Trickle down economics; economic lie number one…

The first of a little mini series about Capitalism that has been nagging at me for a while…

trickle down economics

There was an article in out local paper last week- Argyll and Bute council, like most of our councils, has to make significant cuts to the budget. Despite our large geographical area, Argyll has a low density of population and services are already stretched tight. The article listed the sordid detail of the cuts- older peoples care, youth rehab, road schemes, outsourcing services to the private sector who will do the support of our most vulnerable more cheaply etc etc.

And what is all this about? Why is money suddenly so tight? Why do we all buy into the collective idea that ‘times are hard’ and so ‘we all have to tighten our belts?’

The fact is that not all of us do tighten our belts. Many people are doing very well out of the crisis. This from the Guardian;

The super-rich – the top 1% of earners – now pocket 10p in every pound of income paid in Britain, while the poorest half of the population take home only 18p of every pound between them, according to a report published this week by the Resolution Foundation thinktank, which reveals the widening gap between those at the very top and the rest of society.

Inequality has grown sharply over the past 15 years, according to Resolution’s analysis: the top 1% of earners have seen their slice of the pie increase from 7% in the mid-1990s to 10% today, while the bottom half have seen their share drop from 19% to 18%.

And then there are those right at the bottom- the Strivers who are forced to become Scyvers, or the Skyvers who have lost hope, or those who never had a fair crack of the whip in the first place. Have you noticed that when the economy takes a dip, they always take a hit? They become the problem– the scapegoats.

So we see all these regressive punative policy decisions being pursued by our current government- lower benefits to fewer people, changes to housing benefit to force people to leave their homes if they have an extra bedroom. All this in the context of reductions in care provision, and less funding for voluntary bodies and charities. Our current government is doing things that even Thatcher at her most strident would have baulked at.

But again- why? Where does all this come from?

What the neo-liberal economists will tell us is that the problem is caused by natural adjustments made by a self regulating economic system. That the job of us all is to get out of the way and let it all sort itself out like some kind of higher intelligent life form. The problem, they would say, is an over inflated public sector, whose interference in the natural order of things by public spending, taxation and welfare provision means that the economy fails to self regulate.

This kind of economic thinking has become so pervasive, so wrapped up in the political system, so much in service of powerful self interests, that we all wriggle on its hook. We are compliant because we have bought in to some of the lies that the system has sold to us- perhaps the biggest one is this one- Trickle down theory.

In a nu­tshell, trickle-down theory is based on the premise that within an economy, giving tax cutsto the top earners makes them more likely to earn more. Top earners invest that extra money in productive economic activities or spend more of their time at the high-paying trade they do best (whether that be creating inventions or performing heart surgeries). Either way, these activities will be productive, reinvigorate economic growth and, in the end, generate more tax revenue from these earners and the people they’ve helped. According to the theory, this boost in growth will ultimately help those in lower income brackets as well.

So, the argument is, if we have lots of rich people, and they are encouraged to become super rich, then our country, and our economy, will benefit- right down to the roots.

This analysis does not regard the wealth of the few as contingent upon the poverty of many- in this country and even more crucially in the poor countries around the world whose raw materials and cheap labour we are entirely dependent upon.

It also does not conform with the facts, as the rich get richer, and the poor get poorer.

As the worlds resources are over consumed by the few and our environment continues to be damaged, perhaps beyond repair.

As austerity plans are still touted as ‘good housekeeping’, as if the UK economy could be compared to a household budget.

So, what is the alternative? Fairer, more progressive tax systems? This might be a start- but I think the problem is the system- and we are all part of the system aren’t we? It is really hard to get out of it- the mortgages, the gadgets, the foreign holidays and the dependency on technology to deliver distraction, entertainment and connection.

Where is the Kingdom of God in all of this? What are we, the agents of this Kingdom , to put our energy towards? I am convinced that we need to be engaged critics of injustice wherever we see it- particularly towards the poor and the marginalised.

And the beginning of how we can do this is to take a look at the system through a different set of lenses…

RIP Eric Hobsbawm…

Historian, marixist commentator and intellectual Eric Hobsbawm has died aged 95.

His is a name that has has stayed with me from being a student 25 years ago- someone who was prepared to look at history through the eyes of poor people. Who was prepared to analyse what have become by understanding the inequalities of power and wealth.

Emily has left school and is taking her higher/advanced higher qualifications at a Cardonald College- where she has chosen to study (much to her old dads pleasure) Sociology and Psychology. She is being exposed to all those old questions that excited me in the past (and the present.) How did we get here? Who is calling the shots? How could we be better- how could we organise ourselves so as to protect the poor and weak, and reign in the excesses of the strong and powerful?

Hobsbawm was a large part of this for me in the past. A left field calm voice who was able to speak with a quiet authority.

In praise of him, here are a few quotes (courtesy of the Guardian.)

On socialism and capitalism: “Impotence therefore faces both those who believe in what amounts to a pure, stateless, market capitalism, a sort of international bourgeois anarchism, and those who believe in a planned socialism uncontaminated by private profit-seeking. Both are bankrupt. The future, like the present and the past, belongs to mixed economies in which public and private are braided together in one way or another. But how? That is the problem for everybody today, but especially for people on the left.” 2009 Guardian article

On Tony Blair: “Labour prime ministers who glory in trying to be warlords – subordinate warlords particularly – certainly stick in my gullet.” 2002 interview

And from this essay;

…This was the way of thinking about modern industrial economies, or for that matter any economies, in terms of two mutually exclusive opposites: capitalism or socialism.

We have lived through two practical attempts to realise these in their pure form: the centrally state-planned economies of the Soviet type and the totally unrestricted and uncontrolled free-market capitalist economy. The first broke down in the 1980s, and the European communist political systems with it. The second is breaking down before our eyes in the greatest crisis of global capitalism since the 1930s. In some ways it is a greater crisis than in the 1930s, because the globalisation of the economy was not then as far advanced as it is today, and the crisis did not affect the planned economy of the Soviet Union. We don’t yet know how grave and lasting the consequences of the present world crisis will be, but they certainly mark the end of the sort of free-market capitalism that captured the world and its governments in the years since Margaret Thatcher and President Reagan…

…The test of a progressive policy is not private but public, not just rising income and consumption for individuals, but widening the opportunities and what Amartya Sen calls the “capabilities” of all through collective action. But that means, it must mean, public non-profit initiative, even if only in redistributing private accumulation. Public decisions aimed at collective social improvement from which all human lives should gain. That is the basis of progressive policy – not maximising economic growth and personal incomes. Nowhere will this be more important than in tackling the greatest problem facing us this century, the environmental crisis. Whatever ideological logo we choose for it, it will mean a major shift away from the free market and towards public action, a bigger shift than the British government has yet envisaged. And, given the acuteness of the economic crisis, probably a fairly rapid shift. Time is not on our side.

Where is the new ideology?

It is an old academic political discussion- the end of Ideology– by which I mean the end of the time of battling grand political/economic theories that inspired and fuelled our attempts to understand and shape our society. Thatcher put an end to all that in the UK- not because she had no ideology, but because she cleared the field of all opposition. Capitalism and ‘The Market’ triumphed and gifted us with the so called free movement of capital, trickle down, neoliberalism and globalisation.

Over the next 20 years, nation after nation fell in line, cajoled by the promise of great wealth or manipulated by powerful organisations who needed scarce resources or a new market.

None of this is a surprise, but what is more noticeable is the lack of viable alternative. Sure there are voices of protest- not least the Occupy Movement- but to demand change is not necessarily the same thing as proposing an alternative (I know that the OM are in discussion about all sorts of issues, but I would suggest that no real coherent alternative ideology has yet emerged.)

There was an interesting article in the Guardian today by Aditya Chakrabortty. Here are a couple of quotes;

When the history of how a good crisis went to waste gets written up, it will surely contain a big chapter on the failure of our academic elites. Because just like the politicians, the taxpayer-funded intellectuals at our universities have missed the historic opportunities gifted to them by the financial collapse. And it will be the rest of us who pay the price…

…So have the non-economists grasped their moment? Have they hell. Look at the academic conferences held over the past few weeks, at which the latest and most promising research in each discipline is presented, and it’s as if Lehman Brothers never fell over…

Chakrabortty did a search of recent sociological and social science conferences and academic papers and concluded that pretty much the disciplines were not interested in challenging the core assumptions of the dominant ideology.

So where is the challenge to come from, if not from the academic elite? And more importantly, where are the alternative ideologies going to emerge from?

I watched the two Che Guevara films recently- a time when ideology believed that revolution was possible and even worth killing for. Revolution meant overcoming the ruling elite, empowering the poor and dispossessed and bringing egalitarian justice to society. Whilst I abhor the violence, most of us will instinctively feel the pull of these ideas.

Most of us too will have heard the spoilers- the voices that suggest that such ideas are unrealistic, unobtainable, work against human instincts and have been proved to serially fail because of the repeated failures of communist regimes throughout the world. Therefore the only option left is to continue as we are- with a few tweaks to satisfy the left field.

I want to raise my own voice in protest at this hopelessness. I want to invite my friends into a journey to find a new kind of ideology. We are not there yet, but I think we have some clues;

Start small. Start local.

Buy less, want less, make more.

Reduce waste, increase sharing and holding things in common.

Increase joint social enterprise.

In all things be aware of the impact on those who have little.

In all things be aware of the impact on the environment.

For me, the other academic/social/political group that has been near silent in the offering of a viable alternative is this one- the Church. Because as I look at the economic list above, it seems to me to be also a SPIRITUAL list. Without the life of the Spirit within us, we are mere animals, scratching and scraping at one another for the meatiest parts of the carcass.

So perhaps it all comes down to the word Love. If Economics are subordinate to love, then what might the theories look like? If political science was shaped by love, how might we organise ourselves differently? Even as I write this I feel the rise of cynicism, but- love remains.

I think this is the ideology of the Kingdom of God, and the viral vitality that we can and should bring to all these debates. And we do not have to wait until the universities write papers and hold conferences- because we can make our own small economy now- here.

Kaynes and Hayek, why their ideas still matter…

In order to look for new ideas of how to organise our economy, we have to understand the old ones. Never was this more important.

In the 1920’s and 30’s, two protagonists argued polarised opposite views in the midst of their own economic crisis. One (Friedrich Hayek) insisted that the free market would right itself, and that the job of government was to get out of the way, to reduce its spending and the proportion of the public purse that interfered with the self correcting forces of free market economics.

John Maynard Keynes fundamentally disagreed. He said it was the job of government to govern, and the primary way that they should do this was by managing the economy. He was concerned with the human consequences of boom and bust economics – mass unemployment, poverty.

These two polar opposite positions have been fought over ever since. One libertarian, one interventionist. One arguing for centralised control, the other wanting no control at all. Evidence for the failure of both positions exists.

The free market brought us vulture capitalism, Thatcherism and the current crisis. It became the mantra of the International Monetary Fund, and the basis on which it manipulated whole nations. Centalised managed economies did not do well in the former communist countries. And we in the UK remember the strikes and power cuts of the 1970’s.

However it is also possible to point to the stable, eventually prosperous and well managed period after the second world war when Keynes ruled the world, or the eventual triumph of the Free Market, until this current crisis of course.

The question remains as to how this argument will play out in our current context. It seems that the current political instinct is towards Hayek, whilst having to acknowledge that when the free market is really free, then the unbridled greed it releases is potentially destructive to us all.

There is a really good clip on the Guardian website, here.

Rapture rescue…

Interesting stuff.

Naomi Klein contrasts different responses to global crisis, and specifically uses this term- ‘Rapture rescue’-  a kind of global economic secular event through which some get saved, and others get left behind.

We see this perhaps in the response to terrorism- there is in the West a longing for some kind of second coming to sweep aside the evil and leave us safe in our holy escape pods. Some used to believe that war would achieve this.

Or perhaps capitalism itself could be seen in this way- there are those who believe– who live well and play to the rules of the holy market, and the unfaithful. Some of these can be rescued- but only by becoming like us.

Then there is climate change, which Klein talks about a lot here. Those who still deny the science seem bound up in a defensive wall of self interest. The crisis is external doubt, and the possibility of a threat to a way of life.

The ‘Rapture’ image hit me hard, as it makes a lot of sense- religion is both the engine of our underlying assumptions about the world, and also the means through which we justify and apply a kind of sacred redemption to our actions and lifestyles.

This being true, how might our faith still be an engine, but rather an engine for grace– for us, our neighbours and our environment? How might this  lead us to work for change NOW, not to wall ourselves away from the unfaithful, the undeserving, the already-lost?

Well I liked the simplicity of what Klein said, here-

“If we want the transformation, we can’t wait for it to happen in some massive jolt, we have to plan for it and model it…”

“Only a crisis, actual or perceived produces real change, and when that change occurs this depends on the ideas that are lying around. That is our function, to keep ideas alive until the politically impossible becomes politically inevitable.”

We Christians are carriers of perhaps the best ideas- contained within the life of Jesus. Our function is to keep these stories alive, and to try to live them out in our context.

Well our context is changing…