Class war & the precariat – what ever happened to Thatcherism?

What fate awaited Thatcherism? In my teenage years I believed that Thatcherism represented a reboot the British economy needed; an essential modernisation that would re-align our economy with that of the real world. Old certainties and securities would change and, to replace them, we would all become capitalists – a nation of small businessmen & women with responsibilities for our own fates. This would unleash new wave of wealth-creation. These new-found riches would allow the nation to invest in its necessary infrastructure. Markets served society and Government should not interfere unnecessarily. That was the dream that was sold to us. Thirty years later I don’t believe this was naive or wrong – a market-led utopia still has un-tapped potential. But everything is now upside-down. These new “free markets” were captured only by the powerful to the exclusion of everybody else. They would not serve society. Markets worked only for the 1% and became code for whatever rent-seekers could profit from.

“Capitalism based on rent-seeking is not just unfair, but also bad for long term growth.”

The Economist, 15th March 2014

“Rent seeking” – what is it and what does it mean for us? If you don’t know then now is a good opportunity to find out. Rent-seeking has replaced the Thatcherite dream of an entrepreneurial society and has rewritten the class-based software or our civilisation. In Guy Standing’s 2016 work “The Corruption of Capitalism – Why Rentiers Thrive and Work Does Not Pay” [ISBN 978-1-78590-044-0 Biteback Publishing Ltd] the author offers up the resulting re-shuffle of Britain’s class system.

  • A tiny plutocracy of approx 0.001% – Rupert Murdoch, various hedge fund managers, etc
  • An “elite” (Standing leaves that definition to the imagination but let us guess it means Politicians, old money and traditional industrialists)
  • A “salariat” in relatively secure salaried jobs – management, civil servants, doctors, etc
  • “Proficians” who are freelance professionals – IT Consultants, ie me(!)
  • A core working class of semi-skilled workers – white van man, builders, electricians, etc
  • A “precariat” of low salary, unskilled, on-demand casual labour – Uber drivers, Amazon workers, etc
  • A “lumpen-precariat” at the bottom, unskilled and largely unemployed

Standing’s previous books have been about the precariat and basic income proposals so it is unsurprising that he brings these two ideas together here. Most of this book is, however, not at all engaging as it comes together as a long rant against the modern world. It reminded us of an aimless George Monbiot targeting almost every modern aspect of the economy and finding room to condemn the whole damn lot. However we do suggest that readers stick with it, for towards the end there remains a more useful analysis of the future of politics – to which we shall return.

If you have one problem with this book it would be with the definition of “rent seeker”. Standing’s use of the term is so broad that it literally takes in the activities of any entrepreneur who capitalises on any work that they may do. He suggests right from the get-go that the plutocracy, the elite, salariat and proficians gain most of their income from capital and rental income. Writing in my own personal capacity as an IT consultant this concept is laughable. By definition the salariat & proficians are hard working people and are earning most if not all of their money from that work. The division in understanding comes from the fact that Standing views the world entirely through the lens of the precariat. Hence, literally anybody with a private pension, cash in the bank, a mortgage, an ISA, etc is a rentier. This does end up capturing most of society inside a pejorative term simply because they are educated, have worked hard and have savings. This can serve to alienate a large wedge of society whom would otherwise warm to what Standing is trying to explain.

This does serve to underpin the essential problem with all talk about “elites”. These elites, by definition, do not mean “us”. An “elite” is “not us” yet have power and wealth that exceed our own. To anyone living on a dollar-a-day in the developing world, the entire population of the developed world will appear to be an elite. Other divisions are meaningless. To give the concept meaning we normally write about “elites” in terms of power and influence that can be purchased in an unjust fashion. Yet even this definition may not help if you understand that all western privilege has been built on the back of slavery and dominion over poor countries. So let’s park that conversation and embrace Standing’s viewpoint for sake of argument.

Readers of George Monbiot, Noam Chomsky and James Meek will be familiar with the myriad of ways in which the modern, western, developed, Capitalistic economy is riddled with corruption in the service of power. We need not go through these arguments again here. Although traditionally such critiques are voiced by the left we must also recall that similar arguments are made by the right. The true believers in free-market capitalism have many of their own beefs with actual-capitalism. So broad is Standing’s attack upon rentier-capitalism that he encompasses both side of this equation. Although occasionally giving a nod to the left by stating that the State has a role in the market, say, for renewable energy, the main thrust of his work is that all Government involvement corrupts markets in favour of whoever has the most influence in Politics. Which, according to the author, appears to be a pretty large group in society!

A large part of this book is devoted to the “three lies” of rentier capitalism. The first of the lies is that it is not based upon free-markets. For example intellectual property rules are cited as a prime example. Standing states that the second lie is that intellectual property rights reward risk takers. He suggests that most of such property is part of the commons as it is heavily subsidised out of the public purse. (Think here of “The Entrepreneurial State” by Mariana Mazzucato) The third lie is that rentier capitalism is good for growth whereas Standing contends that the opposite is true. Certainly given the events of the last 75 years the empirical evidence supports this. Modern free markets have worked well in hoovering wealth out of the economy but not at generating it in the way a Scandanavian social democracy can. The post-war settlement was far more successful on all social measures and economic growth too. Growth ended for western nations when they adopted neo-liberalism. A few profited but for the many there was nothing but economic crash, endless austerity and Brexit. Free trade is good but the modern breed of investment treaties have done nothing to expand the economies who sign up to them.

“In the UK corporate welfare is estimated to exceed £93 billion every year…”

“While giving so generously to British and foreign firms, the UK Government has argued that spending on social services and benefits must be cut by £20 billion more by 2020 ‘balance the books’. This is a policy driven by ideology, not economics.”

…and it is not as if privatisation has been much of a big help…

“In 1993, before privatisation, British Rail was paid £1.3 billion in subsidies. By 2006-07, the government was subsidising private operators to the tune of over £6.8 billion a year.”

Standing argues that the removal of this corporate welfare would improve growth and sustainability whilst reducing inequality. Although this is sensible Standing also levels his sights upon the sharing economy and the alternative financial institutions that have arisen since the 2008 crash. Traditionally we would have considered peer-to-peer lending as a good thing as it puts ordinary lenders in touch with ordinary borrowers and cuts out the big boys. What’s wrong with that? Standing states that the money is funnelled into tax-free savings accounts “representing another nice subsidy for the affluent and profit for the platforms“. This is true if your definition of “affluent” is anyone with an ISA or a pension. Which is probably most people in some form or other. It is hard to follow exactly where Standing is going with this line of reasoning as he doesn’t justify why he thinks peer-to-peer lending ends up in tax-free savings. That would seem pretty irrational as the interest on borrowings vastly exceeds the interest on savings. Nobody borrows to save. Government intervention in the savings market is fully warranted and is a hangover from the days when conservatives thought they could buy votes by creating a property-owning middle-classes. Today the idea that saving is a good thing remains solid. Savings are security. What defines the precariat is their lack of security – their lack of savings. Helping people save would lift the precariat out of their dilemma.

Yet modern rentier-capitalism has begun the opposite process. It is now gutting the the middle classes and liquidating their assets. Quantitative Easing has been used to pump money into the real estate investment market and pushed up property prices. The children of the middle classes can no longer save up to buy a home as their parents once did. That element of Thatcherite-capitalism has been crushed by the rentier-capitalism although it was a natural conclusion to the same direction of travel. Readers of Picketty would well understand. Modern free markets subsidise the landlord not the individual home-buyer.

“Today, wages are kept down on the grounds of ‘competitiveness’ with wages in some other part of the world, while desired domestic consumption is fanned by easy credit.”

“This revival of the Faustian bargain has stimulated growth, but it is unsustainable. It is scarcely the model of the prudent housewife, on which Thatcherite economics was based.”

If people cannot buy homes they can still borrow for other things to maintain their standard of living. This can never be maintained and within lay the seeds of the next financial crash. Such crashes, rather than becoming minor bubble in the stream, become mighty dams to hold back our civilisation from progress. Credit bubbles make the lives of the precariat more precarious and can only lead to the strangling of most of the players in the market. Debt today has become Orwell’s Fascist boot in the face of humanity.

“High student debt has also been shown to inhibit risk-taking and entrepreneurship.”

Debt has become a trap for the poor – like a modern workhouse it is a prison that Government policy only makes worse when essential aid is withdrawn. Debt would be less a factor if our civilisation had kept its public-assets available to all in society. Such “commons”, Standing argues, have been destroyed by neo-liberalism. The “Lauderdale Paradox” states that as private riches grow public wealth declines. Our society should be sharing its common wealth instead of commodifying it and selling it off, like the family silver, to the highest bidder. Commons, he suggests were once preserved by “communities of social solidarity and empathy” but no more. Those communities too have been destroyed. The commons were enclosed and their role in providing subsistence was taken up by the state. Yet neo-liberalism robbed society of this. It doesn’t believe in any form of commons supplied by Government. Hence when such support is withdrawn there are no other commons to fall back upon. Without the commons and the state there is nothing left but feudal landlords. Therefore the clock cannot be turned back to some glory-days 200 years ago. You must have either big government or big commons. Today we have neither and this represents the source of our own destruction. What options does this leave the precariat if they have no savings, large debts and no shared social assets? Within it lies the seeds of revolution.

Standing now introduces us to “Hartwick’s Rule of Inter- Generational Equity”: to be sustainable, a society must invest enough of its rental income from extraction and use of exhaustible natural resources so that future generations can benefit as much as today’s generation. Thus the commons may be plundered as long as we save for a future where those commons are no longer there (or indeed the State is no longer there to substitute for the commons). Since modern neo-liberalism disregards all concepts of inter-generational equity then no such saving was believed necessary. This was on the basis that people today discount the future. This is one magnificent failing of modern market economics – the idea that just because individuals under-value the future that society should do so to. Today we call Hartwick’s Rule “sustainable development” and is an economic concept that even the World Bank understands. It represents a core concept that underpins post-carbon living. Living today as if we will be living tomorrow. It is as much a simple economic principle as an ecological one.

“…nature is not capital, unless turned to commercial use. To call it natural capital is to imply it is no longer part of the commons. [..] Capital is about a relationship of production, about making profits..”

Towards the latter third of the book Standing returns to the precariat and the “sharing economy” with a long discussion about the many wrongs (and wrongs) of such platforms as Uber. Indeed he singles out Uber specifically as it may be the best known. He sees nothing good in such peer-to-peer economic systems:

“Rentier platforms are also feeding off the erosion of the social commons and commodifying some of its traditional forms. For instance, by offering cheap taxi rides they may reduce the numbers using subsidised public transport and accelerate the loss of public bus services.”

In this one instance we can see how hard it is to reconcile Standing’s view of the economy with that of the neo-liberals. It is completely at odds. He believes in subsidised bus services as a “commons” whilst the neo-liberals see that Uber is a free-market replacement for state subsidised transportation. This argument follows lines of dogma which can only be resolved by resorting to Hartwick’s rule. Which of these two forms of public transport offers the best opportunity to save something for future generations? Which has better temporal-utility? Both get you from A to B. The “commons” version sees transport as a public good paid for out of taxation because it gets cars off the road and saves fossil fuels. Neo-liberals look weak when it is looked at this way but strong in terms of their favoured rhetoric – that of “freedom to choose” and reduced taxation.

Next Standing turns his attention to the essential essence of the problem – democracy.

“…a tiny minority are thriving, while millions are struggling with stagnant incomes and growing insecurity. This imbalance surely would not be tolerated in a proper democracy.”

Proper democracy? Now we are at the heart of the problem and one we shall return to in our next blog (a review of “Against Elections: The Case for Democracy” by David Van Reybrouck). Standing says the result of neo-liberalism since the 1970s has been a “thinning” of democracy

“…based on disengaged citizenry, a decline in voting, collapsing political party membership and increasing domination by a global plutocracy.”

In essence, how did the neo-liberals get away with it? The culprits are the usual suspects as we have listed elsewhere: a long list of well funded Think Tanks, Right-wing domination of the media, corrupt Politicians, a complicit establishment and the Orwellian rewriting of history to discredit all that came before. Standing concludes ominously:

“Revolt is coming, in many forms.”

First up: the Occupy movement who have given us all so much hope. Standing describes this movement as being that of “primitive rebels” who have forged part of the road-map to the changes that are to come. However it had largely fizzled out by 2014 and its refusal to engage with regular politics had, Standing argues, played into the hands of an establishment who owes its continued existence to people not voting them out of power.

Standing himself see the precariat themselves as the source of a political earthquake unseating the elite. His words echo Orwell’s “Nineteen-eighty-four” if we were to replace the word “precariat” with “proles”. The author sees dismissal of the precariat from those “of a Marxist persuasion” as being based upon the class ideology of the 19th century. Certainly in this we agree although, ironically, he kicks off the book with his own brand of class analysis. He agrees with the Marxists that this is a class problem but disagrees as to which class represents the solution. Again we can observe the irony of Orwell’s “Animal Farm” as it seems to not matter which group of animals sit at the farmer’s table. They are just pieces on a chess board and Standing does not entertain the idea that class has nothing to do with it. He promotes an idea of class solidarity largely decimated by years of neo-liberal individualism and the destruction of civic society. He writes that a “group identity must be forged” to mobilise change. Really?

Standing is sure that the proficians will not stand shoulder to shoulder with the precariat arguing that they do not have similar interests. Anyone above the precariat has too much to lose. All those pensions, ISAs and mortgages we guess, huh? However, Standing offers up this thought:

“But with their life of insecurity, they should be sympathetic to the realities faced by the precariat. They are potential allies.”

We believe the precariat has allies everywhere. Society is so atomised and most of us have some beef with the inequality in wealth and opportunities, that alliances will be forged if there is to be genuine hope. Standing doesn’t dwell upon the subtleties in operation here. The proficians are motivated by more than money. Like most people they enjoy being their own bosses. They are simply a well-paid professional version of the precariat. They get no sick-pay, no paid holidays, no employee benefits. Their “class” has been established in modern neo-liberal economies in the interest of supplying professional skills on a flexible basis. They are no different from the precariat other than the fact they are educated, qualified, articulate and command higher fees for their services. They are a precariat-with-savings. Governments have offered certain incentives to this new class in order to free up the market in services. However it has not been a one-way street and the sector has endured over fifteen years of attacks by governments who see the proficians as a part of the economy unprotected by trade unions hence an easy target for a growing tax burden. In short, we would argue that Standing has little understanding of the profician class and maybe he should spend some time studying it in the way he has studied the precariat.

Although Standing pursues his ill-conceived class-based theory of social change he does highlight other essential elements. The first is that a genuine alternative to neo-liberalism must be on the table. There needs to be new political parties. Old ones should be allowed to die. Progressive economics needs to be pursued with new ideas that are no longer wed to old party structures. Those parties are based upon old class loyalties and need re-inventing for the modern age. Politics needs shaking up. It should not be dumbed-down and it does not need right-wing populists. Critical thinking needs to be stimulated.

“Once parties degenerate into rent-seeking entities, they must be killed off, not resurrected.”

Amen to that. I write these words during the run up to the British 2017 General Election. There is much talk and local action on progressive alliances between progressive parties. Yet the old Labour party actively stops activists from engaging with other parties. Yet such intervention guarantees that no progressive party will be in power because of Britain’s first-past-the-post electoral system. (Standing makes no mention of the urgent need for Proportional Representation – another bedrock issue for the renewal of British democracy.) Many of us are now wondering if Labour’s demise in favour of a broader progressive pact might not be such a bad thing. Most people will NOT be voting for the Conservative government.

Standing see the issue somewhat narrowly

“The old progressives are stuck in tired agendas, while pandering to the interests of the elite. Their vocabulary reveals little understanding of contemporary realities, including the insecurities, anxieties and aspirations of the emerging class.”

There is that word again. “Class.” Standing sees this as a class issue with alliances only being necessary for “specific issues“. His analysis of the problem is correct yet his solution is hampered by his focus on his beloved precariat. What is needed are new unifying forces that operate across classes. There must be a free-market of ideas. For that to happen the Murdoch-lead Right-wing press-pack has to be neutralised. They are the elite that each party panders to. It isn’t the proles who are key. It is the media. The old paradigm has to be utterly discredited and this cannot be done with the old propaganda machine that relentlessly breaths life into the old system that serves it. When the proficians stop reading The Times newspaper and the working class stop reading The Sun we will have hope.

Instead we get Standing’s proposal for an alliance between progressives of the left and the libertarian right. To what purpose? Just how long would such an alliance last if it could be forged in the first place? Unreal.

As we enter the last gasp of Standing’s “The Corruption of Capitalism” we are finally witness to a few genuinely good ideas. He returns to the question of sustainable development with the suggestion that each society needs a sovereign wealth fund. Rental incomes should be taxed and the proceeds pooled to recreate the commons. Banks that are too big to fail should be owned by the wealth fund. Profits would be redistributed using a basic income structure described as a “social dividend“. As inequality impedes growth the sovereign wealth fund can be the tool that mitigates its worse effects.

In addition Standing suggests Quantitative Easing (“QE”) should be targeted at very poor regions to prevent the need for emigration from those areas. If the British QE had been diverted into peoples’ pockets..

“Inequality would have been reduced, economic security improved, growth boosted. Instead, asset bubbles, debt, homelessness and food banks have grown.”

Hence the people’s anger could be diffused with such a genuinely populist measure. Yet none of the progressive parties (with the possible exception of the Greens) offer such a radical agenda. Those that the media call “populist” are extremist right-wingers who promise to reverse the decline with unicorns and rainbows behind-which no genuine solutions exist. Both populist UKIP in Britain, and the Republicans under Trump in the USA, offer only platitudes alongside the usual hard-Right plans to dismantle what is left of the commons in order to pay for tax cuts for the elite. Dare we say it but the parties of the elite are not interested in sharing the commons since they have purchased them already. Blaming immigrants for the outcome is nothing more than cover. Genuine solutions exist. For example the Greens in the UK recognise the fact that immigrants bring prosperity hence that wealth should be targeted into the areas when newcomers settle. This too would calm tensions that the xenophobic-Right capitalise upon.

At this moment in time our society is caught in an ugly downward death spiral. The forced-decay of social institutions is the result of neo-liberal dogma. Yet, for all the pain working families feel… they keep voting for the same political parties who prescribe the same failing medicine over and over again. Voters need new inspiration.

“…proponents of austerity increasingly resemble medieval quacks. If the blood-letting of public spending cuts does not reduce debt and stagnation, bleed some more. Without a new income distribution, a dark age threatens.”

That dark age is once again upon us. If inspiration cannot come from existing political structures then new ones are needed.

Guy Standing has written a solid body of work that gives a hint at what may, hopefully, be coming. His solutions are good ones but his class-based analysis comes not close to explaining how we solve the problem of the right-wing media. Rupert Murdoch’s The Sun newspaper calls the result of every election. This will only change when the vast majority of people can regain the analytical and critical thinking required to recognise propaganda. This is the toughest nut to crack. If the precariat can come up with some new alternative then maybe the future belongs to them. Yet we all remain powerless in the face of the corporate media machine.

Revolt is long overdue.. Everyone needs it yet few are asking for it.

About post-carbon-man

A passionate advocate of a peaceful transition to a sustainable political-economy, Mark hails from a working class farming background. Today he is a Company Director and Chairman of the Low Carbon Chilterns Co-operative. Whilst at University (Engineering Masters) he was active in Conservative Student politics but has had no affiliation since. He has travelled widely on business covering the USA, Europe, Middle East and Central Asian Republics. In 2007 Mark founded Post-Carbon-Living and a year later co-founded Transition Town High Wycombe. He lives with is wife & daughter in a home they retrofitted to be carbon-neutral. Today he blogs about surviving politics on a shrinking planet and is passionate in his rejection of Nationalism.

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