It's only Marxist if the Labour Party does it

Reports that Chancellor Rishi Sunak is ‘considering’ raising corporation tax from 19 to 24% are fascinating not least because of what they say about our mainstream media.

Because no-one in the MSM seems to have noticed that even mooting such an idea completely contradicts the foundations of Tory economics.

Sunak, it is alleged, is mulling increasing corporation tax by 5 percentage points in order to boost revenue by £12 billion. But the crux of Conservative economic thinking going back decades is that the way to increase the tax yield is actually to cut rates on the wealthy and big business.

This conviction underlay George Osborne’s decision to reduce the top rate of tax from 50 to 45p in 2013. And it undergirded Tory minister David Lidington’s 2017 assertion that corporate tax yield has been ‘shooting up’ since tax levels started plummeting precipitously after the coalition took office.

The theory, as most things seem to in British politics, comes from America. In 1974 – so the story goes – economist Arthur Laffer met Dick Chaney in a Washington bar and drew a diagram on a napkin showing that increasing tax rates beyond a certain levels causes tax revenues to decline, not increase. Apparently, high tax rates compel the wealthy to work less or evade taxes (which obviously the government is absolutely powerless to prevent).

Though the napkin itself did not survive, in the next decade when Ronald Reagan was president, the ‘Laffer Curve’ justified swingeing cuts in personal taxes for the rich and seemingly endless reductions in corporate tax rates.

And the ethereal napkin, despite its empirical emptiness, has continued to guide the policy of western (in fact most) governments. Just four years ago, Theresa May was proposing a corporate tax rate of 17% and was prepared to go even lower to attain the most ‘competitive’ rate in the G20.

Up to now, however. If the theory is correct Sunak should be advocating further tax reductions precisely in order to increase revenue. But instead he’s arguing for a tax rise, in the process damning the entire theory as completely wrong-headed.

Before this latest leak, cracks were already showing. In the last election campaign, Boris Johnson committed to delaying May’s corporation tax cuts in order to fund the NHS, which is utterly nonsensical is you believe, as Johnson did, that cutting corporate tax increases the tax yield. But Sunak’s musings, even if they are not acted upon, drive the proverbial coach and horses through Conservative economics.

But it won’t be just the Conservative party that will be affected. At the last election, as we know, Marxist Anti-Christ Jeremy Corbyn – who proposed raising corporate tax to 26% (2 points is all the difference between sensible economics and wealth devouring Stalinist madness) – was banished to the outer darkness by all that is holy. The new model Labour party has bought into the idea that he lost because he was ‘too left-wing’. Indeed, Blairism and Brownism were conspicuous by their unquestioning acceptance of the precepts of the Conservative economics and the private good/public bad dogma.

But now the Conservative party itself seems to be rejecting some of those very precepts. So what is the Labour party to do?  Shadow Chancellor Annaliese Dodds, who recently mooted a wealth tax only to find herself out on a limb, is surrounded by convinced Blairites in the shadow Treasury team. Bridget Phillipson, Pat Mcfadden and Wes Streeting would have great difficulty – probably more difficulty than Conservatives who have a pragmatic side – in backing corporate tax rises. Indeed Phillipson can’t even commit to abolishing hospital parking charges for NHS workers.

   
It may be that the Sunak story is all wind and no substance. Some of us still remember Theresa May’s ‘burning injustices’, her call for responsible capitalism and proposal for workers on company boards, the sum total of which, in the fullness of time, was the banning of toilet charges at mainline train stations. But even if Conservative corporate tax rises turn out to be oxymoronic, the mere fact that they were put ‘out there’ and not denied is incredibly significant.

Despite what Jordan Peterson says, the world is not your lobster*

I’ve been enticed back into reading about Jordan Peterson and his exemplary lobster. For the uninitiated, Peterson – ‘classical liberal’ and self-help guru – believes we should be inspired by the not so humble lobster, willing to fight all-comers (well other lobsters) for the best places to live. The lobster (and also the merciless wren, the chicken, the chimpanzee etc.) is an example of nature’s dominance hierarchy which is a “near-eternal aspect of the environment”. Older than trees in fact.

Humans, according to Peterson, are just as subject to the unforgiving laws of this dominance hierarchy. Despite our cultural pretensions and elaborate societies it still operates under the surface. “It’s inevitable,” avers Peterson, “that there will be continuity in the way animals and human beings organise their structures”. Thus, brutal economic inequality – the fact that 85 ultra-wealthy people at the top of society have as much as three and half billion at the bottom – is given a biological justification.

Read the memo: it’s inevitable, get used to it and don’t – the ultimate Peterson sin – start getting resentful.

The immediate temptation, to which many have succumbed, is to say Peterson’s examination of the natural world is hopelessly partial. Why choose to focus on the lobster or the status-obsessed chimpanzee and pass over the egalitarian, sharing bonobo or the unaggressive, vegetarian gibbon? An argument that can be traced back to Kropotkin’s highlighting of mutual aid among animals, in contrast to the simplification of the survival of the fittest.

Civilised hierarchies

However, this argument rather misses the point, or to be more precise, it concedes too much before it gets to the bone of contention. Because human hierarchies – that is actually existing hierarchies that have dominated the history of human civilisation before reformers, revolutionaries and utopians messed with them – are radically and qualitatively different to animal dominance hierarchies. In fact the latter don’t merit the appellation ‘hierarchy’ at all, the word originally applying to the rule of the high priest in ancient Greece, a uniquely human dispensation.

Only in early hunter-gatherer societies, can human arrangements be said to resemble dominance ‘hierarchies’ among animals in the sense that charismatic and talented individuals might acquire power. And even then, the evidence suggests tribal members were aware of the dangers of power becoming entrenched and embodied in certain individuals and took steps to ensure that, uniquely in the natural world, economic relations, family structure and political life were regularly shuffled.

The history of civilisation in all parts of the world, by contrast, and despite its undoubted benefits, is the history of dynasties, aristocracies, land-owners and empires on the one side and serfs, slaves, indentured labourers, and workers on the other. Slavery was an unmissable feature of ‘civilised’ society for thousands of years. It’s not a Western invention or imposition; it was only abolished in China in 1908.

In such societies, the facts of birth and inheritance were all-important. Intelligence, cunning, physical strength, charisma – or whatever other attributes Peterson thinks differentiates winners from losers – would at best have enabled the lucky incumbent to progress within their caste or class. Only very rarely would they have permitted them to rise within the hierarchy itself. Hannah Arendt’s description of the “caste conceit” of the British aristocracy in the 19^th century – “the pride in privilege without individual effort and merit, simply by virtue of birth” – could be applied to ruling castes and classes throughout history the world over.

‘God hath placed them there’

Such hierarchies were, in Murray Bookchin’s description, were “clothed in ideologies” because they were anything but natural. They were, however, intended to endure and such longevity was not merely secured by immense military power but also because most people, especially those oppressed by such hierarchies, were assiduously convinced of their, often divinely-ordained, legitimacy. Something animals obviously can’t be. Lobsters don’t bequeath their hiding places to their offspring nor insist to other lobsters left with stringy pieces of seaweed as camouflage that it’s blasphemy to object to such inequality because it’s been prescribed by the great lobster god.

Hence belief systems like the medieval ‘Great Chain of Being’ in which everyone – serfs, vagabonds, yeomen, lords etc. – had a recognised position because ‘God hath placed them there’.  In 17^th century England, parish priests issued weekly instructions for servants to obey their masters and behave “lowly and reverently” towards their betters.

In such societies, the personal attributes and characters of rulers might be a source of regret or rejoicing, but they were irrelevant for determining the power they wielded. As Bookchin noted about now infamous European monarchs:

Figures like Louis XVI of France and Nicholas II of Russia, for example did not become autocrats because they had genetically programmed strong personalities and physiques, much less keen minds. They were inept, awkward, psychologically weak, and conspicuously stupid men (even according to royalist accounts of their reigns) who lived in times of revolutionary social upheaval. Yet their power was virtually absolute until it was curtailed by revolution.

But, but ...  I’m guessing Peterson would instantly interject were he to be – unlikely I know – reading this: what you’re saying might be true for human hierarchies deeply ensconced in tradition and time-encrusted practices, but since the advent of liberal-democracy and capitalism and the demise of ancien regimes it has been possible for people born in difficult circumstances to, through their own native ability and self-discipline, rise in society and transform their lives.

“… the most valid personality trait predictors of long-term success in Western countries,” says Peterson “are intelligence … and conscientiousness.”

As a precursor, “success” needs to be defined. Because so much intelligence, conscientiousness and talent that doesn’t fit into money-making purposes and interest those organizations that hire people to do their bidding (and into which democracy is not permitted to intrude) simply withers or is actively suppressed.

Yea, even unto the Middle Ages

However, the other side of the coin is that liberal capitalism’s reputation for social mobility – progressing up the income scale during your lifetime – has been greatly exaggerated even on its own terms. So many of our current political leaders have emerged from privileged backgrounds and wealth amassed before y’know everyone had a crack at it. David Cameron is descended from King William VI and was brought up in a stately home, Boris Johnson’s full name is Alexander Boris de Pfeffel Johnson and Donald Trump inherited his fortune from his property tycoon dad.

Social mobility’s heyday under capitalism was actually in its post-war social-democratic incarnation when the rich were heavily taxed and finance forced into productive investment. Since the 1980s, after capitalism became more purely capitalistic, it’s gone down. A 2017 report found that in the US after the ‘inflection point’ of 1980, inequality skyrocketed and social mobility started “declining sharply”. The British Social Mobility Commission reported last year that inequality is now “entrenched from birth to work” and according to the UN Development Programme a “great new divergence” is taking place around the world, leaving educated young people stuck in low wage, dead-end jobs:

“What people perhaps 30, 40 years ago were led to believe and often saw around them," an UNDP administrator says, “was that if you worked hard, you could escape poverty.” Yet in many countries today, he says, upward social mobility is “simply not occurring” anymore.

This is modern-day capitalism, where intelligence and conscientiousness aren’t, after all, enough to help you lead a better life. And by the way, this conclusion is not impaired by Peterson’s revelation that human and lobsters share “basic neuro-chemistry” so you can administer an anti-depressant to a lobster and it will fight “harder and longer”. Anti-depressants have been administered to millions of human beings since the late 1980s, making evidently no difference to rates of social mobility.

Entrepreneurs and capitalists

Why, you might ask, does it have to be this way? Because capitalism is at heart a system where great wealth is extracted by people who do nothing to earn it. It isn’t, despite the advertising, a justice dispensing machine where, notwithstanding the rough edges, diligent and creative entrepreneurs are rewarded for the improvements they bring to people’s lives.

As author David Schweickart has astutely shown, the entrepreneur is capitalism’s “white knight”, routinely unveiled to justify ‘returns to capital’ that have nothing to do with inventions or improving methods of production. Vast fortunes are made and replenished daily simply by virtue of the ownership of real or financial assets:

In a capitalist society, enormous sums are paid to people who do not engage in any entrepreneurial activity or take on any significant risk with their capital. Trillions flows to shareholders who make an entirely passive contribution to production.

In fact, despite the enormous changes wrought by the economic system known as capitalism, the capitalist bears an uncanny resemblance to the landowners and landlords of past centuries who commandeered immense wealth and power without doing anything to deserve it. Indeed, capitalism has frequently coexisted with small coteries of landowners in most parts of the world. Which is why land reform was such a seminal political issue for numerous countries in the 20^th century – something you might be aware of if you manage to get over a fixation with capitalist white hats and communist black hats.

Don’t complain

The awkward problem is that wanting human society to replicate the daily fights for survival, nourishment and safety evident in the animal world requires not a laissez-faire approach, but massive government intervention in society. It demands severe taxation of the rich and punitive restrictions on inheritance. It compels instituting downwards as well as upwards social mobility, which means abolishing private education that works, in effect, to over-promote a small section of the population and lavish resources on them. And even then, the result would be a pale imitation of animal ‘hierarchies’.

But western societies are intent on the diametrically opposite policy. Every time in recent history – for example the 2008 financial crisis or the current Covid-19 crisis – the wealth of the moneyed and propertied has been threatened, governments stepped in to artificially protect it and institute bogus stock market booms.

Isolated conservatives and ‘classical liberals’ may have objected to this massive transfer of wealth from poor to rich but the vast majority – Peterson included – raised not a whimper of protest.

The grain of truth in Peterson is the emphasis on personal responsibility and the insistence that, whatever your circumstances, no-one, apart from yourself, determines how you react. But others before have expressed this anti-determinism better. “It makes no sense to complain since nothing foreign has decided what we feel, how we live, or what we are,” said Jean-Paul Sartre, trickily also a Marxist, in 1943.

But ignoring the structures of society that are not amenable to individual efforts to change them but can, nonetheless, still be changed collectively, is not only wrong but is liable to lead to depression and resentment, the very things Peterson says he wants to alleviate.

* my son

The Long March of State Neoliberalism

Whenever neoliberalism is defined it is invariably equated with the osmosis of the ‘untrammelled free market’ into ever more areas of life.

One of neoliberalism’s intellectual originators – Friedrich Hayek – made the hugely influential claim that people (and by extension their political representatives) could never know enough to plan or intervene in the economy. A person’s knowledge was limited to “their own small circle” and the things which were important to them, which only they knew. Because knowledge was never available to people “in its totality”, attempting to direct the economy in certain ways or favour some economic entities over others was dangerous and inimical to the limited sphere of freedom people truly possessed.

The consequence of these assumptions was that only the free market could guarantee liberty. The only genuine choices people could make were to do with buying and selling because they concerned matters and desires that only they knew about. If markets were left alone and the price mechanism remained unregulated, the economy would achieve ‘equilibrium’ and people would receive what they wanted and were due.

These ideas have played a massive role in constructing the world in which we now live, in areas as diverse as electricity provision, financial services, corporate mergers and takeovers and the housing rental market (to name a few). The job of government was restricted to setting markets up and getting them running. Beyond that the state should get out of the way. It cannot, according to Hayek, know more than markets do. And while individuals within markets can make mistakes, markets as a whole – because they are an agglomeration of individually optimal choices – cannot be wrong.

Thus democracy – which is, in essence, about the ability of people to understand the world and act on their desires – should be heavily constricted. Indeed, we can be sure that had representative government and a universal franchise not already existed, neoliberals would not have invented them and would have opposed any attempts to create them – as their 19^th century forebears in fact did.

This ‘market fundamentalism, as many have noticed, requires a stronger state than the ‘night-watchman’ state of neoliberal yore. The state must not only enforce private property rights but also banish outside interference with markets. In practice, in the US, Britain and elsewhere, this meant destroying the power of the trade unions. Although voluntary, not statutory, organisations, trade unions distorted markets by intruding on their natural operations – by, for instance, insisting people were paid more than they were worth in ‘market terms’. The Conservative party in Britain, which under Thatcher became a truly Hayekian organisation, dutifully destroyed the power of trade unions.

However, the state as an entity never went away, and as the Covid-19 crisis has shown it has proved more important to neoliberalism than few can have imagined.

How low can you go?

The 2008 financial crisis was a major turning point. Not only did governments use their power to bail out banks and corporations – which under the law of the free market should have vanished – they instituted a regime of ultra-low interest rates. At these historically unprecedented levels – never going above 1% – they have two important effects. Firstly, they preserve insolvent, hugely indebted companies by reducing the amount of interest they have to pay on their debts. This is the polar opposite of the approach of the Hayekian Thatcher to manufacturing industry in the Britain in the early 1980s. She hiked interest rates – up to 15-17% – as a way of driving trade union-heavy manufacturing industry to the wall.

Secondly, they make any recovery of the private sector extremely difficult. Just as they make debts more affordable, ultra-low interest rates discourage investment by ensuring the financial return on advanced money is negligible (the tiny official bank rate was reflected in nominal interest rates in the economy as a whole and Quantitative Easing programmes made sure they stayed low). But in these circumstances, private companies naturally eager to make profits had somewhere to turn – the government.

The two phases of privatisation

In this they took advantage of the historic process of privatisation, which aside from the onslaught on trade unions and deregulating the economy, was the main way neoliberalism was implemented. In Britain, the “great divestiture” of privatisation had two distinct phases. In its early years privatisation was about simply transferring ownership of industries from the state to the private sector. In this way, companies like Jaguar, BP, Cable & Wireless, Rolls Royce, British Steel and even Thomas Cook were denationalised and had to sink or swim in the private sector. While some survived, others were taken over, heavily denuded (British Steel) or went bust – as was the fate of Thomas Cook last year.

But privatisation soon became much more ambitious. From the mid-1980s until now, it has been primarily about contracting out monopoly services from the state to the private sector. The (very long) list includes utilities (water, electricity etc.), railways, academy schools, NHS contracts, air traffic control, the Royal Mail, local authority outsourcing and care homes. Very often these services were funded – and continued to be funded – by the government and, most importantly, could not be allowed to cease to exist.

This very conditional privatisation was actually very welcome to the large companies that won the contracts to provide these services. They were anything but free markets zealots and were very glad for a guaranteed profit stream in the context of private sector torpor. As noted by health campaigner Allyson Pollock some years ago in terms of NHS privatisation, “the private health care industry is not interested in a purely private market. Its interests lie in becoming for-profit providers in a basic health system funded out of taxation.” An insight that could be applied across the board of modern privatisation.

Hence, Britain has seen the grown of private companies – such as Serco or Capita – that specialise in delivering public services. Potentially everything in the public sector – GP services, benefit assessments, prisons, school inspections, speed cameras, nuclear laboratories, early warning systems and even the operation of spy planes – was open to being run by the private sector on a contract basis.

The hollowing out of the state in the name of putative private sector efficiency and ‘sound management’ (ho, ho) has occurred across the world. A 2004 profile of Lockheed Martin in the New York Times noted:

Lockheed Martin doesn’t run the United States. But it does help run a breathtakingly big part of it. Over the last decade, Lockheed, the nation's largest military contractor, has built a formidable information-technology empire that now stretches from the Pentagon to the post office. It sorts your mail and totals your taxes. It cuts Social Security checks and counts the United States census. It runs space flights and monitors air traffic.

In one sense, this was – from the point of view of neoliberals – a welcome development that flowed naturally from the thinking of pioneers like Hayek: the state was creating and protecting markets. But in other ways, it had unforeseen consequences. Large oligopolies hoovered up contracts – far from competition letting a thousand flowers bloom, three or four companies – at most – reigned supreme. Competition, in the idealised vision of Hayek, meant “decentralised planning by separate persons”, but in no sense can the actually existing privatised state be described as decentralised or involving people, as opposed to large corporate entities. Only big companies had the resources to bid for government contracts and public sector monopolies – the object of neoliberals’ enduring enmity – became private sector oligopolies.

Secondly, democracy or government – the very thing neoliberals wanted to restrict and limit in its ambitions – was essential to the whole process of privatisation. Closeness to government was essential to winning contracts and a revolving door between the private sector and elected institutions and the civil service span permanently. This was an open door for corruption and a distortion of democracy but it was of no interest to neoliberals who were unconcerned about the distortion of something they didn’t like in the first place.

They were however concerned about the private sector and this became, thanks for the ultra-low interest rate regime, equally distorted. It is not a widely known fact the Austrian school of free market economics (of which Hayek and fellow neoliberal, Ludwig Mises, were the most prestigious members) was intensely distrustful of low interests rates because it holds them responsible for causing economic slumps (see the musings of former Tory and UKIP MP Douglas Carswell for a 21^st century version).

But although low interest rates potentially increase the amount of money circulating in the economy and make life easier for insolvent companies by reducing the interest of their debt, they make it difficult to make a profit on investments because the returns on offer are so low. The alternative is either to go for riskier private sector investments or to seek the security of government contracts which often offer double digit returns.

Since the financial crisis interest rates in Britain have never gone above a half of one per cent and, since the coronavirus lockdown, have been cut further – to 0.1%. This situation – in conjunction with the Hayekian ideology of successive Conservative governments – goes a long way to explaining the incompetence of the public response to the virus.

Useless and lethal

What was demanded was a smooth and joined up public health response, involving local councils, that prioritised above all else the needs of health workers and patients. What actually happened was a labyrinthine mess of competitive tendering and outsourcing which awarded contracts to large companies, like Deloitte and Serco that had no expertise in what they were supposed to do. The result, apart from “cementing the position of the private sector in the NHS supply chain”, has been a test and trace system that won’t be “fully operational” until September and a “useless” system of delivering PPE to NHS staff. The deaths of hundreds of NHS and care workers from the virus, many of them avoidable with proper PPE, as well as the highest excess death rate in Europe – in part the consequence of inadequate or non-existent PPE allowing the virus to spread in hospitals – cannot be divorced from this farrago.

But this is likely to merely be a trial run for what is in store. Against the backdrop of a huge fall in GDP of over 20%, the worst projected economic downturn of all major economies and mounting unemployment, the government will almost certainly proclaim a jettisoning of ‘ideological presumptions’ and commit to an interventionist, state-driven economic policy. A ‘green industrial revolution’ will be announced, aiming to create jobs and reskill millions of people.

Such a policy might even appear ‘socialist’ – a green industrial revolution was obviously the centrepiece of Labour’s offer at the last election – but the Conservative version will be careful to offer private companies profit-making opportunities at every stage of the process. It will be a like a souped-up version of the Work Programme. This can already be seen in the free school meal voucher scheme – the one extended over the summer holidays after the campaign by Marcus Rashford. A corporation – Edenred – is in charge of the scheme, not local councils. Astonishingly, the same company has been accused of “woeful” preparation and failing to send out vouchers to hundreds of thousands of parents who need them.

Facile comparison

This is why equating the current actions of the Conservatives in Britain with the policies of Corbyn’s Labour at the 2019 election is facile. The superficial resemblances – increased public spending, train nationalisation, a green industrial revolution – betray fundamentally antagonistic philosophies.

This is not a question of one being enthusiastically statist and other reluctantly so. It is matter of the Conservatives being committed to constructing a statist shell underneath which a privatised bevy of oligopolistic corporations running contracted out services are permitted to make a level of profits which the fêted free market can no longer provide. Some ‘Corbynite’ policies, such as a ‘national care service’ and ensuring 100% high speed broadband, would, it is true, have supplied a statist stimulus to the private sector. But others such as renationalising the NHS and utilities like water and electricity would have repealed the decades-long neoliberal hollowing out of the state.

But this, as we know, will not happen. Instead state neoliberalism, its intellectual roots now long forgotten, will continue its long march.

.