Thatcher is dead: now we must bury Thatcherism!

Where to start? One place could be the excellent article by Ken Livingstone in the Guardian today. Ken summarises the failures of Thatcherism very well, but there is much more that could be added to what is a very long list. I've chosen one telling quote which shows that Thatcherite policies, continued under the governments' of John Major and Tony Blair's New Labour, have lead directly to the crisis we are now in:

"Thatcher's destruction of industry, combined with financial deregulation and the "big bang", began the decline of saving and accumulation of private and public-sector debt that led directly to the banking crisis of 2008. The idea that bankers would rationally allocate resources for all our benefit was always a huge lie. Now the overwhelming majority are directly paying the price for this failed experiment through the bailout of bank shareholders."

I recommend you read Ken's piece and I would like to add a few things he clearly knows about but didn't have space for; the Thatcherite policy of council house sales depleted the stock of social housing and has played a considerable role both in the unsustainable house price boom and the housing crisis we now face; Thatcher trumpeted the 'virtues' of "the great car economy", running down public transport and leading to increased noise and air pollution, which we still haven't dealt with, and increased congestion; the privatisation of the utilities has lead to not only the ridiculous rip off prices we now pay for fuel, and increased fuel poverty, but the proceeds from the debacle are largely transferred abroad and lost to our economy; and during the period of the Thatcher and Major governments there was a chronic lack of investment in schools and hospitals, classroom roofs leaked and hospital patients were left in corridors on trolleys.

Margaret Thatcher: a legacy of social, environmental and economic failure

The reality is that only a small minority really benefited from the Thatcher 'economic miracle', and in the process the revenue from North Sea oil was squandered on tax cuts and paying for unemployment. For the majority of people the 'economic miracle' was built on a house price bubble, and the accumulation of debt. It was a castle built on sand.  Nor was the reality of the 1970s nearly as bad as been claimed by the propagandists of the right. Sure there was industrial strife and rampant inflation but who caused the inflation? - not the workers that's for sure. The horrors of the  three day week? - that was down to Ted Heath's Tory Government. If we continue with Thatcherism, and for this read neoliberalism, inequality will increase, our economy will continue to stagnate, and we will fail to deal with the issues of climate change and build a green economy. We need a real alternative, an economy for all our people, such as the one I have suggested in this post, and we need it very soon.

Why we can and must build our own economy

UK companies are sitting on a cash pile of about £750 billion, and EU companies have about €2 trillion stashed away. So why on earth is our economy struggling? There is plenty of cash to get the economy moving and create the much-vaunted 2.5 million private-sector jobs that George Osborne has been promising us. Why isn't this private-sector job creation happening? Apparently, it's because firms don't want to invest due to a lack of "confidence" (sic!). The problem is that neoliberal austerity policies are reducing the share of national income for working people and depressing demand in a consumer-capitalist society. This is confirmed by a quote from the following article in the Wall Street Journal which states:

".... that policies aimed at further depressing the share of labor in national income will further undermine economic growth. He [SimonTilford] suggests increasing corporate income won't help spur investment while squeezing households by cutting wages will damp growth." [my italics]

In other words, neoliberalism is self-defeating, as I argued in a recent post. Erm... but isn't our government meant to be doing what the private sector - the market - wants? If the corporations and banks want austerity, why haven't they any confidence? What this situation clearly illustrates is that capitalism always wants to have its cake and to eat it. They want austerity to make us pay for the crisis and to trash the welfare state, but they also want us to be able to buy their products!

If we can't rely on either governments or the private sector to lift the economy and produce the jobs that we so desperately need, what are we going to do? Well, we can forget the banks and the corporations because they are not going to help us. They are part of a failing neoliberal economic system which is essentially exploitative and destructive, a system which is eating the planet, and in the process, destroying the prosperity of most of us, of the 99%. As capitalism gobbles up the planet's resources, cannibalises the public sector, and indulges in an orgy of financial and property speculation in order to try and maintain its falling profitability, millions of people are suffering globally. Not just people in the so-called third world, but people in the once-prosperous west, and nowhere has this become more obvious than Greece, which is the front-line of neoliberal austerity.

But one of the starkest outcomes of this crisis is in the modern home of capitalism itself, the USA. Detroit, the motor city, and once-great powerhouse of American capitalism has been devastated. Paul Craig Roberts has written about this in The Ruins of Detroit :

"Detroit’s population has declined by half. A quarter of the city 35 square miles is desolate with only a few houses still standing on largely abandoned streets. If the local government can get the money from Washington, urban planners are going to shrink the city and establish rural areas or green zones where neighborhoods used to be. President Obama and economists provide platitudes about recovery. But how does an economy recover when its economic leaders have spent more than a decade moving high productivity, high value-added middle class jobs offshore along with the Gross Domestic Product associated with them?"

Capitalism at work: economic devastation in Detroit

But amongst the ruins of Detroit, at the grassroots, economic activity is stirring. This is a grassroots revolution. People are beginning to come together and realise that if they want a better economy they are going to have to do it for themselves, and they are starting to rebuild from the ground upwards through co-operatives like the Evergreen Co-op. What's so inspiring about this re-birth is that it is community-focused and lead not by overseas investors or the 'entrepreneurs' of neoliberal myth, and hungry for a buck, but 'ordinary' citizens, and what it shows us just how extraordinary us ordinary people can be. Here is an extract from the recent Re-imagining Work in the Motor City conference:

"In another discussion, participants acknowledged that relying on political and economic leaders to lead was a fruitless endeavor because they have forgotten the people they are supposed to represent. A “we have to do it ourselves” attitude permeated the conference in a recognition that representative democracy is in serious decline. Besides, they said, societal change usually occurs at the grassroots level—and rigid social class distinctions and hierarchies have no place in the new economy we are envisioning". [my italics]

People in Detroit have realised an essential truth - that capitalism dis-empowers all of us. The system is designed to make us think that we need the super-managers and capitalists, that without them, we just couldn't survive. This system is designed to keep us in our place and to keep them in the luxury that only they can afford. But as a result of this crisis, in which whole communities have been abandoned, this myth has been busted, because more and more people are beginning to understand that 'they' need us, but we really don't need them.

But its not just in Detroit that this phenomenon is happening. All over the USA, people are beginning to turn their backs on capitalism and the banks and find their own solutions by building their own economy. According to Gar Alperovitz in his New York Times article entitled Worker Owners of America Unite:

"Some 30 million Americans, for example, now participate in the ownership of co-op businesses and credit unions. More than 13 million Americans have become worker-owners of more than 11,000 employee-owned companies, six million more than belong to private-sector unions."

The politicians and corporations who control our economy want us to believe that it can be restored, but only on their terms, and they are resorting to ever more desperate means to try and continue as if the great crash of 2008 never happened. In the process, through neoliberal austerity, they are making the poorest pay for the crisis, but they're also beginning to scrape the bottom of the fossil fuels barrel with tar sands extraction and shale gas exploitation, both of which are environmentally destructive. These are acts of desperation, meant to prop up a failed system which has run its course.

The truth is that we cannot rely on capitalism and its tame politicians like Obama and Cameron to help us. Essentially, we are on our own. But that, despite the hardship, gives us an opportunity, an opportunity to build an economy that we own and control ourselves. Such an economy needs to be co-operative and community based, supported by local banks and credit unions, which are subject to democratic control.

Co-operatives create wealth and employment, they are rooted in communities, they do not downsize or outsource jobs overseas. They build strong local economies that are resilient in the face of climate change. Best of all, there are no fat-cat managers or owners to cream off the bulk of the wealth that is created. That does not mean we should ignore political parties, we need to support and help build parties that are supportive of this kind of economic development. And we need to help to propel such parties, through the democratic process, into government. Then we can really get down to the business of rebuilding an economy that is truly our own.

For reference see: America Beyond Capitalism

Why capitalism won't exist in 50 years time

I've been reflecting on the Coalition government's claim that the market will make up for the 750,000 public sector jobs that are going to be lost under the austerity measures imposed by Chancellor George Osborne. In his first emergency budget, which introduced £81 billion of cuts, Osborne claimed that the private sector would take up the slack by creating 2.5 million jobs. Clearly that hasn't happened, but what if it never does? Why should the private sector create that number of jobs in the UK anyway? In a golbalised economy it may be that the market will provide jobs elsewhere instead, or maybe the jobs will just never materialise.

Of course, Osborne never mentioned what kind of jobs would be created, but its a fair bet that the jobs, if created won't be as good as the public sector jobs that have been culled by the government. Not all public sector jobs are well paid by any means but many are highly skilled, and nearly all offer better benefits than private sector equivalents. Its likely that many 'replacement' private sector jobs will be low skilled 'McJobs'. To add to the existing problems in the job market, Osborne is now trying to implement a long held dream of the Tories to 'regionalise' public sector pay in order to drive down wages still further, on the excuse that the private sector will be able to compete in the jobs market with their McJobs. This is likely to backfire on the government because public sector workers will seek to keep pace with those in similar jobs around the UK, leading to more disputes and industrial action.

There is still the question of whether any jobs will be created. The record is not good. Its worth reading this article by Larry Elliot which shows that in the past 100 years the private sector has failed to replace jobs in the North of England lost when heavy industries such as shipbuilding, cotton manufacture, steel-making, and coal mining went into terminal decline.The reality is that Osborne's approach is going to hit the North, which is already suffering, very hard. That is part of the reason for George Galloway's recent victory in Bradford West - people are fed up with a lack of jobs and opportunity and the fact that none of the three main parties are offering an alternative to austerity.

My view is that the oft promised jobs will never be created. For sure, as long as we follow the discredited 'free' market neoliberal ideology beloved of Mr Osborne. Why? -  because we have entered a different, and, I believe, final, phase of capitalism. There are a number of different factors working here to bring about the demise of capitalism as we know it;

Firstly, the rise of financial capitalism, fuelled by deregulation of the banking and finance sectors. If you want to get the best return and make money you invest in financial instruments, and property, that is the quickest and easiest way to make a buck. There are currently trillions of dollars flooding this financial system, and none of it is being invested in job creating industries. The problem for capitalists is that the 'real' economy is suffering from falling profitability;

Secondly, the model of consumer capitalism on which we currently rely for our prosperity is slowly breaking down. Consumer capitalism really started in the 1920s with Edward Bernays, and only really took off in the period of prosperity following WWII. Bernays, who is often called the father of Public Relations is credited with creating consumer 'wants' rather than the 'needs' that existed previously. Neoliberalism is undermining that consumer-lead model though globalisation by making people, particularly in the affluent west, poorer. You have to earn a decent amount of money to support the consumption that consumer capitalism needs. In the USA consumer spending is 70% of the economy. That is why neoliberal capitalism is relying increasingly on, the creation of debt to sustain consumerism, the cannibalising of the public sector, and corporate welfarism, to maintain its failing profitability;

Edward Bernays - the man who invented consumer capitalism

Thirdly, and most importantly, we are reaching the limits to growth. Resources, and oil in particular, are becoming depleted, which means that capitalist expansion is becoming impossible. capitalism relies upon compound growth, and you don't need to be a Nobel prize winning economist to understand that this kind of growth is unsustainable.

The fourth factor may prove to be the most important - climate change -  which is likely to damage the global economy further by extreme weather events like the recent tsunami in Japan, and damaging agriculture, thus limiting food production. That is an issue which I have covered extensively on this blog. Attempts to postpone the inevitable end of 'business as usual', such as the exploitation of shale gas and tar sands, are likely to be self-defeating.

If you want to know more about monopoly capitalism and how this crisis is being driven by factors one and two then you should read the excellent book 'The Great Financial Crisis' by Magdoff and Foster, which explains how capitalism has increasingly invested in finance, at the expense of the real economy.

I just want to finish this post with a prediction. Capitalism as we now know it won't exist in 50 years time. I won't be around to see it but I have no doubt that capitalism will reach its limits, economically and environmentally in the next 50 years or so. What we ought to be doing now is planning for the future. That future will inevitably mean more state intervention, not because of ideology, but because of necessity. In 2008, when the global economy was crashing, the state came to the rescue. There is no doubt that it will have to come to the rescue again because, by then, 'free' market fundamentalism will have brought the whole house of cards crashing down.