Anne Gray, 18.4.09
In the justifiable furore about police brutality which followed the events of April 1st and 2nd in London, we seem to be losing track of what the summit was really about. Suddenly - the ‘Washington consensus’ is dead, Keynesianism has been rehabilitated, and the leading capitalist governments are trying to spend their way out of recession. But is the era of neo-liberal economic policy really over, or is it just taking a new form ?
Let’s turn aside for the moment from the question of how many trillions of dollars worth of economic stimulus the world needs, and whether the politicians have ‘done enough’ in terms of these numbers. What is the crisis, and the British government’s solutions, going to do to the distribution of income and wealth ?
The recent measures to address the banking crisis will lead to a major transfer from poor to rich in at least six different ways:-
First, the massive rise in government borrowing means we, the taxpayers, one day have to pay more in order to get the national debt back down to size. Second, despite the government’s willingness to expand corporate welfare for the banks and let their executives get away with fat rewards for failure, public services are likely to be starved because ‘there isn’t enough money’. That is, public spending is now hitting a ceiling defined by the market’s confidence in UK government bonds and the economy’s future ability to repay. So, for example, schools and universities are currently faced with major funding deficits, and thousands of students will be unable to enter uni this year.
Third, the government are likely to have a further round of ‘selling the family silver’ to fill the hole in public sector finances. We can expect more privatisation over the next few years for this, if no other reason.
Fourth, the general message from the government has been that money can now be very cheap to borrow, but bankers must not take risks and the government is not taking any either – except where needed to provide corporate welfare to failing banks by buying their shares. Result; small businesses affected by the recession are going under, and new ones, especially the ones we need in innovative and ‘green’ sectors can’t start up or expand. The result will be greater monopolisation of the economy, with small shops and restaurants, farmers and small manufacturers all disappearing. The demise of Woolworths and MFI in the ‘big store’ category should not blind us to the likelihood that the survivors of the recession will be mainly the giants who already hold too much market power. The losers already include smaller stores like Myers in Crouch End, and key ‘green’ enterprises like the UK company recently applauded for pioneering the generation of wave power off the coast of Portugal.
Fifth, the reliance on near-zero interest rates to get the economy moving, without doing anything about the institutional basis of pensions and savings, has left many pensioners high and dry, and workers approaching pension age with the prospect that they could work till they drop without saving enough to retire.
Sixth, neo-liberalism for the unemployed is still going strong. Despite the soaring numbers on JSA, the government has continued with its welfare reform plans, which were bad enough when they were conceived in 2006-2007, a period when dole queues hit a historic low. Over the next 3 years the unemployed will be made to compete ever more strongly for a pool of vacancies that has all but dried up. There will be tougher benefit rules which will stop JSA for more people who fail to meet job centre requirements, and a new scheme to bully people into low paid jobs by threatening them with workfare placements after two years on the dole. Changes in the benefits systems for people with disabilities, and for lone parents, are designed to force many of them to start searching for work. If there is none, the government will waste a fortune on back to work schemes (now to be largely done by private contractors, who have already demanded a huge increase in the payments they get per person placed in work, because they know they will have so few). And to set even more people to chasing so few jobs will intensify the wage-reducing effect of high unemployment. Which of course is what neo-liberal employment policy since John Major’s day through Labour’s ‘New Deal’ has always been about – tough benefits rules to bully people to apply for more jobs, especially low-paid jobs, and hand cheap labour to the employers.
How would we, as Greens, address these problems ? There is much that needs fleshing out in Green Party policy, and much in the Green New Deal, published last July, that needs fine-tuning and updating as a result of the cataclysmic economic events of the last few months. But the Green Party is the only electoral force – apart from the remnants of Respect – to oppose privatisation. And it is the only party calling for less rules and more universal rights in the field of state benefits, the long-established Green ideal being a universal citizens’ income which would bring in-work and out-of-work benefits all together in one allowance and ‘means-test’ only through progressive income tax. We also need to think about broadening capital ownership as a key to democratising the economy and bringing down interest rates permanently, as proposed in Rodney Shakespeare’s book, ‘The New Economic Paradigm’.
Molly Scott-Cato, in her book Green Economics, calls for a different kind of economic stimulus which would not add to the national debt, a demand which she stressed at the recent Green Party conference in Blackpool. That is, spending newly created money directly into the economy to produce real wealth. Not the Bank of England’s ‘quantitative easing’, which simply buys up old government bonds from those lucky enough to own them and hopes that they spend it on something that creates wealth and jobs – rather than foreign bonds, or derivatives, or second-hand buildings. All of the forms of investment envisaged in the Green New Deal could be done as direct government spending. Likewise, under this heading we could place a large increase in benefits and state pensions (to bring them into line with most other west European countries, and update them to the relationship they held to wages in the years before Thatcher).
David Byrne, a prominent member of the Green Left group within the Green Party, was a signatory to an excellent letter in the Guardian on April 14th, joining with several socialist academics to call for an end to tax havens and much larger taxes on wealth and inheritance.
But the basic architecture of the pensions and savings system is a major obstacle to real economic change. It gives us all a purely selfish interest in the capitalist castle (of bubbles) in terms of rising house prices, and because much of our pensions saving is now stock-market dependent, in rising share prices. Older people need something solid to invest in which gets them away from this – a start could be local authority bonds which are seen in the Green New Deal as an important vehicle for ‘green’ investment and building social housing. Some detailed policy on local authority borrowing and investment, and on investment vehicles for social enterprise and creative lending to small business, would make a real contribution to developing a post-credit crunch economy of a saner and fairer kind.