Lurking behind the obsession with budget austerity which is sweeping Europe (and threatening the USA) is far more than an economic debate about how best to return to growth. The critical question is whether the post-war ‘social democratic’ settlement is being dismantled – is the state becoming a mere vehicle for serving the interests of the super-rich?
No, I don’t mean to suggest that the state is, and always has been, no more than the ‘management committee of the bourgeoisie’. As James Galbraith has argued in The Predator State, the vulgar Marxist notion that capitalism leads to an ever growing political conflict between the interests of a small class of monopoly capitalists on the one hand, and the vast proletarian majority on the other, is of little use today. Amongst other radicals, Thorstein Veblen, the late19th century American economist, understood that keeping the lower orders well-fed and, above all, maintaining a social hierarchy in which each could aspire to moving to a slightly higher rung was of crucial importance in maintaining the stability of capitalism. The middle class may earn a small share of the national cake compared with the super-rich, but they – and their vote – must be kept on side. In Galbraith’s phrase, predators require healthy prey.
Clearly the Camerons, Merkels and Bushes of this world are not plutocrats but merely their useful servants. The big guns behind them are the media barons (eg, Murdoch and Springer) together with the Wall Street and City bankers, industrial CEOs and even ancient aristocrats who feature in the Times Rich List. Some are famous while others (eg, the Koch brothers in the US) prefer to hide from the public gaze, but their fortunes finance Washington’s K-Street and similar political lobbies in London and Brussels. In Britain, for example, it has taken only two generations for the ratio of average FTSE-100 CEO earnings to the average industrial wage to go from 20:1 to 70:1.[i] This means that if the current industrial wage is about £25K per annum, the average FTSE CEO receives not £500K but £1.75mn a year.
Meanwhile, privatisation has created a large number of small fry clinging to the sharks. Think of the traffic cones on Britain’s roads, each placed there by some small new contractor who benefited from the break-up of our public utilities and able to afford an aspirational life style by virtue of employing unskilled, non-union labour.
Does the new plutocracy really mean to dismantle the welfare state, whether in its European social-democratic version or its US ‘new deal’ version? Galbraith argues that they don’t, preferring instead to maintain state support to the economy (whether through defence, medical coverage, state education, pension provision and so on) while making sure that an ever growing portion of this income stream is siphoned off to the predatory rich. Even in the USA, the state’s direct and indirect spending amounts to nearly 40% of GDP, only just short of the European average.
The most obvious example of predation is that of the 2008 financial crisis in which the state guaranteed the banks’ survival unconditionally while passing on the cost of the ensuing economic slump to the man in the street. Other examples include the IMF-led campaign to privatise public utilities, the privatisation of occupational pensions under Thatcher (though Reagan and the Bushes failed to privatise social security in the US), the rise of school voucher schemes subsiding the middle-class, the privatisation of prisons, and the use of private security firms to wage war.
A most significant step in the UK under Major, Blair and Brown was the creation of the NHS ‘internal market’, which had the effect of enabling private capital to access a huge public revenue stream through outsourcing and through PFI schemes.[ii] As Pollock and other writers have pointed out, the aim of this sort of privatisation has been to safeguard the public service shell while, under the banner of greater efficiency and wider choice, to channel profits to an emerging class of ‘wealth creators’. The new ConDem alliance has carried the process a step further by handing the NHS management function to GPs who, largely unable to discharge the function, will in due course hand it in turn to US-style Health Maintenance Organisations (HMOs).[iii]
George Osborne now promises to ‘radically simplify’ the UK benefit system; in effect, all benefits will gradually be means tested and the benefit-dependent poor will become increasingly stigmatised. Those in work can look down upon the ‘undeserving poor who can look down upon ‘feckless immigrants’ – sound familiar?
Of course, Britain is not alone in this. In the name of credit-worthiness, deficit hawks throughout the EU are calling for balanced budgets. In practice, this means major cutbacks in public spending and further direct or indirect privatisation in the name of greater efficiency. The distinction between public and private goods has virtually disappeared. In the words of the late Tony Judt:
This is the second generation of people who can‘t imagine change except in their own lives, who have no sense of social collective public goods or services, who are just isolated individuals desperately striving to better themselves above everybody else.[iv]
Individualisation, fragmentation, and the loss of a common political culture are all part of the same process which strengthens the rulers and leaves the ruled confused and de-politicised. This is the key to ‘rolling back’ the State, that version of politics in which the State ceases to act as the servant of the majority, in which the post-war social democratic settlement disappears. That’s what Andrew Glyn – one of Britain’s finest political economists – meant by the prescient title of his last book, Capitalism Unleashed.[v] Let’s hope Ed Miliband has taken this lesson onboard.
An earlier version of this article appeared in October on the Compass UK website.
[i] Will Hutton, ‘When the boss asks you to take a pay cut, demand a share in the company’ The Observer, 21 June 2009.
[ii] See Allison Pollack’s excellent NHS PLC; Pollock, A (2005), NHS plc; the privatisation of our health care; London: Verso books.
[iv] Tony Judt, quoted in Ed Pilkington, ‘A bunch of dead muscles, thinking’, The Guardian, 9.1.2010.
[v] See Glyn, A (2006) Capitalism Unleashed, Oxford: Oxford University Press.