Gove is delivering the Cowardly State

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The Guardian has reported this morning that:

Taxpayer-funded academy chains have paid millions of pounds into the private businesses of directors, trustees and their relatives, documents obtained from freedom of information requests show.

This is the inevitable consequence of the creation of what I have called the Cowardly State. When I read this story this morning part of the opening chapter of my book, The Courageous State, resonated heavily. The relevant section, on the creation of the Cowardly State, reads as follows:

Across Europe governments have abandoned intervention in the economy.  David Cameron and George Osborne led the way in the UK when, without an electoral mandate, they secured power and declared to the surprise of the followers of their coalition partners that the only way to deal with the economic crisis was for government to walk away from the problem. 

That is precisely what Cameron and Osborne, with their allies Nick Clegg and Danny Alexander, have done since then. These two have become the apotheosis of something that has been thirty years in the making: they are the personification of what I call the cowardly state. 

The cowardly state in the UK is the creation of Margaret Thatcher, although its US version is of course the creation of Ronald Reagan. It was these two politicians who swept neoliberalism into the political arena in 1979 and 1980 respectively following the first neoliberal revolution in Chile in 1973 that saw the overthrow of the democratically elected Allende government by General Pinochet. Since then its progress has been continual: now it forms the consensus of thinking across the political divide within the UK, Europe and the US.

The economic crisis we are now facing is the legacy of Thatcher and Reagan because they introduced into government the idea that whatever a politician does, however well-intentioned that action might be, they will always make matters worse in the economy. This is because government is never able, according to neoliberal thinking, to outperform the market, which will always, it says, allocate resources better and so increase human well-being more than government can.

That thinking is the reason why we have ended up with cowardly government. That is why in August 2011, when we had riots on streets of London we also had Conservative politicians on holiday, reluctant to return because they were quite sure that nothing they could do and no action they could take would make any difference to the outcome of the situation. What began as an economic idea has now swept across government as a whole: we have got a class of politicians who think that the only useful function for the power that they hold is to dismantle the state they have been elected to govern while transferring as many of its functions as possible to unelected businesses that have bankrolled their path to power. 

This, it should be said, has not just been an issue within the Conservative party. Thatcher arrived in power with what was, in retrospect, a remarkably timid manifesto for change, and although she became bolder as her career as Prime Minister progressed she retained a strong belief in the power of government regulation over the businesses that she privatised. Her legacy was regulated capitalism: ownership in private hands, with some power to control those sold-off enterprises retained by state-appointed regulators that were one stage removed from the ministers who appointed them.

This is a state that now exists solely to facilitate the looting of its power to tax for the benefit of an elite who want to own its assets through the PFI scheme, and be guaranteed a high and risk-free income for doing so.

It is a state that wants to privatise its education system through ‘free schools’ — free only because yet more tax goes to the private sector in the process. And it is a state that wants to hand control of one of the UK’s greatest achievements — the National Health Service — to the market so that we can copy the US healthcare model and double the cost of provision in exchange for worse healthcare outcomes — all so that a few can cream off from the tax revenues a wholly undeserved and excessive risk-free return for being in the right place at the right time, somewhere near their old school friends who might now be in power in Westminster.

No wonder we’re in a mess. And no wonder the world’s markets are teetering on the brink of collapse. After all, why invest in businesses when something so much more attractive — the outsourced tax income stream of a government as anxious as possible to give it away — is waiting to be claimed just around the corner?

The result is that private industry has discovered that rather than trying to innovate new products in an uncertain consumer marketplace it is much easier to make profits from the certain commodities that people are always going to need, such as health, education, local government services, the utilities and so on that were once the preserve of government. So not only are these services now more costly because a profit margin has been or is being added into their cost structure, it can also be argued that their transfer into the private sector via outsourcing actually weakens the incentive for companies to invest in new technologies which might be useful to meeting people’s needs.

Meanwhile, in the financial markets speculation has replaced real investment. This is logical because investing in new technologies in manufacturing or services is a much less safe bet for individual businesses than just getting on one of two gravy trains, the first being public sector outsourcing and the second financial derivatives.

In that case no wonder faith in government itself — and its ability to control anything — has been shattered. 

As commentator after commentator has said, we now have weak governments led by weak politicians who are bereft of any idea apart from dismantling the mechanisms of state that they have been elected to manage for the benefit of the private sector.

This is what neoliberalism has brought us to. This is the legacy that Thatcher has delivered to us. This is what happens when government is run by cowards who believe that there is nothing they can do but acquiesce to the demands of the market.

I wish I had been wrong. I'm not though.