Taxpayer as Shareholder

A guest post from Gerald Hartley, local green activist in Stroud and south-west regional elections co-ordinator

The British tax payer is a ‘shareholder’ in the state enterprise in all its many forms.  Over the decades this ‘enterprise’ accumulated assets worth billions of pounds. Coal mines, railway stations lines and rolling stock, power stations, steel works, canals, bus companies, lorry fleets, a national grid of gas pipelines and electricity lines, telephone lines, water mains and sewage pipes, pumping stations and treatment plants, council houses, hospitals, health centres and clinics, town halls, fire and police stations, roads and bridges, libraries, schools and colleges, elderly persons and children’s homes.  Why did it do so?  Because the private sector failed to provide all the things needed for the common good.

The Thatcher era began and governments ever since have continued, to sell those assets cheaply to the private sector and use the cash to make their financial performance look better than it was.  But now it is also a cover for the lack of revenue caused by the financial crash brought about by the very people that fund and support the Tory party.

Where asset sales cannot be justified, such as schools, pseudo-private organisations are constructed to eliminate democratic input and maximise elite structures. This is the very serious underlying aim of the Tory party – an elite society with everything owned and run by their friends and supporters to protect their common interests, untroubled by the rest of us.  They can see that financial crisis may come and go, but privatisation only gets reversed in a revolution.

So we the tax-paying shareholders in the UK state, have lost most of our assets, suffer reduced services, but pay the same tax and receive no dividends.  When the Tories crow that they have kept the council tax at the same level for 3 years, do you laugh or cry?  But it’s the kind of propaganda that keeps them at the helm.

In the 18th Century, there was little that the peasants could do to oppose the Enclosures of common land.  This saying, from that time, seems strangely apt all this time later.

‘The law doth punish man or woman
Who steals the goose from off the common
But lets the greater felon loose
Who steals the common from the goose’ 

Geese are not very bright.  So maybe it’s time for the ‘have nots’ to demonstrate that they are brighter than that and stop blaming Europe, immigrants or anything else handy and take the trouble to understand just how the globalised financial system is designed to benefit a tiny minority at the expense of the planet and every species living on it.

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Drop the Debt, Dublin Style

Campaigners from the Anglo: Not Our Debt camapaign were busy in Dublin this week, investigating a crime scene. They cordoned off the Central Bank in Dame Street and subjected it to forensic analysis on the CSI model. The white-collar criminals were not in evidence, but in the case of Ireland the fury at politicians is at least as fierce as the fury at banksters themselves. The Irish campaign is part of an international network of groups campaigning to challenge the imposition of austerity in response to illegitimate debts that were not entered into by democratic agreement. Such debts should be labelled as 'odious' and should not be allowed to destroy social bonds or public services.

The anger of the Irish campaigners relates to the failure of the government to use the criminal law to bring to justice those who have destroyed the Irish economy. They are encouraging the Irish people  'to submit complaints of suspicion of financial crimes in Anglo to the Gardaí, for example under Section 6(1) of the Criminal Justice (Theft and Fraud Offences) Act 2001.' Hence the creation of a crime scene in central Dublin yesterday.

Although the Anglo-Irish Bank no longer exists the Irish people are still paying for its reckless lending: repayments will amount to more than €47.9 billion by 2031, a full 30% of Ireland’s GDP. The campaigners are calling for the debts to be frozen. Their fury has been increased by the release last month of the so-called 'Anglo tapes', in which John Bowe, ex-head of capital markets at Anglo, can be heard laughing about the bailout that the bank has managed to extort from Irish taxpayers.

In a tape that would shame anybody outside the financial 'community' Bowe discusses his negotiations with Ireland's financial regulator as 'fun and games'. He asked for €7bn. in return for which they offered only paper guarantees and which he refers to as a bridging loan 'until we can pay you back. . . which is never', this last joke being a cause of considerable mirth on both sides. The phone call took place in October 2008, two days after Ireland pushed through a €440bn (£373bn) bank guarantee scheme that has nearly bankrupted the state. What the tapes make entirely clear is who is holding the power: the politicians have clearly capitulated to the interests of the bank's boldholders, explicitly so according to Bowe.

But these tapes underline the illegitimate nature of the debts and increase the potential for arguing a legal basis for them to be declared odious.Vicky Donnelly, of the Not Our Debt campaign said, 'The Anglo tapes show that the Anglo debts originated on the basis of deliberately misleading information. We question the timing of the release of the tapes and request that the full content of the tapes be publicly disclosed. We want to know who knew of the content of the tapes which, had they been made public earlier, would have led to massive public pressure to write off the Anglo promissory notes last February. This debt is illegitimate and should be written off now, once and for all.'
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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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Institutionalised Violence in Europe

One of the best moments during my visit to Latin America came during a visit to a project celebrating the life of Dario Santillan. Following the economic disasters of shock-tactic neoliberalism under Menem he was one of the heroic young people known as piquiteros who both resisted and responded with hope and in solidarity. Dario was killed trying to protect his friend Maximiliano Kosteki who was under police fire, as shown in the famous image of him. As part of our exploration of the solidarity economy in Argentina we visited the Frente Popular Dario Santillan where Dario worked and where his comrades continue their emancipatory economic activity and keep his memory alive.

Th visited also produced for me one of the funniest moments of the trip. To raise funds the comrades sell t-shirts that they make on site. Finding the design but not in the colour I wanted I actually heard myself asking 'Can I have Capitalism Kills in the purple please?' I am now the proud possessor of said t-shirt. In the global consumer society my wish is their command, even in a ramshackle printworks in an Argentinian barrio.

One of the things that makes Latin American politics so fascinating to Western radicals is that the oppositions are so much more explicit than they are in the late capitalist countries where we have a system of Danegeld and consumption-based narcotics to undermine our dissent and soothe our sense of powerlessness. In Argentina and Brazil the economic injustice and the violent struggle between capital and labour is still visible.

But it was also in this continent that Catholic social teaching evolved into the idea of 'institutionalised violence', to describe a situation where the institutions of the state defend a situation of such inequality that it stunts and shortens human lives. In the statement from their conference in Medellin in 1968 the Latin American bishops defined institutionalised violence as existing:

'when, because of a structural deficiency of industry and agriculture, of national and international economy, of cultural and political life, "whole towns lack necessities, live in such dependence as hinders all initiative and responsibility as well as every possibility for cultural promotion and participation in social and political life," thus violating fundamental rights.'

Just as labour control through debt crisis and public-sector destruction through austerity began in Latin America and travelled across the Atlantic, including during the Menemismo that Darian fought to resist, so evidence of institutionalised violence is now emerging in Europe. Leading academics have found early evidence of the destructive health effects of cuts in government spending and the psychological and physical impacts of recession.

In Greece the incidence of HIV has doubled since 2011 and the country has also experienced its first malaria outbreak for many years. The book, called The Body Economic, concludes that austerity kills, although the body-count will never be laid at the door of the politicians and bankers responsible.

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Lessons from Porto Alegre

Having come half way across the world to learn about participatory budgeting it was rather a disappointment to learn that it was now a shadow of its former self. Our informant, Sergio Baierle of the Central Bank of Brazil, spoke of the emancipatory endeavour in the past tense and with some sadness, as we discussed it in the staff canteen on the top floor of his office in leafy Porto Alegre.

Participatory budgeting is that most unlikely thing: a policy move where politicians actually relinquish power to the people they govern. Perhaps more unlikely is the fact that the politicians in question, the Workers' Party, were socialists who might traditionally have been expected to centralise and control power. The reality was that when they came to power in the city in 1989 expectations were vast but the coffers empty. Participatory budgeting was a system for mediating these demands.

The process worked by neighbourhoods across the city creating assemblies which met to discuss how they would like to see the city prioritise its spending across a range of categories such as housing, sewerage, pavements, social services, and so on. In a simple and transparent process these priorities were then weighted according to the quality of existing services in the neighbourhood and the size of population to create proportions of need, from which proportions of the city budget followed.

This idea of asking the people themselves to choose priorities for spending was truly revolutionary, particularly in a political culture dominated b clientelism, where the power of the strong men relied on the patronage they could offer in terms of new roads and schools. It was also an extremely effective means of redistribution, especially when combined with a large increase in the rate of corporation tax for those who had benefited from the increase in value of commercial property.

But as Baierle shared with us, the system has diminished and virtually disappeared since the Democratic Workers' Party returned to power in the city in 2005. In 2011 none of the projects prioritised through the participatory budgeting process were funded, compared to rates of 98 or 100% in the early years. Commitment and participation have also inevitably been affected by this ineffective implementation, as well as by the increasing ability of local businessmen to game the system.

Participatory budgeting is a radical idea and one that has a particular relevance in a time when money is short. The most important contribution is the genuine negotiation between citizens and their politicians about the limited nature of resources and how they should be spent. This is a clear contrast with our politics of austerity, where the message is that we cannot have anything that we want and yet the government can still follow its priorities such as a costly reorganisation of health services and a new generation of nuclear power stations and nuclear weapons. If money is short it should be our business to decide whether we want it spent on these white elephants.
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Irrational Expectations

For years leading up to the financial crisis it was obvious that the money within the economy was being misallocated. A tiny elite were managing to control most of the finance and were constantly and rapidly reinvesting it in ways that could make the largest and fastest returns for them. This led to inequality within and between nations and had devastating consequences for our health and our social well-being.

But the misallocation of capital has also destroyed the ability of the economy itself to function. Although I resist cultural explanations for the financial crisis, whose origin was political, the attitude towards money amongst those who consider themselves entrepreneurs is a significant part of the explanation for the continuation of the banking and financial crisis. The whole notion of money being used as a facilitator of economic activity has evaporated as 'investors' have come to understand their role as only one of accumulating profits for no effort. The irrational expectation of vast returns for no risk is now preventing the normal mechanisms of a capitalist economy from operating.

At the level of firms this is being demonstrated by the unprecedented hoarding of cash by corporations. During the good years companies learned how to make large profits but they did not learn how to spend them: the process of globalisation and weak power by labour unions enabled companies to achieve unfeasibly high margin. Now that times have changed they are refusing to reduce these margins but they are nervous about investing the cash. More importantly, their expectations about the sorts of returns they might expect for their investments are what economists would call 'sticky'--they have not changed in line with the vast changes in the economic environment. This has led to a situation where British businesses were holding as much as £750bn in deposits, around two-thirds of it in cash. The Reuters graphic shows the situation in the US, where this issue is the subject of considerably more debate than in Europe.

There is, of course, a simple expedient to resolve this problem. Just as the government should use the power it has through owning two of our largest banks to ensure that they lend into the productive economy, so the Treasury should create incentives for companies to spend rather than hoard cash. A new capital tax proportional to reserves held should do the trick. It would encourage companies to spend their own money, but allow the government to spend it in the interests of the citizenry if they refuse to.

For long years the problem of our economy has not been that there is not enough cash around but rather than it is in the wrong hands. As the political authority governments have the power to address this, but their decade-long ideology of impotence is preventing them from doing so. Meanwhile the politics of austerity grinds on, punishing the poor and crushing life out of the economy. On the private and public side those in power, wedded to an anachronistic understanding, are sucking money out of the economy and ensuring that the slump continues.
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