THE SATURDAY ESSAY: Deregulated big business alongside small government is a fantasy

You can only live that dream in your sleep

Here are some mind-boggling facts freely available for anyone to read about and then decide if we are all mad.

The total government revenue from personal tax is around 40% of GDP. So for every Pound of output we, the 52 million adult citizens of the Disunited Kingdom produce, 40 pence of it is paid to a total of around 650 MPs and and 137,000 senior civil servants. Sixty pence divided by 52 million is a lot less than 40 pence divided by 137,650.

Since 1980, despite much cutting of top rates of tax, that 40% has only come down from 44%. Since 2000, it’s been fairly constantly at that latter figure. Is there one single person in Britain who thinks we’re getting the same in service as we did in either 2000 or 1980? Because if you do, you’re wrong. Government is doing a lot less but costing the same in terms of the drag effect upon GDP.

From 2000-2010, the average British citizen’s annual wage value dropped by 30%. So in theory, you might expect the Government to be helping us more. But they’re helping us less. Quite a lot of the 650 MPs and Whitehall Mandarins over that period simply helped themselves, but that’s another story nobody wants to publish. As to helping us more, the Government can’t…because if we earn 30% less and more of us are working fewer hours, then the tax intake goes down, and the welfare costs go up. As this is something of a flaw in neoliberal fiscal economics, Iain Duncan-Smith has decided to cut welfare – or to be more precise, cap it. It doesn’t occur to him that maybe the model’s wrong: much quicker and cheaper to simply do less and give less.

Bit by bit – with an accelerating pace since the Risible Right hijacked the Coalition about a year ago – the Government is selling its responsibilities to gargoyles, crooks and serial liars, aka their mates – the Pally Privatisation of which I wrote yesterday. That they’re selling it to folks with the morals of a feral alley cat is bad enough. But the medium term result of all this is that the Government, each year, has less and less to do.

The NHS, once privatised, will be a huge task removed from the legislators and the Mandarins. Education is going in the same direction. In 1979 when the Mad Handbag came to power, legislators and civil servants still had an enormous public sector to run – gas, electricity, water and so forth. All those responsibilities have disappeared.

The bottom line is that over the last 35 years, Westminster and Whitehall’s workload has dropped by something in the region of 30%. But the cost in GDP terms, and the number of MPs, have remained the same….while the senior echelons of the civil service have grown.

So despite the fact that we’re earning less and getting less, we’re paying the same price for far less service from the Government. This is heads they win, tails we lose. But it is also, again, neoliberal economics at work: reduce the expectations of labour to become more competitive in the global marketplace. Read Mario Dragula on the subject: he’s very eloquent about it. However, once again neoliberalism ends up as a daft idea, because with smaller disposable incomes we spend less, and so recessions set in….and stay. Lower taxes mean more Detroits. Leveraging models mean higher debts and even more Detroits.

The basic tenets of neoliberal fiscal management have been shown to be bollocks – as have its social economics and globalist mercantilism. The State under neoliberal policies becomes, inevitably, more indebted, poorer, less able to kickstart social change; and then it becomes technically insolvent once the banking ideas of the philosophy leave it to pick up the bill for leveraged investment and derivatives trading that was an accident waiting to happen from Day One. And the disparities of wealth plus a squeezed middle mean lower mass consumption…yet the system is dedicated to production growth.

The muddle and hypocrisy of Neoliberalism

Pretty much everything Milton ‘Father of Neolib’ Friedman suggested is, if you read the foregoing carefully, doomed to produce socio-economic disaster. This is of course what we have rapidly building up now. But from here on today, I want to focus on the gobsmacking double standards of those who continue to say this is the way forward for humanity….and the above example about multinational banking is as good a place to start as any.

Friedman repeatedly said ‘the weak must go to the wall’ – because he thought commerce had responsibility only to its shareholders, not society. But the weak didn’t go to the wall in 2008: both then and still now, the banks have been a massive drain on taxpayers. The world banking system has been a 24/7 welfare scrounger for just over five years. So the markets must decide…..except when it decides we’re all a bunch of pricks. Then the politicians decide…to tax the rest of us.

Another key tenet of neoliberalism is this market decision/free market guiding principle. But that isn’t what happened after 2006. The Libor rate, the gold price, the stock market valuations and the interest rates have all been centrally bent or fixed. That’s a Soviet command economy, isn’t it?

Neoliberalists dislike Big Government, allegedly. But we have a fanatically neoliberal government in power in the UK, and its government is getting bigger while its role gets smaller. Also – because Civil Servants and Ministers insist that arse-covering must come first – they only like dealing with Big Suppliers. Just as globalist banks only like dealing with big merger deals, and starve SMEs of money. But I thought neoliberals were supposed to be the champions of all things entrepreneurial and pure?

Rupert Murdoch fancies himself as a neoliberal; he is anti-EU, anti-socialism, anti-trade unions and all for open, free markets.

So the first thing he does on his online titles is paywall them. In the US, he buys up smaller competition; and if they won’t sell well, he’s not averse to hiring a few strongarms or initiating a price war to wipe it out. He already owns the Wall Street Journal, but he’s considering a joint bid for the Financial Times. In Australia, Murdoch has almost every element of the media scene sewn up. Whenever a competitor appears, his first instinct is to throttle it. He works hard day and night to bribe cops and officials. He smears the BBC at every opportunity, and lobbies for its licence to be removed.

Rupert Murdoch isn’t a free-market admirer: he’s a corrupting monopolist control freak who lies his head off to every Committee he comes up against. But he is hailed by Gove and Hunt as a great neoliberal reformer. So I suppose he must be one, right?

Ronald Reagan swallowed the Friedmanite hemlock in one gulp. Then he proceeded to leave the US after eight years of ‘neoliberal’ fiscal policies with the biggest debt in its history. But the American Right worships the memory of Ronnie: so he was a neoliberal after all. He did, when all’s said and done, use the phrase ‘trickle down wealth’ over and over, right?

Except that throughout the US and UK, there’s never been so much as a drip, never mind a dribble. Every economist with half a brain knows what’s happened: the very poor are 10% better off (which, at a level of zero wealth, still equals zero wealth), the top 5% are 140% better off, and the middlers are 30% worse off. But the neoliberals kind of gloss over that one. Well they would really, being in the 5% an’ all.

And that’s not them being dumb, because most of the very rich are very intelligent. They know full well that Man is a hunter-gatherer-storer. That there is no philanthropic or Quaker mentality any more to produce massive charitable acts or foundations. That wealth travels upwards in an uncontrolled environment. They just like being rich, so they gloss over it as “an inevitable consequence” of the “natural order of things” being restored.

You see, for the greedy elite, Milton Friedman was and is just another Kerensky – another Useful Idiot who provided the necessary academic rationale for being a selfish pillock. So they could deny the existence of Society by saying “A company’s only duty is to the shareholders”. Milt said that. It’s one of the most stupid observations ever made in history – it helps multinationals explain why they avoid paying almost any tax, because I did it for the shareholders, it was my fiduciary duty – in that it ignores the water, energy and fit workforce that only society can produce. But Milt said it, so Dan Hannan parrots it at every opportunity.

Trouble is, Board Directors of big companies and bankers simply don’t abide by the shareholder rule. They pay themselves huge salaries and award themselves massive bonuses, or spend vast sums on the legal and financial services ‘expertise’ required to swallow up yet another competitor in a mega merger. All the major banks and Newscorp have faced AGM criticisms of this behaviour for years….from, oh dear, the shareholders. Does it worry these liars that this is the case? Of course not. I mean c’mon…once you’ve laundered a few billion dollars built on human misery from Colombian drug lords, who GAF about the shareholders?

Wherever and whenever one interrogates the ‘philosophy’ of neoliberalism, it appears time and time again as an excuse for men to behave badly. So too, in different ways, does Islam. And Communism. And the NHS. Because all these religions and philosophies, which start out with a well-meaning seer, get taken over by those who come after…and ruined by monied hubris.

Beyond the double helpings of hypocrisy they insist on so generously dishing out, faux neoliberals – aka, almost all those who use his name in gain – ignore the obvious dead-end, self-defeating elements at the core of Friedmanism.

They’re so obvious, only the rich and greedy would feign not to notice them. Demanding cuts in services, on the whole, makes a recession worse. Squeezing the mass middle reduces their ability to consume. Reducing central governmental spend destroys infrastructure and contributes to feckless despair: this in turn puts up the cost of policing and welfare. Free markets make bad as well as good decisions, because they are merely collections of human beings whose frontal-lobe behaviour patterns are juiced up with testosterone. The dependence placed upon remote shareholders in a Bourse context starves entrepreneurs of money, and means a company can be at the mercy of everyone from asset strippers to pension institutions desperate to make money in a hurry. Revenue is placed before planning for a prosperous future, and so manufacturers do deals with the retail trade that compromise the independence of their brands, or fire people in Q1 to help the bottom line in Q4. But that too puts up the cost of welfare and destroys the home-grown manufacturing base: it hands a free gift to foreign competition.

I have ethical qualms about neoliberalism’s barmy assertion that companies owe no debt to society. But equally, I think it is a classic case of looking through the wrong end of the telescope: societies work to live, they don’t live to work. If a business model destroys the wealth and contentment of millions of human beings, it must die. Russian and Asian Communism died, and so must neoliberalism.

However, I am and remain a capitalist believer in using risk monies to encourage entrepreneurs. But I am not a globalist (it obviously doesn’t work) and I think self-sufficiency is more important than anarchic mercantile trade. I am not a neoliberal and I am not a Keynesian. My ideal society would be one in which there is far more business mutuality and far less multinational bourse influence. One where the power of central politicians was massively reduced, where rich business interests were kept out of the process, where the community ideal was revived as, along with the family, the basis of a stable culture….and above all, individuals were encouraged throughout education to take responsibility and think for themselves.

The final irony is that real capitalism is about risk and reward, but neoliberal multinational thinking focuses on risk aversion through monopoly. Its free markets are in reality fixed and dominated. From end to end, today’s business and banking leaders have done little beyond buying politicians and selling their customers a pup. They’re being found out, and their hegemony will end. Nothing was ever more certain.

Yesterday at The Slog: The smart money is deserting the stock markets