Back Wealth Creators... Back!

David Cameron suggests, in fact he demands that the balance of our economy is changed so that the private sector is larger and the public sector smaller. His rationale for this is that only the private sector contains wealth creators, whereas the public sector only recycles taxes. To understate the point somewhat, this is both overly-simplistic and fatuous. In short, it is just plain wrong!

Speaking on the closing day of the Conservative Party Conference the PM said that Britain must get behind its wealth creators as he announced further cuts to the public sector. Let’s explore that, for example what do we mean by wealth creators? Is this a collection of people who generate money for its own sake or are we talking about real value added to the economy? These are very different things, the former includes investment banking traders who simply speculate on markets without producing anything, the latter are those that actually produce physical products and services that increase the quality of our lives.

John Fallon a recent appointment by Cameron as Vince Cable’s number two cites private equity bosses as an example of wealth creators. Therefore we can see that this government’s emphasis is purely on people looking to make a profit from their use of money rather than actually contributing something solid and worthwhile. This also explains the Government’s reluctance to interfere in a financial sector which caused the 2008 financial crash and ensuing recessions through irresponsible trading. This is certainly the kind of activity that this government favours, it is after all where the Cameron family fortune was earned – Cameron’s farther ran off-shore tax havens for the wealthy.

If we really did want to increase wealth by increasing the value that our economy adds then our politicians would perhaps have a closer look at how money actually travels around our economy. 

As you can see from the diagrams above both private and public sectors are simply ways in which we organise money flows around our economy. If we wish to increase that flow then we have to develop the efficiency of the areas we currently have and/or invent new areas. It is a common misconception that the private sector does this better than the public sector. Think about hospitals, schools, roads, trains, the postal system and many more. Only the public sector can generate the vast sums of money required to finance such ambitious projects, since the private sector relies on sales to survive and therefore cannot take such large scale decisions without the potential of immediate sales. Only the Public sector can make the initial outlay which is why we see these industries beginning as public sector entities before being privatised once they are stable enough to produce a profit for those lucky enough to be in a position to buy them on the cheap.

As was shown in my previous post "Does Privatisation Work?", neither is the private sector more efficient than the public sector. Indeed, any efficiency gains that are made benefit only the shareholders and senior managers of the organisation in question. There will be those who tell us that the public sector does not generate wealth and at the moment this may be true to some extent, but only because all of the wealth generating industries have been stripped from it and given to those who exploit assets purchased by the tax-payer to generate their own wealth. This means that the added value that is being generated from these divested industries is not reinvested to improve conditions in the UK.

Examples of this are easy to find, according to the Telegraph profits of the FTSE 100 companies doubled to £73Bn per year between 2003 and 2007, and again to £150Bn between 2007 and 2010 despite the economic conditions. The Guardian reports that the tax they pay as a percentage of profits had fallen to 26% from over 35% by 2011. The Telegraph goes on to develop this point explaining that 37% of FTSE companies paid no corporation tax whatsoever, while the others employed various means to significantly reduce their tax bills. Meanwhile UK unemployment was increasing, real wages were falling and the Government has used lack of money to justify an austerity push which has reduced all of our standards of living and decimated the public sector. Still being the socially responsible entities that they are the FTSE companies responded by setting up new ventures in tax havens so that they could avoid their tax obligations to an even greater extent – all but two of them have done this. And this money does not find its way back into our economy through spending as so many of the shareholders are based in other countries or are actually other organisations.

This pattern - the focus we have had on private sector wealth creators over the past thirty years - is the very reason why we have growing inequality in our country. The Private sector has one legally enshrined goal – to maximise value to shareholders. This means that they have no incentive to improve the quality of life for employees, no incentive to reduce pollution, no incentive maximise value to customers and no incentive to improve the outcomes for their local community.

There is little evidence to suggest that public sector organisations cannot provide the same added value as the private sector beyond the spin of politicians who have become blinded by their own dogma. In actual fact the public sector is better placed to maximise added value since less money is leaking from the system in the form of the exorbitant profits that large private businesses accrue. Imagine a situation where some of those profits had been reinvested into the UK economy. Not only would this have served to improve the services that we all share, but there would have been indirect effects such as reduced unemployment and the consequent increase in consumer spending which would actually have benefitted private businesses as well in the form of increased sales.

More than this though, public sector organisations have far less incentive to cheat in the way that we have seen the banks manipulate the Libor rate, or in the way that we see huge multinational companies avoiding tax – that is avoiding contributing to the society where they generate their vast profits. But if we try to explain this to a politician - or indeed try to explain this to anyone who has done well from the private sector – they point ruefully to the 1970’s and tell us that the public sector doesn’t work.

Let’s be honest, the public sector was not hugely efficient in the 1970’s. There, I said it! But this does not mean it can’t be. Let’s remember the fact that the post-war move toward a more collective society happened because the traditional private sector alternative was not able to produce the required outcomes for everyone. Instead of persevering and working to improve the functioning of the public sector, Margaret Thatcher and Keith Joseph decided instead to research how they could make free markets more palatable so that we could return to a system that was better for them. The result is what we have now: A divided, unequal and self obsessed society where people are treated as commodities to be used to maximise value to shareholders. A society where people are reduced to [human] resources whose only real purpose is to increase profits for an organisation, not to improve the society that they are a part of.

Cameron’s view builds on Thatcher’s ideas in that it asks us to sacrifice those in the public sector, and below the top of the private sector so that we can further the pursuit of riches for a few. For example he wants to relax employment rights to make it cheaper and quicker for businesses to sack you if they are not making a profit. He wants to reduce you to a serf who can be bought and sold on a whim. His vision will see more jobs lost with the consequence of ruined lives as he seeks to make what is already the most flexible labour market in Europe even more flexible for the benefit of the large multinational companies and rich captains of industry who sponsor his political career.  His vision will lead to an intensification of the process that has led to triple digit increases in wages for the top 1% while the rest of us have seen wages increase by an average of just 47% between 1986 and 2011 (Guardian). This is growing inequality in action with frightening results such as the fact that the richest 10% of Londoners are 273 times more wealthy than the poorest 10% (Guardian) - this is why the queues are so long at food banks.

Nonetheless, we must take a leaf from Thatcher’s memoirs and rethink our public sector as she re-branded the private. We must hold on to the ideals of equality of opportunity and collective endeavour but design ways for national organisations to be more efficient. The public sector is more difficult to manage than the private sector precisely because it seeks far more than the one-dimensional aspiration of increasing the wealth for a few. This does not mean however that it is impossible and anyone with even the most rudimentary conception of our society’s problems must conclude that change is not only desirable but that the need for it is urgent.

In response to the growing private sector assualt, we must develop an alternative that provides the best outcomes for the masses, for the 99%, for all of the people within our society and for those beyond it. An alternative that is more ambitious than the private sector aims of wealth creation. An alternative that not only provides better outcomes in terms of adding value, but which goes beyond it to improve the quality of life for everyone. This is not change for changes sake. We urgently need to stop “wealth creators” gorging themselves on our rights, our lives and the fabric of our society. We cannot continue to turn a blind eye to the destruction of lives, and we cannot continue to accept growing poverty and inequality as the collateral damage of an inefficient, immoral and unfair system.

The Sale of The West

For the first time in its long history, Great Britain is no longer self-sufficient. For example, we now import over 40% of our food, and according to ‘Food Matters’ this figure is rising.  Indeed, comparatively speaking we no longer actually produce much of anything at all. We have sold the future of our children and our grandchildren for the benefit of a few cheap consumer goods and an annual holiday abroad.
 
Hijacked Economy
To appreciate the problem, you have to see what the economy really is, and what it’s for. In statistical terms it is the total value of the goods and services produced by all of the people in the country. But it’s more than that; it is a collection of all of our jobs taken together, all of our work taken together. Our economy is the collective value of our efforts as a people, a nation. The outcomes are supposed to feed us and clothe us, to provide healthcare and many other things. But our economy is also supposed to allow us to contribute to a collective effort to develop and improve living standards for everyone. It is supposed to be “Our” economy!

Not only do we not produce as a country the things that we need to survive. We also do not give our people the opportunity to contribute to their own existence.  The government tell us that UK unemployment stands at 2.6m people a dubiously low figure. The TUC’s alternative count is over 6m people and rising, meaning that over 16% of UK people of working age are not able to contribute to their own standard of living. Unfortunately however, wherever the true figure lies, that isn’t even half the story. According to the UK government’s own figures over 13m working people exist on less that 60% of the average income, and more than 7m people (again in work) in 3.6m households live in extreme financial stress unable to feed themselves and their families at the end of each month.

 The Political Lies

The political right, and the right wing press would no doubt tell us that this is because the unemployed are lazy, they won’t work hard enough. Lest we forget however that France have a maximum 35 hour working week and the average real income over the channel is still a third higher than ours. In Holland people work among the shortest working week in Europe and yet their average income is 50% higher than in the UK. This is not about effort unless everyone in The West is lazy, this is about the way we allow our economy to operate.

The UK economy is now service based (services account for 74% of GDP and rising) with virtually no primary industries such as farming (7%) or manufacturing industries which together now account for only 11% of UK GDP having steadily fallen from 22% in 1990 and considerably over 30% in the 1970’s. We have all noticed and much has been written about corporations outsourcing jobs to cheaper countries, and the vacuum has been filled with low skilled, low paying service sector jobs.  Perversely we even have an industry which specialises in outsourcing UK jobs and employs directly or indirectly 3.1m people to do it. 10% of the UK workforce are dedicated to taking away jobs from British people.

 
Outsourcing
Through the media we are constantly told that economic growth is the only way to improve standards of living, and yet we choose to send our work elsewhere. In contrast, let’s look at current successful economies. The undisputed engine room of the world’s economy is now China, and they will shortly become the largest economy in the world too. The secret of their success has been export led growth, a reliance on improving skills and maximising output as opposed to paying people in other countries to do it for them. For evidence of this witness the fact that China produces 20% of the world’s manufactured goods already. Despite this, and while the west continues to languish in austerity-fuelled recessions, the Chinese government have recently announced £800bn of further government spending in an economy experiencing over 7% growth.

This is an even more serious threat than it sounds and not just for Britain. The western world relies on China for its manufactured goods, just as it does on Africa and South America for cheap agricultural produce. As these economies grow (and they are growing at astounding rates) their currencies will increase in value and our imported goods will cost much more money as a result. The Chinese Yuan has increased in value by 40% over the last ten years meaning that goods from China now cost 40% more. Very soon this means an end to cheap consumer goods and food. Of even more concern than this is the fact that we do not have the skills to produce these things ourselves anymore and so we will have to pay higher prices or go without. We have relied on other people to produce things for us for so long, that we couldn’t do it now if we wanted to - or even if we had to…

The Mortgage on Our Futures
What this means then is that over the last 40 years we have profited from the fact that people in developing countries have a very low standard of living and have been prepared to provide both our luxuries and our necessities at extremely low prices. We have profited from the poverty and the misery of others, and sold our souls to do so. But it is not only us that will have to pay the price when the tide turns, it is our children and our children’s children. We are leaving the next generation with an economy they cannot contribute to beyond low paid, low skilled service sector jobs - regardless of how they perform in education. Just as worryingly though, we are leaving them without the skills or the infrastructure that they will need to provide for themselves. Instead they will be doing anything from tracking the stock market to serving drinks, as we slowly forget how to grow food, catch fish, mine for minerals, make things or generally satisfy our basic survival needs.

The ‘Sale of The West’ is real in that we have sold our infrastructure and our independence for a few cheap distractions and the illusion of progress. But with these we have also sold the aspirations of our children and their very ability to provide for their own needs. We have mortgaged the future of our countries and it’s almost time to start the repayments!

Does Britain Need a New Party?

Background
To discuss this I’m going to need to take you through the short term future of politics in Britain. Here is a (subjective) diagram which highlights where our main political parties stand on the political spectrum at the moment. Just a quick glance demonstrates how the parties and so our political discourse has become bunched together on the right-wing. This is dangerous and disenfranchising since it allows politicians to make the frankly absurd claim that there is only one solution to any given problem, safe in the knowledge that their competitors will not stray too far from their dogma. It also limits the debate around political and economic issues that can take place since no one is presenting an alternative to the 'Big-Business-is-Best' argument that currently prevails.

NB.. I use the word capitalism in the diagram to denote an emphasis on free markets.

Labour
Clearly there should be something of an appetite among the electorate for more socialist policies in 2015, given the effective privatisation of the NHS and the further erosion of rights and services by the coalition. For this reason, Labour will engage in a great deal of rhetoric as a veneer for not very much policy. The issue is this, Labour do not need to be left of centre to win an election. The poorest people in Britain who benefit most from socialist policies, have fairly set voting patterns in that they tend to be either staunchly Labour or staunchly Conservative. Thus even though they are the clear majority in the country they will not determine the outcome of an election. Therefore Labour only need to be to the left (or seen to be to the left) of the Conservative party to compete, and so they will continue to target their policies at Middle England and London where the majority of the floating voters are located. They will frame themselves as the alternative to the unpopular right-wing policies of the Tories without actually offering a real alternative.  Because of this, most of their campaigning will be negative and focus on the bad things that the Coalition has done during their time in office. Labour's position is also likely to harden with the potential loss of Scotland from the Union as the Scots constitute a part of their traditional left-leaning base. Labour will therefore have to place even more emphasis on luring traditional Tory voters and so their creep to the right which began in earnest under Blair, will continue and accelerate.

Conservatives

In contrast, the Conservatives are masters at selling the unsellable and having set out their stall on the far right during this term, they cannot backtrack without looking weak – political suicide. They have masterminded the right's high-jacking of the agenda over the last four decades using the media to mobilise the poor to vote against their own interests. They have also been remarkably successful at using propaganda to link socialism with communist experiments in other parts of the world. Sobriquets such as the “Loony Left” have forced left and centre parties to the right, creating a climate where dialogue around alternative economic models has been impossible and so all major parties now attempt to use the same tools to achieve only slightly different ends. In ideological terms there is no realistic electoral threat from the left and on the right the Conservatives will have no serious concerns about UKIP’s relatively modest vote share.
They will be conscious of the damage to their image among Middle England voters from their ‘austerity’ and ‘squeeze the middle’ policies and so they will play to the patriotism of the British, most likely by attempting to provoke another war with Argentina in the run up to the election – the scrapping of naval assets has virtually been an open invitation to the Argies to attack the Falklands. Of course this will bring with it expense and therefore a further mandate for austerity after the 2015 election. Nonetheless, they will not communicate a commitment to further austerity until after the 2015 election since it will certainly be a vote loser. They will attempt to force the coalition to collapse about a year to eighteen months before the contest, and then roll up the most politically damaging policies and hang them around the necks of the Lib Dems - they do not need to be completely successful in this endeavour, they merely need to create some doubt concerning their percieved 'nasty party' antics. They will follow this by embarking on a charm offensive based on spun statistics of what is likely to be a jobless recovery much like that in the US. - More manufacturing and technical jobs will quietly move  to cheaper countries overseas while the vacuum continues to be only partially filled by low paying 'flexible' service sector jobs which will allow the Tories to claim unemployment is being reduced. Money is likely to be pumped into the real economy (instead of into the banks) for a short while roughly eighteen months to a year ahead of the election to create something of a feel good factor, but this will only be spent on short term projects that can be ditched without drama, after the election.

A Note on Patriotism in Politics
Digressing briefly on the subject of patriotism since I mentioned it above, politicians speak of it conveniently when it suits their interests. Threats to our freedom, Terrorism, the Axis of Evil, and malcontents who want to hold the country to ransom all figure prominently in their hyperbole. No real reference to patriotism as a love for your country and fellow citizens is ever made though. It can’t be, otherwise we would have the contrasting relief to see how treacherous our leaders and their financial backers really are. Our politicians should take a leaf out of Hollande’s book who notes that the wealthiest should pay higher taxes in France since it is their patriotic duty to contribute to the welfare and prosperity of the nation; to help the people whose efforts have provided their wealth. Unfortunately that can’t happen in Britain since we still equate patriotism with the glory of the Crown.  With an outdated imperialist vision that sees us line the streets as our young people die in wars that they don’t understand and ignore the fact that many people profit from their deaths. Regardless of the questionable motives for war in Iraq, who do you think profits when embargos are lifted as a result of Saddam’s passing and the free flowing oil that results? Who profits from the government’s purchase of weapons to fight an extended war in Afghanistan or incursions into the Middle East? Whether or not you believe in the moral or legal cases for these military campaigns, no-one can ignore the money trail. Meanwhile the donors to all political parties and the lobbyists and politicians who have supported the conflicts, auctioned our public services and sold our rights, store the proceeds off shore and avoid even contributing a small portion of their blood money to the cause of the public good. Talk of patriotism is a smokescreen, a front to manipulate the easily led and poorly informed to think, act and vote as will be required to enrich the rich and impoverish the poor.

Liberal Democrats (although I’m not sure there’s much point…)
As far as the Lib Dems are concerned, they are fighting a losing battle to the point where it’s hardly worth wasting a paragraph. Their unpopularity as a result of their sheepish, whipped  support for Tory policies is irreversible whether or not they now terminate the association. Clegg knows this and I would guess his escape route is already assured, probably as a conservative MEP or some ‘non-partisan’ figurehead position such as taking over from Chris Patten at the BBC. The Lib Dems will try to present a new Clegg-less face of hope and leftward reform. This will not wash however, and the Libs vote share will be halved at best, making them even more irrelevant than they have been in coalition. Because everyone knows this, they will struggle to garner the corporate sponsorship that is now a pre-requisite for election success in that it is the basis for the expensive smearing campaigns that are now a necessity.

The corporate donor issue will also cripple any idealistic plans Labour might have too. As much as many MP’s and party members will champion a movement to the left, the leadership will be well aware that they need to get elected first and foremost, so they will have to chase funding from the super-rich corporations and donors that this government is creating with its current and its historic Public Sector “reforms”. Promises will clearly have to be given about 'favours' to be delivered in return, for such is the nature of politics in a corporate fascist democracy. Not buying it? Ed Miliband acknowledged this recently, stating in a speech that no political party can afford to be anti-big-business.

General Election 2015
In reality then, little will change in the run up to 2015. The Conservatives will stay ultra-right and attempt a PR coup to maintain power. They will have a vague manifesto and a plan to shade the election and continue their policies to make the rich richer and the poor and disadvantaged work harder for their scraps. Labour will decide that all they need to do to beat the Tories, is to not be the Tories (not being Bush won Obama a Nobel prize remember), and so their policies too will be vague and effectively they will maintain the status quo if they attain office. For Labour – and because the public will always equate them with the left no matter how misguided this is - it means a slow drift ever further rightward which will contribute to the on-going reduction of confidence in the party and a strengthening of the belief that the only way is the Tory way. Fundamentally, this means the only choice we have is a faster or slower movement to the right now, and an unavoidable accelerating movement right as we head further into the future.

An Alternative?
There is another way however. If another party were created and supported, if a modern party of nationalisation, employment rights and responsibility for all were to emerge. A number of things would change. Yes there is the threat that the left would be divided, but this is only a concern to those who seriously believe we still have a party of the left. A new party would offer the potential for a wider popular movement which could then begin to seriously discuss equality and rights in the public domain. More importantly though, it would put pressure on the Labour party - precisely because their vote share would be threatened. They would be faced with the choice of committing to the left or holding the moderate right. No longer would they be able to coast into elections without real convictions and values beyond stopping the Tories. No longer would they hold their position as the major opposition to Conservative rule, by promising only to not be as bad as the Tories. If they hold the centre-right they will condemn the Lib Dems to long term extinction, and if they move left they begin to provide a real alternative to the corporate fascism that we currently endure, as was their function in the early 1900’s. The Tories too would need to respond, they would need to renew their message that capitalism can be socially responsible, and in all likelihood they would commit to promises of greater regulation (probably in the financial sector) since this is the cheapest guarantee (both in terms of spending and their own private interests in large corporations) that they can give in the near-term. Again, this would put pressure on the Labour party to move further left to differentiate themselves and thus go some way to putting social and economic justice back on the agenda. Unfortunately though, the emergence of a new party at this late stage is somewhere between unlikely and the second-coming. This has to be the long term plan, in the immediate future we must seek to limit the damage.

What Now?
So then, either the Tories get re-elected, or Labour edge it without making any 'risky' ideological changes. Even in the latter scenario Labour merely keep the government benches warm until the Conservatives return at the following election. And return they will, with a reinforced argument to criticise their most obvious competitors on the basis of their limited achievements during that period, and continue their looting of our country. Once we strip away the PR, the spin and the mainstream-media smokescreen, modern politics is not about patriotism, policy, conviction, ideology or representation. It is about one thing and one thing only – career politicians getting elected! This means that manifestos will get progressively more vague, rhetoric ever louder and real debate ever marginalised until something changes, or something is changed. Until as a populace we create a viable conviction based leftward challenge that represents real political plurality. Until then we have only the choice between staying right or moving further right, and that means a smaller Public Sector, the eventual complete loss of free healthcare, education and the police. The gradual disappearance of employment rights, corporate regulation, our progressive tax system and the abolition of our already diluted democracy. In concise terms we as a nation will head further into the neo-liberal wilderness as the wealthy become the overlords of a post-modern feudalist state. As people, our status as resources will be solidified and our ability to protest or force change irrevocably compromised for another generation at least.

Summary
We need a new political movement to make change - real change - because the truth of the matter is that the Labour Movement has fizzled out. Either it has been infiltrated by the more priviledged classes or its political leaders, like the pigs in Animal Farm, have fallen pray to the spoils on offer in our society for the wealthy and well connected. They are now themselves part of the top 1%, and too many of them will have too much to lose by implementing the policies that would really help the majority in our country. In 2015 we all need to vote anywhere but Tory; to vote for the person standing against the Conservative candidate with the best chance of beating them (best to avoid BNP though). Not just to protect the poor, but because we all deserve a stronger, fairer and happier society where we value each other as free individuals rather than inanimate factors of production.

But after 2015: Yes, Britain does need a new political movement and a new political party. We need them because in the long-term, we will have to create our own alternative to resurrect our democracy.