Beginning to See the Light: The Unelected Are Returning Us To The 1980s, Why Does It Feel Like The 1930s? 

 

‘Now Main Street’s whitewashed windows 

And vacant stores 

Seems like there ain’t nobody 

Wants to come down here no more’ 

 
In 2019, the Tories won a landslide election with an 80 seat majority. Of the 650-seats contested they won 365, 56%. This overwhelming majority was despite only 43.6% of voters choosing them. 

Our new PM, Liz Truss, won the support of only 32% of the parliamentary party, and whilst, 57% of party members, that only equated to C. 91,000 votes. Hardly a convincing mandate. 

Despite her lack of mandate Truss and her cohorts are saddling us with policies and debts that stink of hope and desperation planning. The only growth they will generate is in the wealth gap. 

In January 2021, when I relaunched the column as ‘Beginning to See the Light’, I wrote background piece which was; ‘The new column, entitled ‘Beginning to see the Light’ will continue with a commentary on the weeks’ events, highlighting what I believe is the biggest issue facing us, the wealth gap, that has created such an unequal society.’ 

At that time the newly elected Tory government led by Johnson had won a sweeping victory on the back of the promise of ‘levelling-up’. So popular was this promise that previously impregnable Labour seats in the ‘red wall’ voted Tory for the first time in generations. 

Whether Johnson meant what he said, or it was just clever politics by his adviser, Dominic Cummings, we will never know. His premiership was swept away by Covid and an ocean of sleaze and lies. 
 

‘A cheap Thatcher tribute act’

 
His undemocratically elected replacement, Liz Truss, is a cheap Thatcher tribute act. Despite being at school in the 1980s, she is a throw-back, a believer in what is referred to as Thatcherism or Reaganism, but is more accurately known as neoliberalism. 

This ideology supposes that everything is subservient to ‘the markets’;  democracy submits to the power of money. Anything that impedes the accumulation of wealth, such as public ownership, tax, regulation, trade unions, and political protest, should be done away with. 

The theory accepts that the rich will be the initial beneficiaries, however, on the back of their prosperity the economy expands and well-paid jobs are created. A trickle-down effect that benefit us all eventually. To achieve this governments should focus on growing the economic pie rather than worrying about how it is distributed. 
 

‘Focus on growing the economic pie rather than worrying about how it is distributed’

 
Supporters of neoliberalism often cite the work of the US economist Arthur Laffer. His work supposed that tax cuts for the wealthy had a multiplier effect, and any revenues lost by governments from reducing tax rates would be more than compensated for by the fruits of higher growth. What is often forgotten is that Laffer himself said his theory worked best when personal tax rates were high, between 50% and 100%. Below 50%, Laffer found cutting taxes led to bigger rather than smaller budget deficits. 

If neoliberalism is the chassis what will power Truss’s car? 

The motor that they intend will drive the lunacy is the City, property markets, and deregulation. 

An initial step is the proposal to scrap the cap on bankers bonuses. Given the timing this is as insensitive as it is controversial. 

According to the Office for National Statistics, pay growth in the private sector is running at 6% as opposed to 2% in the public sector, endorsing the already strong belief that there is one rule for bankers and another for everybody else.  

Sharon Graham, the general secretary of Unite, says that while the Bank of England lecture workers to show pay restraint, the chancellor’s signal to the City is ‘let it rip‘. 

To support this free-for-all, Truss and he chancellor, ‘crazy’ Kwarteng, are in-favour of ‘light-touch’ regulation.  Truss has previously described the financial sector as the ‘jewel in the crown‘ and believes that is being held back by regulatory overkill. Now, with the support of Mr Kwarteng it’s time for Big Bang II.  
 

‘There is one rule for bankers and another for everybody else’

 
For those with memory issues the last time we tried this it led to the GFC of 2008 from which the economy has never recovered. Unlimited bonuses and light regulation led to the excesses that created that crash, and with following policy austerity, led to Brexit, and the populist ‘levelling-up.’ 

The basis of levelling-up was the realisation that Britain was far too dependent on the success of the City, the polar opposite of what Truss purports to believe.  Whilst she accepts that her proposals will disproportionately benefit people at the top she has said: 

‘to look at everything through the lens of redistribution, I believe, is wrong. Because what I am about is growing the economy, and growing the economy benefits everybody. The economic debate for the past 20 years has been dominated by discussions about redistribution. And what has happened is, we have had relatively low growth … and that has been holding our country back.’ 
 

‘Everything is being staked on neoliberalism and the supposed trickle-down effect’

 
Everything is being staked on neoliberalism and the supposed trickle-down effect happening   

In February this year, the then levelling up secretary, Michael Gove, contrasted levelling up with ‘trickle-down economics‘, and said that if the free market was left to itself, ‘then what you see is inequality growing’. 

This week, President Biden commented; ‘I am sick and tired of trickle-down economics. It has never worked.’ 

In 2015, the International Monetary Fund rubbished trickle down, saying that governments should focus on policies that directly help those on low and middle incomes. (1) 

‘We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the Top 20% results in lower growth – that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class.’ 

My issue with all of this is simple. History shows that neoliberalism only contribution to society was increasing the wealth gap, there was no discernible trickle-down effect because there was no growth! Growth under Thatcher and Reagan post 1980, was slower than in the years preceding WW2.  

 

Source: https://www.macrotrends.net/countries/GBR/united-kingdom/gdp-growth-rate 

Jack Leslie, Senior Economist at the Resolution Foundation, said: ‘Levels of wealth inequality in the UK have remained high but steady since the 1980s. But, thanks to a multi-decade wealth boom, the UK’s wealth gaps are now the highest on record. The UK is second only to the US when it comes to wealth gaps in advanced economies.’ (2) 

In financial year ending 2020, the income of the richest 20% of people was over six times higher than the poorest 20%, while the richest 10% received 50% more income than the poorest 40%. (3) 

Neoliberalism is smoke and mirrors, sold to us as a means of enhancing freedom and choice, when, in truth it’s about power, shifting tax and regulation from the rich and powerful on to people who are poor and weak. The taxes the wealthy once paid have been transferred to those less able. 
 

‘It’s about power, shifting tax and regulation from the rich and powerful on to people who are poor and weak’

 
Truss’s campaign was pure neoliberal gospel: tax cut, freeing business from regulation, supply-side reform, and the creation of low-tax, low-regulation ‘investment zones’. Her policies will achieve little other than transferring wealth from the poor to the rich, supported by ‘culture war’ plans including  attacking trade unions and protesters, pursuing fossil fuels, and dismembering the NHS. 

Truss is typical of populist politicians she governs through sound-bites, and headlines. The energy cap is an example of this, sounds great, bills capped at £2,500 p.a., potential cost to the country £150bn. 

But, lift the bonnet and it doesn’t look so clever. 

Firstly, we, the taxpayer are paying. The energy companies will continue to make obscene profits, pay-out dividends to their overseas owners, and bear no part of the cost. The rich just get richer. 

Secondly, it papers over the cracks. The cap at £2,500 represents an average increase of £10 a week, on top of April’s rise of £14 a week. Jonathan Bradshaw and Antonia Keung at York University, calculate that fuel costs will consume: 
 

• 20% of the income of 4.1 million families in October.  
• By May, that figure could rise to 7.4 million.  

 
For 2.2 million families, energy bills will take up 30% of their income, this could rise to 3.8 million families by May. 

The upshot of this poorly targeted initiative is that 5 million children could fall into poverty this winter, and more families will rely on the country’s 3,000 food banks. 

As Gordon Brown wrote in the Guardian, ‘for the first time since the welfare state was created, it is the food bank, not social security, that is now our safety net, and charity, not universal credit, that is our last line of defence.’ 

Interestingly, Truss’s dash for growth and rerun of 1980s neoliberalism looks increasingly out-of-step in the post-Covid, energy crisis UK 
 

‘For the first time in years, poverty is spreading to middle-income families too’

 
According to Ipsos, 73% of the public consider poverty and social inequality alongside inflation as their top issues. This is hardly surprising as, for the first time in years, poverty is spreading to middle-income families too. There seems to be a realisation that the situation comes about not because we are a poor country, but because we are a rich yet highly unequal country. 

The proof of this is evidenced by the decision to reverse the national insurance rise, the richest will get £1,800 p.a. and the poorest only £7.66. 

A survey for National Centre for Social Research shows public support for increased taxation and public spending, including social security benefits. Support for redistributing income from the rich to the less well-off was at its highest levels for nearly 30 years. 
 

• 61% of Labour voters and 46% of Tory voters were pro-tax and spending 
• 52% said the government should raise taxes and invest more in health, education and social benefits. 

 
In addition, there are concerns about the viability of all this unfunded spending.  

The subsidy offered to offset rising energy bills can hardly be described as sustainable, and is predicated on how long war in Ukraine lasts ending. With Putin’s speech yesterday, it is clear that he is doubling down on his gamble, and that the conflict could be drawn-out.    

In addition, there is the governments ability to borrow so much in their beloved markets. 

According to the Institute for Fiscal Studies (‘IFS’) thinktank, if the government presses ahead with sweeping tax cuts in a mini-budget on Friday our mounting debts will be unsustainable.  This risks a further run on an already week pound. 

The IFS report said: ‘Recent rapid increases in the cost of debt interest highlight the risks of substantially and permanently increasing borrowing and putting debt on an ever-increasing path. There is no miracle cure, and setting plans underpinned by the idea that headline tax cuts will deliver a sustained boost to growth is a gamble, at best.’  

‘Crazy’ is betting everything on his belief that extra borrowing will generate economic growth of 2.5% over the next decade, compared with a previous forecast of 1.5%, lifting tax revenues above the cost of tax giveaways.  
 

‘It failed then and it will fail again’

 
Forty years on we are making the same bets, powered by the same engines. It failed then and it will fail again. The 1980s economic success that Truss and her believe happened is illusory. It’s buy-now-pay-later economics, driven by inflating asset values and household debt and burning through human relationships, conditions of employment, and the living world.  

In the gap between expectation and disappointment, humiliation and resentment thrives. The previous failures of the self-same policies led to the exponential growth of the wealth gap, which eventually manifested itself in Brexit and populism. 

The disappointment in the ‘red wall’ and beyond will create the conditions that Fascist leaders thrive in, blaming the frustration of people’s hopes on scapegoats. History shows that when political choice is lacking and people see no prospect of a brighter future, they become susceptible to the transfer of blame. The transfer – attacking refugees and fomenting culture wars – is already well under way. Truss’s techniques of distraction open the door to fascism.  

‘Bill collectors they ring my phone 

And scare my wife when I’m not home 

Got a bum education, double-digit inflation 

Can’t take the train to the job, there’s a strike at the station’ 

 

Notes: 

1. https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2016/12/31/Causes-and-Consequences-of-Income-Inequality-A-Global-Perspective-42986 

1. https://www.resolutionfoundation.org/press-releases/the-uks-wealth-gaps-have-grown-to-over-1-2-million/ 

1. https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householdincomeinequalityfinancial/financialyearending2020provisional 

For some reason the copy Philip filed yesterday was quarantined and only surfaced this morning. However, not a single word needed to be revisited in the lee of Mr Kwarteng’s ‘mini-budget’.

Everything that was predicted, or possibly leaked was spot-on; Matalan Maggie has bet the farm on growth and that, by working once, trickle down in the UK could be the exception that proves the rule.

It’s a massive gamble, based in no small part on the Tories’ need to defibrilate its beating heart with just two years to go before a general election.

Any sign of a windfall tax? Nah, the fossil fuel fat cats are going to continue to draw heartily, whilst government loans us the money to hopefully stay alive. 

I want to share Philip’s preamble because it shows his workings, and this week returns to the increasingly worrying rise of the far right:

This week, like many we consider Truss’s proposed economic miracle. As with all miracles it will prove illusory, championed only in the eyes of believers and beneficiaries.

The beneficiaries will be the few, the rich. History shows that neoliberalism’s promise of trickle-down benefits doesn’t work. It didn’t in the 1980s and it won’t now.

Her drive for growth is unfunded, and will saddle the country with a possibly unsustainable debt burden. It’s a gamble, “pump and dump”: pump up the economy and dump another 5-years of Tory misery on us.

There are people in her own party who might vote against this, however I suspect that they will have few chances. Where she can she will push through bills with as little parliamentary scrutiny as is possible.

Truss, only 2-weeks into her premiership, is already facing a potential House of Lords rebellion over proposed legislation to tear-up part of the Brexit arrangements for NI over concerns that it gives ministers “dictatorial” powers to pen and pass laws without scrutiny.

 About 50 Conservative, Labour and cross party peers are seeking advice from legal and constitutional experts on the options including strategies for delaying the bill or using a process that could collapse it altogether.   

One peer said: “My concern is not so much the Brexit issue, but the constitutional issue. The Henry VIII powers are extraordinary here. In my view we would turn the country into an elected dictatorship rather than a parliamentary democracy and I don’t use those words lightly. What is happening here is parliament is going to give a carte blanche to any minister to do whatever they want to do without any explanation, including breaking international law.”

The article says enough about neoliberalism, its history, and the government’s plans. What follows is an example of which I fear, this is based on the forthcoming Italian election where a right-wing, fascist coalition is expected to triumph. There, as here they have income inequality, discontent and their own equivalent of the “red wall”.

 A suburb north of Milan, Sesto San Giovanni, used to be a no-go zone for the right. It was Nicknamed “Stalingrad”, and was home to the huge workforces employed in four metalwork factories.

Now the winds of fascism blow past the Karl Marx municipal library. On Sunday,  polls suggest Sesto is on the brink of voting for Isabella Rauti, the daughter of Pino Rauti, one of Italy’s most prominent 20th-century neo-fascists, and among the most senior figures in Meloni’s party. A precedent was set 5-years ago when Sesto elected its first right-wing mayor after decades of unbroken rule by the left.

The sense of post-industrial disillusionment in places like this has carried through to the generations. According to Roberto Camagni, professor of urban economics at the Politecnico di Milano: “‘The workers’ – that old phrase – isn’t a relevant category any more in Sesto. The loss of the old blue-collar world in Sesto and elsewhere was a cultural loss as well. Old class solidarities disappeared, along with a certain sense of security.”

The new reality is more anxious and more fluid in its political affiliations. “The sons and daughters of many of those old workers are more insecure, often in precarious jobs,” says Camagni. “Or employed in call centres and in low-level white-collar jobs which are vulnerable to automation. The far right is profiting from a widespread sense of frustration, exploiting it to create a different, menacing kind of solidarity – one that unifies people against immigrants and other minorities.”

Since being elected in 2017, Sesto’s first rightwing mayor, Roberto di Stefano, has followed the playbook Camagni describes. A supporter of Matteo Salvini’s populist League party, Di Stefano orchestrated opposition to plans for an adequate mosque for the city’s sizable Muslim population, who currently worship in an out-of-town prefab hut. Recently re-elected, during his first term in office he also launched a ‘clean up the streets’ campaign. More than 200 people were driven out of the town – most of them homeless, migrants or street vendors.

Sounds familiar doesn’t it?

Musically, we start with Springsteen’s “My Hometown”, which could be any town in the UK after Truss has finished with us. We end with “The Message by Grandmaster Flash. It’s about time we faced reality and listened.

Enjoy!

@coldwarsteve
 

 
 
Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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