Waking up to Sonny and Cher again

In what I suppose can be classified an example of irony, they keep repeating Groundhog Day on TV. But in order to live in Bill Murray’s head and experience the same day over and over again you don’t have to switch on ITV4. You just have to reside in Britain and pay the barest attention to politics.

The latest example of the recurrent waking nightmare comes in the form of the Daily Mail demanding (in the person of columnist Andrew Pierce who’s also a regular on Good Morning Britain) action against “an army of shirkers” on sickness benefits “which the British taxpayers are footing the bill for”.

According to the Mail “a senior government source” only a million of the 2.4 million people on universal credit or ESA and not required to carry out work-related activity are “so disabled they are incapable of doing any work”.

If this rings any bells, it might be because of the 2007 ‘independent’ report by former investment banker David Freud – commissioned by Tony Blair just before he left office – which concluded that the 2.68 million people then on Incapacity Benefit should be reduced by 1 million.

Despite Freud getting “his numbers wrong” (he only looked at recent claimants, not long-term ones), his eponymous report became holy writ for different governments. Its thinking was at the heart of the Work Capability Assessment (WCA) – the “functional”, non-medical test for all Incapacity Benefit claimants introduced by Labour in 2008. The WCA was founded on deliberately ignoring medical history and the opinions of doctors.

Although it was Labour’s brainchild, the Conservative/Lib Dem coalition found the WCA very much to their liking when they assumed office in 2010. In fact, Freud switched sides – if he had ever had a side beyond that of the rich – becoming a junior minister in the Cameron government.

Sick consensus

Judged in terms of the amount of sheer human misery the WCA has generated – it was revealed in 2017 that the number of disabled claimants attempting suicide had doubled in its first nine years  – I think the assessment has no equal among post-war domestic government policies.

There is no reason to think, by the way, that the current moral panic over work-shy fakers is any more grounded in reality than Freud’s report was. As a result of Covid, lockdown and the near collapse of the NHS, Britain is a much sicker nation. But these factors will be completely ignored by propagandists eager to replicate past tricks.

But the depressing reality is that these tricks work – in the sense of guiding the ‘national conversation’ in a certain direction. Or, to be more exact, returning that conversation to the lines it took between 2006 and 2015. Welcome to Groundhog Day politics.

Sir Kier Starmer’s Labour party, for example, has signalled that it is right behind the government’s approach to sickness benefit claimants. In January, in a speech delivered at Iain Duncan Smith’s think-tank (now there’s symbolism for you), then shadow Work and Pensions secretary, Jonathan Ashworth, decried the “the huge economic cost” and the “the increased health-related benefit bill” the taxpayer is lumbered with as a result of severely disabled people not getting jobs. Ashworth was referring to claimants in the ESA Support Group – exactly those who, according to the “senior government source” with the ear of the Mail, are not so disabled they are incapable of any work. I think you call it being on the same page.

Being there

But in the brief interregnum between 2015 and 2019, then Labour leader Jeremy Corbyn was definitely not on the same page. In fact he was reading an entirely different book. Centrist Starmer fans love to claim that while Corbyn was leading an ineffectual protest movement, the very serious Sir Kier is determined to actually win an election and make a difference by being in power. The first part is very likely to happen.

However, discounting for a moment that sabotage from within his own party may have prevented Corbyn from becoming Prime Minister in the summer of 2017, it is interesting to note the degree to which he yanked politics in a more humane direction simply by being there; by being leader of the opposition for four years

For example, I don’t think it’s a coincidence that the percentage of Universal Credit claimants sanctioned fell from 9% in 2015 to 3% in 2019, the exact period of Corbyn’s tenure. With him safely out of the way, ‘Boris’ Johnson’s “way to work” policy severely intensified the sanctions regime in 2022.

In 2016, with Corbyn’s Labour committed to scrapping the Work Capability Assessment, the government eased WCA conditions, excusing those with severe conditions from reassessment. By contrast, with the putative opposition now reading from the same hymn sheet, the government is planning to tighten the fitness to work test – by removing lack of bladder or bowel control or the inability to access an outside location from the list of “descriptors” used in the assessment.

It’s remarkable just how many U-turns Corbyn – whose leadership was under almost permanent siege from within – did force the government to make. And these were not all extorted when the government was enfeebled after losing its majority in the 2017 election. Many happened before that.

That as Chancellor under Johnson Rishi Sunak could signal “a decisive end to austerity” had a lot to do with the fact that Corbyn implacably opposed austerity from day one of his leadership. Indeed, that’s why he was elected by the Labour membership. He was also integral to forcing the original austerian, George Osborne, to beat an embarrassing retreat on proposed tax credit cuts.

Now, by contrast, with Starmer’s Labour committed to abiding by Tory spending plans, the renewed austerity earmarked to begin in 2025, will happen regardless of which party wins the next GE. Any momentum behind a campaign to abolish the Tories’ two child tax credit cap has been asphyxiated  by Starmer promising to keep it – one of the many “hard choices” (the phrase parrots Hillary Clinton) he has pledged to make if he enters Downing Street.

This pattern has been replicated across the policy spectrum – from taxes on the super-rich, to the treatment of refugees, from the powers of the security state over citizens, to the disavowal of public ownership of utilities. Corbyn shot holes in pre-2015 cross-party mono-politics – extracting some, not insignificant, concessions – while Starmer has methodically rebuilt the ramparts.

Iron Man

To be fair to Sir Kier he does have a stellar record on U-turns. Unfortunately, they all apply to Labour’s own programme – the social-democratic policies that got him elected as leader but which he has systemically discarded in favour of enervated third-term Blairism.

Corbyn’s mere presence shifted British politics slightly to the Left. His successor has used his position to return it to the sterile trajectory it took before the unexpected elevation of the MP for Islington North. And by stopping Corbyn from even standing again as a Labour candidate – an act with no precedent in British political history – to ensure that that fleeting effusion of hope never recurs.

Regardless of whether Starmer wins the next election or not, that’s his role.

Re-post: How capitalism has become too successful for its own good

Given that the Guardian newspaper has belatedly cottoned on to the idea that stagnating wages, rather than reckless banks, are the ultimate cause of our never- ending economic troubles (and started quoting David Schweickart), I thought I'd repost an article from January 2012.

I think it encapsulates an integral part of the impasse we are now facing. Good that other people are now catching up, albeit two years late ....

"There are many kinds of capitalism. Free market capitalism, which easily morphs into the dominance of corporations. Or social market capitalism, in which there is a larger role for the state and workers are represented on company boards. There is even state capitalism, in which everybody works for state enterprises, which pass themselves off as socialist, but exploit people just the same.

But now perhaps there are only two kinds of capitalism which count. Successful capitalism and capitalism which is too successful for its own good. The consequences of each are different but equally horrible in their own way.

Back in the roaring nineties successful capitalism was thought to be the only game in town. In Britain, Tony Blair’s New Labour exemplified the social democratic acceptance of capitalism. The “market” would hum along unmolested in the background and the government would skim off the tax revenue. Labour spokespeople waxed lyrical about the wealth-creating genius of the private sector and spent the proceeds on tax credits for the working poor, the National Health Service – health spending went up by 30 per cent – and relieving child poverty. It was, in essence, a deal.

But, said Left and green critics of capitalism, this was a myopic accommodation, trading short-term advantages for long-term disaster. Growth – the social ecologist Murray Bookchin said expecting capitalism not to grow was like expecting a lion to become vegetarian – might support enlarged public spending but would eventually make the planet unliveable.

In 2007, a British professor of engineering worked out that, based on an economy growing at three per cent a year, we would consume resources equivalent to all those we have consumed since humanity began as a species by 2040. In 33 years. I think the word you are grasping for is unsustainable.

As the writer Mark Fisher has said, successful capitalism was based on a fantasy: “A presupposition that resources are infinite, that the earth itself is merely a husk which capital can at a certain point slough off like a used skin, and that any problem can be solved by the market”.

To believe in successful capitalism you had to stick your index fingers in your ears and sing “la, la, la” very loudly. But both celebrators and critics agreed that capitalism worked.

Oh shit

But just as capitalism was swaggering around the globe, assured in its invincibility, disaster struck.

The global economic meltdown happened, the worst economic contraction since the Great Depression. $14.5 trillion of value was wiped from global companies.

The former masters of the universe, who meet at Davos, now speak of a “dystopian future” destroying the gains of globalization.“For the first time in generations, many people no longer believe that their children will grow up to enjoy a higher standard of living than theirs,” they warn.

Something had gone badly wrong.

The conventional explanation was that investment banks were too reckless, financial speculation overreached itself and the economy became dangerously skewed. But, in truth, capitalism had become too successful for its own good.

In the US, where the crisis was hatched, wages had stagnated since the mid-70s, while productivity – worker ouput that the employer benefits from – raced ahead. The result was not only spiralling inequality (the US was actually more equal than many western European countries in early ‘70s) and burgeoning corporate profits, but an orgy of personal borrowing so that consumption could be maintained despite the fact that earnings weren’t going up.

A cursory look at recent US economic history shows a series of bubbles. A massive stock market crash struck in 2000. The price of shares is dependent on the expectation of future corporate profits so crashes occur when there is a realisation of total over-optimism about profits. The crash was stopped from turning into a recession by reducing interest rates to below the rate of inflation for three years. Borrowing doubled – the house price and house building bubble ensued – but when that burst so spectacularly in 2007 there were no more bubbles left. Reality – the reality of stagnating earnings – could be evaded no longer.

A dusty old critique of capitalism suddenly became remarkably persuasive. That held that capitalism was inherently self-destructive. Each employer tries to keep wages, which are just another cost, as low as possible. But if they are too successful in that endeavour, the same workers with the low wages won’t be able to play their other vital role in capitalism, that of consumers of goods. Economic health depends upon the employer impulse to keep wages down being frustrated by another countervailing power. Capitalism can be too successful for its own good.

Flatliners

Worryingly for economic health, the US capacity for stagnating earnings has proved a very effective export. In the UK, earnings grew strongly throughout the ’80s and ‘90s but have flat-lined since 2003, four years before the onset of the ‘great recession’. Worker productivity, meanwhile, has kept on steaming ahead. Post-downturn wages rises in Britain are currently half the rate of inflation. Average wages are forecast to be no higher in 2015 than they were in 2001. France and Germany have followed a similar trajectory. Researchers describe an acute “decoupling”of earnings from growth.

The UK Resolution Foundation, which has produced a series of reports on living standards, worries that a return to growth won’t necessarily mean rising wages. Stagnating earnings also ensure burgeoning inequality (yes, it can get worse).

But there is another larger, elephant in the room, problem. The US experience demonstrates that you can’t, to use the economists’ elegant term, “decouple” growth from earnings forever, without eventually destroying growth as well (in industrialised, western countries at least, the experience of developing, exporting countries like India seems to be different). Earnings are purchasing power, in economics-speak ‘demand’, and growth cannot survive indefinitely without purchasing power.

The economic vista in front of us is that of a tsunami of bank debt inexorably making its way to shore. At the same time, earnings power which could lift countries out of recession, is exhausted. The level of personal borrowing is huge and, as we have seen, earnings stagnated or declined even before the recession.

That last factor cannot be wished away, or undone by governments even if they were inclined to. The reasons for stagnating earnings are analysed by a Resolution Foundation report. Technological change has obviated the need for low-skilled workers, firms have given precedence to share dividends over the pay of ordinary workers, outsourcing has increased, and the bargaining position of workers has been diluted. None of these factors will be reversed given current trends and the balance of power politically and economically.

The globe stops warming

It doesn’t have to be this way, you cry. And you’d be right. The Resolution Foundation report, Painful Separation, finds that in some European countries, namely Finland, Sweden and Denmark, there has been only mild divergence between economic growth and median pay. It is no accident that in Scandinavian countries, they say, “Recession? What recession?”

They haven’t killed the goose that lays the golden egg. They, if it isn’t stretching the metaphor too far, nurture their goose. They have effective countervailing powers like strong trade unions. They haven’t left successful capitalism behind. But there is a catch.

Amid all the deleterious social effects of the great recession – the homelessness, the riots, the suicides, the divorces – there was one undoubtedly progressive, though unintended, result. The sudden drop in economic activity achieved something international protocols and protesters invading airport runways had failed to. The rate of global warming was arrested. For only the fourth time in 50 years, carbon emissions fell.

It is clear that the kind of capitalism that Anglo-Saxon societies have been living through for the past 30 years is an ineffective form of capitalism. Growth rates have been unimpressive, financial crises have become more frequent and earnings have been held down. Too much power has been given to or taken by corporations and the rich. Capitalism has become too successful for its own good.

The South Korean economist, Ha-Joon Chang, in his book 23 Things They Don’t Tell You About Capitalism, argues convincingly that what we call “free market economics” has been shown to fail spectacularly. He puts the case for more assertive government control, different forms of ownership, the outlawing of financial products like derivatives, and the rebalancing of the economy away from finance and into the long-term production of manufactured goods. Capitalism can work if the harnesses are placed back on and it is guided in the public interest.

In other words, a return to successful capitalism, a capitalism that is in rude health. Chang eulogises the “miraculous” performance of South Korea in the ‘80s and ‘90s, which grew at an average of six per cent year. China today, he says, illustrates what can be done if free market prescriptions aren’t followed.

The problem isn’t the economic reasoning. The problem is that the world, ecologically, cannot cope with the replication of the Chinese or South Korean economic success stories. If earnings in the US had continued to track GDP growth, as they had done from 1945 to 1973, the average household would have earned $80,000 a year, not $50,000 as they in fact do. Even accounting for the spike in borrowing, consumption has been suppressed in US as capitalism has become too successful for its own good. It is revealing that Chang mentions the word “environment” just once in his entire book.

Chang, like John Maynard Keynes seventy years ago, wants to save capitalism from itself. 

Post-capitalism

But the truth is that neither successful capitalism, nor capitalism that is too successful for its own good, presents a remotely desirable prospect.

The latter leads, in Ann Pettifor’s words, to “dramatically higher levels of unemployment, the loss of savings, home foreclosures, bankruptcies, emigration, suicides, divorce, social unrest and political upheaval – to name but a few of the consequences.”  The former provides a swifter route to the dystopian future of global warming.

Awareness of the awful consequences of both alternatives leads to the realisation that the only rational option left is some form of post-capitalism. It doesn’t mean, in the caricature of one British government minister, everyone running around in Maoist boiler suits, but it does entail an end to the growth fetish and ensuring a secure standard of living for everyone. What “post-capitalism” is like in detail is what we should be concentrating on now.