Tuesday, 12 September 2017

The UK's economic model is broken (And only Labour can fix it)

"The UK’s economic model is broken. Britain stands at a watershed moment where we need to make fundamental choices about the sort of economy we need. We are failing those who will grow up into a world where the gap between the richest and poorest parts of the country is significant and destabilising." As a country therefore we must now "reject the current patterns of economic growth that delivered most of the gains to corporations and the richest in society."   

You might be forgiven for thinking these words were spoken by Jeremy Corbyn or John McDonnell, those "dangerous, hard left, socialists" now leading the Labour Party. But no! They come from Justin Welby, the Archbishop of Canterbury. And he's right. And he's not alone in that stark assessment. For he was speaking as a member of the Economic Justice commission of the the Institute of Public Policy Research ("IPPR").

Last week, the IPPR's Economic Justice commission released its interim report. Their conclusion was both alarming and unsurprising. They said things that were probably already pretty obvious to most people looking at this country with open eyes:
  • that over the past 10 years (and long before) the very rich in this country have got a lot richer. Between 2009 and 2015 the UK’s richest 1,000 families saw their assets double from £258bn to £547bn  and since the 1970s the share of national income going  to owners of businesses and property rather than wages has increased by over one third.
  • meanwhile most of us have continued to be worse off  over the last 10 years- the UK has suffered the longest period of stagnant/ falling wages in 150 years. Since 2010 average earnings per employee has fallen by 6% despite GDP rising by 12%. And this is against a background of the wealth & income gap between the richest and the rest steadily wideneing since the 1970s.
  • increasingly millions of lives are blighted by poor wages, unaffordable housing, low-quality jobs and rising unsecured debt
  • They concluded that to put things right the British economy is in need of radical, "deep, fundamental reform, comparable to Labour's Attlee government after the war. " 
And far from simply being a mouthpiece for the Labour party (whom they have also critcised in the past), the IPPR is one of the most well-respected independent policy think tanks in the UK. It was their report on Social Justice two decades ago that heavily influenced much of the better work of early New Labour governments to reduce poverty and improve our public services; through e.g. the introduction of a minimum wage, working tax credits and significant re-investment in our NHS and schools (funded partly by windfall taxes on privataised utilities).

Membership of the Economic Justice commission is in fact drawn from a very broad cross section of our society. As well as charitable, church and community groups it includes significant business leaders, such as Dominic Barton, the global managing partner of the consultancy McKinsey and Company; Helena Morrissey, Legal & General’s head of personal investment; Sir Charlie Mayfield, the chairman of the John Lewis Partnership. So  when they make such bold statements we really should sit up and take notice.

I'm afraid we are now reaping the bitter fruit  of Margaret Thatcher's failed economic philosophy, just as the USA is suffering from the legacy of Reaganomics. They were in truth just another branch of the false economic religion of neo liberalism. It was built on an idolatrous worship of the false blind gods of the freemarket to whom they sacrificed so much of the state's own assets. Of course, it was done with the best of intentions. They did not set out to make the rich richer and the rest of us poorer. They thought it would benefit all (or at least most of us).

Their economic model would supposedly allow the entrepreneurs a free hand so that they would generate the wealth that would just naturally trickle down to the rest of us and we would all be better off. It went hand in hand with the rejection of our previous social democratic model that planned for the country's future, to allow more balanced rights between business and property owners and workers and tenants and ensure a more even distribution of wealth. (Note that "old" model has by and large still been successfully pursued in many other North European countries such as in Scandinavia and even Germany).

This false economic religion of neo liberalism has not borne the sweet fruits it promised for anyone but the rich. This is just as we were warned by the country's last truly social democratic Prime Minister, James Callaghan. On the eve of Thatcherism in Labour's 1979 manifesto he warned:

"The Conservatives are ready to gamble the people's future on a return to the nineteenth century free market' - despite its pitiless social consequences. .... The new technologies hold out the prospect of faster growth and a better quality of life for all... The use of crude market forces advocated by the Tories will not and cannot achieve these changes in a way that is acceptable to the British people...This election comes at a time of change unparalleled since 1945. A generation has now grown up in a welfare state which remains the envy of the world in health care and education. We have demonstrated a capacity for skill and inventiveness which keeps us at the forefront of world technology. Those are no mean achievements. A Tory Government would put all this at risk."

How prophetic that warning proved to be!

Sadly, in 1979 the country ignored James Callaghan's warning and chose a dangerous socio-economic experiment under Margaret Thatcher that we have been living under for nearly 40 years now. Contrary to what the new model promised, under their free market approach  British businesses have largely hoarded cash or returned it to shareholders rather than investing in the future. Business investment has now been been declining for a quarter of a century; we have piled our money into housing speculation rather than wealth-creating assets. Not only has this meant lower productivity and fewer quality jobs, it has also resulted in too few homes (especially affordable ones) and a much higher cost of living that squeezes most households.

We have ended up with a country with a huge trade deficit, buying far more from the rest of the world than we sell to it. Our surplus in services is dwarfed by our deficit in goods. This has happened not because of the European Union's Single Market (which actually could have offered us the opportunity to increase what we sell as has happened in Germany). Certainly wider global competition played a part in the contraction of our manufacturing basis. However, it was also the result of "disastrous, destructive, deliberate deindustrialisation" (to quote the head of the IPPR) . But another underying reason was a political settlement where policy has been set in the City of Westminster in the interests of the City of London, not the country as a whole.

We have also seen a huge reduction in taxes for the richest at the same time as an increase in those taxes that most hit ordinary folk, especially the poorest, such as VAT.

And we have sold off so much of the state's "family silver" (as the former Tory Prime Minister Harold MacMillan bemoaned). We have dismembered so much of our state structure which has been sold off to rich private individuals and corporations and even foreign governments. These private interests have leached billions of pounds in private profits from our public services whilst usually providing a worse service. This has involved the loss of our council housing and tof he inherent monopolies of energy, water and rail and the ownership and running of our schools, hospitals and even prisons. What will be next? Our courts, our police force, the army? (If you want some further insight into this I recommend reading the excellent Dismembered by Polly Toynbee and David Walker).

And all of this inevitably has has led to an ever-widening gap between the rich few and the many and especially the poorest. 

Sadly, this was an economic model largely adopted by New Labour. Hence Maragaret Thatcher's boast that her proudest legacy was Tony Blair. This was illustrated by New Labour's continued love affair with the City of London (which contributed to the financial crash of 2008) and the disastrous expansion of PFI (which will have cost the state about six times the value of the assets built). However, at least the New Labour governments did significantly moderate the damaging effects  of neo liberalism, e.g. through our welfare system and the introduction of the minimum wage. Such policies did reduce poverty even as they allowed inequality to continue to grow. 

And now we have suffered seven years of Tory-led blind economic incompetence. Self-defeating austerity with the butchering of so much of our public services and the removal of much of the welfare state's safety net. This has almost finished this destruction job of our social democratic model. It has resulted in huge increases in poverty and private debt and a fall in real wages and wealth for most of us whilst the very rich have taken more and more and put back less and less. And the Tories' ritual incanctation (repeated e.g. by my own MP at the election) that the best way out of poverty is work not welfare has rung increasingly hollow. 60% of households in poverty are now working households. 

In consequence of all this we are now a poorer and more divided country than we have been at any time since the 1930s. And many economists believe we are also on the verge of another consumer debt led crash (resulting this time largely from the austerity driven fall in wages). 

It was this growing awareness among ordinary folk that they were getting a raw deal which led to the Brexit vote as an act of rebellion in so many working class/poorer communities. They rightly felt the last 40 years had left them and their communities behind. For some of those leave voters their vote was nothing more articulate than putting two fingers up to our rich privileged establishment, epitomised so well by our then Eton-educated Prime Minsister and Chancellor. 

However, many had been transfixed by the "Euro Monster"- the fictional demon created by  another part of the rich establishment. 
This "Euro-Monster", so the stiory goes, is an evil beast who has taken control of our lives by removing the power for our national governemnt to make decisions in our interests and by forcing on us the curse of uncontrollable immigration. This is supposedly the cause of the raw deal that most of the country has experienced - poor wages and unaffordable housing etc- and which our national government is sadly powerless to prevent. However, it's nonsense, a myth. 

The very large majority of laws that have left ordinary people with a raw deal have been made entirely in this country, eg the selling off of our public services to private and foreign interests or the resetting of our tax system to benefit the rich or slashing funding of our welfare state or restriction of access to justice. At the same time all serious independent research has found there is actually very little link between the economic problems most folk have endured and higher immigration. The disconnect between immigration and economic damage is most obvious when you realise that some of the most strongly leave voting constituencies actually had some of the lowest levels of immigration (eg North east England).

This mythical Euro monster was a self-serving invention of certain rich, establishment interests -like the foreign billionaire owners of the Mail & Telegraph. They invented it to try to blind ordinary folk to the real cause of the loss of control and their raw deal- them!- the rich individuals and corporations in whose interests this country has been run for nearly 40 years. It suits their fictional narrative very well that our membership of the EU (since 1972) happens to have coincided with the real sell off of country to the rich under the economic religion of neo liberalism (since 1979).
It is a sad irony that the the social & economic woes that lead to the Brexit vote are only likely to be worsened by Brexit itself, at least the hard form of it that the current government seem to be recklessly pursuing. If they continue down that route the likely failure to achieve a free trade deal will only make us all even poorer.

There is only one UK political party with a plan to reset our social and economic model to work for the good of all rather than just letting the very rich help themselves whilst so many suffer. That party is Jeremy Corbyn's Labour party and it's why there can and will be no return to New Labour.  Their goals are to achieve ends that should be endorsed by all biblical Christians (which I seek to be) and frankly by all right thinking people of other faiths or none:
  • reduce poverty and homelessness
  • set people free from debt
  • give everyone a fair stake in and a secure place in the resources this country has to offer
  •  protect God's planet that we all share and depend on
  •  increase social justice
  •  pursue peace in this country and the wider world
Their means of achieving these ends were sketched out in their recent election manifesto- For the Many, Not the Few- a title which would well fit the same hymn sung by The Economic Justice commission.  Although the manifesto was finalised at such short notice it proved increasingly popular the more people learned about it. It was also pretty well received by many of the world's  leading economists who in a joint letter endorsed their economic plans as just what the country needed to revitalize our post Brexit evonomy. Labour's radical transformative policies included:

  • a new National Investment Bank ready to lend £1/4 trillion for business and innovation over 10 years
  • a new £1/4 trillion fund to rejuvenate our crumbling infrastructure over the same period
  • increased income tax rates on the richest
  • a potential land value tax to act both as a wealth tax and a means of forcing property developers to build hosuing the country needs now rather than horde until the price is "right" (for them not the rest of us!)
  • a massive programme of affordable housebuilding especially through construction of councl housing
  • the reintroduction of rent controls and greater rights and security for tenants
  • a clamp down on tax evasion and tax avoidance
  • the start of the reversal of the governments' welfare benefit cuts which are plunging so many into poverty
  • new employment rights and protetcions including banning zero hours contracts and new rights to trade union representaion
  • an increase in the minimum wage to £10 per hour by 2020
  • the abolition of debt-burdening student tuition fees
  • renationalising our railways and water industry
  • establishing a new national energy provider focussed on green  renewable energy production
  • reversing the privatising of the running of many of our public services to bring them back under state/council control
  • caps on pay of those in charge of companies performing government contracts.
Since the election we have also seen the Labour party articulate a sensible soft Brexit: an approach that both respects the (albeit very misguided) leave vote whilst avoiding the Tories' hard Brexit cliff edge that threatens to plunge all of us into even more tubulent economic seas.

And over the coming months hopefully Labour will be able to develop further radical, transformative policies which like 20 years ago will no doubt be positively influenced by the IPPR's final report. Hopefully this will include other policies that Labour has seriously considered but not yet articulated such as enforced profit shares for all employees (which narrowly missed making it to their last two manifestos).

Even the Tory party are slowly recognising that things have to change. Hence Theresa May's already forgotten or watered down promises to cap energy prices, take action over excessive executive pay and now consideration of doing "something" about student loan debts. However what they have actually put forward so far has been very thin gruel which will not really nourish the many.

I confidently hope and pray that our current government will soon fall, perhaps on their own Brexit sword, and that after the following election we should see a radical Labour government elected. A government that will transform and reset our socio-economic model to work for the many not just the few, just as they did under Clement Attlee 72 years ago.

And the real test of that transformation (as it was for Thatcherism with New Labour) will be when the Conservative party adopts that same new social democratic model- just as they adopted the old social democratic model under the likes of Churchill and MacMillan in the 1950s.

This desire to provide an economy that works for the benefit of all and protects the poorest is a very biblical aim. It was with a similar end in mind that God founded his first earthly kingdom of Israel. In  Numbers and Deuteronomy God makes clear that every citizen is to have a stake in their promised land so that there should be no need for any poverty. However if there was poverty (which due to human sin God knew sadly there would be) the poor must be provided for and justice for the poor must take precedence over individual self interests. This included the radical jubilee system of cancelling debts and redistributing wealth, i.e. giving land back to the families who originally owned it. 

Similarly today I believe we need to take back control of our country to ensure we all get a fair share. It is not about taking back control or ownership from the mythical "Euro monster" (who actually controls relatively little). It is about taking back control and ownership from those who really have snatched it from us- the rich individuals and corporations in whose interests this country has been run for nearly 40 years. 

The perfect fair society that will truly benefit everyone can ultimately only be realised when Jesus returns to earth to establish his kingsom of heaven on earth. Until then due to human sin we will fall short, as will any future Labour government. But by God we can do so much better ! And the God that I and the Archbishop of Canterbury believe in challenges us to do so.

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