What Price Democracy?

The politics of austerity has many political objectives but an important one you learn about quickly as a local councillor is its use as a mantra to incapacitate you. Anything you might want to do cannot be done, you are told, because we are living in a time of austerity and nothing can be afforded. With many Tory councillors in Stroud this appears to extend to democracy, which itself must be undermined and diminished because it is just too expensive.

In Stroud we are presently being subjected to a boundary review, triggered because one of our wards had slightly more than the 10% above the average number of voters per representative that is considered acceptable. So the Local Government Boundary Commission for England has fallen on our heads to undertake a review (curiously there is no problem with funding their work in spite of the austerity we hear of daily). While you might expect them to begin their work with objectives such as improving local democracy, enhancing citizen participation, or making representatives more accountable, in fact they have one aim: to reduce the number of councillors.

This caused me to question how well we are represented compared to our European neighbours: how much do we, as the home of democracy and children of the mother of parliaments, invest in our elected representatives? You will be shocked to read the comparisons in a report carried out recently by academics at Birmingham University. In France there are 118 citizens per elected member, which rises to around 600 in Italy and Spain, and 1075 in Greence. In the UK it is 2603: the largest number of any EU country. We are the least well represented of all, and yet the politics of austerity is being used to reduce our representation even further.

Anecdotally I have also received a lot of evidence about the disastrous levels of connection between citizens and their councils in some of the vast new unitary authorities that have been introduced under the Tory aegis. In both Wiltshire and Cornwall people report that they have no idea who to contact about local services and that the geographical areas they are supposed to identify with make no sense to them. The mantra of austerity is matched by the chorus of complaints about the quality of politicians, yet how can local politicians perform well when the areas they represent make no sense and are too vast to be comprehended?

I have reached a point of fury in debates over the cost of democracy when I have to bite my tongue to stop myself pointing out that Mussolini may have appeared cheap but the less-than-immediate costs were rather higher. The fact that this thought even occurs suggests the desperate state of our democracy and the way the politics of austerity is being used to undermine it further.
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This is What Austerity is For

In a climate of fear and austeria the received wisdom is that you should not be concerned about the size of your pay cheque: you should be grateful to have a job. It is this climate of reduced expectations and hegemonic exploitation that has led to the situation described by a special issue of their journal published today by the Institute for Fiscal Studies, which shows that wages have fallen more in the past five years than in any previous time during our long economic history. As far as those earning wages or salaries are concerned, this is the worst ever recession.

Although even I would not go so far as to suggest that the controllers of capital would have provoked a global financial crisis in order to attack the interests of labour, as soon as the crisis arrived they were the first to control the ideological agenda. Sadly, like sheep, most working people and the party that is supposed to represent their interests followed in the wake of the corporate spin-masters, bleating the mantras of austerity and failing to challenge the inequality and economic disintegration that its policies would inevitably bring.

The figure shows that the falls in wages came not during the recession itself but later, during the period of austerity that was caused by Tory policies (P50 is median earnings and P10 and P90 the lowest and highest 10% of the population, respectively). The IFS also show that the effects of the recession have hit the wages of the young particularly hard. This is useful for the interests of capital, since we are now likely to have generations of young people who are grateful for employment on any conditions and grow used to exploitative rates of pay.

There is a human side to the story, since the data make clear that those working for small firms are experiencing a degree of solidarity. In harsh economic times employers are keeping staff on, partly no doubt for fear of losing skills; partly for more humanitarian reasons. The longer the government strangles the economy the more these compassionate employers will come under pressure to also dismiss their staff.

The IFS conclude that the agreement to reduce wages but keep unemployment low makes this a less severe recession that those of the 1980s and 1990s. I would beg to differ for two reasons. First, the concealing of unemployment and under-employment in this creeping recession reduces the pressure for mobilisation and political change. Secondly, the permanent reduction in the wages of working people will affect current generations for their whole working lives and future generations too. The gains that resulted from the struggles of past generations have been lost and few have the will or the understanding to challenge the loss.
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Do Not Structurally Adjust Your Mindset

I notice that I've been averting my gaze for a while from the disaster that is political economy in 2012. I think perhaps I have just said everything I can say and become depressed at the supine nature of 'public opinion'. How can it be that the majority of populations in countries across the well-educated, sophisticated world of Western Europe are accepting the trashing of the public sectors their parents and grandparents fought so hard for? How have the financiers and their pet politicians managed to pull off this amazing coup? If you still have the energy for convince your austerity-loving friends about the Big Lie, then you will find the deficit-myth website a helpful ally.

I find something ironic in the fact that the leadership of the World Bank was contested between Nigerian finance expert Ngozi Okonjo-Iweala and Jim Yong Kim, who looks like he might be from some country other than the US but actually isn't, just at the time when the focus of the Bank's attention is shifting from the traditional majority-world victims, to a new range of suckers in the more temperate parts of the globe. With Obama's backing Kim was always going to be laughing all the way to the Bank.

The purpose of a structural adjustment programme and an austerity programme is essentially the same. Both grow out of debts taken on by governments without the conscious consent of their peoples for reasons that benefit a tiny minority. Both result in cuts to public services or social programmes that the vulnerable depend on. Both ensure that, through high levels of public debt, the wealth of nations is extracted by corporate financiers. The policy that was invented in Africa and tested in Latin America is now being imposed in Europe.

The Bretton Woods project reminds us that the BRICS are forging a new path to an economic future that rejects the elite, neoliberal, expropriative economy of the 20th century. The battle is taking place between the global institutions, with the IMF and World Bank sticking to the Washington consensus, while UNCTAD and UNESCO take the part of the poor. Obama may have kept control of the World Bank, but the world's peoples need to find solidarity in rejecting its destructive policies. The similarities between austerity for the rich and structural adjustment for the poor should help us to build this solidarity.
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Squandering the Wealth of Life

In the immediate aftermath of the 2008 financial crisis, Bank of England staff attempted to estimate the financial costs to the UK economy. In 2009 Andrew G. Haldane, Executive Director for Financial Stability at the Bank estimated that the permanent loss to the UK economy from the banking crisis was anywhere between £1.8trn. and £7.4trn.

The softer, less measurable, more human consequences are only just now becoming clear. A paper in the Lancet in July 2011 began to measure the impact of the 2009 crisis on health, and specifically on suicide rates. Economic crises unsettle people in various ways, but the most obvious, pressing and observable is the loss of employment, which quite literally kills. The authors of the paper considered the pre-2004 EU members and the more recent members separately.

The graphic from the paper reproduced here compares unemployment rates amongst adults with rates of suicide across the EU. Unemployment began rising rapidly in 2009, with a 35% increase over 2007 levels. Shockingly, however, the increase in suicide preceded this, suggesting that it results from fear of unemployment and general rise in anxiety as a result of the instability caused by financial shock. As the authors conclude:

‘the steady downward trend in suicide rates, seen in both groups of countries before 2007, reversed at once. The 2008 increase was less than 1% in the new Member States, but in the old ones it increased by almost 7%. In both, suicides increased further in 2009. Among the countries studied, only Austria had fewer suicides (down 5%) in 2009 than in 2007. In each of the other countries the increase was at least 5%.’

The fact that it is fear and uncertainty that causes suicide, as well as the reality of unemployment and poverty, indicates the irresponsibility of the Coalition strategy of creating an aura of austeria in order to make it easier to impose their draconian cuts. This undermining of social confidence can itself cause increased rates of suicide, which are only a marker of more general social dis-ease.

Greece gives us an indication of the future for the people of Europe if these desperate austerity measures are continued, a policy that Cameron recently argued for at Davos. Official statistics for that country indicate a 40% rise in those taking their own lives between January and May of 2011. Studies of rapid social change repeatedly indicate that the increase in uncertainty and the fraying of the social fabric are not only politically dangerous but also very destructive to human life and health.
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Rebalancing, What Rebalancing?

I write this post as a councillor in the local authority that faced the largest cut in its central government funding in the current funding period - a full 28% over this and next financial years. I assume this is a reward for having a Tory council and having just elected a Tory MP, as well as being a debt-free local authority. I have to hope that the good voters of Stroud draw the right conclusions and do something different with their votes next time.

Recent research from Newcastle City Council has made me feel both better and worse. Published in today's Guardian it makes the partisanship of the present government plain to see. Traditional redistribution measures, including the sharing of local authority rents and local business rates, are being abolished, leaving the richer parts of the country free to profit while those in the deindustrialised north in particular struggle. Northern cities and boroughs are losing £150 to £200 per head, while the leafy boroughs and shires of the south lose between nothing and £50 per head.

The inequalities are magnified by the fact that poorer areas are more dependent on public-sector jobs, which are some of the few well-paid jobs in northern cities that once depended on skilled manual jobs. The massive cuts to the public sector will also hit these areas disproportionately hard.

From a macroeconomic point of view this makes plain the massive withdrawal of liquidity from the local economies up and down our country that is taking place. The paradox of thrift is alive and well in Stroud, as councillors and officers alike respond to fear and threats of future austerity by leaving posts unfilled and cutting spending to add money to the growing reserve. The shade of Keynes haunts our council chambers, but nobody is listening.
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Age of Austeria

A recent FT article gloating about the 'resilience' of corporate earnings in what we are misguidedly calling 'the age of austerity' is the final straw. In all plethora of abbreviations we have been using in discussing the financial crisis the two letters we should have been focusing on were PR. The greatest success of the financiers has not been their takeover of our political and educational elite, but their ability to convince the working people of this country that the destruction of their public services and loss in incomes is inevitable.

The FT article discusses the latest corporate reporting season with glee: corporate profits are up and shareholders are celebrating. In both the UK and the US the profits of companies are demonstrating an 'extraodinary resilience': 'Companies on both sides of the Atlantic escaped the financial crisis in fine fettle.' The article is called, in a title I cannot help admiring in spite of myself, 'Bulls graze on resilient corporate earnings'.

I have been searching for some time for data that explores the share of productive value in this country which goes to employees and companies. The difficulty of finding such data is evidence in itself of the politically biased nature of research funding and the consequence of the privatisation of the Office for National Statistics, undertaken by Gordon Brown in 2005. Private-sector data gatherers collect the data that the profitable want to know about.

The best data I have been able to find come from a report by the TUC called Unfair to Middling. They show that much more of the value created in our economy is going to owners than to earners. Since the 1970s the share of wages and salaries has dropped from a high point of 65% in 1975 to just above 50% now. By contrast the share of profits has risen to almost half. The burden of taxation falling on individuals went up from around £50bn. in 1990 to £110bn. in 2000 and £150bn by 2009. At the same time the tax on corporate profits, which increased massively during this period, increased more slowly. That is because the taxes on business profits have been cut: during the past decade they have fallen from 32% to 23%.

The conflict of the 1970s is not warmly remembered, but it was that generation's refusal to accept inequality that won a relatively comfortable and prosperous life for working people. On this day of international worker solidarity we should remember that it was solidarity and struggle that brought us some measure of equality, and unless we continue to fight for them, these gains will be lost.

Perhaps it is just about time that we all told Mr Cameron to 'Calm down, dear'. We have had more than we can stomach of his politically motivated whipping up of an atmosphere of austeria which is used to conceal a massive reallocation of wealth within our society. Tweet