Tuesday, 21 February 2017

André Gorz and the importance of refusing work

Twenty years ago the French philosopher André Gorz warned of the crucial difference between a basic income that enabled its recipients to refuse work and one designed to prompt them to take any on offer.

At a time when basic income advocates were a novelty, Gorz foresaw the dangers ‘inherent in demanding continuous income for discontinuous work’. Basic income was, according to one contemporary conservative advocate, not an end in itself, but the means for everyone to ‘fit themselves into this new system’.

The idea, said Gorz, was ‘to enable employment to become intermittent, and [it] may even encourage such intermittent employment’.

But a ‘sufficient’ unconditional basic income had precisely the opposite logic. “The aim,” he wrote in 1997’s Reclaiming Work, “is not to force the recipients to accept any kind of work on any terms whatsoever, but to free them from the constraints of the labour market. The basic social income must enable them to refuse work [my italics] and reject ‘inhuman’ working conditions.”

Far from encouraging work and entrepreneurship, Gorz wanted a basic income, in line with the ideas of libertarian communists and socialists of past eras, to lead to ‘less employment and less selling of labour and services’. He looked forward to the ‘elimination of work as the dominant form of activity’ and its replacement by myriad forms of ‘personal activity’.

In the late ‘90s, few policy-makers paid serious attention to proposals for a basic income. Now, by contrast, basic income pilots are springing up like mushrooms after a cloudburst. Experiments are planned, or are in progress, in Finland, Canada, the Netherlands and Scotland.  The kind of basic income they embody, however, is closer to Gorz’s nightmare than his dream of liberation.

Intermittent employment, through zero hours contracts, extreme part-time work, freelancing and the burgeoning gig economy, was only just emerging into the sunlight in the 1990s. But now it is an established fact of life for millions of people. And all the basic income pilots, without exception, take intermittent employment as a given, even a desideratum. Basic income, in other words, becomes a means for people to ‘fit themselves into this new system’.

In Finland, the centre-right government hopes the basic income pilot will help participants ‘take short-term jobs’ and ‘encourage people to seek and accept work’. The BI pilot in Ontario, Canada, though set at a more for generous level than in Finland, aims to ‘strengthen the incentive to work’.  In the Dutch city of Utrecht, the ruling socially liberal D66 party, which has initiated a BI experiment directed solely at the unemployed, is committed to ‘strengthening the economy for entrepreneurs, be they big multinationals or small-scale freelancers.

This all suggests that these basic income pilots, besides being more humane that punitive welfare systems, will be good for the economy. But ‘sufficient’, Gorz-style basic income, aimed at facilitating the refusal rather than the acceptance of work, while sounding utopian, may in fact be more economically beneficial. This is because it works to a counter western societies’ now permanent over-supply of labour.

A basic income that is i) substantial and ii) paid to everyone, not just the unemployed and the poor would, according to one article on radical implications of basic income, ‘simultaneously push up the wage rate for unattractive, unrewarding (which no one is now forced to accept in order to survive) and bring down the average wage rate for attractive, intrinsically rewarding work (because fundamental needs are covered anyway)’.

Or, as one of the organisers of the Swiss group, Generation Basic Income (which advocates a monthly ‘basic income max’ of nearly £2,000 a month), puts it: ‘Income from labour will be renegotiated ….Good work that people like to do, will be cheaper. Poor work that people do not like to do, will be better paid, because no-one can be blackmailed with their existence to do it.’

Many basic income advocates stress the inexorability of automation as demonstrating a ‘like it or not’ justification of an unconditional income. But so-called advanced economies, certainly the UK, are de-industrialised without being fully automated. In many ways, they are running on the easy availability of abundant cheap labour. There are now 20,000 hand car washes in Britain, while the automated version – rollover car wash machines – have halved in number in a decade.  This is reverse automation.

 A substantial basic income, that enabled the refusal of work, could turn off the labour tap and spur automation in a way that ‘incentivising employment’ basic income won’t.

In short we don’t need to create more low paid work but this is just what the intermittent employment model of basic income is predicated upon doing. A ubiquitous justification of this model is that it gives the recipients the confidence to start their own business because they won’t face starvation if they fail. It’s hard to argue with the logic except that the last thing we need is more small businesses. Self-employment in the UK, in the most un-basic income conditions imaginable, has already increased by 26% in the last ten years, and now encompasses 15% of the workforce. Simultaneously, since 2008, the income of the self-employed has dropped by a quarter.

The reason is that the ranks of the self-employed have been boosted by a legion of small-scale service businesses – cleaners, gardeners, dog walkers, website designers, personal trainers, nutritionists – that are often barely able to keep their head above water financially. Introducing an insufficient basic income would boost the number of these services immensely and – because they would be many more freelance dog walkers for busy dog owners to choose from – would water down self-employed income even more.

Ventures like Task Rabbit, which matches freelance contractors with people seeking help with tasks like moving or cleaning, have spread across the US and are now growing in the UK. According to the chief executive of one ‘crowdworking’ US company, technology now enables employers to recruit people for ten minute tasks, pay them a tiny amount of money and then ‘get rid of them when you don’t need them anymore’. This is as good a description of a capitalist dystopia as I can find, and it’s an economy that would be massively emboldened by the guilt erasing incentivising employment model of basic income.

The above may seem churlish in the context of a welfare state that has morphed into a punishment state, and relishes denying income to the sick and disabled, forcing them to beg at food banks. Compared to this, unconditional income is little short of an epiphany. But when I think of the future in the light of a basic income predicated on incentivising work, I can’t help but envisage millions of self-employed task bunnies meekly serving the myriad whims of the elite. Labour will have never been so cheap or so abundant. No-one will starve but everyone will be exploited.

Thursday, 2 February 2017

The deformities of 21st century capitalism

In part one, I noted the strange anomaly that an ever more munificent corporate tax regime has resulted more and more frugal rates of investment by the private sector. Waving farewell to the relative high points of the 1960s and ‘70s, corporations have chosen to keep hold of a larger and larger proportion of their profits. Governments around the world have played the role of useful idiot, plying multinationals with multiple tax cuts, while pretending not to notice that the money given away almost never goes into production.
Especially in developed countries, says the United Nations Conference on Trade and Development (UNCTAD), corporations are now mainly using profits to pay out dividends or buy back their own shares, rather than investing in new plants or equipment. Or they are simply banking the profits, often in zero percent tax havens. It is estimated that corporations are sitting on $700 trillion worldwide.
This graph, from Chapter 5 of UNCTAD’s 2016 Trade & Development Report, illustrates just how extreme the fall in investment in the major economies has been over the last three decades:

The crucial concept here is the decline in ‘fixed capital formation’ – investment in tangible things like equipment, factories or new products. So-called ‘investment’ in financial instruments – just betting on a rise in the value of these assets – has grown exponentially.
In a remotely rational world, this outcome might have prompted a bit of a rethink on the part of governments. But, in keeping with the era of alternative facts, it has, in fact, inspired the realisation that these efforts to lighten the burden on corporate-land were, in retrospect, paltry and what is called for is a far more muscular approach to taxing cutting. The ‘love fest’ embodied by Donald Trump and Theresa May is leading the charge for a more reasonable levy on the world’s richest people. Where this will end is anyone’s guess. Probably in us sub-humans paying for the privilege of being exploited, except, of course, we’re doing that already.
What is eminently predictable is that if Britain and America set the pace by radically cutting rates of corporate taxation, other countries will feel obliged to follow suit for fear of appearing unattractive to roaming corporations. Ireland, with its corporate tax rate of 12.5%, may well be a harbinger of everybody’s future. Though Ireland will doubtless want to revise that rate downwards in an effort to retain its competitive advantage.
But for those of us keen on keeping our reality principle intact, there is another kind of realisation. That the mantra of austerity, of no money left, of ‘expansionary fiscal contraction’, is nothing more than an excuse for unnecessary suffering. There is plenty of money left, it’s just in the wrong hands, and, most importantly, is not being used. The Tax Justice Network estimates that there is up to $32 trillion lying idle in tax havens, equivalent to 10 to 15% of global wealth. US corporations alone – led by the likes of Google, Apple and Microsoft – have $2.1 trillion stockpiled overseas.
Interestingly, there is a law in America that penalises firms found to be hoarding cash. They have to pay 20% above the normal corporate tax rate. But since 1986, multinational companies have been exempt from this restriction. They can avoid all taxes on profit paid to affiliates, known as ‘passive foreign investment companies’, with no conditions on its (lack of) use. The result has been multi-trillion dollar cash mountain, untouched by the American government and not used for any productive investment.
Donald Trump is planning a ‘repatriation holiday’ for these multinationals – a discount tax rate of 10% if they bring it all back home. The narrative – as ever with Trump – is that this will create jobs. But the last time it was tried – in 2004 – it actually eliminated nearly 21,000 jobs, despite its proponents claiming it would create 660,000. The money was repatriated but was mainly used for mergers and acquisitions, the perfect rationale for streamlining workforces.
The alternative to Trump’s plan is obvious. Reinstate the pre-1986 penalty and properly tax the trillions of dollars siphoned overseas and doing precisely nothing. Apple alone has over $200 billion. The money could be used for …  just to pluck a few ideas out of the air, creating a single payer health care system, rebuilding infrastructure or instituting a basic income.
Other countries could follow the American lead, triggering a healthy race to the top, rather than the bottom, which is whether global tax competition has led us over the past 40 years. The adoption of such a policy would also have the attractive side effect of stealing the nationalist right’s thunder. Trump is, aside from the misogyny and immigration bans, relentlessly focusing on creating jobs and cajoling corporations into not moving to China. Apart from pointing out the glaring flaws in his plans (see above), the answer cannot be a centrist blank.
The Investment Dilemma
But this policy is, at best, half a solution – because it does not address why private sector investment is so feeble in the first place. If corporations could smell profit on the horizon, they wouldn’t need any encouragement to invest. They wouldn’t need the meaningless inducements of tax cuts or a regulatory cull.
We are, as some economists have noted, in the middle of depression. Global GDP rates are a pale shadow of what they were pre-2008, interest rates remain at rock bottom, companies shun investment and hoard money and global trade is running at less than a quarter of its pre-crisis rate. None of the 20 largest shipping container companies in the world are forecasting a profit.
An economy in such a parlous state clearly has effects. One of the most apparent is that businesses become obsessed with cost-cutting and reducing their overheads. They look to shore up their profit margins, rather than expand production. Part-time, zero hours and other flexible contracts have mushroomed in this environment. Good, stable jobs and adequate pensions rapidly become a memory of the capitalist golden age. Economic insecurity consciously becomes the order of the day.
There are also dire geo-political consequences. The word antisemitism dates back to 1879, not coincidentally in the midst of the long depression of the late 19th century. The Great Depression of the 1930s ushered in Nazism and consolidated totalitarian rule in the Soviet Union. In our time, Trump is threatening trade war with China, which could easily escalate into actual war. Humanity, it was nice knowing you.
So to say that ending the capitalist depression is important is the understatement of the 21st century. But, ignoring the legions of apologists for the system, there is no consensus as to the cause and therefore the way out.
The 21st Century Depression
The most moderate of the critics – in the sense that they often (but not universally) believe that capitalism can be successfully reformed in the public interest – are the Left Keynesians. This is where you’ll find left-wing politicians like Jeremy Corbyn and Bernie Sanders.
Left Keynesians hone in on capitalism’s effective demand problem. Through perpetual competition, businesses are compelled to clamp down on costs, including wages – a process eased by the vanquishing of organised labour across the Western world in the 1980s and ‘90s. But, of course, workers, in their other incarnation, are also consumers.  So this is akin to cutting off your nose to spite your face. In economic terms, the gap between supply and demand grows dangerously wide. According to a report last summer, the real incomes of around 2/3rds of households in 25 advanced economies were flat or fell between 2005 and 2014.
“The roof might cave in,” American thinker David Schweickart wrote presciently in 2002. “A deep and enduring global depression is a real possibility.”
The obverse is also true. Well paying, stable jobs and pensions that allow consumption not just subsistence living to happen, ensure the equilibrium of the system.
But the difficulty in accepting waning demand as the ultimate cause of global depression is that consumerism – the motor of the economy in industrialised countries for many decades – has not really abated. Still, nine years after the 2008 crash and a ‘lost decade’ of wage (non) growth, consumer spending is the dominant force behind UK economic growth, responsible for 70% of economic activity. The endurance of consumer spending has been called ‘privatised Keynesianism’.
What is true is that this consumerism – founded on personal borrowing – is much more precarious than in the past. A rise in interest rates, as happened in the US in 2007, or a blip in unemployment could cause the roof to cave in once again. But ebbing demand is not, in itself, the problem. You could safely argue that demand would be stronger had wage growth kept pace with previous decades. But in no sense has consumer demand collapsed.
The other solution often proposed by Left Keynesians is that public investment should substitute for moribund private investment. In the UK, Corbyn is proposing £500 billion government spending over 10 years through a National Investment Bank. Former Greek finance minister Yanis Varoufakis wants a revitalised European Investment Bank to spearhead economic recovery and an end to austerity.
The argument is that when, in Keynes’ words, the ‘animal spirits’ of the private sector are depressed, government should fill the gap. In any case, as interest rates are so low, government borrowing is begging to happen and, most importantly, will ultimately pay for itself through higher economic growth and increased tax receipts.
The flaw is that no convincing reason is given as to why increased public investment will stimulate a revival of private investment. Japan, the world’s third largest economy, has stubbornly resisted the siren song of austerity and invested hugely in infrastructure – planning, in 2013, to outlay over $2 trillion over ten years, with the explicit aim of spurring growth. Yet Japan has not emerged from nearly three decades of anaemic economic performance and its economy actually shrank in the last quarter of 2015.
Interestingly, Japan illustrates how a country can combine huge private and public debt and masses of unused corporate profits. “Japan’s corporate savings glut is unique in scale,” says Martin Wolf of the FT. In common with their counterparts in other countries, Japanese corporations are making high profits and not investing. The country also has the highest debt levels in the world.
So, in order to understand why private investment refuses to budge in response to financial inducement, government investment or Trump-style cajoling, I believe you have to look elsewhere – into the realms of anti-capitalist economics:
The Marxist Dissidents
Karl Marx called the tendency of the rate of profit to fall “the most fundamental law of capitalism’. According to this theory, all profit derives from human labour but as mechanization inevitably spreads through the economy, replacing workers with machines, the overall rate of profit declines. Various counter-tendencies – such as paying workers more, finding new markets or using dirt cheap labour – continually operate and can for a long time eclipse the tendency of profit to fall. But, in the end, this law will reassert itself.
The relevance for my argument is that the decline in the rate of profit first makes itself felt through a slump in investment.  Expectation of profit is the motivation for all private sector investment, and if this expectation is dampened or vanishes, investment won’t happen, or will happen on a much smaller scale. A decline in investment is a sign that a recession or depression is impending.
There is disagreement among Marxists of this kind as to when the decline in the rate of profit started to kick in. Some, such as Andrew Kliman, trace it back to the first recession of the post-war period in 1973. Others, such as Michael Roberts, claim it was postponed until 1997. But all agree it is a fact of life now.
One way of temporarily offsetting the decline in the rate of profit is financial speculation, or a rise in ‘fictitious capital’, as Marx called it. “If the capitalists cannot make enough profit producing commodities, they will try making money betting on the stock exchange or buying various other forms of financial instruments,” says Roberts.
It is a conviction of Marxists of this ilk that capitalism can only be restored to health – rates of investment will rise to support a growing economy – if there is a mass destruction of ‘capital value’.  This means a spiral of bankruptcies and a huge rise in unemployment. The crash of 2008 didn’t involve such destruction; it was arrested and bailed-out. Andrew Kliman thinks we are thus doomed to experience a state of ‘not quite recession’. Another Marxian economist – Roberts – says we are in the midst of an ‘economic winter’, awaiting another crash which will finish the job of 2008.
Under this variant of Marxism (most Marxists reside in the Left Keynesian camp), there is no final apocalypse, no final and irrevocable crisis. The decline of profit is cyclical – if is allowed to play out, levels of profit are restored and the whole process (or ‘crap’ in Marx’s description) can begin afresh. However, given the geo-political events that would be triggered by another crash of capitalism, and one much deeper than 2008, one can assume that the apocalypse will be general, not economic, involving world war and mass physical, human destruction. Kliman thinks that the warlordism afflicting parts of Africa and Asia is likely to become the norm if capitalism persists. The only way to avoid such a scenario is to transcend a profit-driven economy.
However, there are other post-capitalist thinkers who don’t regard capitalism’s travails as cyclical. By contrast, they think its troubles stem from having reached the limits of its technological capacity. And having over-stayed its welcome, the defects of capitalism are now grossly outweighing its benefits.
The Capital Glut
Capitalism epitomises a strange combination of abundance and scarcity. Corporations hoard money, landowners and developers hoard land. But there is also, says economist Harry Shutt, an over-abundance of capital at the summit of society, perpetually seeking financial returns.
This ‘wall of money’ does not merely comprise the profits of corporations. It is also made up of pension funds (a vast number of occupational pensions have been invested on the stock market since the 1980s), insurance companies and other ‘investment’ firms seeking returns for their clients.
And it is in the nature of capital-ism, money used as capital, that the profit made is immediately recycled as new capital seeking fresh returns. “The inevitable consequence of maintaining a high return on the capital stock as a whole,” writes Shutt, “is that yet more investible funds will be generated for which outlets must be found.”
Others, such as the geographer David Harvey, have noted the same expansive logic. “To keep to a satisfactory growth rate right now would mean finding profitable opportunities for an extra $2 trillion compared to the ‘mere’ $6 billion that was needed in 1970,” he writes in Seventeen Contradictions and the End of Capitalism. “By the time 2030 rolls around, when estimates suggest the global economy should be worth more than $96 trillion, profitable investment opportunities of close to $3 trillion will be needed.”
But, to my knowledge, Shutt is unique in adding another dimension. The pressure to find new investment opportunities to satisfy the perpetually expanding horde of capital has been intensified by a steady decline, since the 1970s, in outlets for fixed investment – investment in physical things such as plants or equipment. Technological change means that capital-intensive industries are becoming rarer (as are labour-intensive factories but that is another story).
Last year’s UNCTAD report hinted at this process (see graph above).  In the leading developed economies (France, the USA, UK, Japan and Germany), the report reveals, fixed capital investment rates fell from over 20% GDP in 1990 to ‘historically low levels’ of less than 16 per cent in 2015.
In 2016, Bank of England Governor, Mark Carney, lamented ‘more savings chasing fewer investment opportunities’ – an acknowledgement that there is now ‘too much capital for capitalism to function’.
This pincer movement of declining fixed investment opportunities and an ever-growing mass of money clamouring to be used, means an incessant pressure for financial deregulation and privatisation. This money becomes, in Marx’s description, ‘fictitious capital’. The original rationale for privatisation – loss making state industries requiring the bracing discipline of private investment – has been quietly abandoned.  Profit-making state enterprises – particularly profit-making state enterprises – are now considered the most succulent fruit, as a means of supplying safe outlets for private investment.  In the language of international government bodies like the IMF, the OECD and the Bank of International Settlements, deregulation and privatisation are urgent ‘structural reforms.’
Privatised utilities are one essential source for private investment. Prices and investment strategies, such as London’s ‘Super Sewer’- are now set at a level guaranteeing a high return for private investors. Over-investment is mandatory and set, in Shutt’s words, “on the basis of a hypothetical market rate which effectively guarantees a stream of profit on whatever investment is allowed”.
“For decades,” says one Guardian economics commentator, “they [savers] have bullied governments to release assets for sale that can then be leased back at high returns. In the UK, this is why we have privatised utilities and a swath of other safe, previously state-owned, assets in private hands.”
Opening up public, taxpayer funded assets, such as the NHS, to private sector investment – whether at home or from countries like the US, is now an integral component of government policy. This wall of capital at the summit of society is the main reason why neoliberalism did not die in 2008, despite disparate predictions of its imminent demise.
So under this understanding of the present state of capitalism, its travails are not cyclical. Mass destruction of capital value will naturally abate the pressure on public assets for a while, but the intractable problems of technological advancement, which does not demand huge capital investment as it did in the past, will reassert themselves. Capitalism, as a system, has outlived its usefulness. Its deformities are now front and centre.

Tuesday, 27 December 2016

The spectacular and unheeded failure of corporate tax cuts

“When corporate tax bills are cut,” Oxfam remarked matter-of-factly earlier this month, “governments balance their books by reducing public spending or by raising taxes such as VAT, which fall disproportionately on poor people.”

A 0.8% cut in corporate taxation across the 35 OECD countries between 2007 and 2014, the charity pointed out, was accompanied by a 1.5% increase in the average VAT rate. VAT (or sales tax in America) is a flat ‘regressive’ tax. When you buy a packet of chocolate digestives you pay the same amount in tax as Richard Branson, Rupert Murdoch or Bill Gates. This switch is, quite simply, a huge redistribution of wealth from poor to rich.

But while corporation tax has been reduced across the world in response to economic crisis and has been heading resolutely southwards ever since the 1980s, we are about to see corporate tax cuts on monster truck tyres. Donald Trump wants a US corporate tax rate of 15% compared to the current 35%. Theresa May’s ambition meanwhile is for the lowest corporate tax rate in the G20 (lower than Trump’s America, in other words, which is in the G20). Britain’s corporate tax rate is 17%, 11 percentage points lower than when the Tories took office in 2010 (the previous Labour government also reduced it).

This is the other arms race. Except in this one, governments fight to give money away, not accrue weapons.

I could spend paragraphs fulminating about the injustice of continually cutting taxes for the richest people on the planet while the poorest shoulder all the pain of a policy designed to repair the damage caused by a financial crisis they weren’t responsible for. I could waste energy pointing out the bizarre logic of claiming to cut a government deficit by deliberating slashing your income. But I’ll content myself with one salient fact – corporate tax cuts are presented as invigorating the economy, freeing more money for investment and jobs. They’re about making Britain ‘super competitive’, proclaiming we’re open for business, increasing research and development spending blah, blah, blah. But on that score, they’re a spectacular failure. An unexpurgated flop.  But it’s a failure almost everybody manages not to notice.

The fallacy

Because corporation tax cuts do not stimulate investment. Quite the opposite.  According to economist Michael Burke the private sector investment ratio in Britain (gross fixed capital formation as a proportion of firms’ operating surplus,) peaked at 76% in 1975, dropping to just 53% in 2008. By 2012, it had plummeted to 42.9%. By a strange coincidence in 1975 corporation tax in Britain, at 52%, was the highest it’s ever been. That’s at the same time as the peak in the investment ratio. In 2008 the corporate tax rate was 28% and in 2012, 24%.

According to Burke, corporation tax cuts are based on the ‘fallacy’ that they will ‘spur investment’. The investment rate has fallen by around a third in Britain since 1970, the same period that has seen corporation tax cut by more than 50%.

Other countries paint a similar picture. The investment ratio in the US peaked in 1979 at 69%. In 2008 it was 56% and it declined further to 46% in 2012. In Canada, which has undergone three waves of corporate tax ‘reform’ since the ‘80s, business investment has fallen steadily for two decades. In the words of one economist, Michal Rozworski, “For every dollar earned before tax, only about 60 cents goes back into maintaining and expanding business capital.  Compare this to 80 or more cents just a decade ago.”

But the political class of the western countries refuses to see the obvious. Decades of evidence that corporate tax cuts don’t work in the sense of producing more private sector investment, are met with renewed determination to institute even more drastic reductions. Even business seems to be saying, 'enough is enough'.

As Burke points out, a dynamic capitalist economy could well produce an investment ratio of over 100%, financed by borrowing in the expectation of greater profits in the future. So 69% (the US 1979 peak) is nothing to write home about, and 46% is “a sign of enfeeblement”.

The cash mountain

One rather glaring indicator that a further corporate tax giveaway won’t generate new streams of investment is that the corporate sector is already sitting on a mountain of cash that it is not using. Worldwide, this unused mass of money was estimated at $7 trillion in 2014. This year non-financial US corporations alone were judged to have $1.68 trillion in spare cash. All this while ‘underinvesting’  is the order of the day and there is pressure from shareholders to increase capital expenditure.

Apart from sitting in bank accounts, where does this mountain of cash go? The answer is in increased dividends to already bloated shareholders (which may be other companies), in share buy backs so that the company, in stock market terms, appears much healthier than it actually is, or in acquiring other companies. So the corporate sector comes across very active (mergers and acquisitions are at an all-time high), but this fevered activity just worsens inequality and increases the value of assets while producing very little of worth to society. Actual investment – new products, new machinery, new workplaces – is frequently perceived as too risky.

One theory that may tentatively rear its head at this point is that there is a negative correlation between reduced corporate taxation and investment – in other words, higher corporate taxation (and it was much higher in previous decades) is actually responsible, in some little known way, for greater levels of investment. The anthropologist David Graeber goes some way down this path in his essay Of Flying Cars and the Declining Rate of Profit, suggesting that the heyday of corporate research in the 1950s and ‘60s was really the outcome of high rates of tax – companies preferred to divert money into research, investment and rising wages rather than seeing it appropriated by the government. When that environment was transformed in the tax cutting, deregulating ‘80s and ‘90s the incentive, so to speak, for research and investment vanished.

“In other words,” writes Graeber, “tax cuts and financial reforms had almost precisely the opposite effect as their proponents claimed they would.”

Apple won’t make those ‘darn computers’ in America

Donald Trump’s proposed tax holiday for US multinationals repatriating cash gives credence to what Graeber is saying. Prior to 1986, corporations had to pay a 15% tax penalty for hoarding cash. Under Ronald Reagan, though, multinationals were allowed to hold unlimited amounts of cash provided they did so overseas. This produced a huge influx of money into tax havens. Rather than reinstituting the penalty on squirrelling away profits in other countries, Trump is proposing reduced taxation on repatriated cash as a way of incentivizing investment in manufacturing. The last time this trick was tried (under George W Bush in 2004), more than 90% of the repatriated money was used for share buybacks, increased dividends and larger salaries for executives. Another example, if one were needed, of corporate tax cuts having an altogether different effect to the one advertised.

But I think we have to look further than Graeber’s implicit suggestion that higher corporate tax is integrally linked to higher levels of private investment. If corporations are actively preferring alternatives to investment, such as share buybacks, bigger dividends or hoarding cash, the question is why has investment become so unappealing? Why has capitalism, which presents itself as a the apogee of a vigorous system transforming the world for the better, become so feeble?

Part two to follow

Tuesday, 25 October 2016

People-hating ideology let off the leash - A review of I, Daniel Blake

Before you write anything, if you choose their words, they have won half the battle. What Britain possessed in the past was a social security system – something you paid into through National Insurance contributions and then received benefits from as of right when you were unemployed or sick. Slowly, inexorably this social security system has been transformed into a ‘welfare’ state, which dispenses financial assistance from ‘hard working taxpayers’ to those unfortunates who run into hard times. Unemployment benefit has morphed into Jobseekers Allowance (don’t spend it all on sweets children or we’ll take it away). These people inevitably become a burden borne by the majority. Think of that enormous ‘welfare bill’ or the ‘welfare cap’.

But even here words tell lies. As I Daniel Blake demonstrates (a fictional film which distils the real life experiences of hundreds of thousands of people) to describe the system administered by the Department of Work and Pensions as a welfare state, is rather like dubbing the Russian military a befriending service*. A more accurate depiction of it is a ‘punishment state’ or ‘fuck you state’ or a ‘please die quietly and don’t disturb us state’. The last thing this system does is to look after the welfare of its ‘customers’. If you don’t have a mental health problem before you enter this hellish world, you probably soon will.

“They’ll fuck you around and make it as miserable as possible,” says one character in I, Daniel Blake. Therein speaks the voice of experience that a thousand newspaper pundits seem unable to grasp. That’s the entire point – to humiliate you so you accept any conceivable work, or drop your claim altogether (which the lead character in I Daniel Blake does), so they can trim the figures and tell the media how well they are combatting ‘worklessness’.

‘Can you help me fill in the form because I can’t write?’ I asked a JobCentre ‘greeter’ after they had twice lost my application for Employment and Support Allowance I submitted with the help of a friend following a stroke in 2010 which made handwriting impossible. ‘No, we can’t do that because it involves money,” was the answer. A few weeks later came the farce of a work capability assessment which declared me fit to work, when I was barely fit to go the bathroom. But for any future employers out there, I can assure them it’s been categorically proved beyond a shadow of doubt that I can raise my hands above my shoulders at least once.

I know what the reaction of many people to I, Daniel Blake will be. The story is an extreme one based on anecdotal evidence, they will protest – most people who go through the system can’t have these experiences. But, if anything, the tale of 59 year old Daniel Blake, a carpenter who suffers a heart attack and applies for Employment and Support Allowance, is restrained. He goes through a work capability assessment, and is found (surprise, surprise) fit for work, a decision confirmed by a ‘mandatory re-assessment’. He appeals but is forced to claim Jobseekers Allowance in the meantime as his only source of income. He is sanctioned (all his money is stopped) for not being able to prove he is looking for work which his doctors have told him he’s not meant to do. Eventually, he drops his claim, and lives on nothing.

I, Daniel Blake seems filmed almost entirely in close-up. I only remember one wider city-scape shot. There is a reason for that. The claustrophobic style mimics the perception the protagonists themselves for whom the outside world gradually loses all meaning. Everything becomes focussed on the next thing you have to do – filling in that form, getting that GP certificate, proving you are looking for work, phoning the DWP. You live in a state of permanent anxiety.

You could be forgiven for thinking that should Daniel Blake win his appeal and be judged retrospectively unfit for work, he’d be safe (this doesn’t come to pass for reasons I won’t spoil). But you’d be wrong. To be unfit for work, you need to be awarded 15 points in a work capability assessment. He originally gets 12 and, if he won the appeal, most likely he’d have ended up with 18 or 20. This would have placed him in the Work Related Activity Group of Employment and Support Allowance (ESA). As the name implies these people still have to look for work and if they don’t do so to the satisfaction of the JobCentre they can be sanctioned. In first three months of 2014, there were nearly 16,000 sanctions imposed on this group - people who have been found, to the satisfaction of the DWP, unfit for work. These are, just to be clear, indisputably sick people left with nothing or virtually nothing to live on.

Daniel befriends a single mother of two, Katie, who is sanctioned herself for arriving a few minutes late at Newcastle JobCentre when she had just moved up from London. Even if you are the sort of automaton that thinks this is justified, her young children are inevitably hurt too. At this point you realise you are in the presence of an ideology that has been let off the leash and knows no bounds. This is zero tolerance taken to an extreme. It, quite plainly, hates human beings.

How on earth did we get to this point? I have read several lamenting reviews of I, Daniel Blake pinning their anger on Tory austerity. If only it were that simple. Yes, the Tories have made the system Daniel Blake encounters more callous. In 2013, they abolished the right of people appealing against an incorrect fit to work decision to receive ESA while they waited (a process that can take months and months). This was an ‘incentive to appeal’ you understand. Thanks to the Conservatives, people in the work related activity group can only claim ESA as of right for 12 months – after that point if their partner earns £16,000 or more, they are screwed. Most recently, they changed the law so that new ESA claimants would receive only the same weekly amount as Jobseekers Allowance claimants - £30 a week less. This is all part of the plan to transform sickness into a personal failing of the claimant, in the same fashion that unemployment has been, where ‘work is abstracted from the material conditions of paid employment and inequality’.

But the basic rudiments of the system that awaits Daniel Blake when he has a heart attack were firmly in place when the Conservatives gained the keys to the car in 2010. It was New Labour who introduced work capability assessments as part of the 2007 Welfare Reform Act. It was New Labour who introduced sanctions for benefit claimants, including disabled benefit claimants (although, the length of sanctions and their conditionality were both intensified by the Coalition and the Conservatives). And the work capability system was actually harsher under Labour. According to the DWP’s own research over half (55 per cent) of people found fit for work after the WCA system was first introduced, were neither claiming benefits nor in work 15 months later. In 2012, this figure had been reduced to 30 per cent.

All mainstream politicians, who cleave so fervently to the fabled centre ground, support the system exposed in I, Daniel Blake. These centrists have carefully constructed it after all. It took that extremist interloper Jeremy Corbyn to finally commit the Labour party to scrapping the work capability assessment.

There is only one element of I, Daniel Blake I found remotely jarring. That is when Daniel Blake, driven to exasperation by the requirements of ‘benefit advisers’ that he can’t, indeed shouldn’t, fulfil, calmly walks out of the JobCentre to spray paint a protest on its outside walls. While he does he is cheered on by a gathering crowd across the street. I don’t know Newcastle that well, but I can’t help feeling that in many towns and cities of this country, he would not have been cheered. According former deputy Prime Minister Nick Clegg, ex-Chancellor George Osborne (a man convinced he had created the ‘new centre ground’) would relish any chance to reduce or restrict benefits “because focus groups had shown that the voters they wanted to appeal to were very anti-welfare, and therefore there was almost no limit to those anti-welfare prejudices.” That’s the tragedy of I, Daniel Blake – the realisation that the inhumanity it exposes doesn’t produce revulsion from many of your fellow citizens but applause.

*There is, actually, an uncanny resemblance between the cuts imposed on disabled people by Vladimir Putin in Russia and the policies of the British government under David Cameron and Theresa May.