Monday, 13 September 2021

Corporate Socialism and the Capitalist Underclass

 

Politics now – witness Keir Starmer’s neo-Blairite recapturing of the UK Labour party seems to inhabit a mental universe of its own creation rather than trying to deal with the inconvenience of reality. And occasionally the dissonance reaches comical heights of absurdity.

Boris Johnson, for example, when asked recently to justify the ending of the £20 uplift for Universal Credit recipients in October – which the government’s own internal modelling concedes will have a “catastrophic” effect – replied that it was his “strong preference” that people saw their wages rise “though their efforts” rather than through the taxation of other people.

Effort you say. Leaving aside that most people on Universal Credit are actually in work – and thus already are making an effort – the preferences of conservatives don’t seem to stretch to the most glaring welfare dependence affecting society today – the mammoth no strings giveaways to corporations and the immensely wealthy. Which curiously aren’t ending next month and necessitate about as much effort as turning a computer on.

Austerity in reverse

In the aftermath of the Great Financial Crisis of 2008, the world’s central banks (state banks like the Bank of England or the US Federal Reserve) literally created $10 trillion. In response to the Covid-19 pandemic, they created a further $9 trillion. For the past 18 months, central banks have generated $834 million an hour. This goes by the innocent sounding name of Quantitative Easing (QE for short).

QE is initiated by the central bank bringing into being a batch of new money (often called ‘fiat money’ i.e. money without the backing of gold – from the Latin meaning ‘let there be money’. Don’t picture a Fiat 500, that doesn’t capture its size). This is used to buy assets, usually government but also occasionally corporate bonds (debt), from banks, insurance companies or pension funds.

This has two main effects. One is to force interest rates down to very low levels, thus enabling heavily indebted institutions to survive. And the second is to create – by the buying of the assets – a huge mass of money ($13.9 million each minute) seeking investment opportunities and which is incentivised by the low interest on government bonds to go into other assets such as shares, property or commodities. As a result of this influx, their price increases.

QE is invariably presented as “pumping” money into the economy. In reality it involves pumping huge amounts of money into the financial system. Banks are not inclined to lend to the ‘real’ economy, which is the official story behind QE, if returns from buying and selling other assets (such as company shares) are higher. Corporations are not motivated to invest in plant or equipment if they can make more money from buying back their own shares, whose value is guaranteed by QE. Mergers and acquisitions – buying a company, asset-stripping it and selling it on – are also fuelled by the vast funds created by QE.

In theory, QE can be an emergency measure, helping the economy through a rough patch, and then being reversed so that ultimately no new money is created. But this is not how it turns out in practice. The Bank of Japan is still engaging in QE 20 years after it pioneered the policy. In 2018, the Federal Reserve started ‘quantitative tightening’ – the selling or retiring of assets on its balance sheet – but had to call a halt to the process less than a year later because of a negative reaction from markets. This was, it should be stressed, before the pandemic.

Rich bono

Unsurprisingly given how it works, QE has a hugely regressive effect on inequality. It’s not rocket science to understand that if the value of shares goes up, the prime beneficiaries are rich people because they are most likely to own shares. Additionally, banks and corporations benefit because they own shares in each other. “Owners of property have made out like bandits,” said hedge fund owner Paul Marshall in 2015. “In fact, anyone with assets has grown much richer. All of us who work in financial markets owe a huge debt to QE”.

The latest, Covid-inspired, rush to QE has massively exacerbated this inequality. Five million more millionaires were created during the pandemic, while the number of people worth more than $50 million increased by a quarter. Stock markets have hit record highs despite precipitous drops in GDP. In Britain, contrary to all previous recessions, property prices have continued their upwards trajectory. The world is awash with central bank money,” says economist Grace Blakeley, “and it’s all flowing up rather than trickling down”.

Take from the poor and give to the rich

The QE reflex exposes just how right-wing – across the political ‘divide’ – our politics is, notwithstanding ephemeral lapses like Jeremy Corbyn’s Labour party. In 2019 the China-based economist Michael Pettis mused over two different ways to stimulate an economy – “giving to the rich” and “giving to the poor”. Giving to the rich involves tax cuts for business and the wealthy and policies such as QE “which tend to cause a rise in the prices of assets, most of which are owned by the rich.” Giving to the poor, in Pettis’s description, entails cutting taxes on the not wealthy, funding social safety nets, creating jobs or “setting minimum basic income policies”.

It’s revealing that the response of the British government – and other western governments – to the financial crisis and the Covid pandemic has almost exclusively centred on the first option. In addition to endless QE, corporation tax has fallen from 28% to 19% (it is slated to rise to 25% in 2023 but whether that will happen is a moot point). The top rate of income tax was also cut by George Osborne in 2012 and, if that wasn’t enough, capital gains tax (the tax you pay when you sell shares) was slashed by the soon-to-be newspaper editor in 2016.

As for the second option, it is not a question of giving to the poor but rather of taking from them. Taxes which affect poor people the most, such as VAT and now National Insurance, have been hiked. Social safety nets, by contrast, have been cut – witness the benefit freeze, sanctions, and the £30 cut in weekly payments to disabled people. Creating jobs has been left to the tender mercies of the private sector, and as for basic income policies, I think there’s been a pilot project in Finland. In Britain, destitution and food banks are the preferred course of action.

Boris Johnson’s “strong preference” for people to see their incomes rise “through their efforts” strangely only applies to folk without share portfolios. “The imbalance is unbelievable,” says Robert Reich, former labour secretary under Bill Clinton in the US, “Socialism for the rich, corporate socialism, but the harshest form of capitalism for most working people and the poor.”

The whimper of capitalism

 Of course, the notable feature of “corporate socialism” – apart from its colossal unfairness – is that it’s not capitalism anymore. QE is a massive distortion of the fêted free market. The theory of capitalism is that asset values are based on economic fundamentals – if stock prices rise that is because people believe, maybe mistakenly but genuinely, that the companies in question will generate profits in the future. Under the QE regime, they are rising because the state, in the guise of ‘independent’ central banks, is injecting huge amounts of money into markets.

Former Greek finance minister Yanis Varoufakis sees this as a momentous change. Pre-financial crisis capitalism (before 2008) may have been based on “daylight robbery” – the extraction of rent from a market controlled by Coca-Cola or General Electric – but it was still rooted in some kind of market and driven by private profits. That is no longer the case:

Then, after 2008, everything changed. Ever since the G7’s central banks coalesced in April 2009 to use their money printing capacity to re-float global finance, a deep discontinuity emerged. Today, the global economy is powered by the constant generation of central bank money, not by private profit.

To be more precise, the pursuit of private profit is still at the heart of the system – we haven’t socialised hedge funds – but the profit urge does not ‘make the world go round’. Central banks do.

 Market society, not economy

The supreme irony is that while the economic summit of society is changing into something that is not capitalist, capitalist values are penetrating ever more deeply into the texture of life. Economic and monetary values dominate politics and morality and we seem unable to value non-economic realms without assigning them a financial status, such as “natural capital”.  Individual endeavours, such as learning, physical fitness, volunteering, or nurturing ‘mindfulness’ are frequently seen in terms of their effect on our employability and careers, and undertaken for that reason.

In the 1980s, the social ecologist Murray Bookchin pioneered the idea that we don’t just live in a market economy, but also a market society. By the middle of the 20th century, he said, “large-scale market operations had colonised every aspect of social and personal life.” The prognosis in the second decade of the 21st century is that we seem to live in a market society without the concomitant market economy. Or possibly an irredeemably rigged market economy.

How long will it last?

The ultimate question is whether this regime of corporate socialism is sustainable. Japan, “the petri-dish” of Quantitative Easing, been following the policy since 2001 – several years before the rest of the advanced capitalist world followed in its wake. Indeed, it has deepened the practice considerably, coming to own around half the company shares quoted on the Tokyo stock exchange. “If this trend continues it is evident that the Japanese state will become the de facto owner of the bulk of what has been the hitherto privately owned enterprise sector,” wrote economist Harry Shutt in 2019.

However, from the point of view of the powerful and wealthy in Japan, the discernible effects don’t appear catastrophic. Profit has continued to be extracted, well-known corporate forms have endured and, if there has been a quiet revolution in ownership under the surface, it hasn’t resulted in a shift in power. In fact, inequality, low growth, ferocious competition for jobs and little prospect of pay rises, have, far from inculcating a spirit of rebellion, fuelled a culture of conservatism among Japanese youth.

The rulers of our society don’t have, despite the propaganda, a fervent ideological commitment to the free market, but merely a belief in private property. If that endures, they are satisfied.

The lingering question is, if Japan has indulged the QE fixation for two decades without presaging economic Armageddon, are western economies free to follow its example and practice QE for years, decades even, and emerge basically unscathed? Or are we preparing the ground for a financial collapse of mammoth proportions?

I want to address this question in the second part.

 

 

 

 

 

 

 

 

 

 

Saturday, 14 August 2021

The Fiction of Consent – The Unfreedom at the Heart of Liberalism

 

If liberalism has one guiding thread it’s that nothing should happen to a person without their consent.  John Locke, probably the most famous philosopher in the history of liberalism, argued that “no-one ought to harm another in his life, health, liberty or possessions.”

Good intentions were rather undermined by the fact that in Locke’s Britain, a bastion of liberalism since the Glorious Revolution of 1688, the number of offences for which the death penalty applied rose to around 250 by the early 19th century. A person could be hanged for stealing a handkerchief or taking an unauthorised clipping from an ornamental bush. A slight impediment to health, one might think.

Locke himself invested in the slave trade and thought children as young as three ought to be sent out to work.

But, nonetheless, the principle was laid down.

The liberal dictatorship

In addition to a penchant for hanging peasants, early liberalism was implacably hostile to democracy. Faced with the huge Chartist petition of 1842, the liberal historian and politician Thomas Macaulay declared universal suffrage “incompatible with civilisation”. Chartist leaders in Britain were jailed and the mere demand for the vote often treated as a criminal act by the ‘liberal’ authorities.

However, in the intervening years the opposition of most liberals to democracy dissipated to such an extent that ‘liberal-democracy’ is now seen as an eternally natural state of affairs, rather than the coupling of once sworn enemies.  And in the reconciliation the liberal principle of consent has survived. Governments, it is proclaimed, are dependent on the will of people. They are compelled to seek a popular mandate. Nothing should be done without the people’s consent.

However, I want to argue that both economically and politically, the liberal – now liberal-democratic – principle of consent is a sham. In the words of Noam Chomsky and Edward Herman we manufacture consent, we don’t seek it out.  A society founded on genuine consent would look incalculably different to the one we now inhabit.

I will illustrate this hollowness by looking at two seemingly disconnected topics – UK Labour party leader Keir Starmer and “modern slavery”.

By any means necessary

Keir Starmer was overwhelmingly elected as leader of the Labour party in 2020. In his election campaign, he presented himself as a crusader for striking miners and printers. If elected, he promised to make “the moral case for socialism” based on ten pledges – including support for common ownership of utilities, abolishing the House of Lords, an end to ‘illegal wars’, and reversing cuts to corporation tax. He also set himself up as the unity candidate, promising “an end to factionalism”.

In retrospect – after a year and a half of Starmer’s leadership – all this seems utterly farcical. He has shunted the party inexorably to the Right, urging activists to embrace the legacy of Tony Blair, a man venerated as “the master” by George Osborne.  Starmerism has involved courting the support of billionaires, seeking Parliamentary candidates from outside the party and trade unions, defenestrating the left-wing leader of Scottish Labour, forcing shadow ministers to apologise for being ‘anti-business’, refusing to make any spending commitments and being outflanked from the left by the Conservatives, for example on nurses’ pay. In the words of an aide, rather than making a moral case for socialism, “all that nonsense” – meaning Corbynite policies – had to be ditched.

And far from seeking unity, Starmer has waged an unrelenting war on opponents in the party, removing the whip from his predecessor for telling the truth, sacking left-wingers from the shadow cabinet on spurious grounds and expelling and suspending members who disagree with him, including swathes of left-wing Jews.

It is sometimes argued that Labour party members – all half a million of them – are unfortunate, but necessary, collateral damage in Starmer’s quest to make Labour “electable”. But this is belied by Starmer’s plummeting approval ratings and the fact his predecessor’s policies – if not the man himself – were popular with voters.

However, in assessing Starmer’s performance, mainstream commentators don’t condemn the duplicity he exhibited in order to get elected as Labour leader. In fact they laud him for shrewdness or political nous. Because Starmer encapsulates – in telescoped form – what ‘democracy’ under neoliberalism, or ‘new liberalism’, is. It is not about seeking to define and represent the popular will, but to obtain – by any means necessary including lying – consent for a pre-ordained set of policies.

Without doubt pre-neoliberal Parliamentary democracy has often manifested exactly the same tendency. But it has been distilled into an art form in the last four decades, with real power usurped by pan-governmental organisations like the IMF. Governments are now placed in a straitjacket, compelled to support balanced budgets and accompanying austerity, liberalized financial markets, low corporate taxes, and personal tax rates that don’t prompt an exodus to the Bahamas on the part of the very wealthy. Given the resentments that this state of affairs inevitably generates, ‘democracy’ is largely about ensuring they are directed at powerless targets, usually immigrants and benefit claimants.

Curiously, however, even though the spirit of democracy can be unashamedly trampled on, the formalities can’t. Free and fair elections must be periodically held and consent, by hook or by crook, extracted. It is an irony of history that just as a wave of democracy rolled across the world after the fall of the Berlin Wall, toppling dictatorships and one-party states in its wake, the actual content of democracy was hollowed out. Governments, whatever their theoretical commitments, were invariably compelled to accept the strictures of IMF Structural Adjustment Programmes and the dictates of the Washington Consensus. Post-apartheid South Africa is a textbook example of “democracy without democracy”. Elitist fears expressed at the dawn of universal suffrage a century and a half ago, that democracy would swamp liberalism, have proved groundless. Precisely the opposite has happened.

Liberalism and slavery

The same liberal neuroses about consent can be observed in the furore over “modern slavery”. Governments bend over backwards to condemn it in the strongest possible terms, charities pledge to eradicate it, and the media join the chorus.

This is not to deny that modern slavery is a serious problem, and a separate category from the conventional employer/employee relationship. But the wall erected between “compelled labour” and the normal workings of capitalism is supremely ideological. In the urge to locate “exploitation” as happening solely when a worker is coerced – the UK’s Gangmasters & Labour Abuse Authority defines its aims as “preventing worker exploitation” – another claim is implicitly made: that when the labour exchange is free and consensual exploitation doesn’t occur.

But this is nonsense. In the words of academic Neil Howard, this fictional binary “protects the system from the moral outrage that might otherwise challenge its hegemony”.

Capitalism – i.e. an economic system based on ‘free’ labour exchange – cannot do without reams of people without property who are compelled to rent themselves out in order to procure the means to physically survive.

Even if one is to ignore the millions of people on the margins of the global economy who choose to submit to servitude or trafficking because in conditions of dire poverty they represent their least worst options, a comparatively wealthy country like Britain shows the depth of the well from which exploitable people are drawn.

There are, it is estimated, 16 million people in the UK who have less than £100 in savings. And nearly 80% have some form of personal debt in the shape of credit cards, personal loans, bank overdrafts and payday loans. In such circumstances – and in those of a benefit system that will sanction claimants who can’t prove they are looking for work – saying no to a job offer is not, practically, possible. In previous, more honest, eras, this was called wage slavery.

Exploitation through the ages

Marxism is frequently presented as nightmare ideology that wants to make everyone the subject of an all-powerful state and was responsible, in the last century, for killing millions in gulags and famines. But the hysteria partly comes from Marxism’s insistence, uniquely in economic thought, that exploitation doesn’t just occur under patently coercive arrangements like slavery and feudalism but also when people, on the surface, voluntarily choose to work for an employer.

“There’s only one basis that any capitalist ever hired a worker,” says author Richard Wolff, “and that condition is ‘you gotta produce more for me than I pay you for coming here to do it’”. In this sense, capitalism is no different from prior economic systems, or the vestiges of such systems that remain. In all cases, a small minority exploits the vast majority in order to extract a surplus from them. “Capitalism, even though the workers are not slaves or serfs, does replicate those two systems in this particular way,” says Wolff. “One group of people – the employees – go to work on condition that they produce a surplus that the employer gets.”

You may baulk at the notion that someone like Lionel Messi (salary €71 million at Paris Saint-Germain F.C.) is exploited. However, what cannot be honestly denied that is corporations and other businesses, practically and legally required to maximise profit, view the world’s population as either a resource ripe for exploitation or a human mass to be left to rot (“the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all,” said 20th century economist Joan Robinson). In the latter case, the human material is created for trafficking and forced labour in the West.

And in most Western countries, exploitation – exploitation that is of workers who ‘freely’ consent to do their jobs – is intensifying. In Britain, in the wake of the financial crisis, zero hour contracts have mushroomed and many workers – for example builders or delivery drivers – are falsely reclassified as ‘independent contractors’ in order to save the employer from having to fork out for holiday or sick pay. They can also earn below the minimum wage because they aren’t officially paid a wage and don’t have set hours.

In addition, as pandemic conditions slowly lift, many employees are finding they are being sacked and told to reapply for their jobs based on inferior conditions. Despite the rhetoric about the inestimable value of key workers in the worst stages of the pandemic, Tesco, British Gas, British Airways and local councils and have all tried to engage in this “industrial thuggery”.

In such circumstances what better way to shield capitalism from justifiable anger, than to focus all attention on the plight of slaves and coerced workers who, it is claimed, exist entirely outside of its legitimate confines?

The cooperation of the exploited

But there is a deeper reason, in my opinion, for this blindness of liberalism. In the 1970s, psychologist Stanley Milgram, author of the famous obedience to authority experiments, noted that for obedience to work seamlessly, those subject to it had to believe that their submission was a voluntary choice. “The psychological consequence of voluntary entry is that it creates a sense of commitment and obligation,” he said, “which will subsequently play a part in binding the subject to his role.”

Any endeavour – and that includes the ubiquitous labour contract – is so much easier to perform if the victims of it can be convinced to cooperate. Enforcing coercion is hard. It requires perpetual surveillance and overcoming an ingrained human resistance – some have called it counterwill – to bowing to another’s desire.

That is why liberalism insists that consent exists in political and economic arenas when patently it has to be fabricated. But if consent can be given, it can also be withdrawn, if only spiritually at first.


Wednesday, 30 June 2021

Worthless but more powerful than ever – the non-death of Britain’s right-wing media

 

A couple of weeks ago the Financial Times reported that the Sun newspaper, bastion of working class conservatism for nigh on half a century, had been marked down by Rupert Murdoch as a “worthless asset”.

The tabloid, which in the ’90s claimed it alone could sway general elections, had been so denuded by falling sales, legal costs related to the phone hacking scandal, and damages paid to civil claimants, that it made a pre-tax loss of £201 million in 2019-20 and had “zero carrying value”. The management of Murdoch’s News UK expected it “would not return to positive growth”.

Those who lament the Sun’s baleful influence on this country’s political and ethical culture – from smearing dead football fans as hooligans, to hounding gay celebrities, to, with certain Blairite lapses (if lapses they can be called), cheerleading for Thatcher – might indulge in a fully justified bout of schadenfreude.

But if there is such a thing as ‘pyrrhic crowing’ this is it. For, despite its financial woes, the right-wing media is as strong as ever in Britain.

There was a brief period of optimism around the time of the 2017 General Election when it seemed like shoestring news sites like Evolve and the Canary, and even single person blogs (not this one) could go under the radar of the mainstream media and reach millions. But that window was abruptly slammed shut, as traditional media organisations upped their social media game (News UK claims the print version of the Sun and its website reach a total of 36.5 million people), and a Facebook algorithm change meant that alternative sources of news found their ‘shares’ drastically reduced. 

One little appreciated reason for the Conservative victory in 2019 – beyond Brexit and Corbyn’s sullied reputation that is – was the diminished influence of alternative media and the restored power of the mainstream press.

The huge decline in newspaper sales in Britain is not an illusion – they have dropped by two-thirds in 20 years according to one estimate  – but the influence of the press, and the mainstream media more generally, is felt far beyond the number of sales or subscriptions.

As shown by the Hancock surveillance (and the absence of any need to explain how it occurred), the Sun still has wields huge influence and, even if it is a financial dead weight, will not be permitted to go under.

Notwithstanding diminished sales, the right-wing press still commands a palpable physical presence and is basically assured that its leading stories will be amplified by broadcasters or least relayed through regular paper reviews.

In Bad News for Labour: Antisemitism, the Party and Public Belief (the first chapter of which is an eye-opening account of how an invented narrative pushed by the right-wing and liberal media can become firmly lodged in the public mind), one participant who doesn’t read newspapers explains how he came to his belief that 20% of Labour members had been accused of antisemitism:

Headlines I see. I work in Tesco’s. As I walk into the shopping mall I read the headlines every day …. Most of my perception was based on – as I say I don’t read newspapers – my perception was based on the number of headlines and how long it was in the papers. [participant 4 nods in agreement]

And in an era of all-pervasive social media reach, and permanent smartphone connection to the Internet on the part of most of the population, the reach of the press – quite apart from actual newspaper sales – is greater than ever. Web portals, search engines, Facebook and Twitter will all place the output of the mainstream media in front of users so even if you consciously don’t read a newspaper, you will find it hard to avoid knowing what they are saying.

This is reminiscent of Noam Chomsky’s and Edward Herman’s concept of “big news” in 1988’s Manufacturing Consent, except that these “sustained news campaigns” are even more potent than they were three decades ago.

We are reaching a state where news and advertising are converging. This is not necessarily because news is becoming the slave of advertising, though that does occur, but because news is taking on the qualities of advertising. Advertising works through endless repetition so that even if it is incredibly annoying (or perhaps because it is) the brand name becomes ingrained in the observer’s brain and they may choose it if they ever buy that product.

News now – amplified through multiple platforms – works on the same principle. Deliberate censorship is unnecessary because in our information-saturated society unwelcome news can be guaranteed to reach only a small minority if it does not receive the blessing of escalation by powerful interests.

There are many important and validated news stories – for example, the purging of Labour party members by Keir Starmer, falling life expectancy, or the ongoing atrocity of the UK ‘welfare state’ – that fail to make even a ripple on public consciousness because they are not amplified.

In a compulsively busy society such as this one, the attention of most consumers of news is necessarily slight with most relying on snatches of news to form a picture of what is going in on the world. There is, as others have said, “a crying need” for the Left to invest in its own media because a social media presence, however strong, cannot compete with a uniformly hostile mainstream media. But even if new investments are made and TV stations created, the gatekeepers will still do their utmost to ensure the vast majority remain unblissfully unaware.