As legend has it, Gorbachev realised the Soviet system was finished when he found himself sitting in a meeting of the Politburo discussing the catastrophic shortage in the production of women’s lingerie. Unlike the planned economy one of the serious advantages of a ‘free market’ as we are frequently reminded, is that it is not possible it could ever suffer such a problem. Responding to need is after all its reason for being.
But what, it was once wondered, would happen when it had indeed catered to peoples needs? After all how many fridge freezers can the average family cope with? What then? No problem there either. After it has produced what people actually need, it set about creating a need for what it produces. Enter the advertising industry. And the happy result of their endeavour is the consumer society, which in turn begat the phenomenon of the ‘buy now pay later’ economy.
Living on the ‘never-never’ – the majority.
Britons have now racked up so much debt on loans and credit cards by purchasing on the ‘never never’ that the total borrowed now exceeds the entire value of the economy. The financial consultant Grant Thornton is forecasting that gross domestic product (GDP) will hit £1.33 trillion this year. Fractionally less than the £1.35trn that was outstanding on mortgages, credit cards and personal loans in June.
This symbolic overtaking is the first time that the country's 60 million people owe more to the banks than the value of everything made by every office and factory in the country. Debt on personal loans and credit cards totals £214bn. Overall, individuals owe the staggering sum of £1,344,721,000,000. Responding to the latest figures, the Bank of England predicted debts would remain a "social" rather than an "economic" problem, indicating it believes indebtedness will be contained to individuals rather than threaten businesses. Repossession leapt 30 per cent in the first six months of this year compared with the first half of last year. County court judgments rose by 32.5 per cent and personal insolvencies in England and Wales 33 per cent more than the 62,000 last year. According to the experts, it nevertheless remains a mere ‘social problem’ - for now.
But as Datamonitor, the independent financial analyst, have warned, the total number of Britons credit blacklisted will jump by 20 per cent to 8.6 million by 2011. Now if the best part of nine million consumers are no longer privy to serious credit and thus no longer runners in the consumer rat race, then sooner or later, what is now a social problem will surely become a business, and then, a political problem.
In the meantime here are two sets of different, though related sets of figures to conjure with.
Living on the never-never – The corporate angle.
Almost a third of the UK’s 700 biggest businesses paid no corporation tax in the 2005-06 financial year, an official study has found, while another 30 per cent paid less than £10m each,.
Explanations for the low tax bills of many large companies include low profitability, the availability of tax losses from previous years, high financing costs and the impact of capital investment and pension fund contributions. City bonuses meanwhile hit an all-time high with a payout of 14 billion. Bonuses across the economy rose sharply because profits are at a record high at British firms following several years of strong growth in the world economy we are told.
More than half, £14.1bn, was earned by the 1 million people in the financial services sector. The figure for 2006 bonuses was £10.9bn. The bonuses have fuelled unprecedented demand for luxury goods and high-end property. The waiting list for a new Rolls-Royce is now five years and there is a shortage of crew members for super-yachts. (Doubtless the market will provide.)
The majority of the £14.1bn will have been earned by a few at the top of the City tree pulling in hundreds of thousands or even millions in spring bonuses at the end of a year which saw growth in the City account for more than half of all growth in the economy. Figures from the ONS on Friday showed profits growth of 16% in the second quarter of the year, the biggest rise for nearly 13 years, while wage growth of just 3.6% was the slowest in more than five years.
Richard Lambert, the director-general of the CBI, said: "Bonuses, like other performance-related pay mechanisms, are a very effective way to motivate employees and are used across the entire business spectrum, not just the financial services sector." Quiet so. The brazen contradiction between low business taxes being put down to ‘low profitability’ whereas rising bonuses are explained away by ‘record profits’ does not need to be laboured. Suffice to say we are being had.
The only solution – Neo-liberalism.
The philosophy responsible for the enormous re-distribution of wealth is called neo-liberalism. Neo-liberalism claims that we are best served by maximum market freedom and minimum intervention by the state. The role of government should be confined to creating and defending markets, protecting private property and defending the realm. All other functions are better discharged by private enterprise, which will be prompted by the profit motive to supply essential services.
But as David Harvey explains in his book ‘A Brief History of Neo-liberalism’, wherever the neo-liberal programme has been implemented, it has caused a massive shift of wealth not just to the top 1%, but to the top tenth of the top 1%!
In the US, for instance, the upper 0.1% of the wealthy has already regained the position it held at the beginning of the 1920s.
And as things currently stand neo-liberalism is the only philosophy in town. Thatcher, Clinton, Blair, Bush and of course Brown and Cameron were, and indeed are, all strict adherents to its guiding principles. None of this has happened by accident. In 1947 when the Mont Pelerin Society first met, its political project did not have a name. But it knew where it was going.
The society's founder, Friedrich von Hayek, remarked that the battle for ideas would take at least a generation to win, but he knew that his intellectual army would attract powerful backers. Its philosophy, which later came to be known as neo-liberalism, accorded with the interests of the ultra-rich, so the ultra-rich would pay for it.
Not just pragmatism - them.
The Heritage Foundation, the Hoover Institute, the American Enterprise Institute and many others in the US, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute in the UK, were all established to promote this project. Their purpose was to develop the ideas and the language that would mask the real intent of the programme - the restoration of the power of the elite - and package it as a proposal for the betterment of humankind.
Think, toll roads, foundation hospitals, school academies run by business, privatised pensions, university fees and the congestion charge and you’ll get the general drift. And not only does it argue for minority rule, the real subversive nature of the project is to demand that the rest of us to admire them for it. It is not enough that they are all neo-liberals, they insist that we must be too.
Terms like wealth creators, tax relief, big government, consumer democracy, red tape, compensation culture, dependency culture, job seekers and benefit cheats were all invented or promoted by neo-liberals, and have become so commonplace that they now seem almost neutral. But neutral they are not. When in government, Thatcher warned her ministers against the use of ‘working class’ as a description, on the grounds that ‘it got people thinking about it [class]’. That today a previously neutral term is barely mentioned at all is proof of the efficacy of neo-liberal conditioning.
Not just pragmatism - us.
What the history of the Mont Pelerin Society reminds us is that politics is not always about elections, recruitment, paper sales, much less the exclusive promotion of this or that sect. Practical ideas with a universal application are in essence what it’s really about. It is hard to remember when progressives last made a memorable contribution in this regard. That is why the IWCA, when itself little more than idea, argued that ‘new thinking, new strategies, and new language’ were required.
‘New thinking’ was responsible for a direct re-orientation to working class communities utterly abandoned by the so-called left decades previously. The IWCA was probably the first to classify New Labour as neo-liberal. Innovative ‘strategies’ at a street level regarding multiculturalism, youth crime, drugs, and immigration and police have been rewarded by a return at the polls that is unprecedented for an organisation competing on a fraction of the budgets of our national opponents.
More importantly the evident popularity of such policies within working class communities has helped liberate genuine progressive elements from the shackles of a discredited liberal orthodoxy. OK, so there might not be too much in terms of 'new language' (though ‘social cleansing’ might be a contender) yet, but if the Mont Pelerin Society time frame is anything to go by we have a considerable way to go.
As legend has it, Gorbachev realised the Soviet system was finished when he found himself sitting in a meeting of the Politburo discussing the catastrophic shortage in the production of women’s lingerie. Unlike the planned economy one of the serious advantages of a ‘free market’ as we are frequently reminded, is that it is not possible it could ever suffer such a problem. Responding to need is after all its reason for being.
But what, it was once wondered, would happen when it had indeed catered to peoples needs? After all how many fridge freezers can the average family cope with? What then? No problem there either. After it has produced what people actually need, it set about creating a need for what it produces. Enter the advertising industry. And the happy result of their endeavour is the consumer society, which in turn begat the phenomenon of the ‘buy now pay later’ economy.
Living on the ‘never-never’ – the majority.
Britons have now racked up so much debt on loans and credit cards by purchasing on the ‘never never’ that the total borrowed now exceeds the entire value of the economy. The financial consultant Grant Thornton is forecasting that gross domestic product (GDP) will hit £1.33 trillion this year. Fractionally less than the £1.35trn that was outstanding on mortgages, credit cards and personal loans in June.
This symbolic overtaking is the first time that the country's 60 million people owe more to the banks than the value of everything made by every office and factory in the country. Debt on personal loans and credit cards totals £214bn. Overall, individuals owe the staggering sum of £1,344,721,000,000. Responding to the latest figures, the Bank of England predicted debts would remain a "social" rather than an "economic" problem, indicating it believes indebtedness will be contained to individuals rather than threaten businesses. Repossession leapt 30 per cent in the first six months of this year compared with the first half of last year. County court judgments rose by 32.5 per cent and personal insolvencies in England and Wales 33 per cent more than the 62,000 last year. According to the experts, it nevertheless remains a mere ‘social problem’ - for now.
But as Datamonitor, the independent financial analyst, have warned, the total number of Britons credit blacklisted will jump by 20 per cent to 8.6 million by 2011. Now if the best part of nine million consumers are no longer privy to serious credit and thus no longer runners in the consumer rat race, then sooner or later, what is now a social problem will surely become a business, and then, a political problem.
In the meantime here are two sets of different, though related sets of figures to conjure with.
Living on the never-never – The corporate angle.
Almost a third of the UK’s 700 biggest businesses paid no corporation tax in the 2005-06 financial year, an official study has found, while another 30 per cent paid less than £10m each,.
Explanations for the low tax bills of many large companies include low profitability, the availability of tax losses from previous years, high financing costs and the impact of capital investment and pension fund contributions. City bonuses meanwhile hit an all-time high with a payout of 14 billion. Bonuses across the economy rose sharply because profits are at a record high at British firms following several years of strong growth in the world economy we are told.
More than half, £14.1bn, was earned by the 1 million people in the financial services sector. The figure for 2006 bonuses was £10.9bn. The bonuses have fuelled unprecedented demand for luxury goods and high-end property. The waiting list for a new Rolls-Royce is now five years and there is a shortage of crew members for super-yachts. (Doubtless the market will provide.)
The majority of the £14.1bn will have been earned by a few at the top of the City tree pulling in hundreds of thousands or even millions in spring bonuses at the end of a year which saw growth in the City account for more than half of all growth in the economy. Figures from the ONS on Friday showed profits growth of 16% in the second quarter of the year, the biggest rise for nearly 13 years, while wage growth of just 3.6% was the slowest in more than five years.
Richard Lambert, the director-general of the CBI, said: "Bonuses, like other performance-related pay mechanisms, are a very effective way to motivate employees and are used across the entire business spectrum, not just the financial services sector." Quiet so. The brazen contradiction between low business taxes being put down to ‘low profitability’ whereas rising bonuses are explained away by ‘record profits’ does not need to be laboured. Suffice to say we are being had.
The only solution – Neo-liberalism.
The philosophy responsible for the enormous re-distribution of wealth is called neo-liberalism. Neo-liberalism claims that we are best served by maximum market freedom and minimum intervention by the state. The role of government should be confined to creating and defending markets, protecting private property and defending the realm. All other functions are better discharged by private enterprise, which will be prompted by the profit motive to supply essential services.
But as David Harvey explains in his book ‘A Brief History of Neo-liberalism’, wherever the neo-liberal programme has been implemented, it has caused a massive shift of wealth not just to the top 1%, but to the top tenth of the top 1%!
In the US, for instance, the upper 0.1% of the wealthy has already regained the position it held at the beginning of the 1920s.
And as things currently stand neo-liberalism is the only philosophy in town. Thatcher, Clinton, Blair, Bush and of course Brown and Cameron were, and indeed are, all strict adherents to its guiding principles. None of this has happened by accident. In 1947 when the Mont Pelerin Society first met, its political project did not have a name. But it knew where it was going.
The society's founder, Friedrich von Hayek, remarked that the battle for ideas would take at least a generation to win, but he knew that his intellectual army would attract powerful backers. Its philosophy, which later came to be known as neo-liberalism, accorded with the interests of the ultra-rich, so the ultra-rich would pay for it.
Not just pragmatism - them.
The Heritage Foundation, the Hoover Institute, the American Enterprise Institute and many others in the US, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute in the UK, were all established to promote this project. Their purpose was to develop the ideas and the language that would mask the real intent of the programme - the restoration of the power of the elite - and package it as a proposal for the betterment of humankind.
Think, toll roads, foundation hospitals, school academies run by business, privatised pensions, university fees and the congestion charge and you’ll get the general drift. And not only does it argue for minority rule, the real subversive nature of the project is to demand that the rest of us to admire them for it. It is not enough that they are all neo-liberals, they insist that we must be too.
Terms like wealth creators, tax relief, big government, consumer democracy, red tape, compensation culture, dependency culture, job seekers and benefit cheats were all invented or promoted by neo-liberals, and have become so commonplace that they now seem almost neutral. But neutral they are not. When in government, Thatcher warned her ministers against the use of ‘working class’ as a description, on the grounds that ‘it got people thinking about it [class]’. That today a previously neutral term is barely mentioned at all is proof of the efficacy of neo-liberal conditioning.
Not just pragmatism - us.
What the history of the Mont Pelerin Society reminds us is that politics is not always about elections, recruitment, paper sales, much less the exclusive promotion of this or that sect. Practical ideas with a universal application are in essence what it’s really about. It is hard to remember when progressives last made a memorable contribution in this regard. That is why the IWCA, when itself little more than idea, argued that ‘new thinking, new strategies, and new language’ were required.
‘New thinking’ was responsible for a direct re-orientation to working class communities utterly abandoned by the so-called left decades previously. The IWCA was probably the first to classify New Labour as neo-liberal. Innovative ‘strategies’ at a street level regarding multiculturalism, youth crime, drugs, and immigration and police have been rewarded by a return at the polls that is unprecedented for an organisation competing on a fraction of the budgets of our national opponents.
More importantly the evident popularity of such policies within working class communities has helped liberate genuine progressive elements from the shackles of a discredited liberal orthodoxy. OK, so there might not be too much in terms of 'new language' (though ‘social cleansing’ might be a contender) yet, but if the Mont Pelerin Society time frame is anything to go by we have a considerable way to go.