|Britain's Harshest Cuts in a Generation - For Whose Benefit?|
Britain’s Coalition government has announced the harshest cuts in spending since 1918. Are they necessary austerity measures to ensure economic stability, or an ideological attempt to shrink the state and promote the private sector in its place? Commentary by George Monbiot and Johann Hari.
22nd October 2010
18th October 2010 - George Monbiot, The Guardian
We’ve been staring at the wrong list. In an effort to guess what will hit us tomorrow, we’ve been trying to understand the first phase of the British government’s assault on the public sector: its bonfire of the quangos. Almost all the public bodies charged with protecting the environment, animal welfare and consumers have been either hobbled or killed(1). But that’s only half the story. Look again, and this time make a list of the quangos which survived.
If the government’s aim had been to destroy useless or damaging public bodies, it would have started with the Commonwealth Development Corporation. It was set up to relieve poverty in developing countries, but when New Labour tried, and failed, to privatise it, the CDC completely changed its mission. Now it sluices money into lucrative corporate ventures, while massively enriching its own directors. Private Eye discovered that in 2007 this quango paid its chief executive just over a million pounds(2). The magazine has also shown how the CDC has become entangled in a series of corruption cases(3). Uncut. Unreformed.
The same goes for the Export Credit Guarantee Department. The ECGD effectively subsidises private corporations, by underwriting the investments they make abroad. At one point, 42% of its budget was spent on propping up BAE’s weapons sales(4). It also pours money into drilling for oil in fragile environments(5,6). A recent court case showed how it has underwritten contracts obtained with the help of bribery(7,8). Uncut. Unreformed.
The Sea Fish Industry Authority exists “to help improve profitability for the seafood industry”(9). Though it is a public body, all but one of its 11 directors work for either the fishing industry or food companies(10). They seek to “promote the consumption of seafood”(11), to “champion the industry in public debates”(12) and to “influence the regulatory process” in the industry’s favour(13). Uncut. Unreformed.
Can you see the pattern yet? Public bodies whose purpose is to hold corporations to account are being swept away. Public bodies whose purpose is to help boost corporate profits, regardless of the consequences for people and the environment, have sailed through unharmed. What the two lists suggest is that the economic crisis is the disaster the Conservatives have been praying for. The government’s programme of cuts looks like a classic example of disaster capitalism: using a crisis to re-shape the economy in the interests of business.
In her book The Shock Doctrine, Naomi Klein shows how disaster capitalism was conceived by the extreme neoliberals at the University of Chicago(14). These people believed that the public sphere should be eliminated, that business should be free to do as it wants, and almost all tax and social spending should be stopped. They believed that total personal freedom in a completely free market produces a perfect economy and perfect relationships. It was a utopian system as fanatical as any developed by a religious cult. And it was profoundly unpopular. For a long time its only supporters were the heads of multinational corporations and a few wackos in the US government.
In a democracy under normal conditions, those who were harmed by abandoning public provision would outvote those who gained from it. So the Chicago programme couldn’t be imposed in these circumstances. As the Chicago School’s guru, Milton Friedman, explained, “only a crisis – actual or perceived – produces real change.”(15) After a crisis has struck, he added later, “a new administration has some six to nine months in which to achieve major changes; if it does not act decisively during that period, it will not have another such opportunity.”(16)
The first such opportunity was provided by General Pinochet’s coup in Chile. The coup was plotted by two factions: the generals and a group of economists trained at the University of Chicago and funded by the CIA. Their ideas had already been comprehensively rejected by the electorate, but now the electorate was irrelevant: Pinochet used the crisis he had created to imprison, torture or kill anyone who dissented. The Chicago School policies – privatisation, deregulation, massive tax and spending cuts – were catastrophic. Inflation rose to 375% in 1974; the highest rate on earth. Even so, Friedman insisted that the programme was not going far or fast enough. On a visit to Chile in 1975 he persuaded Pinochet to hit much harder. The result was a massive increase in unemployment and the near-eradication of the middle class. But the very rich became much richer, and the corporations, scarcely taxed, deregulated, fattened on privatised assets, became much more powerful.
By 1982, Friedman’s prescriptions had caused a spectacular economic crash. Unemployment hit 30%; debt exploded. Pinochet sacked the Chicago economists and started re-nationalising stricken companies, whereupon the economy began to recover. Chile’s so-called economic miracle began only after Friedman’s doctrines were abandoned. The Chicago School’s catastrophic programme pushed almost half the popultaion below the poverty line and left Chile with one of the world’s highest rates of inequality(17).
But all this was spun by the corporate media as a great success. With the help of successive US governments, similar programmes were imposed on dozens of countries in which crises ensured that the population was unable to resist. Other Latin American dictators copied Pinochet’s economic policies, with the help of mass disappearances, torture and killings. The poor world’s debt crisis was used by the IMF and the World Bank to impose Chicago School programmes on countries that had no option but to accept their help. The US hit Iraq with economic shock and awe – privatisation, a flat tax, massive deregulation – even as the bombs were still falling. After Hurricane Katrina wrecked New Orleans, Friedman described it as “an opportunity to radically reform the educational system”(18). His disciples immediately moved in, sweeping away public schools while the residents were picking up the pieces of their lives, replacing them with private charter schools.
Our crisis is less extreme, so, in the United Kingdom, the shock doctrine cannot be so widely applied. But, as David Blanchflower warned yesterday, there’s a strong possibility that the cuts programme will precipitate a bigger crisis: “it’s a terrible, terrible mistake. The sensible thing to do is to spread [the cuts] over a long time”(19). That’s another feature of disaster capitalism: it exacerbates the crises on which it thrives, creating its own opportunities.
So we shouldn’t wonder that 35 corporate executives wrote to the Telegraph yesterday, arguing, just as Milton Friedman used to do, for a short, sharp shock, before the window of opportunity closes(20). The policy might hit their profits for a while, but when we stagger out of our shelters to assess the damage, we’ll discover that we have emerged into a different world, run for their benefit, not ours.
2. Richard Brooks, 3rd September 2010. That’s Rich! How Britain’s poverty relief fund abandoned the poor … while its bosses cleaned up. Private Eye.
3. As above.
14. Naomi Klein, 2007. The Shock Doctrine: the rise of disaster capitalism. Allen Lane, London.
15. Milton Friedman, Capitalism and Freedom, quoted by Naomi Klein, as above.
16. Milton Friedman and Rose Friedman, Tyranny of the Status Quo, quoted by Naomi Klein, as above.
17. Naomi Klein, as above.
18. Milton Friedman, 5th December 2005. article in the Wall Street Journal, quoted by Naomi Klein, as above.
21st October 2010 - Johan Hari, The Independent
Margaret Thatcher is lying sick in a private hospital bed in Belgravia but her political children have just pushed her agenda further and harder and deeper than she ever dreamed of. When was the last time Britain's public spending was slashed by more than 20 per cent? Not in my mother's lifetime. Not even in my grandmother's lifetime. No, it was in 1918, when a Conservative-Liberal coalition said the best response to a global economic crisis was to rapidly pay off this country's debts. The result? Unemployment soared from 6 per cent to 19 per cent, and the country's economy collapsed so severely that they lost all ability to pay their bills and the debt actually rose from 114 per cent to 180 per cent. "History doesn't repeat itself," Mark Twain said, "but it does rhyme."
George Osborne has just gambled your future on an extreme economic theory that has failed whenever and wherever it has been tried. In the Great Depression, we learned some basic principles. When an economy falters, ordinary people – perfectly sensibly – cut back their spending and try to pay down their debts. This causes a further fall in demand, and makes the economy worse. If the government cuts back at the same time, then there is no demand at all, and the economy goes into freefall. That's why virtually every country in the world reacted to the Great Crash of 2008 – caused entirely by deregulated bankers – by increasing spending, funded by temporary debt. Better a deficit we repay in the good times than an endless depression. The countries that stimulated hardest, like South Korea, came out of recession first.
David Cameron and George Osborne have ignored all this. They have ignored the warnings of the Financial Times, the newspaper most critical of their strategy. They have dismissed the warnings of Nobel economics laureates like Paul Krugman and Joseph Stiglitz, who have consistently been proved right in this crisis. They have refused to learn from the fact that the country they held up as a model for how to deal with a recession – "Look and learn from across the Irish Sea," Osborne said – has suffered the worst collapse in the developed world. They have instead blindly obeyed the ideological precepts they learned as baby Thatcherites: slash the state, and make the poor pay most.
Osborne galloped through his Comprehensive Spending Review (CSR) speech, failing to name almost any of the services that will be slashed or shut down. It's revealing that he doesn't want to name them while the nation is watching.
But beneath the statistics, there was a swathe of human tragedies that will now unnecessarily unfold across Britain. PriceWaterhouseCooper – nobody's idea of a Trotskyite cell – says that a million people will now lose their jobs as a direct result. My father lost his job at the height of the last Tory recession, and had to leave the country to get another one. I remember how that felt. I remember what that did to my family.
Now it's going to happen to a million more families and probably more. For the private sector to get all these people into work, as Osborne claims, there would have to be the most rapid business growth in my lifetime. Does anyone think that will happen? Osborne has chosen the weakest people to take the worst cuts. The poorest 16-year-olds were given £30 a week to stay on in education, so they could afford to study – until Osborne's team dismissed it as a "bribe" and shut it down. The frailest old people depend on council services to wash them and feed them – yet Osborne just slashed their budget by 30 per cent, which service providers say will mean more pensioners being left to die in their own filth. Every family living on benefits is set to lose an average of £1,000 a year – which, as I've seen from living in the East End of London, will mean many poor kids across Britain never getting a birthday party, or a trip to the seaside, or a bed of their own, or a winter coat. This isn't just On Yer Bike, it's On Yer Own.
The irrationality of this approach is perhaps plainest when you look at housing. We badly need more affordable housing in Britain. Some 4.5 million people are stuck on waiting lists, and the average age of a homebuyer is now 37. It's a cause of constant stress to the real middle class and despair for the poor. By a happy coincidence, house-building is one of the best stimulators of the economy: it employs a lot of people on average wages, who then spend their money quickly in a "multiplier" effect.
Yet Osborne has chosen the opposite. There will be on average one new home built per week in the whole of London and the south-east. That's one. Indeed, instead of building homes, he's driving people out of them. By slashing housing benefit, London councils alone say 83,000 people here are going to be forced to leave their homes, with 1.3 million ending up in more debt. Cameron has revealed that his baby daughter sleeps in a cardboard box decorated for her by her big sister. Thanks to him, a lot more people are going to be sleeping in cardboard boxes soon.
It can't be coincidental that this is being done to us by three men – Cameron, Osborne, and Nick Clegg – who have never worried about a bill in their lives. On a basic level, they do not understand the effects of these decisions on real people. Remember, Cameron said before the election: "The papers keep writing that [my wife, Samantha] comes from a very blue-blooded background", but "she is actually very unconventional. She went to a day school." Osborne is a beneficiary of a £4m trust fund he did nothing whatsoever to earn and which is stashed offshore to avoid tax. Clegg actually thought the state pension was £30 a week, a level that would kill pensioners.
These attitudes have real consequences. We're not in this together. Who isn't in it with us? Them, their friends, and their families. They were asked to pay nothing more in this CSR. On the contrary: they are being let off left, right and centre. To pluck a random example, one of the richest corporations in Britain, Vodafone, had an outstanding tax bill of £6bn – but Osborne simply cancelled it this year. If he had made them pay, he could have prevented nearly all the cuts to all the welfare recipients in Britain. You try refusing to pay your taxes next time, and see if George Osborne shows the same generosity to you as he does to the super-rich.
There is one stark symbol of how unjust the response to this economic disaster caused by bankers is. They have just paid themselves £7bn in bonuses – much of it our money – to reward themselves for failure. That's the same sum Osborne took from the benefits of the British poor yesterday, who did nothing to cause this crash. And he has the chutzpah to brag about "fairness."
Britain just became a colder and crueller country. And for what? To pantingly follow a disproven ideology over a cliff. On the eve of the general election, Cameron told us: "There'll be no cuts to frontline services," "we're not talking about swingeing cuts," and "all cuts will be fair". Is it possible to call him anything but a liar and an ideologue today?
You can enjoy a long rest, Baroness Thatcher – your successors have embarked on a mephedrone-charged imitation that exceeds your most fantastical dreams.
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