It is my usual morning practice to scan a wide range of news sources before deciding what to write on this blog. Doing that this morning provides plenty of issues of immediate interest that could be worth commenting on (strikes, the falseness of GDP as an indicator, expected interest rate rises, energy issues, that Martin Wolf in the FT and Phillip Inman in the Guardian both agree with me on the affordability of public sector pay rises) and one.stand out article by John Harris in the Guardian.
As he argues:
A maddening thought is clearly rattling around Tory minds: this wasn't supposed to happen, was it? Over four decades have passed since Margaret Thatcher began her war on organised labour. Six years ago, the newly elected Tory government led by David Cameron passed a Trade Union Act whose stringent new restrictions on strike action looked like the belated conclusion to what she had started. And yet here we are, faced with what the Daily Mail calls a “calendar of chaos”, with the unions suddenly at the centre of the national conversation.
He's right. This was not meant to happen. Union activism was meant to be over, little lamented by any politician, from Wes Streeting and Oliver Dowden onwards. And yet it is happening, for good reason. As John Harris puts it:
All this points to something that most of us surely understand as a matter of everyday experience: the fact that our basic needs have endlessly been met on the cheap. What just about held everything together was the combination of unprecedentedly low interest rates and trifling inflation – which meant comparatively cheap goods, easy credit and a lid being kept on strikes and disputes. With those comforts now gone, a confounding new reality has hit us, made even more glaring by the effects of Brexit.
As he then notes (and this piece is so competently and densely argued paragraph length quotes are required):
However the current wave of walkouts ends – and make no mistake, strikes will always risk public backlashes, not least when they involve hospitals and disrupt Christmas – it is rooted in deep issues that are not going to go away, and they demand changes that touch just about every aspect of politics. At the moment, it is the Tories who are failing to understand that basic point, but if Labour wins the next election, the same tensions will collide with Keir Starmer. His apparent insistence that a Labour government will stick to current public spending limits may soon be sorely tested. So will his equally stubborn approach to Brexit and the European single market, for one inescapable reason: that if Britain is to properly fund its public services and transport and pay people what they need and deserve, it will have to tackle its anaemic levels of growth and sluggish productivity – both of which demand a much closer economic relationship with Europe than the one we have ended up with.
His conclusion is clear. We are facing a crisis of a sort that has been absent from politics for a long time because government did, post the 2008 crisis, make the economy work largely by using QE and low interest rates to make that possible, and now refuses to do so again. This means that:
More than anything, this winter of strikes demands a seriousness that our political establishment has long since mislaid.
And that is from all parties. Harris gives no further with his argument than this. His conclusion is that seriousness is required. So I will add the twist, and there are at least three of them.
First, as I argued in threads I wrote over the weekend and so will not repeat again, we need to newly reappreciate the value of public services and those who work in them.
Second, in turn this requires that we reappraise the public / private split in the economy. This means we may need to pay more tax so better services are supplied, although other funding options are also available. But it also means that we might consume less that the private sector has to provide as a result to free the resources to make this revived public sector possible. Will that really be such a bad thing given we need to be sustainable? Policy to achieve this might be required.
Third, this will require something we are wholly unfamiliar with, which is is politicians who know why they are in office (which should be to make the world a better place, but rarely has been for some time) and who are able to make the decisions to achieve that goal.
Add this up and what John Harris says is right. We are, and need to be, entering a new political era. The only problem is that very few politicians seem aware off this and even fewer seem to understand what it might demand of them. And that is the truly worrying bit.
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Are you on Mastodon, Richard?
Yes
Richard.Murphy@mas.to
It’s @RichardJMurphy@mas.to, not Richard.Murphy.
You are right
Sorry
I added a BTL to the Harris piece which tried to paraphrase the point made in an earlier blog (by you Richard) that any pay rises would be mostly clawed back in the form of taxes – albeit with some timing differences. Thus my main critique, in an otherwise good article, is that most jounrnalists seem to miss the point about taxation.
Back in 1984 when I worked for Sony, I did a “back of the envelope” calculation on how much I paid in tax – I stopped at 60% (the direct taxation on wages was easy – it becomes harder with fuel, taxes on elec & gas etc) – appalled at the amount of money that went almost straight back to gov. So much for Thatcher’s low-tax economy.
The failure to recognise that gov spending in terms of pay rises to gov workers mostly comes back as tax should fundamentally alter the debate. That it is not even mentioned/considered, once again shows a failure on the part of the media as egregious as, for example, the dead silence on the Al Jazeera Labour Files. I like Harris’ stuff, somebody needs to engage with him on how the (political) economy works.
Margaret Thatcher also introduced double digit VAT, introduced tax on property, increased tax on fuel. She also nationalised industries in order to make them more attractive for private investors to buy.
So many of the Thatcherite disciples do not remember what she did, only the sound bites. Everyone they disagree with do so simply because they are on the wrong side of history. Much of British history, including that of the empire, is written by Tory politicians.
The politicians who do understand it are declared unelectable and politically assassinated by all sides. In the void that is left (and is indeed the so-called left), my fear is that the far right will bloat still further and fill the vacuum. Farage’s natural habitat.
Having got my cost of living rise like so many others recently in the public sector, it did sink in how much of it went back to the government who authorised it in the first place. You could see it on your payslip.
And yes, it was much better that many had got, but still not enough for 12 years of almost nothing. And it also came too late – we are now incurring a retention crises and we do not have enough staff to get us to be where we need to be.
Your piece is general and I have focused on health – but the same principles apply on any issue where joint action/provision is required.
It is a cliche that “there is nothing more important than good health” – but it is true…. and it IS clear that people want better health and social care provision. This requires more resources (staff) who will have to come from somewhere and be paid somehow.
Our first choice is clear – either we re-align our work force to provide this or our state health/social care system will remain in permanent chaos with only very wealthy people able provide for themselves and their families in the face of bad luck and shortages of qualified people. Let’s face is, Tory policy is “permanent chaos” (as they could outbid everyone else) but for the rest of us who would be destroyed by serious illness, lingering old age etc. (or appalled at having to watch our neighbours destroyed) an alternative is required. This must mean fewer people doing other things or greater immigration to plug the gap. The 100k+ vacancies exist for many reason but poor pay and lack of (funded) training opportunities are at the top of this list.
Parking MMT arguments to one side (and this is fair – it is unreasonable to bank on continuous money creation, taxes would need to rise at various points in the cycle to control inflation) –
– these need to be paid for either by higher tax, charges at the point of use or an insurance system.
The problem with a private insurance system is that the profit motive will lead to huge efforts by insurers to “cherry pick” clients and then wriggle out of claims. We know this – it is what insurers do! Of course government could regulate to stop this but we also know that regulators struggle in the face of cunning opposition. In reality, the government would always be left with the risk of the sickest and poorest in society so we would just have created a system that privatises profits (insuring the young and healthy) and still requires government to care for the old and/or chronically sick.
We have been down the route of privatization plus regulation many times in the last 40 years; most have failed, some failed very badly. The definition of insanity is doing the same again and expecting a different result.
We already have a working insurance system – the NHS. Premiums are paid through general taxation on “ability to pay” rather than “medical risk”. All we need to do is “raise premiums” by raising taxes…. and then the NHS do its job.
….. and the teachers, and the transport workers and, and etc…
“This must mean fewer people doing other things or greater immigration to plug the gap.”
It is worth remembering that in mid-Victorian Britain, one of the largest markets for labour in the greatest industrial power in the world of the time, was not industry, but domestic service. The significance of this is rarely acknowledged. We are continually obsessed with the false economic shibboleths of neoliberalism.
Domestic service is now restricted to the very few; but rather than phoney ‘full employement’ at wage rates sometimes far below the current inflated cost of living (which ensures the real viablity of the services offered at these rates is ever tested); what we need is a recalibration of our needs and a higher emphasis on decently paid labour in the care system, which is trained and – oh, yes – the dignity of this labour being properly respected by politicians; clapping outside 10, Downing Street, while paying buttons is frnakly insulting. This would of course, also transform the bed-blocking problem in the NHS.
Your point that “Domestic service is now restricted to the very few” is not entirely accurate — for the most part we just call it ‘care’ now, and it still employs significant numbers. According to SkillsForCare*, “The total number of adult social care posts in 2021/22 was 1.79m” (1.62m filled). Which is still 5% of the total workforce. Comparing that to the 1.3 million women in domestic service in 1891, when the population was around half what it is today, the drop in ‘domestic service’ seems far less dramatic.
(I have struggled to find figures for the total workforce then, but it seems to have been around 10m, which would mean 13% in domestic service.) To be fair, far more women in those days were ‘employed’ by their husbands as homemakers, which distorts the analysis.
* https://www.skillsforcare.org.uk/adult-social-care-workforce-data/Workforce-intelligence/publications/national-information/The-state-of-the-adult-social-care-sector-and-workforce-in-England.aspx
‘Kim SJ’,
Yes, care represents the modern version of domestic service; greatly valued by Victorians, if also underpaid. That was the whole point of using Victorian domestic service as the reference point: even when Britain was the leading industrial power, one of its largest forms of employment was domestic service. I wrote “Domestic service is now restricted to the very few; ……. what we need is a recalibration of our needs and a higher emphasis on decently paid labour in the care system”. Today the care system is a vital service (it can bring the NHS hospitals to a grinding halt if under-resourced).
In relation to a privatised Health Insurance system, Clive makes the point “Of course government could regulate to stop this but we also know that regulators struggle in the face of cunning opposition.”
We also know that Tory governments have little or no interest in effective regulation of anything – witness Companies House, the shrinking of the state, tax havens, freeports, charter cities, the GFC of 2007/8 etc. Their free market ideology enables misappropriation, exploitation and accumulation of private wealth at a cost to the rest of society and all the while they cite Adam Smith as justification for it, but anyone who has actually read Smith’s works will know that he specifically warns against lax regulation of the markets. They clearly think the electorate are stupid.
I think the difficulty with the concept of “moving into a new political era” is that if the established politicians don’t want to move into that new era, and currently that means both labour opposition and the conservative government, then they’re not going to let anyone move. Try as strikers, commentators, individuals might to make this push for more responsibility and forward thinking in government, if our current politicians don’t want that, I don’t see much that the common brit can do to force them into it.
Politicians always follow in the end
John Harris is usually on the money, my only quibble with his essay is that he says an era that’s started in 2008 has come to an end.
I suggest the era that started in 1979/83 lasted till 2008 when its end was signalled by the banking crash. That crash revealed the hollowness of the underlying intellectual approach to the policies we are still subjected to. But the collective left hasn’t used the time to come up with a coherent alternative narrative and has shown itself unable to respond effectively (note many honourable exceptions), the actual result of 2008 and an intellectual vacuum on the left was 2016 – Trump and Brexit.
Politics in the UK has run on inertia (and increasing desperation) in the 15 years since 2008. Finally the TU movement has responded with the Enough is Enough campaign; it is long overdue. Kondriatev waves suggest technical change and economic exploitation are followed by financialisation. The fiancialisation triggers an organised labour response as wages decline. This can explain what is going on in broad terms if you factor in the delay effect of the damage done to the Labour Movement by hostile legislation and changes to work that make it harder to organise (amongst other things).
So I think something ended in 2008 but what then started is only just getting going.
Sadly we don’t seem have the policies lying around that once seemed impossible and now could become politically inevitable (to paraphrase Friedman)
Nesrine Malik in the same edition of the Guardian sums up what makes this so depressing; “ If victory means that Labour is winnowed down to a shape acceptable to the very rapacious interests it is meant to challenge, is it a victory at all?”
There are actually many good ideas are lying around but it needs vision, boldness, the desire, insight, nouse, and storytelling ability to pick them up and run with them.
We must continue, in hope rather than expectation. I support tactical voting. When Labour needs other parties support it will be under pressure to deliver some constitutional change. If it is forced to, it may just may bring in enough devolution for real change to start.
Yes, yes, yes, I couldn’t agree with you more whole heartedly.
So agree that Labour politicians dont grasp the enormity of the struggle underway.
It isn’t as if there hasnt been enough about it – surely they have read at least some of ‘How Democracy Ends ‘, Adventure Capitalism’, ‘Democracy for Sale’, ‘The Reactionary Mind’, ‘Shock Doctrine’ etc etc.
Kreeping autocracy – a real worry that BBC under effective government control – as on @BBCr4Today when govt spokesman says ‘ if we pay the nurses we will have to take it from patient care’. Did the interviewer point out that was not true – it was a political choice? – nothing.
The government’s refusal to give inflation-linked pay rises to public sector workers is based on the false notion that there has to be a decrease in the debt-to-GDP ratio. They do not specify what the target rate should be and are scared it will go over the present UK ratio of 97% debt to GDP to over 100%. The US and France have ratios well over 100% and Japan has well over 200%. Their economies are more healthy and more productive than the UK’s and there is very little (except some in the US) of involuntary starvation or deprivation as is the case in the UK and getting steadily worse. Even the prudent Germans have a ratio of 75% which will probably increase with the energy crisis and the Ukraine war.
And net of QE it is less than 70%
At the end of WWII Britain’s national debt/GDP ratio was 250%. It didn’t stop Britain setting up the welfare state and NHS. In 1945 the debt predicament was far worse than now, because Britain was in debt to the US (in a foreign currency – the now, almighty $), for real commodities, goods and services during the war. That is not the case now, and the national debt now is unusually in the long British history, notably below 100% (especially if QE is cancelled on consolidation).
I believe that Covid and its Global supply chain impacts (in China, merely for an acute example), Brexit (taboo but economically disastrous), the Ukraine war and the Russian impact on energy supplies (uncovering a serious energy security catastrophe for Britain and Europe that should never have happened), and the cost of living crisis hitting energy prices and household to a dangerous, destabilising dgree that is an attack on our national security; compounded by 12 years of austerity (unjustified) that has been handled by Government incompetenty, wrecked the infrastructure, and the national resource resilience: added together justifies the extensive use of QE and tax policy ‘as if’ we were in national crisis (the equivalent of war); in order to secure survivable living standards and secure a viable economic future, before we face not just recession; but a Great Depression. It does not require debt lratios that are significantly above QE consolidated 100%. We have been conned and scammed by neoliberal chancers with an attitude to debt abandoned even by Conservatives (then Tories) after the South Sea Bubble in 1720. That is how anacrhonistic these inept political backwoodsmen/women are: this political farce and abject economic has to stop – now.
Well put
Economic vandalism’ is all I’ve seen since 2010 and they’ve enjoyed themselves too – that sums up the Tories this last 12 years but also since 1979 when you consider how many chickens have come home to roost.
From Eric Pickles and Grenfell Tower, to Blair supporting Bush and sending British troops to Iraq under equipped right up to the NHS and Covid and finally BREXIT, all this is the hallmark of Tory incompetence. I will not miss them if/when they pass.
Not news to anyone here but the clock has been turned back to the end of the last Tory government that left the NHS in a similarity parlous state, along with the rest of the public services and national fabric. Peoples’ memories as ever are very short.
Whatever the failings of New Labour, the NHS, education and much else in the public sector was in an infinitely better state when they left. And the Tories have trashed it again.
In the case of the NHS and privatisation, it seems to be forgotten that this is heavily dependent on resources – nurses, doctors and beds – all of which are in chronically short supply. Private sector health relies on the NHS to provide it with expensively trained resources (for which I have long thought they should be charged). Unless those resource problems are tackled, it will be hard to improve, private or public. Though public will make far better use of those resources for the same level of spend.
And John Harris is always good – articles, podcasts and his excellent anywhere but Westminster series with John Domokos.
George Monbiot, like John Harris, seems to be running out of patience, in his latest article;
https://www.theguardian.com/commentisfree/2022/dec/09/us-world-climate-collapse-nations
He says’
‘..the scope for gentle action diminishes and the rush towards drastic decisions accelerates. Some of us have campaigned for years for soft landings. But that time has now passed. We are in the era of hard landings.’
With a touch of black humour, tinged with despair a friend of mine recently said we are basically treating the earth as a single use planet…. I fear he’s right, but fervently hope it won’t come to that.
It’s a good comment
Very black
Nesrine Malik has got Labour spot on – and really depressing about trying to win on its opponents terms rather than its own. Something we have been saying on here for all year.
https://www.theguardian.com/commentisfree/2022/dec/12/labour-win-general-election-party-defeat
Correct
You and Harris articulate much that is right but the focus on ‘anaemic levels of growth and sluggish productivity’, ignores realities:
1 Hopes are from ‘weak’ to ‘vanishing’ that, in 2100, a majority of humanity will have good prospects for surviving the developing climate nightmare. Already 1.1 degrees higher than pre-industrial times, the Paris Agreement aspired for a maximum of 1.5 degrees.
The Potsdam Institute for Climate Impact Research, looked at 1,200 possible pathways for the planet’s future. The conclusion, published on 1st December: ‘It most likely will not be possible. Or at least without major [and highly dangerous] overshoot first.’ https://www.washingtonpost.com/climate-environment/interactive/2022/global-warming-1-5-celsius-scenarios/ Potsdam lead author, Lila Warszawski, insisted that it will take massive changes and more than one technology to get near the goal and, even then, success is far from assured.
No coastal community can escape the threat of inundation as a result of sea level rise that ‘growth’ accelerates. (https://iopscience.iop.org/article/10.1088/1748-9326/aaac87/meta?itid=lk_inline_enhanced-template)
2 Your analysis makes no reference the current Montreal negotiations. According to UN Secretary-General, António Guterres “Ecosystems have become playthings of profit. Human activities are laying waste to once-thriving forests, jungles, farmland, oceans, rivers, seas and lakes.” “Humanity’s war on nature is ultimately a war on ourselves.”
Swiss Re insurance group says that more than half of global GDP depends on the health of nature.
Civilisation is surely vulnerable to habits of casual and unnecessary consumption.
The attitude of too many MPs appears to be ‘I will cheer, speak and vote for my side’ as if politics is a football game of no serious consequence. Billionaires, appear to be even more short-term in their determination that personal wealth and power are the only criteria that matter. Party loyalty trumps the interests of constituents and outweighs issues of integrity.
In May 1940, Churchill’s insight, integrity and rhetorical mastery, changed the entire context of Britain’s role in WW2.
Perhaps politicians will soon listen more carefully to Caroline Lucas.
I guess that at least half of humanity already wants the necessary taxes and restrictions to consumption. Greater satisfaction and communal harmony is more likely to be achieved if the focus is on ensuring, to the greatest possible extent, that every human community has access to ADEQUATE CLEAN WATER, FOOD, WARMTH and SHELTER.
Most humans already know that this is what is necessary. As the climate and ecological crisis deepens, it is surely possible to create a context in which the vast majority of the rest will come to agree or at least acquiesce.
I wish that 1, 2 and 3 were all true.
1. IMO people appreciate the fact that many public services are free at the point of delivery, but they do not genuinely value or appreciate those who supply them. Hence, if the money is available, they tend to make alternative private choices (outside emergency health care).
2. The public/private split is not dependent on taxation. It’s an ideological choice. If Labour is to succeed, it needs to break this false narrative
3. True.
Might the “ New Era” be that of big donor based policies and politics?
There seems to be a little confusion about how much money, spent by government, is taxed back.
Basically all of it is taxed back as it flows through the economy. As I understand it, this process takes about a year. The only bit that doesn’t get taxed back is savings.
So, if the government pays higher wages it will get (almost) all of it back. Which makes a mockery of the idea that they can’t afford it.
Money is not really the issue. It’s real resources that matter. The government SHOULD be spending to “balance” demand, not to meet fictional fiscal targets. Of course, if the government (or anyone else!) spends too much, they will cause inflation. But that’s not the case at the moment, with real wages stagnating or declining for decades, and with the economy entering recession, the government should be spending. Wny not spend on public sector wages.
Unfortunately the government didn’t read Harris’s article and refused to discuss pay, thus making the NHS unions walk away. If they wish to be a union with Scotland, why can’t they take note of what Sturgeon has done and resolve the matter, at least for now?
Drat and Blast!
I’ve only gone and caught Covid at work – my first time with the infection and infected the rest of my family by the look of the things who have already had it.
Why at work? Because where I work people come into work to save on bills – public sector and all that – even if they are ill.
Can’t believe it! Despite up to date jabs, very unpleasant – sinusitis, a thumping headache that only Migraleve gave me any relief from and generally felt I’d been ran over by a tank or two
.
Took plenty of liquids and fresh orange juice but I only tested positive as I’ve started to get better which is weird, although my chest and throat are now raw. I can’t speak for long.
Four of us in our office have all come down with it at the same time because of one person who came to work with a ‘bad cold’.
No sense of taste or small BTW. Missing my son’s Christmas piano recital at school this week is an awful prospect. Just goes to show that we should not let our guard down.
Agreed
And get well soon
And then still take care – long Covid is nasty
https://covidaction.uk/2022/12/13/long-covid-action-campaign-call-resources/
A zoom call I was on last night about long covid. Long covid is a patient made term because the government doesn’t want to know about it.
It was also organised by Long Covid SOS.
Thanks
Sympathies PSR and just hope that it clears up for you.
Like you, my brother has just got it having escaped so far. A reminder that it has not gone away. Especially for those that still have to go into work, potentially on crowded transport. And of the pressures that means for the NHS.
I work in Local Government and we got a ‘lump sum’ rise which wasnt that bad for the lower paid.
Given what they did during Covid I cant see why it isnt possible to give a lump sum in addition to a percentage award with the lump sum being a payment acknowledging service during Covid
David Byrne says:
The public debt to GDP ratio must be looked at in terms of the private (personal and corporate) debt to GDP ratio in order to assess the health of the UK economy.
The latter debt ‘bubble’ should be of greatest concern to government now because when it bursts ………….
My thoughts can be summarised in three words. Catastrophic economic decline.
Agreed
This is the aspect of Neoliberalism that (aside from Steve Keen) is rarely talked about.
Whilst the deficit spending by government floods upwards in icreased net financial assets for the already rich for the working and middle class the previous consumer lifestyle which is now being steadily replaced by basic survival relies heavily on bank credit. And as we all should know by now bank credit creates the deposits which then have to be repaid with interest. And the Bank of England seem ideologically committed to hastening financial armageddon with its policy of raising interest rates
Good to see Steve Keen getting another mention. For those interested in learning more about ‘alternative’ economics, the Debunking Economics podcast with Steve is well worth listening to.
https://podcasts.apple.com/gb/podcast/debunking-economics-the-podcast/id1484374606
The more that I have learnt, the more I see neoliberalism and neo-classical economics as a cult, full of beliefs and intuitively false assertions. Home economics anyone?!
Call it a religion
Home economics?! Or rather ‘Homo Economicus’
Wretched spell checker. Though Home Economics is probably being kind to the current lot and Maggie’s handbag
Or we could look to Belgium where wages are indexed to inflation for almost all workers. There is no wage price spiral in Belgium. It’s a small cabal of right wing economists who have blown the 1960s out of proportion and now it has become dogma amongst central bankers. Be interested to know your thoughts
https://cepr.org/voxeu/columns/wage-price-spirals-historical-evidence