The battle for the spoils of the next recession is already being waged. Whether or not the world will hit recession is debated. What is not is that we are in for a tough economic time when the memory of 2008 is still fresh with us and the impacts of much of the austerity that was supposedly going to restore UK public financial health has yet to hit. Whether or not we have recession is merely a technical issue: we are set for a few more years of economic misery and what is intriguing is the spat developing in the media about who might gain from this.
Damien McBride (a man for whom I usually have little time) makes an interesting point in the Guardian:
Whether or not a crash is imminent — let alone one on the scale I fear — remains deeply uncertain, but the one assumption I have up to this point considered safe is that the beneficiaries in political terms would be on the left.
My reasoning was that if — for the second time in a decade — the economy crashes because of loose lending, bad investment and laissez-faire government, the capitalist model that survived the 2008 crash unscathed would finally be ripe for upheaval. In that case, I believed, Jeremy Corbyn, Bernie Sanders and other leftist candidates around the world might get the mainstream hearing they are currently denied.
Now I'm not so sure.
Nor am I. The right are already lining up to make the next recession their own. Trump is just the pinnacle of a movement that seeks to say that if only we have less government we would have been better off.
Robert Zoellick typifies the right wing economic argument in the FT, saying:
After seven years of extraordinary governmental stimulus, the world needs a shift from exceptional monetary policies to private sector-led growth.
Having dismissed government led solutions proposed by Larry Summers and Ken Rogoff to our economic problems he argues:
The third growth solution would re-focus policy on boosting productivity and potential, especially in the private sector.
The argument is that any intervention reduces the impact of market forces and this suppresses demand. So, he says:
For the eurozone, labour market flexibility, incentives to work and invest, and more efficient systems of social protection are vital. For the US, the question is whether the public will elect a president and Congress that will work together to rekindle private dynamism.
You can just see it: reduce labour protection, attack trade unions, bigger tax breaks for business and on and on. His conclusion? This:
If in 2016 there is no shift from monetary to growth policies, the future envisioned by Profs Summers and Rogoff could prove more likely: sluggish growth; currency conflicts; and populist politics and fights over distribution – punctuated by mini-crises as struggling economies falter. Political leaders can either try to shape their countries' destinies now or risk a future reckoning from the decade's economic experiments.
It's as if any government intervention is 'an experiment' that leads us inexorably from the market nirvana. The only trouble is, he believes it, and so do many others.
This is the fight ahead, and it is vital. But it's one where apathy, applauded for its positive qualities (which it has, for a ruling elite) by Janen Ganesh this morning will play a major part and where the battleground may be unexpected. Gideon Rachman inadvertently hinted at that this morning when saying (again in the FT):
The death of David Bowie last week made me feel first wistful, then optimistic. At a time when the papers are full of war, terrorism and crashing markets, listening to Bowie reminded me not to get too worked up about the daily headlines. Music and art will last, long after the political and economic news has faded away.
His message was that few remember the economic travails of the 70s, but we do remember the vision of Bowie that had such impact on the social liberalisation of society.
The question then is whether or not we face bigger travails than the 70s and, as importantly, whether a fight to preserve something - democracy, community, cohesion, social worth and collective well-being - can be as powerful a motivator as the demand for what became known as LGBTI rights.
My answer is that it all comes down to who tells the better story. For thirty five years the right has. The left has to overcome that to win. It's some challenge.
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The economic cycles of capitalism are inevitable as history has shown only too well. So it’s not if but when the next serious recession hits and how deep it will be.
But there is a fundamental problem with waiting for the next crisis before trying to change the economy, in that by the time the next big crisis occurs it will be too late to change direction because without an alternative waiting in the wings and firing on all cylinders (or preferably solar power and electric motors) the established order will tighten its control of all the levers of power and suppress any attempt to usurp it (as happens every time there is a financial crash).
So the change needs to be happening now, with or without any political support, enthusing the general public to become less reliant on large corporations and centralised organisations, and instead taking control of their own destinies and starting distributed co-operative ventures to provide all the everyday essentials of their own lives.
Locally owned, controlled and sourced energy, food, water, transport, the internet and media to name but a few. We can take back power, but it needs to start at the sharp end of life and not in the corridors of Westminster. What is needed is sufficient co-operative and green finance to enable it to happen quickly and across the country.
Couldn’t agree with your initial point and the subsequent prescriptions more. This is exactly the path down which a network of social groups in Manchester are beginning to venture. Grassroots, people and place-centric, started now projects are being increasingly stitched together in anticipation of the needs that are coming rather than in panic once they are visited upon us all.
The only point I’d make about any current occupants of local government, central government, NGO and large corporate roles is that they need to be aware right now that their ability to have done something about it beforehand is being noted.
Great comment, Keith.
Fantastic post. In a way it is like going back in time but with the wisdom we have acquired to be wary of those not altruistic about it.
Because it is otherwise the end of the road, waiting for what, fair treatment, hope for our children to thrive. Another co-op movement that started in Rochdale all those years ago brought forward into the 21sr century. They won’t like it.
‘Another co-op movement that started in Rochdale all those years ago brought forward into the 21sr century. They won’t like it.’
I remember reading that in Florida (?) so many households had gone off grid, in creating their own electricity, that they brought in a law to say that all households had to be connected to the State grid. So much for the land of the free market.
Richard
Perhaps unrelated to this post. I read this FT article by Chris Giles, which you’ve no doubt read yourself. As a newcomer to things economic and certainly the MMT perspective, it’s difficult to see through it. How correct are the writer’s assertions? I have severe misgivings. Comments?
http://www.ft.com/cms/s/0/761ab30c-b941-11e5-bf7e-8a339b6f2164.html?siteedition=uk
I found the claims bizarre
I read it and thought, asI have done increasingly over the last year or so, that Giles is losing touch with reality
Apparently nothing private sector can go wrong in his book
Oh yes it can – and this is one that might well do so
If he thinks private debt isn’t a huge problem, then he struggles with the dynamics.
The problem is when the economic flow becomes insufficient and then the whole thing quickly collapses like a house of cards.
I’ve no idea whether the the government’s policies will affect things before 2020. The dynamics are too complex and they haven’t yet managed to make much of anything of note stick.
The main supporting strut in Giles’ bizarre argument is that in general they have net assets despite mortgage+credit card debts. This , i assume, simply means they have a house, whose value exceeds the debts. To see the roof over your head as a net asset is about as meaningless as saying ‘Ill sell my air supply in an oxygen deficient environment.’
It proves that Economics is like religion, you can say almost anything and get away with it.
Unbelievable.
And Giles is in a weird fringe sect
“Political leaders can either try to shape their countries’ destinies now or risk a future reckoning from the decade’s economic experiments.”
To paraphrase the time honoured observation about propositions at Union Conferences; ‘The words are the words.’
What Zoellick wants us to think here with this piece is that he and the ideas he represents are about no role whatsoever by the state in the economy and looking at this particular sentence one could well be tempted to observe that he really needs to make his mind up as to what it is he wants because he seems to be all over the place, wanting his cake and to eat it at the same time.
However, what he (and the paradigm he represents and is arguing for) really means here is that he actually has no problem with the state taking an active role in the economy. It is just that the role is to actively protect, maintain and ensure economic structures, processes and relationships which favour a tiny minority at the expense of the majority. The State, in this paradigm, has an active rather than passive or no role whatsoever in exterminating any space or terrain which might employ ideas and criteria based on wider considerations than profit maximisation for the few.
This represents an atomised and reductionist view of human general and economic behaviour where the role of the State is to act as enforcer for a narrow, self interested, sociopathic view of the world. A part of the paradigm this view seeks to champion is the myth that the State has no role and should disappear. If the State really did disappear and/or played no role in shaping the economy in the way in which people like Zoellick require there would be a bull market bubble in brown trousers because this lot could not survive without the role played by the State in ensuring their needs are the only game in town.
This is my take on our economic status/problems (bear in mind that I only have a 2:1 degree in Modern History, like George Osborne, so I’m not that bright!).
If another recession is used by the right to enforce a ‘shift to private sector growth’ then that is it not necessarily a bad thing. The problem is, of course, is how do you stimulate the private sector without state intervention? The main economic driver for growth in the last 35 years has been the increase in house prices. It has not been private sector growth or wages. It has not been hard work or industry but speculation. And house prices are being propped up by government stimuli e.g. ‘Help To Buy’ and low interest rates.
Our economy is unbalanced. Our industrial and manufacturing capacity has declined rapidly in the last 35 years. We are wholly reliant on the service sector for growth but it alone cannot make up the difference because it is dependent on an increase in disposable income, which in the last 35 years has come from the rise in house prices!
The right is being disingenuous when it says it can improve growth without state intervention or increasing our industrial and manufacturing output. What they actually mean is that they would like to destroy the state.
But as Osborne was forced to admit in his last budget, because wages are so low in the UK relative to the cost of living (and have barely improved under his tenure), millions of working people are now dependent on the state for working tax credits or other types of benefits, as well as the NHS and the State Pension.
In an ideal world there would be no need for the State. However, as the Right love to point out to the LEFT, we do not live in an ideal world and until real wages significantly improve and start to rise above any increase in house prices the economic outlook for Britain is very gloomy and the Tories, if they want to stay in power, have no option but to continue to use the state to subsidize wages and house prices.
In my opinion the solution is to reinvest in industry and manufacturing. In fact, I’ve often thought that returning to a protectionist economy might work, although I’m sure there are lots of economic reasons why it would not work.
http://www.zerohedge.com/news/2016-01-23/its-only-manufacturing-recession-whats-big-deal-heres-answer
I agree totally. It’s the $64,000 challenge. I have little doubt that the neo-cons have an armoury of financial BandAid and sophisticated spin that will convince the electorate, yet again, that they are the only ones who have the managerial experience, resources and & intellect to repair the damage caused by their own policies.
It’s a puzzle for progressives both in Europe and the USA as to why people vote for parties and individuals who are most likely to make their lives less comfortable. It’s a form of cognitive dissonance.
(For anyone who hasn’t seen it, this is an interesting BBC 3-hour trilogy made almost 9 years ago by Adam Curtis explaining how the public mind-set has been managed: The Trap: What Happened to Our Dream of Freedom – http://thoughtmaybe.com/the-trap/#top. There may be other links I’m unaware of.
As you said, for 30+ years the right has successfully communicated a more appealing ‘story’ (fairy-tale) for the middle-classes with the result that ‘Overton’s Window’ has shifted significantly to the right making it ever more difficult for progressives to get their message across. And with the MSM concentrated in fewer right-wing hands, the ‘problem’ has become even more challenging.
Personally I’m pessimistic as to how the general population can be persuaded that the ‘houshold budget’ narrative does not apply to sovereign governments. It’s firmly embedded in their subconscious and reinforced daily by the business community who have to operate their enterprises under the same financial constraints. I’m only guessing, but probably less than 10% of the adult population understand how a modern fiat currency works.
So, what’s the answer? There is no other choice than to keep plugging away, step by step, at all levels of society but especially in colleges and universities where they are still teaching outdated economics 101.
The work that you – and the many others like you – do is an essential building-block for a better future. Progress may seem depressingly slow against an unusually well-armed ‘opposition’, but change will eventually come about. It always does. And it will be from the bottom up. In the meantime one can only hope and pray that the worst Cassandran predictions aren’t realised, for the sake of future generations. But don’t hold your breath.
Happy Tuesday!
That is partially the reason, but not completely.
The ‘neoliberal’ consensus has prevailed because both Labour and Consevatives are fighting over the same swing voters in the same marginals, and these voters are middle aged and older property speculator incumbents, that is “tories” with a small “t”, who vote tactically for whichever party promises them the biggest tax-free effort-free capital gains on land/house prices for them to cash in via remortgages. Same as in the USA, Australia, Canada (somewhat) and New Zealand.
UK politics are in effect the “elected” dictatorship of South East middle aged or retired landladies.
Property speculation (fueled by government-sponsored private debt) is the single biggest, defining, central issue of the past 30 years of UK (and Australian etc.) politics and economy.
And it is because the amounts of money involved are GIGANTIC. An important quote:
http://www.bbc.co.uk/news/business-19288208
“In 2001, the average price of a house was £121,769 and the average salary was £16,557, according to the National Housing Federation. A decade on, the typical price of a property is 94% higher at £236,518, while average wages are up 29% to £21,330”
That’s an average between the North and the South, and it does not really apply to the North.
But even it taking it as it is, that means £12,000 a year for a decade of tax-free effort-free income for a working class family in the South earning around £16,000 after tax.
£12,000 a year of tax-free effort-free windfall is GIGANTIC, especially if it recurs every year for 10 years as per the above numbers; and actually it has been going on for 20-30 years. And for the millions of people with a house in London it has been even bigger than in the rest of the South.
Do people really realize what an extra £12,000 a year of (purely redistributive rentier) windfall going on for decades can mean on top of an earned after tax income of £16,000? For millions if not a dozen million families?
Do readers here realize what that means to “aspirational” Southern voters and what they are prepared to vote for to keep it coming?
We had some years ago a “small dip” in house prices that resulted in the first bank run in over 100 years and the “commanding heights” of the UK financial system being nationalized, something that apparently is totally fine with “smaller state” George Osborne. Plus over 5 years effectively of recessions with a collapse of 20-25% in median after-inflation wages. And a 25% collapse in the pound. Which by itself would have been a major political bomb not so many decades ago.
But thanks to the vigorous shifting of the Overton window and the much changed class interests of many South East voters, that’s amazingly now all business as usual.
Who are the “conservatory building classes” and what worries them (usual links):
http://www.dailymail.co.uk/femail/article-2308344/Petronella-Wyatt-Its-hell-posh-poor.html
http://www.dailymail.co.uk/femail/article-2841450/Just-live-1m-house-doesn-t-mean-m-not-breadline-Ursula-knows-ll-little-sympathy-says-trying-match-parents-comfortable-lifestyle-left-penury.html
http://www.dailymail.co.uk/money/mortgageshome/article-2105240/Stuck-rent-trap-How-middle-class-family-kept-remortgaging-home-pay-bills-longer-afford-repayments.html
All three are from the Daily Mail, the mouthpiece of the “conservatory building classes”. Reading it is a VERY good guide to what “Middle England”, that is the affluent property owners from the South East who shop at M&S or Waitrose really think.
Bob you have accurately described (as per the Daily Mail) the dystopian scenario (AKA false material aspiration and consumption) that has now become a real life living nightmare for so many people who believed the rhetoric and tried to follow the British version of the American dream.
Sadly, and inevitably, the noose of increasingly unaffordable levels of debt will tighten around their necks forcing them to burn the treadmill of work ever harder until they fall down sick and exhausted.
If it wasn’t such a shocking reality for so many people, it would be easy to blame a few for being foolhardy and feckless. But this is exactly what has increasingly driven much of the population of the UK since the financial deregulation beginning in the 70’s and 80’s – not by accident but by design!
Capitalism will bleed most of us dry, spit us out and then take back all the assets that we never owned anyway.
I’m still of the opinion that unless Labour poses the question what is the economy for? (Then tries to answer it by saying something like it is a system for distributing resources) then I fear real progress is unlikely. Neoliberal ideas will not be successfully challenged without starting from first principles and whilst John McDonnell’s economy talks sound academically very interesting they need to start from basics, unless all they are doing is preaching to the converted.
As for Robert Zoellick’s “a president and Congress that will work together to rekindle private dynamism.” Well, I know he’s an (ex? ) Yank Banker, so we shouldn’t really pay attention to him, but he seems especially confused.
Private dynamism is obviously very dynamic but clearly not dynamic enough to be self starting. Surprise! It needs to be rekindled by the State!
Never mind that his “incentives to work” do not seem to include full employment.
Such people seem still to be presumed the great and good. We may know that they are at best discredited and at worst just empty vessels, but Labour has the difficult task of showing them up for what they are.
The reality is that the Right will say the usual thing: that they did not go far enough.
I think that many people will buy that.
The only way the CN can win is to join forces, settle small differences (or some form of purdah) and collectively aim at the weak spots (broken promises) that the Right has been pedalling since 2008 (and before).
There needs to be someone who can pull these people together and present a unified case that focuses on the failure of TINA and the prospects for new ways of thinking.
Some form of project manager, link-person – whatever – who can pull these unified but also seemingly disparate voices into one and to get them to combine all these strands of ‘intellectual light’ into a powerful laser beam-like focus and burn away all the crap we’ve been fed about TINA.
It’s needs to be someone who is already moving in those circles, paid to work on these ideas or in the realm of them at least;
someone who is willing to subordinate their own particular views and ego to achieve an accommodation with other significant voices but also enforce some sort of benign discipline amongst the others to get those involved to subordinate their selves to focus on TINA and not their own little projects and research interests;
someone who is prepared (in short) to be a leader of sorts – a point of focus.
I know that I can be bellicose at times and also perhaps too eager to add drama to my contributions but I do feel genuinely that this is a key moment. I am convinced that the CN needs a unifying force or presence of some kind.
Otherwise change will take much longer because matters will have to get much worse – in fact as TINA continues to actually help more money to percolate upward to huge vested interests there will be further accrual of power so that I don’t believe any more in this ‘tipping point’ that might be caused by things getting too bad.
The biggest risk is that with human beings being so very hardy and resilient we could enter a period of social and economic stasis – a new modern serfdom – that could go on for a very long time indeed – fuelled by soma such as Youtube, mobile phone apps, celebrity culture and huge sporting events .
Long enough to render the superb ideas portrayed in this blog as meaningless perhaps? And that would be a great shame indeed.
CN?
Quite – what is CN?
Sorry.
CN = ‘Counter-narrative’ – something that I’m trying to convinced myself exists (and you if you like) in order to feel that I’m actually contributing to a need for change.
The CN is opposite to the austerity / private good-public bad / markets are best / the Scots are evil narrative from the Right/Tories/Blue Labour/ Liberal demi-whats.
Or the CN is just about every good idea and insight that the blogger and contributors of this blog talk about on a regular basis thank God.
Before everyone gets too carried away, it was the private sector that caused (promoted may be a better word) the last recession. And the previous one/s.
With the private sector currently playing find the pea with $1400 trillion of imagined assets.
The state gets blamed for stagnation because of restrictive legislation (in fact it was relaxation of regulations that set the stage for the last private sector love-in disaster).
As far as bringing production “home”, the gov is already moving that way with poor wages, poor work conditions (cutting HSE budget/staff etc) and castration of unions.
Maybe they should become aware:the jobs are not coming home.
As Steve Jobs said: the workforce with the highest skill-set are abroad ( and they’re cheaper) (and they don’t have unions, frequently violently so) (although as someone who witnessed mounted police bludgeoning unarmed women during the miners strike, violence towards unions is always available for the gov).
As an aside, I note that victims of the “private sector blacklisting scandal”, where union officials, among others, were put onto an illegal database by some of the largest private sector companies, have been awarded sums in excess of £150,000.
Obviously, in a shrunken state, we will return to the private sector paying no attention to law at all. But wait! They don’t anyway!
JohnM;
” it was the private sector that caused (promoted may be a better word) the last recession. And the previous one/s.”
What, all of the private sector? Every firm, every sector, every employee, every manager?
Get a grip.
Oh well, maybe I ignored large supermarket chains…..no, sorry, they seem to have thousands of companies registered abroad [collectively], which seem to do no other trade than passing of profits between them.
Of course, some banks didn’t grab the government teet when they crashed the global economy, one at least borrowed money abroad to solve its empty balance sheet: But wait, it borrowed the money from itself!
Some of the rubbish financial empires did the honest thing, they went bust.
Then there were [some of] the largest construction/infrastructure companies in the UK, running, knowingly, an illegal database for the purpose of not employing “troublemakers” (union reps etc). Well, looks like “they” will be paying a hefty price for that (what’s 3200 X an average of 90 thousand…)
Well, I agree that many employers are honest. They are at a massive disadvantage because of the advantage others get from playing fast and loose (and totally sloppy) with laws and regulations (laws are for little people that cannot afford expensive law and accountancy companies).
One company breeching regulations and breaking laws means that others will do the same. Corruption spreads; fast.
As a person with a fairly extensive knowledge of small workplaces, I know the rampant ignoring of a large amount of laws/regulations exists, and grows, whether tax laws/health and safety laws, or any (and many) others.
I have looked at the supermarkets
It is not thousands
You may push a hundred or so
But I accept that profit shifting is likely as a result in at least some cases
Update:
Many of the victims are refusing “compensation”, and want their day in court.
Just like to say to all the posters on this subject Mr Murphy, wonderful contributions, nothing incendiary, just measured and valuable contributions, if only you were not all busy earning a living to pay the bills you would have the making of an admirable political voice.
Well that is an argument for more part-time politicians. If most of us here can only be part-time that is at least some progress…
Well; maybe not thousands, for supermarkets. But a quick look gives me 151 for 4 of them.
Barclays has nearly 400….
Mind you, the number of offshore companies operated by that same four is nearly 900…
BP has loads….WPP media has the most..