envy” as it used to be derided. Beside the fact that these individuals do not deserve their loot under any objective free market criteria, such mammoth inequality fundamentally distorts society. As I have argued in a previous post, these billions are not all spent on buying luxury yachts or even blasting into space. They are also used as capital – money invested to make more money. In areas such as housing, privatisation, fossil fuel extraction, the media and democracy the invested funds of the ultra-rich are perverting society in ways that are directly at odds with the interests and desires of the vast majority. And through QE we have, through government action, turbocharged this process.

But then that is not all that surprising as the ultra-rich basically own the government as well.

Friday, 28 January 2022

Overthrowing the system with Tories

 That archetypal “good Tory”, Rory Stewart, was brandishing his emotional intelligence again last week. In the Financial Times, he unveiled the bombshell that Boris Johnson is “a terrible prime minister and a worse human being”. But, he stressed, Alexander Boris de Pfeffel Johnson’s awfulness is no aberration. He is the “product of a system that will continue to produce terrible politicians long after he is gone”.

Before we start celebrating any epiphanies, note the absurd narrowness of Stewart’s definition of ‘the system’. In the liberal Tory imagination he personifies the system comprises the first past the post electoral system, unserious and partisan politicians, a lack of critical thinking and an obsession with winning elections. Naturally Europe is presented as the alternative. “Germany had Angela Merkel” says Stewart. That’s the same Angela Merkel who inflicted a regime of economic sadism on Greece and allied with the antisemite Viktor Orban in the European Parliament, using his party’s votes to help elect failed politician and Merkel protégée, Ursula von der Leyen, as European Commission President. Lucky old Germany.

We must also brush over the fact that the policies Stewart advocates – and has implemented as minister under Cameron and May – are cruel, irrelevant or weird. He opposes “cuts to the army” little more than a year after Johnson announced a £16 billion increase in defence spending. And he repeats Tony Blair’s lament that there are no “new ideas” in British politics. And they say satire is dead.

It’s strange but I seem to remember some new ideas – and critical thinking – emanating from the official opposition from 2015 to 2019. I’ve also got this odd sense that a Labour leader from that period displayed some actual empathy in contrast to Johnson whose only capacity for empathy is for himself.

But the real problem with Stewart is total obviousness to the fact that a couple of years ago the entire system – finance and business, politics, the media, the armed forces, religious leaders, the higher civil service and so on – chose Johnson, either explicitly or effectively, and united to obliterate the anti-Johnson, Jeremy Corbyn.

Rather than spending a week or so going over the whole tragic saga, let’s just concentrate on the role played by the fearless fourth estate, the media. Lest we forget, Johnson was elevated to the status bumbling, self-deprecating, national chum by regular appearances on the BBC’s Have I Got News for You. A journalist himself, after resigning as Foreign Secretary he returned to the Daily Telegraph on a stipend of around £23,000 a month. During the 2019 election campaign, when they weren’t eviscerating the Labour leader as mortal threat to the nation’s soul and security, the media were urging voters to give Johnson a chance even though they – of all people – knew what he was really like.

Conservative but independent-minded journalist Peter Oborne says he was told by senior BBC executives that they didn’t want to expose Boris Johnson’s lies because, to do so, would undermine trust in politics.

But it’s in the current furore over Johnson’s lockdown partying that the role of the media is really laid bare. For obviously these parties did not happen last week. They occurred more than a year ago but remained a secret to the public – who are suitably outraged – until now. Why? Dominic Cummings alleges that “lobby hacks” didn’t say anything because they were at some of the parties. Whether that’s true or not, we do know that one party was a leaving do for the future deputy editor of the Sun.

It beggars belief that the higher echelons of the media were in the dark until leaks about – up to now – 17 parties.


 

In the words of writer Dan Hind, “The antics in Downing Street have been transformed into matters of political consequence deliberately and with considerable skill, skill that could have been used against Johnson at any time. This is not ‘news’, this is a redistribution of knowledge, from the tight circuits of elite complicity into the wider world.”

It is sobering to realise just how much of our ‘national conversation’ consists of matters the elite chooses to talk about and deem important.  Johnson’s soaring popularity, underpinned by the support of most of the press, survived revelations over corrupt PPE contracts, damning official reports into thousands of avoidable pandemic deaths and a proven recourse to lying when under pressure. None of it had any discernible effect until last autumn when a section of the press mysteriously found the lucrative lobbying jobs taken by MPs a step too far and started talking about it incessantly. It’s revealing, by the way, that Stewart’s indictment of ‘the system’ does not include the fact that nearly half of Britain’s top 50 corporations have “connections” with a sitting MP.

Now in the aftermath of the ‘bring your own booze’ scandal, Boris’s approval ratings have sunk to Jeremy Corbyn levels. That’s power.

For nearly four years, the opposition was scrutinised to within an inch of its life. But now a member of the Trilateral Commission is in charge that scrutiny has simply vanished. Sir Keir can purge Labour party membership of left-wingers, exile his predecessor for telling the truth, impose ‘normal’ candidates on local parties, and replace a social democratic policy programme he promised to uphold with a blanket reassurance that he won’t do anything to even mildly inconvenience the elite – all without fear that virtually anyone in the mainstream media will deign to pay attention. And if they do, they’ll approve anyway.

“We pretend”, says Stewart, “that the politician can wear a deceitful mask before the voters and then take it off in the cabinet room”.

You pretend. We stopped engaging in this farce ages ago.