Class Politics

Don't know what to do with your money in these uncertain times? Check out this very short article in the FT. The big money in the UK is going into big companies - about £70 Billion has been switched into these shares since November - helping shore-up the FTSE 100. 

Based on a regular survey of the UK’s wealthiest individuals, it transpires that, "470,000 adults... own more than £1,600bn of cash, bank deposits and investment... two-thirds of the country’s liquid private wealth."

These 470,000 people comprise less than 1% of the UK population.

Ask yourself - in whose interests do you think the Government runs the country? People like you, or people like them?

Or put it another way, who do you think has most influence over Government policy?

Income Inequality - Back to the Roaring 20s! (YCNMIU!)

This (here) is a must-read from the FT of 8 March. The article argues cogently that levels of income inequality between the richest, and the middles and working classes, have become so extreme that we are in "danger" of entering a new and dangerous period of left-right politics.

Here are some snippets. But do read the whole thing.

"Income inequality in the US is at its highest since that most doom-laden of years: 1929. Throughout the main English-speaking economies, earnings disparities have reached extremes not seen since the age of The Great Gatsby"

Bill Gross, managing director of Pimco, the world’s biggest bond fund, is quoted as saying - “When the fruits of society’s labour become maldistributed, when the rich get richer and the middle and lower classes struggle to keep their heads above water as is clearly the case today, then the system ultimately breaks down; ... the centre cannot hold.”

The situation is the most extreme in the US (but the UK is number 2). According to the article, "Between 1979 and 2005 the pre-tax income for the poorest households grew by 1.3 per cent a year, middle incomes before tax grew by less than 1 per cent a year, while those of households in the top 1 per cent grew by 200 per cent pre-tax and, more strikingly, 228 per cent post-tax. (And bear in mind we are talking only about income distribution, not capital ownership - which is even more skewed).

The share of US wealth owned by the top 1 per cent of households rose steadily from 20 per cent in 1976 to 38 per cent in 1998.

In the UK - "economists at the Institute for Fiscal Studies have identified a rising trend of income inequality to historically high levels since Labour took office in 1997." A chart in the article shows that we are just behind the US thanks to the fatuous middle-class air-heads in "New Labour".

"There is anger, too, about a system that permits bankers to earn huge bonuses when finance booms, while taxpayers pick up the bill when banks fail."

As a result, "Much of the old left-right rhetoric is re appearing in the (US) campaign". But worse, much worse, on a global scale, "there are signs that the mix of policies and economic circumstances that gave a protracted laisser-passer to the rich and to business is coming to an end."

And in another article (here) the author suggests that, "The challenge to the globalisation consensus comes from below. Political elites in the US, Asia and Europe are struggling to convince citizens that globalisation is not just a game that benefits the rich. [errr, but it is...] If the argument is lost in any of the major world economies, the political consensus that underpins globalisation could unravel."

Oh Dear.

US in Iraq, China in Tibet. Same?

I think was Hitler who said that the bigger the lie, the more likely it is to be believed. If this is true, it's true because most people simply cannot believe, don't dare believe, what "their" government is doing "on their behalf". 

Have a look at this from Medialens. It compares the way corporate media deals with two contrasting occupations -  Iraq, where we are helping them out (!) - and Tibet, where the Chinese government is an illegal occupier. (If the article has been archived - then look here instead).

At the same time have a look here at just a tiny sample of the photos of Philip Jones Griffiths who died recently. He was arguably the best photographer of the Vietnamese war (and elsewhere). 

Where are the PJGs of the Iraq war? (This is a little unfair, because there are some heroic photo-journalists in Iraq - what I mean is - where are the photographs?!)

Something to Celebrate!

The "neo-con" era is over!  The idea that you can leave it all to "the Market" (ie to big business), is, officially, bunk!  Privatisation and deregulation, as a guiding and all powerful policy, is toast!

This is what The Financial Times (Martin Wolf) had to say on 25th March> "Remember Friday March 14 2008: it was the day the dream of global free-market capitalism died." Pretty unambiguous.  Here is the rest of his excellent article.  

Oddly, although it is suggested that the cause of the crisis was poor regulation, he concludes that we need more of it.  John Kay, another economist, suggests contrariwise that regulation cannot work - because it asks civil servants to second-guess the business decisions of billionaire managers. 

Quite rightly (in my view) he says that when things are going well, no businessman or woman is likely to heed the advice of the public sector. Especially, as he also says,  "the financial services industry is the most powerful political lobby in the country". Do you suppose, he asks, that the managers of Northern Crock would have listened to the FSA if they had called them before they went down the pan?  Here is his article in full.

In yet another piece, someone else in the FT laments that the new situation represents, "a remarkable change after three decades in which the market appeared to be the answer to everything." He, however, takes solace from the assumed fact that "the Left", apart from suggesting more regulation, also have no idea about what to do next. This is his article.

He is wrong, of course, on the latter point. I don't know which "Left" he was looking at (he quotes the "Socialist Workers Party - SWP"  (otherwise known as the Society of Wedding Photographers). But that is a very poor choice of a caricature socialist party.

So, if the answer is not more, nor less, regulation, and second-guessing clever business leaders, what is it?  

Watch this space.

  

You thought there were three main parties?

Well you were wrong. There's only one party, but it has three wings. Here is what the FT said in an article headed - "Why UK political parties look more and more the same".

Here are a few snippets >

Mr Blair’s decade in power demolished almost every recognisable landmark on the British political scene as he drove his party towards the centre.

The two parties have raced to be first to announce near-identical policies, be it cutting death duties or tackling illegal immigrants or knife-wielding drug dealers.

The narrowing of the political debate is not unique to Britain and is partly a result of external factors. Globalisation has limited politicians’ room for manoeuvre on economic policy: footloose capital can pick and choose between the most favourable tax and business environments.

Nick Clegg has been described by a senior colleague as “Cameron’s stunt double”.

Labour, Conservatives and Liberal Democrats will fight the next election with the same proposed tax and spending totals until 2010-11.

All three parties have embraced the idea of the private and voluntary sectors having a bigger role.

In actual fact the FT is a bit slow. It has been clear for many years that working people have had their political voice neutered ever since the "Labour Party" embraced the "Globalisation" doctrine.

A new party is urgently needed. Have a look here at the website for the Campaign for a New Workers Party.

Global warming - "leave it to us"!

Relax. Private enterprise will sort it out.

This is more or less neo-liberal orthodoxy on global warming (as much else) - and therefore Government policy. In the UK, the opportunity for utilising natural, renewable wind, you would think, must be a sure fire winner. But what's happening?

You may not know, but a proportion of your fuel bills, already at record high levels, is taken as a subsidy for generating wind farm capacity - "the amount of subsidy paid to renewable power generators through consumers’ electricity bills will rise from more than £600m a year to £3bn a year by 2020" (FT 3 Feb 08). But this money, instead of being invested in wind turbines, is being trousered by the electricity companies!

Peter Atherton, head utilities analyst at Citi Investment Research, said: “It’s a bonanza. Anyone who can get their nose in the trough is trying to.” (FT). Let's face it, he should know! When you next get your electricity bill, read this.

World Government

Other things equal, a world government ought to be a good thing. The deployment of resources, the creation of new resources, etc, could be planned so as to exploit (for everyone's benefit) the comparative advantages of different parts of the world.

Global companies already do this - albeit within the confines of their corporate footprint. They will seek to carry out labour intensive processes in low wage economies; component design may best be done where there is access to high tech knowledge and experience (preferably combined with low wages) such as India or China; assembly may need to be done where there is access to good infrastructure and communications; corporate strategy and direction will, of course, be carried out from the best locations in the world where there are access to good golf course, yacht moorings etc.

However, perhaps we already have one - a world government, that is! The people at the Davos meeting in Switzerland almost fit the bill. Even the FT almost agrees (here). There are nearly 1400 business executives at the meeting who, between them, control "22 per cent of the world’s market capitalisation, including the major banks behind the complex financial products that sparked the credit crunch". Why don't they, the FT suggests, sort out the crisis?

"Masters of the Universe"...?

Capitalism? Rugged individualism! Heroes - the businesspeople who "bet the farm" on a project and see it through! They take the risks and enjoy the returns! Not for these the welfare state. No way. You wouldn't catch them skulking to the state, cap in hand, hoping for a hand-out. God forbid!

Ironically, for small and medium businesses this picture is actually not far from the truth. Investors in businesses that, despite everyone's best efforts, go bust - lose their shirts.

The picture for big money is somewhat different. The present "credit crunch" and financial crisis is leading to a situation where international capital is being bailed out with buckets the size of aircraft carriers! Northern Rock, wrecked by its management, has enjoyed £30 Billion or thereabouts of taxpayers' hand-outs - a sum that is about the equivalent of the US trade deficit in goods and services!

The US Federal Reserve (ie, the state) has just reduced interest rates by an almost unprecedented 75 basis points (0.75% to you and me) - which provides a credit lifeline to the erstwhile "Masters of the Universe" and which led to a (no doubt temporary) "market resurgence" today. And "fiscal measures" are also in train (in the US at least) - multi-billion dollar tax cuts.

And, if all this wasn't sufficient, this week's edition of the Economist headlines on its front page (here) the way that so-called sovereign-wealth funds (ie the state) are "buying up Wall Street". And what's worse is that these are (I can barely bring myself to say it) foreign states! As the Economist says, "On January 15th the governments of Singapore, Kuwait and South Korea provided much of a $21 billion lifeline to Citigroup and Merrill Lynch, two banks that have lost fortunes in America's credit crisis... They have deftly played the role of saviour just when Western banks have been exposed as the Achilles heel of the Global financial system."

When you buy shares, doesn't it say on the packet that prices may go down, as well as up? This is as it should be, surely, in accordance with the rules of the "invisible hand" and all that. What big business appears to be saying, though, is that when it puts money on a horse, and the horse turns out to be a nag, it wants it's money back!

Remember this next time someone complains about welfare scroungers!

Jerusalem ?

Here's a marvelous article by FT columnist, Luke Johnson. It's about about what a great nation Britain was/is. It should be read whilst listening to Eddie Elgar in the background, slowly rising to a suitable crescendo as you reach the final paragraphs.

His basic premise seems to be that Britain has been great and can be great again. We discovered capitalism, after all, he says. Right up until 1950 Britain accounted for almost 25% of world manufactured output. Military force was a factor, "The British Empire was largely an undertaking to boost trade", he says.

The core reason "we" became great was because of people like him. If it hadn't been for Britain's "pioneering" capitalists (for he is one) "we" wouldn't have got to where we were in 1914 when, "Britain owned 45 per cent of the world’s foreign investments".

And, "Britain even inspired a second revolution with the privatisation of state assets under Margaret Thatcher. It revived our economy in the 1980s and has been copied everywhere from eastern Europe to South America".

It is true that from the 1970s onward, and especially following the collapse of the Stalinist states, there has been a global wave of privatisation and related polies - otherwise known as "globalisation". We would therefore expect to see that there has been a real boost to economic growth and wellbeing since that time - a "revival" in fact.

The chart below, from the IMF, shows something quite different. World economic growth during what the IMF calls the "Golden Age", from the 50s until the 70s was around 3% a year. This was the period of all the "old fashioned" policies subsequently rejected by Thatcher, Blair and the Globalisers.

During their period, that of "Globalisation", economic growth has been halved! Some "revival". At this rate, we will be "revived" back to the stone age before too long!



Undaunted, or unaware, he goes on to say that the secret of "our success" has been that "we" somehow created a society in which "we" allowed people to get rich. Because if "we" reward initiative, "the whole community gains through the “invisible hand” ".

But just a minute, somethings wrong (in the words of Jimi Hendrix). "We" have slipped behind! "We must do better if we are to prosper in the global economy of the 21st century".

What should we do? What? What?

We should reduce our tax rates, reduce government spending and, "engender a stronger sense of self-reliance and responsibility. We need to regain our sense of confidence and adventure...".

You see, this is what a good education does for you.

Virgin and Tonic

The Ft reports (here) that Branson is now going to launch "a groundbreaking foray into the NHS primary healthcare market on Thursday with a call to family doctors to join them in establishing a network of branded clinics." The government's noddy Ministers of course welcomed the idea.

If there is money to be made doing this, by providing an improved service, - why aren't NHS managers proposing it? The surplus from the enterprise could then support the wider NHS effort.

2007

Here is an excellent summary from a Socialist perspective of the significance of 2007 - written by the general secretary of the UK Socialist Party. I've been following the Socialist Party since my early 20's, but I still get a buzz from reading such clear expositions of political, economic and social developments. Not only do you get an explanation of how they affect the majority of people in the world, but you also get a clear direction for the way forward.

I was very sorry to read about the death of Andrew Glyn in December. He was a socialist economist at Oxford - not many of those around! His last book was (I think) "Capitalism Unleashed".

This is what the Financial Times had to say about him. The article is relatively friendly and fulsome, but it says that Glyn took an alternative, radical perspective on the "free market capitalism" even though he had a perfectly happy background! The implication seeming to be that only if you are in some way psychologically damaged could you possibly have anything other than a thoroughly orthodox view!

"Smash Capitalism Now!"

Serious discussion about capitalism, as a system, is quite rare. With the fall of the Berlin wall at the outset of the 1990s, the overall view of the mainstream media was - "We Won!" For millions of people this seemed to indicate a very decisive end for socialism. Whilst very few people thought that the Soviet Union was a genuine, democratic socialist society, it did nonetheless seem to indicate that there was an alternative way of doing things, and with its demise the field seemed clear for big money. The "market economy" had been truly vindicated!

Since then, big business has had a marvelous time, celebrating the "new era". The frontiers of state have been further rolled back around the world. Complex "financial instruments" have been developed by financial and mathematical "geniuses" to make money seemingly out of thin air. Inequalities of wealth have reached unheard of proportions. According to the Economist of 9th December 2006, 2% of the world's population now own more than half of its wealth. This is the same as saying (again according to the Economist) that in a world of 10 people, 1 person would have £1,000, whilst the other 9 would have £1 each.

Nowadays, however, there is something new in the air. The international debt and housing market crisis - now beginning to affect ordinary people (as per, for example, the ironically named "Northern Rock") - is also beginning to affect the crowing confidence of businessmen and financiers etc.

People are beginning to question some of the major fundamentals - such as, "if the government can find £20 or £30 billion at the drop of a hat to support a failing "building society", how come there is no money for hospitals and schools?" And, "if nationalisation is such an awful concept, as should not be mentioned in polite society, how come it seems the only way out for Northern Crock?". And, "why is the government choosing to rescue Northern Crock, when it didn't bother rescuing, say, the Farepak savings scheme, in which thousands of families lost their Christmas savings? - or Equitable Life etc"

The good old Economist (bless), always the staunchest defender of capitalism, in its editorial of 22nd December 2006, says that if you actually want to, "imperil the world economy", what you need is, "the baroque superstructure of mortgage-backed derivatives that enabled investors to bet on the housing market" - which, of course, is what we've got. The rot, it says, "can spread from housing to other areas, such as commercial property and credit card debt."

It is deeply embarrassed (as it should be) that nationalisation - recourse to the State for gawds sakes - should be seen to be unavoidably necessary.

All I'm saying is that I reckon people will, under the impact of events like the ones I've mentioned here, increasingly start questioning underlying assumptions. And if capitalism really wants to enjoy a "thousand year Reich", it's going to have to do a lot better than this!

The Economist concludes in the editorial above that, "The hope is that the credit markets unblock themselves and that buoyant emerging markets buy rich-world exports and recapitalise rich-world banks." In other words, they hope they "sort themselves out" and that poor countries rescue the rich! Some hope. In any event, as any business consultant will tell you, hope is not a strategy!


(By the way, so far as "Smash Capitalism Now!" is concerned, I used the heading for affect only - this was the heading of a hackneyed old poster of pesky lefty students when I was in my 20s. Never a very good slogan in my view.)