Monday, 29 February 2016

Feeling invisible is the least of working class problems

“If I was of colour or had a disability or a different sexuality I just wouldn’t even bother turning on the television, because you feel invisible,” Times columnist and author of How to be a woman, Caitlin Moran, told the Radio Times last week.

“The lack of working class people in culture at the moment is notable,” she went on. “And when they are represented … Take Benefits Street. It’s the only time I’ve seen people on benefits on television, but you didn’t get to hear them talking about their ideas on philosophy or politics, you didn’t get to see them being joyful – it was simply about surviving, and that made them look like animals. It didn’t show them as human beings.”

This is true but something jars. Representation of working class people is not the same as representation of other so-called minorities. It’s far more troublesome because the implications of genuine representation are far less containable. Put simply, it’s possible to have a resolutely capitalist society that is authentically diverse, and comfortable with multi-ethnicities, equal representation of women, fluid sexuality and disability. It’s not possible to have a resolutely capitalist society that pays more than lip service to working class lives and experiences.

Merely on a superficial level, working class representation in culture is different. The problem is not invisibility but abject distortion and hostility. When the working class is heard in popular culture, it’s invariably with the prefix ‘white’ as if working class views can only be amplified in racial terms. Benefits Street, Benefits Britain, On Benefits and Proud, Benefits by the Sea, On the Sick, Benefits Hotel, Benefits Cat* etc (it’s quite a long list) are all fixated on looking down at people whose lives, intelligence and moral scruples are presented at a qualitatively lower level than those of the viewer. People live in ‘benefits’ houses, have ‘benefits’ babies and smoke ‘benefits’ fags.

These portrayals are dripping with condescension, stereotypes and malice. Invisibility would be a major advance. You could compare this representation with the way homosexuality or ethnic minorities were depicted in the 1970s but even that was less spiteful. It’s like the venom that’s now not acceptable to vent on other racial groups or non-heterosexual people has been stored up to be spewed on targets few will defend.

What does working class mean?

However these depictions are not of the working class per se but people on out of work benefits. The closer people are materially to those at the bottom of the heap, the more they may well want to differentiate themselves. “I don’t think I would want to be in the same class as somebody who takes what they can and has the attitude of ‘Well, I’m better off not working,” Lorraine, a fork lift truck driver, is quoted as saying towards the end of the book, Social Class in the 21st Century.

Just under half of society, if you credit official definitions, are now working class. 10.6 million people in Britain can be described as poor (in work poverty has now overtaken out of work poverty), as their income is below 60% of the median. A further 760,000 are claiming Jobseekers Allowance and 2.3 million are getting either Incapacity benefit, or its successor, Employment and Support Allowance. The term ‘working class’ can be applied to all of these groups, or just one, depending on your intention.

It’s possible to react to working class stereotypes in the same way as racial stereotypes or homophobia. Just as there is sexism and racism, so there is classism. The solution is to fight an attritional battle on sexist, racist, homophobic or classist attitudes so that eventually society is free of them. In this ideal world, working class people have their voice heard equally in culture in the same way that women, ethnic minorities, non-heterosexual and transgender people do. The working class are not looked down on or stereotyped.

But this would be a false utopia. Being working class is not a collection of attitudes to be respected, or the spur behind an ambition to colonise the commanding heights of society, but a state of being that should not exist. The aim should be a classless society. The working class should be abolished. And that is a truly transgressive aspiration.


It’s easier to see the distinction if you examine society’s acceptable and seemingly unstoppable radical edge, the push for diversity. Since 2010’s Equality Act it has been illegal to discriminate against job applicants on the basis of, not just sex or race, but sexual orientation, transgender status or disability. Discrimination obviously does happen but officially it shouldn’t. Government departments have been at the forefront of this drive. The Home Office has been recognised as one of the UK’s Top 50 Employers for Women and offers guaranteed interviews to qualified people with disabilities.  Secret service agency MI5 been has named ‘employer of the year’ by LGBT rights charity Stonewall. In the US, since the time of George W Bush, the US federal government has declared itself in favour of ‘workplace diversity’.

Allied to this, there has been constant pressure to make corporate boardrooms and the upper echelons of public sector bodies more reflective of society. The 30% Club campaigns for greater gender balance at board level in the UK. Groups such as OUTstanding claim business can benefit from greater productivity by enhancing representation of LGBT people at executive level.

It is, without question, a good thing that society, and its cultural expressions, reflect its actual diversity. Gay and transgender people, in particular, have suffered terribly from bullying and worse. The current stigmatising tone of coverage of benefit claimants prepares the ground for sanctions and cuts to sickness benefit. So a more realistic, and, gulp, sympathetic portrait may have tangible effects.

But cultural diversity and equal treatment by employers are profoundly inadequate tools for dealing with the inescapable inequality and autocracy of the capitalist organisation of society. This becomes apparent when you consider how the working class fits into the diversity agenda. The short answer is, it doesn't.

If an employer doesn’t want to discriminate, for example, against working class people, how are they to proceed? They could aim to ensure that people with working class backgrounds aren’t excluded. That would be difficult to define and enforce, but beyond these surface difficulties, whether a working class person even gets to the application or interview stage, is dependent upon innumerable factors. These elements, such as education, childhood experiences, parental wealth, ownership of assets, or cultural capital are produced by entrenched political and economic forces, and not within the gift of enlightened employers to bestow.

The result is that, despite the ostensible backing of Left and Right for greater social mobility and equal opportunity, the reality either gets worse or remains static. Two decades ago, Conservative Prime Minister John Major promised a ‘classless society’.  With impeccable amnesia David Cameron now claims the Conservatives as the ‘party of equality’. But class cannot be undiscriminated away.

A cooperative economy

However the incongruity goes far deeper. Genuine representation of working class opinions and experiences cuts against the grain of organisations built on hierarchy and career progression. For a telesales worker, a front-line nurse, a fork lift driver, a cleaner or a receptionist to have an equal say in the management of the organisations they work for presupposes an end to the arbitrary power of management, and the reaping of profits by senior management and shareholders. This simply cannot be allowed to happen. Power should steadily accrue to those who ascend career ladder. So working class experiences and opinions are necessarily suppressed in favour of those of the upper middle class.

If, however, you wish society to genuinely listen to the experiences of working class people, you have to move towards a cooperative economy, in which the distinction between employer and employee is abolished. This doesn’t mean that a division of labour is no longer needed or that management disappears as a function. But it does mean that enterprises and public sector organisations become classless and democratic. The huge cooperative enterprise at Mondragon in Spain, which contains over 250 businesses, indicates this is quite feasible.

The implications of such a change are massive for a society increasingly defined in terms of status, seniority and inequality. But, like a basic income heralding a post-work future, a cooperative economy could be just as liberating for those convinced they benefit from the current make-up of society, as for everyone else.

*This one is made up but I’m hopeful Channel 5 will commission it

Saturday, 20 February 2016

Those Recession Blues

Don’t panic! A conspicuous feature of mainstream accounts of recent stock market torments is that beneath the systematic shredding of share values everything is fine. Both UK and global equities have lost approximately 9% of their value since the start of 2016 and around 20% since April last year. Nonetheless, financial experts have been on hand to point out that the real economy has not suffered from this ‘equity bloodbath’, and is not likely to.

The sage and sceptical voice of the Telegraph’s Ambrose Evans-Pritchard, despite other downbeat pronouncements, advises a cool view be taken of ‘these deranged markets’. ‘This a stock market rout we should celebrate’, he says. The New Statesman’s Go To finance analyst, Felix Martin, maintains that the ‘global economy is in reasonable shape’. Only its software, the financial system, is faulty and ‘can be debugged’.

I think we should not be taken in by these soothing utterances. There are reasons to be worried. Which become more apparent, when you consider, in depth, the reasons frequently given for why we shouldn’t be:

Stock crashes don’t always affect the real economy

This is true, historically speaking, but the reasons why it was so in the past don’t apply now. The most notable example of a stock market crash not translating into a recession or depression was 1987. Then, the US stock market lost nearly 29% of its value in three days. But a downturn did not materialise (although there was, many argue, a delayed recession from 1990-92). The reason for this was the instantaneous reaction of the US Federal Reserve under new Chairman Alan Greenspan. Interest rates were cut and $12 billion injected into the banks.

Another stock market crash in 2001, the bursting of the dot com bubble, prompted a similar response. After successive rises at the height of the boom, Interest rates were again cut - to 1% in the US and to 4% in the UK. An immediate slump was sidestepped but the seeds of the Great Recession were planted in these actions. Banks, corporations and consumers took advantage of the low rates to borrow like crazy and when interest rates were subsequently raised, the housing market folded.

The official response to the Great Recession, in addition to massive bail-outs and subsequent doses of Quantitative Easing, was to again drop interest rates – to historic lows. Last December, the US Federal Reserve edged them higher and then came to regret the decision as stock markets haemorrhaged value. In fact, they have headed in a resolutely southwards direction, even since the Federal Reserve ended its 6 year $4.5 trillion invented money, Quantitative Easing programme, in late 2014.

Thus, central banks are in an impossible situation. The traditional response to a stock market crash – slashing interest rates – is not an option if they are near zero to begin with. And increasing them to secure the breathing space to drop them again only seems to instigate the very crash you want to avoid.

This is why William White, chairman of the OECD’s review committee, said recently, “Things are so bad that there is no right answer. If they raise rates, it’ll be nasty. If they don’t raise rates, it just makes matters worse.”

This quandary is what people mean when they say central banks have no ‘ammo’ left to fight a crash. And if, in contrast to the recent past, they are bereft of weapons, then a stock market crash will inevitably infect the rest of the economy.

The global economy is not ripe for a fall

Alright, say the recession sceptics, the world economy may not be hitting the high spots of the turn of the century, but it is chugging along nicely. The ‘macro picture’ belies nothing to be concerned about. Evans-Pritchard says world economic growth has been ‘drearily stable’ for years – 3.4% in 2012, 3.3% in 2013, 3.4% in 2014, 3.1% in 2015 and forecast to be 3.4% again this year.

Moreover, the drop in oil and commodity prices, while hitting commodity producing countries and companies, (Japan, Canada, Australia, Russia, Ukraine, Brazil and Greece all experienced recessions in 2015) has been a massive shot in the arm to consumers, akin to a large tax cut. Coupled with near zero inflation, consumers are recovering from the gaping wound to their living standards inflicted after 2008. Consumer spending amounts to up to 70% of GDP in the UK and US, so, the logic goes, when consumers prosper, so do economies.

The flaw here is that there is no real evidence that falling consumer spending or faltering economic growth precipitates stock market crashes or recessions. Or that rising consuming spending is an inoculation against them. Economic growth was respectable (and much better than now), in the run-up to the 2008 crash. But the crash still happened. Research has shown a negative correlation between economic growth and consumer spending in the US. When economic growth was higher in the 1950s and ‘60s, consumer spending occupied a lower share of GDP. Conversely, 2001-10 was a decade of relatively high consumer spending, but low economic growth. The key to economic growth seems to be the level of business investment**.

Declining consumer spending is thus a consequence of recession or stock market crashes, not its cause. One variant of Marxism argues, persuasively in my view, that the crucial element is the overall profit of companies. This profit level should not be confused with profit margins* (the percentage of profit compared to total sales), which can be increased by bearing down on ‘costs’ such as wages, and are currently very healthy. By contrast, overall profit levels are, it is claimed, near post-1945 lows for US corporations, and will, in time, lead to lower business investment. Earlier this month, economists at the mega-bank JP Morgan warned of a 10% fall in corporate profits compared to a year ago. “A double digit decline in profits is a rare event outside of recessions, having been recorded only twice in the last half century,” they say.

In other ways, too, the global economy is labouring under lowering clouds. Debt levels are huge, having grown by £37 trillion since 2007. Debt has doubled in emerging markets while increasing by around a third in developed economies. And this is after the last crash, which was transformed from a bearable ‘v shaped’ recession, into a global credit crunch by huge levels of private debt.

Overall corporate leverage (debt) is at a 12 year high. It stands at $29 trillion in the US and, it is estimated, one third of companies globally are not generating high enough returns to cover their funding. European banks are especially vulnerable, think of Deutsche Bank’s recent losses and credit risks, and may have to be recapitalised ‘on a scale yet unimagined’, says the former chief economist of the Bank for International Settlements. Taking on debt to buy back shares and thus bolster the share price and apparent health of the company, has become a major activity for large US corporations over the past five years. In the words of one financial strategist, “this is not for real economic activity.”

So the major actors in the global economy, the multinational corporations, whose health will determine whether stock markets crash and economies dive into recession, are not in reasonable shape.

You can continually dodge the recession bullet

Underlying all these predictions that the global economy can weather stock market storms is a fantasy – that recession can forever be averted provided the economic fundamentals are sound enough. Before the 2008 crash, similar siren voices were insisting there was nothing to be concerned about.

But history paints a more realistic picture. Two Russian researchers, Korotayev and Tsirel have calculated that there have been six recessions since 1973. This is using the IMF’s definition of a recession – six months where global growth dips below 3%. Using the accepted developed economy recession definition, two successive quarters of contraction, there were recessions in 1974/75, 1980/81, 1990/92 and 2008/9. As opposed to none from the end of the Second World War until the mid-seventies. So, if recent history is any guide, the question is not if, but when.

‘What happens when’ is the crucial question. Because the recession that awaits us is not an ordinary one. By ordinary, I mean a V-shaped downturn during which growths dips below zero and then swiftly recovers. The 2008 slump was not ordinary. It was so prolonged, sweeping and deep because it was accompanied by massive debt contraction on the part of over-leveraged banks and corporations. The signature products of the crash – credit default swaps and collatarized debt obligations - betray exactly what was going on.

Nothing in the official reaction to the 2008 crash, the lowering of interest rates and propping up markets with masses of confected money (QE), has done anything to deal with these underlying causes. It’s why one economist has condemned the worldwide governmental response as “self-contradictory and doomed to failure”.

Thus, the next recession is likely follow a similar course to the last, with the exception that governments have exhausted their ammunition to combat the contagion.

“Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,” said William White, chairman of the OECD’s review committee last month. “It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something.”

The critical assumption here is the inevitability of the next recession and what will follow its in wake. Then we will see if governments really are bereft of ammunition or can conjure yet more monetary tricks to kick the can further down the road. If they can’t, the consequences will be profound.

 *As far as I understand, it is quite possible for a business to increase its profit margins (by cracking down on wages, utilising zero hour contracts or slashing the marketing budget) but reduce its overall profit. Conversely a business can increase profit levels by expanding (taking on more staff, moving to bigger premises etc) yet reduce profit margins. But the long-term aim would be to increase profit and, in time, profit margins. Since 2008, many companies have followed, not the traditional maxim of ‘grow or die’, but rather ‘sweat or die’.

** If this is true, it is a damning indictment of a major plank of public policy over the last 40 years – slashing corporate taxation as a way, it is claimed, of giving businesses more money to invest and thus create jobs. An approach known as supply side economics. Actually business investment as a share of GDP has fallen in most developed countries since 1980. A period when recessions have become much more common.