How the Neo-liberal crisis hasn’t yet begun

The neo-liberal response to the post war settlement took it’s time to take shape amongst the masses. Thatcherism  brought the power of individualism, privatisation, and the knee-capping of the unions. Following on the pressure has been for governments to do away with regulation, and let markets “decide freely”; firstly in terms of corporations against each other, and then in terms of corporations vs the employee and the consumer. As a result, the nature of employment has shifted considerably,  with the jobs for life of 30 years ago replaced with short term contracts,  zero-hours deals, temping, uncertainty, assisted by the increase in under-employment.

Most of the coverage of this relates, rightly, to the impact on our living standards, in the here and now, and the impact on corporate efficiency. But it’s only part of the big lifetime picture.
Almost unremarked in this context at the same time there has been a shift in the nature of savings for the post-working age period of life. From the old staple – an employer provided defined benefit pension scheme,  where the employer took on all the risks,  to the modern approach of defined contribution schemes and stakeholder pensions.

Oh, and in the same period, the level of corporation tax has fallen from 52% to 23%.

So, in the 70’s your employer would (in many cases) provide a permanent, life long job, with a very good pension, and at the same time was paying a decent whack to the state to cover your other costs, and those for your family, and the infrastructure of society. When you retire, you’d also get your state pension, which should mean you could actually still function in society. Effectively the employer was saying – we buy your contribution for 45 years, and spread the pay over your whole life.

And now – if you’re under 50 the picture is somewhat different – well your job isn’t quite so permanent, your wages have dropped 15% in real terms in 5 years, and your defined contribution pension will be lucky to payout £4-£8k a year. At the same time, the state “hasn’t got the money” to pay you and everyone else a decent pension.

Meanwhile, small employers have (relatively) disappeared, increasingly replaced by large mega-corporations, who have dramatically increased the rewards to (very) senior managers; and at the same time taken umbrage at the corporation tax rules and channelled all their profits through complex relationships with Luxembourg and Ireland and Malta, leaving the amount even liable to the paltry 23% corporation tax to be much lower. So there’s less going into your own pension pot, and the promise isn’t there to pay any extra once you’ve done your last shift; and at the same time they’re saying, you know, we don’t owe you & the nation at large anything to cover the rest of your life.

Wow – stand back and consider that shift in thinking for a bit. That’s a huge change. What’s the impact? What’s the government planning? Because the effects will only be starting to trickle in now.

So far we’ve already seen that inequality is increasing. We’ve seen that infrastructure hasn’t been improved significantly – we’re still reliant on coal burning power stations, Victorian sewers, roads are full of pot-holes. There’s a dearth of affordable housing, causing increased poverty and uncertainty for the youngest and most vulnerable members of our society. In short, we’ve relied upon the forward planning of our predecessors, and done very little of our own. In terms of the new challenges we’ve faced – increasing populations, ageing populations, CLIMATE CHANGE, we’ve not really done anything big, societal, and forward thinking.

And let’s fast forward 10-15 years, when the generation who missed out on decent employer pensions (in the private sector) get too old to work, and then 10 years more to when the public sector staff who’ll miss out on decent employer pensions get too old to work – what’s it going to look like? They won’t actually be able to afford to fully retire. They’ll have to keep taking contracts, and trying to squirrel as much away as possible. Will the government tell them it’s their fault, and that they’re scroungers? I don’t know to what degree we’ll be hardened as a society by then to even look at the problem as a societal one. But the life choices for those individuals (Me! Me!) will be greatly reduced – they won’t have what their parents had in terms of regular income, unless things change fast.

I genuinely don’t think there’s nearly enough worrying about this going on. It’s going to hit, and hit large.

Now, I’m not necessarily saying that everything should be as it was – lots of people don’t mind not having a job for life, and defined benefit pension schemes only work if the organisation paying them never shrinks over time – many companies have hit the wall just from trying to keep paying  the people who retired 25 years ago – so it’s not right for everyone. But we do need solutions. And our governments don’t seem to know what a real long-term solution looks like.

That’s perhaps because the analysis of everything in economics and politics is so stupidly short-sighted. A successful economic system should be able to prove itself from birth to death and over again, many times. But the “winning post” for neo-liberal capitalism was set at the equivalent of about 5 years, measured enthusiastically every quarter. That’s not how to measure something as bloody important as the system that defines our opportunities, our lifestyles, and shapes what we do between the really important stuff. That’s madness.

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Things we need to change

Ok – just a quick post I hope, which is boiled down from a series of half-written drafts and uncoordinated thinking, so please bear with me.

Any sane person ought to be aware by now that the model of capitalism / governance in the Western world is a bit broken. (You can read elsewhere for examples – I’m trying to be quick, but essentially we’re talking about tax avoidance, money-laundering, bribery, policy buying, …).

So what needs fixing? (This is UK based, but probably applies everywhere).

1) The beneficial structure of the Company is a privilege that is being abused. So many shell companies that have no employees and no trade exist, and have become the conduit for tax avoidance, money-laundering and other activities that serve no honest purpose. So let’s change that – a Company must have a defined purpose, real actual activity, and real people, residing in the UK as it’s Directors, who are legally responsible for their organisation.

2) The accountancy profession has sat on it’s hands since the onset of the financial crisis, and through sensible, prudent, lazy, incompetence, they have left us with a muddier picture of rules. We need to separate the predatory “advice” side from the regulatory audit side. This mostly refers to the Big 4 as they are known. Auditors can then be free to provide the service to the public that they were set up for. The accounting bodies then need to review and make fit for purpose the various standard setting bodies, who need to actually set some standards. (Follow @secret_ledger on twitter for some of the fun of that fair). Oh, and the auditors need to be properly policed and reviewed – all of the banking scandals of recent times should have been spotted by an auditor – so why weren’t they?

3) Banks / Money – essentially we need banks that serve the people, not serve themselves. My personal preference is to go down the route of removing from banks the ability to create money.

(see http://www.positivemoney.org/

Their proposed reforms in 6 steps:

1. Remove the banks’ power to create money
2. Return that power to a transparent and democratically accountable process
3. Create money free of debt
4. Create money in line with a democratically mandated target (such as a flexible inflation target, as is the case today)
5. Make sure that new money enters first into the real economy instead of through financial markets
6. Give individuals control and transparency over how their money is invested )

What’s left of the banking system after that should be lots of useful, regional service providers, just doing transactional stuff. They might then be able to get their IT up-to-date, instead of spending their brass on their croupiers.

4) Property – let’s restrict the “ownership” of property to UK resident individuals.

5) Politics – with a heavy heart I have to say that we must end the funding of political parties via donations from individuals and companies. Essentially, this system will always favour the wealthy. So the state will have to contribute. This contribution will be based on a £ per member basis; with a weighting – ie £10,000 max for start-ups. I don’t really like party politics, so I see this fix as purely temporary.

6) Governance – we need strictly enforced conflict-of-interest rules. It’s wrong that private sector organisations can write policies which will benefit themselves – but this is a bloody tricky one to enforce. Let’s start with “think-tanks” which must display their funding sources on all documents, and before all media appearances (in a racing-driver style). The rules regarding public and private interests for public officials are inadequate, so let’s put a bar on people voting on policies for which they have a vested financial interest.

Oh, and let’s scrap the House of Lords, and have an upper house based in part on the jury system (terms up to 13 weeks); with a small and restricted number of appointees by each political party (of any size), who will serve 2 year terms; and the remainder being regional representatives selected on a vote. Can’t be any worse than what we have already.

Ok there’s your starter – yes I realise it’s an imperfect list, but I can’t do it all on my own. Not in one go anyway. Please let me know what you think. What I’ve tried to do is go back to base principles, and say, hey, what we need is more folk taking responsibility for stuff. The rest of it – neo-liberalism vs socialism ; red vs blue; left vs right – it’s just window dressing – if we don’t fix the basic structures, we’re doomed to carry on this nonsense.