There are No Borders to Democracy

A guest post from Rodrigo Silva de Souza, originally from Salvador de Bahia and currently studying for a PhD in London

The recent demonstrations in Brazil began completely unexpectedly and took local and global commentators entirely by surprise. Why should a country that is experiencing its best greatest economic success for a generation, that has addressed its historic problem with hyperinflation and become the sixth largest economy in the world, and which is almost simultaneously hosting the World Cup and the Olympics Games, be faced with such a degree of popular unrest? Considering that football is a national passion, why should the people revolt against their government with demonstrations of popular dissatisfaction inside and outside its frontiers?

The answer lies in the paradoxical model of growth and progress that Brazil has adopted. In spite of being the sixth largest economy in the world, Brazil is also the third most unequal country, with a Gini coefficient of 0.56 (UNDP, 2010); graphic thanks to The Economist. So, although local newspapers want to link current events to the minor issue of an increase of just R$ 0.20 (6 pence) in the standard bus fare, the explanation for the huge scale of the demonstrations clearly lies elsewhere.

Those 20 cents were merely the last straw. People are suffering from corruption; urban violence matched by a failure to enforce the law; the largest rate of tax amongst undeveloped countries without a commensurate standard of public services such as education, health and public transport. Brazil’s popular fear a return of inflation and resent the high salaries of politicians (averaging R$ 17,000.00) compared to the wage of a minimum-wage worker (R$ 600.00) or a teacher (R$ 800.00). The doubling in the cost of the new stadia being built for the World Cup has exacerbated dissatisfaction.

 

In a country renowned for its peaceful and welcoming people, the national mood is ‘they do not represent us’. Since the period of the dictatorship Brazil’s media has been biased and corrupt, and it now shamefully tries to manipulate the population, conveying the protests in Turkey as ‘revolutionary acts’, while protests in Brazil were reported as ‘vandalism’. Meanwhile, the police tried to quell the demonstrations with excessive violence used against nonviolent protesters who carried flowers through the streets of Sao Paulo’s with banners proclaiming ‘no violence’. They were met with tear gas and rubber bullets.

The movement was dispersed momentarily, but what the rulers did not realize was that images and videos, never conveyed by the official media, would be shared on Facebook, and people would not allow the football to distract them from their political purpose. The movement took to the streets of Brazil and has been supported all over the world. The Brazilian people have seen through the illusion of democracy they have been living through and shouted ‘ENOUGH! We are tired of being spectators watching the farce of life in Brazil!’

As a Brazilian I have to say that I have never felt so proud of the Brazilian people. I do not know exactly how far these manifestations will take us, and they cause me anxiety, but I think this is an important first step towards a better future. ‘No more impunity! No more corruption! Change Brazil! We want a better future for our children!’ These claims have invaded the web and the streets of Brazil.

On Wednesday I joined several friends and linked up with Brazilians across the world to support the protests and proclaiming that ‘although distant, we are not apart’ and that there are no borders to democracy. Unfortunately, many things needs to change. The fear is that politicians will silence the resistance in Brazil in a subtle and therefore more threatening way: attending to one or two of the movement’s shallow demands requirements, such as the bus fare reduction, and the movement disperses.

These political demonstrations have been observed with suspicion by a part of the population who no longer believes in change and in their power. Moreover, the official media continues to convey images of graffiti and vandalism of some protesters (who are, according to the leaders of the movement, government and police infiltrators). Thus, comments like ‘Why are we doing this now?’, ‘But we always hear news about corruption and thievery’ or ‘Brazil has never grown so much’  illustrate the identity of a people who have learned to be content with small rewards and no longer recognize their strength.

The important thing is that the people are dissatisfied and have perceived that nothing has changed even after a huge demonstration of public opposition, even when they have reached Congress. A prominent example is Renan Calheiros (a corrupt politician who has become President of the Congress): he is still in post in spite of a Facebook petition signed by many thousands. We have been battered again and again for too long. For me personally the overpriced World Cup was the last straw, for the residents of Sao Paulo it was the 20 cent fair rise and police violence.

This current Brazilian democracy is nothing more than an illusion of people power. Even after the demonstrations, absurd laws continued to be approved in Congress to satisfy the lobbyists working for large companies. FIFA has already overpowered the democratic government of Brazil in arrangements for the World Cup: the streets near stadiums are recognized as FIFA territory within Brazil. Moreover, every politician and minister now receives the benefit of a ‘Cup Assistance’ to watch the World Cup games, which costs the equivalent of a working person’s montly wage for each day for each politician who attends the World Cup and is paid for from taxes.

In spite of all this, I have hope in the future and the possibility of change. Democracy is not made only on polling day or during the election period. It will be good for Brazilians to become more politicized, because for so long we have been led to believe that politics is dirty word and we should keep ourselves far from it, and this is just one more discourse to maintain the domination of the rich and powerful. I have hope if the people stay on the streets and show their strength; if they demand that the media broadcast these demonstration or, better still, if they take control of social media to proclaim: ‘Yes, we can change!’ That is the reason I was here demonstrating on the streets of London yesterday.

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The Song of Angry Women in Gezi Park

A guest post from Mark Chivers, Chair of South East Dorset Green Party, who was in Istanbul training as a Climate Leader with Climate Reality

Last Friday evening I walked down Cumhuriyet Street in the Śisli district of Istanbul. It was, unsurprisingly in a city of 14 million, very busy. I passed through the crowds, mostly young and in many ways indistinguishable from their European counterparts. As the road bends and becomes Tarlabasi Street it passes Taksim Square. The area is, in part, a building site so many of the surrounding buildings have already been part demolished, a fact which enhances the feel of total destruction now it also bears the scars of the previous weekend’s events.  Around the square business continues as usual; the cafes packed, shops and street stalls trading busily with locals and tourists.

Gezi Park stretches out to the north of Taksim Square. Last Friday, it was still a protestor occupied zone. Big, diverse and overwhelmingly peaceful (think Glastonbury meets Occupy St Pauls), a colleague summed up the atmosphere perfectly the next morning: ‘Me and my husband went out to eat and one of the protestors was at the next table. We got talking and he invited us back to the park. I was so nervous but we went in; they were amazing. We sang with them, we danced with them, they were so happy. It was incredible.’

The following evening as I headed back to my hotel there was something different about the crowd. Slightly busier than before, but demographically identical to the previous evening, virtually every other person carried or wore a gas mask, hard hat, or both. As I arrived back in the hotel around 9pm, level with my room, across the narrow street, the nightly display of solidarity began. Every night at this time women lean out of their windows, or stand in the street, and bang loudly on their pots and pans in support of the protestors.  

About an hour later as I sat in a pavement cafe, just off Cumhuriyet Street I watched the scene unfolding in front of me. The numbers of protestors had increased. Almost every car that passed sounded its horn, in short bursts or continuously, showing their solidarity with the protestors. Two girls, in their late 20's, came in; gas masks in hands, red faced and panting from running, eyes wet. The waiters welcomed them in and gave them water. The conversation that ensued led to attention being focused on the wall mounted TV which was now covering the story live;  images of the clear out and cleared out park, battered tents, ripped banners, the occasional protestor picking through the debris. There was little coverage of the actual police action but from what I was witnessing beside me, and from the brief explanations translated for me by locals, it was clear it had been brutal.

Despite earlier acknowledgements of disproportionate police actions in Taksim Square and despite an earlier offer to meet with protestors, the warnings given by the Government during that day were final. The park was stormed by force. Much of what was missed from TV, a repetition of the previous week’s events in Taksim Square, exists on the internet.

Heading back to my hotel the streets were now awash with protestors who flooded out into the road itself and frequently broke out into the chant ‘Her yer Taksim, her yer direniş’ (‘Everywhere is Taksim; everywhere is resistance’). As I passed a Kebab shop one of the workers was beckoning passers-by into the shop and starting to close the door. I accepted his invite just as the police water cannon arrived. It stopped at the junction and with no particular aim sprayed tear gas, in a 180 degree sweep, around the junction. I felt my eyes burn as I made it indoors but avoided the worst of the attack. Those outside would not have been so lucky. I was not a lone tourist bravely, stupidly, venturing into a riot zone; the area was filled with tourists and locals just going about their business.  A group of protestors goaded the police vehicle and ran off up a hill opposite. It set off after them. One of the staff looked at me. ‘It's okay now. But don't stay around for long. Go back to your Hotel’.

It was now difficult to know which direction the protestors were heading. Some of those who had been cleared out of the Park were not local and were seeking somewhere to shelter. Others were waiting to see where the police were heading. Some were starting to gather anything to hand to form barricades: pot-plant holders, road-work barriers, loose paving and kerb stones. The scene, as I arrived in my hotel lobby, was one being played out across Taksim and Śisli: small groups, comprising both protestors and bystanders, were gather, sharing stories and wiping their eyes.

On Facebook friends were posting images, news updates and pleas for information. A dozen were stuck in a hotel reception just off Taksim Square, driven in on their way back from dinner, by indiscriminate police attacks. Others posted pictures of clouds of tear gas ‘from my window now!’ Some bore witness to the police storming hotel receptions where fleeing protestors had taken refuge. Almost all who had been out told tales of hotels, cafes and shops who had offered refuge and assistance often with home-made remedies for tear gas effects. No one saw any violence perpetrated by protestors. 

Around 3.00am the noise levels up on the main street grew. A large bonfire was now blazing in the middle of the road. The crowd continued to break out in chants. About an hour later the noise changed. In the distance I could hear shots. Shortly afterwards a sea of white helmeted riot police passed the end of the street, at random intervals one or more would aim skywards and release a tear gas canister, carpeting the area with their obnoxious substance. Protestors ran for cover, disappearing in small groups down the side streets. 

The next morning as I walked down the now quiet streets, some pavements, where used for barricades had lost some of their blocks. Three shrubs, taken from pots which had been used to build a road block, had been neatly positioned by the cafe from where they were taken. The slogan chanted last night now adorned the pavement as graffiti. This, and the occasional broken bottle aside, there was no malicious damage. Over the mile or so I covered I saw just one broken window.

By lunch time, the tear gas was once again wafting up from Taksim Square.  The usual crowds thronged the street, those with masks and hard-hats back at, or in excess of, the proportion of the night before. Our taxi got us out of town avoiding blocked roads and police lines. As we crossed a junction near Taksim the protestors completely filled the streets. Politely and with no issues they cleared a space for us to pass. Down the road a water cannon was making its way towards them. A few metres along the side street we had now taken a lone woman, perhaps in her late 60s, stood rigidly in the street a few metres from her front door. Her expression, one of fury, was matched by the manner with which she banged the pot in her hand.

At the airport I checked for updates from friends and colleagues. Many were moving out of town or heading home early. Many posted pictures of their personal experiences; blocked roads, clouds of tear gas, police loading chemicals into the water tanks of their cannons, spent shells, police storming hotel receptions. Others reported passing the army gathering on the outskirts of town. Others saw pro-government demonstrators being bussed or sailed in to the counter demonstration. Ominously, a number witnessed coaches arriving near the Conference Centre full of plain clothed police; their future role unclear, although video clips on the internet suggest they are primarily snatch squads.

On Youtube you can find a wonderful rendition of ‘Can you hear the people sing Gezi Park’, an uploaded clip features a group of protestors singing, in English and Turkish, the rousing revolutionary anthem from Les Miserables.* Look closely at them. Other than the balance of the choir being predominantly female, this is a good representation of the type of people who I saw in the streets around Taksim over the weekend. For standing up to an increasingly oppressive regime they are putting their lives in danger. In any other European city they will be out shopping, going to the cinema, sitting in bars and cafes.

A number of trade unions have now announced strikes in support of the protestors while the Government has announced the threat of using the army. In an Orwellian proclamation Erdogan claimed he cleared Gezi Park because it belongs to everyone not just the protestors. The reality is it is being handed to profiteers to tear down and develop. 

Erdogan’s determination to crush this protest is precisely the attitude that is fuelling the growth of the backlash. His stage managed supporter’s rallies and calls to patriotism may appeal to those whose primary desire is to maintain their new found prosperity but for many they are the final straw. Over the days and weeks ahead I imagine more will echo the comments of three of my new Turkish friends who, completely independently told me the same thing: ‘Things are really bad; Erdogen has to go, we are no longer afraid.’ I don’t know if he’ll lose this battle but I’m not convinced he’ll win the war. He may yet have to hear the people sing.

*The same theme is now being used more widely to back images and posts about the Gezim Park occupation.

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When is a Co-operative Not a Co-operative?

I was glad to be able to host Peter Pannier's well-informed explanation of the travails of the Co-operative Bank. Since I have spent years recommending on this blog and in public talks that people shift their bank accounts to 'the co-op' I feel a responsibility for its failure. For me, criticising any part of the co-operative movement feels like attacking a member of my own family and I am well aware of the glee with which capitalist apologists are greeting the bank's problems. But if the advantage of mutual economic is our genuine ownership the along with this comes a responsibility to be questioning and critical.

My reluctance to comment is also because I have long known that the answer to the question is 'when it is the co-operative bank' but I have never been sure of the exact ownership structure of the bank. The organisational chart shows that the bank is owned by the Co-operative Group. It is the co-operative bank because it is the banker to the co-operative movement, not because you own and control it if you have an account. We know that anyway because we have never elected the directors and did not get to vote on the decision to buy up the Britannia.

Which brings us to the nub of the problem. Peter Pannier's data demonstrate to my satisfaction that bad decisions were taken by Britannia executives which led to the crisis of solvency. It was exacerbated by the financial crisis but was vulnerable before. Like the managers of other mutuals, at Britannia the directors seem not to have understood the market they were involved in.

I am still left questioning why the credit-rating agencies condemned the Co-operative Bank because of the weakness of its lending against commercial property when they have not done this to the other banks who are holding loans to businesses that are effectively bust and whose collateral has lost so much value since the beginning of the recession that the loans are bound to be bad.

A second question: if the control of the Co-operative Bank now passes to shareholders, as the result of a grand-scale debt-for-equity swap, is it worth continuing to hold an account? We are promised that ethical standards will continue but if your motivation is to avoid the extraction of value by the holders of capital you are left with a difficult decision.

In trying to see the bright side to this gloomy news I am left asking whether it offers evidence of solidarity that you would hope to find in the mutual sector. Just as with the collapse of some of the building societies, which were absorbed by others, the decision to buy the Britannia was argued at the time to be about gaining access to the High Street, but was it really about supporting a mutual in trouble? If not, one is left with serious questions about the quality of the due diligence that was undertaken.

You might also argue, a a pinch, that the solution announced earlier this week is based on self-help. The movement has come up with a plan that avoids government involvement, although it reduces the proportion of the bank that can still be considered 'co-operative'. Many of the bad decisions made by co-operatives and mutuals, especially their excessive borrowing from financial markets, resulted from an attempt to compete in a capitalist market, which is always a weakness of the idea of co-operation within capitalism.

But even these reasons to be cheerful cannot conceal that we are losing a bank that has been part of the co-operative movement for 150 years. As capitalism's crisis slouches on, this seems to be yet another example of how it is sheltering its own while the interests and institutions of working people are being sacrificed.

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What is Going on at the Co-operative Bank?

A longer-than-usual guest blog by Peter Pannier and begins a process of analysis of the troubles at the Co-operative Bank and their implications for UK mutual and/or financial institutions (questions and comments welcome via @peterpannier on twitter)

The idea that the Co-operative Bank and the 47 remaining building societies represent a positive alternative to mainstream banking been most enthusiastically pushed recently by the Move Your Money organisation as well as by anti-capitalist activists, Greens and supporters of the alternative economy. So where are we following the furore surrounding the Bank's 'rescue plan'?

Yesterday (17 June 2013), the Co-operative bank announced its plans to meet the capital requirements of £1.5bn (non-specialists might prefer the Guardian summary). This follows a decision earlier in the year to abandon a bid to take over 631 branches from Lloyds Banking Group, dramatic downgrades by Fitch, S&P and Moodys, and a changing of the guard at the boards of both the Bank and the wider Co-operative Group.

Some people have started asking some pretty good questions about what went wrong at the Co-op: Ruth Sutherland comes up with a dozen and more recently Patrick Collinson put forward another eight.

The problems can be traced back to the takeover (announced in October 2008 and completed in August) of the Britannia Building Society, where the issues were:

• A high volume of (mispriced) commercial property loans, made at the top of the market. With empty shops and low consumer demand, this portfolio seems unlikely to regain any value in the near future.

• A high volume of (mispriced) risky mortgage lending, also made at the top of the market. Again, arrears and repossessions are rising, real wages are falling (meaning making mortgage payments is getting harder), while we still have record low interest rates.

• The need to raise capital ratios because of higher capital requirements instituted since the financial crisis, and the difficulty of doing this through retained profits.

• An inability to raise capital by issuing shares. Many people have suggested this is because of the banks mutual status, but this is wrong. The Co-operative Bank is a plc, hence its ability to convert bonds into listed shares (see this diagram of the ownership structure). The reason the Co-operative Group could/cannot raise capital through issuing equity is two-fold. First, despite the fact that its ownership model does not prohibit it, it has been trading on the idea of being a ‘mutual’ ‘alternative’, and shareholder equity doesn’t fit with this PR image. Secondly, if it tried to issue equity while in crisis it would likely experience the same problem as RBS – no-one wants to buy shares in your bank when it looks like they are going to be throwing their money away. Hence why it has converted bonds (which don’t count toward capital) into shares (which do) instead.

Before the merger with the Co-operative Bank, Britannia was the second largest Building Society in the country. Contrary to perceptions of building societies being safe, traditional, and guided by ethics and principles rather than profits and growth for their own sake, Britannia was following a business model not dissimilar to those of HBOS and Northern Rock: borrowing from the wholesale markets to fund asset growth, frequently via mispriced risky lending, with an increasing interest in (large) commercial property loans.

Perhaps the aspect of the Britannia’s business model that made it most vulnerable in the crisis was its high reliance on wholesale funding. In the UK, building societies face a regulation that means they must raise 50 per cent of their funding from individual retail depositors. Everything else (wholesale borrowing from the short-term money markets and longer-term capital/bond markets , combined with non-retail deposits from other organisations such as local authorities) counts towards the ‘Funding Limit’. Britannia had the highest funding limit ratio of any building society at year-end 2008, and in all but one of the previous five years (it was still the fifth highest in 2005).

Just as they face regulation on liabilities side of the balance sheet, building societies are also limited in the kinds of assets they can hold: they must hold 75 per cent of commercial assets (liquid assets are excluded from this calculation) in the form of residential mortgages. Here too, Britannia was pushing the limit.

In 2008, the lending limit ratio was the highest for a UK building society. Though this was not true in previous years, the trend line is worrying: the Britannia was rapidly increasing the proportion of its lending not in the form of residential mortgages. A particular focus was commercial property, and rather than building up a portfolio of small, relatively safe loans to B&Bs and flats above shops, £900m of the £1.7 bn of ‘impaired’ loans is from just 12 big loans (Collinson, 2013: url, paragraph 1).

This is not to say Britannia were not also making lots of mortgage loans: in terms of mortgage lending as a percentage of prior year loans, Britannia were the 7th fastest growing building society 2007-2008. It appears that the decisions about who to lend to were not well made: 'Impared loans on a book of former Britannia mortgages known as 'Optimum' are running at 17 per cent--way above the industry average--with £1.2bn. of home loans at risk of going bad . . . Across the Co-op Bank’s whole mortgage book, 6 per cent of lending is classed as impaired. A further £1.1billion of loans are in ‘forbearance’, meaning borrowers in supposedly temporary straits have agreed a deal such as a payment holiday.'

In hindsight, these graphs and statistics show that Britannia went into the crisis with pretty much the worst business model possible. It would perhaps be OK if there had been profit in this model, and it was all being put into capital in case of the eventuality that things didn’t turn out well. Unfortunately, as the next graph shows, even as it continued to lend more and more, and in areas theoretically more risky for a building society, Britannia was making less profit per pound of lending (in other words, mispricing risk on a grand scale). I cannot believe that these graphs were not considered as part of a due diligence process (but, if you read the PR from the time you might conclude otherwise).

According to my analysis there are three broad reasons why the merger took place:

• The Co-operative Group had long wanted to take on / offer an ‘ethical’ ‘alternative’ to the larger retail banks in the UK. It had identified various large building societies as routes to this objective, lobbied for the Butterfill Act and took the opportunity when it came, paying little or no heed to the realities of Britannia’s past or the unfolding financial and economic crises. This might also explain the wholly misguided project of taking on the Lloyds branches.

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• The Co-operative Group was interested in growing its banking operation (consistent with above). The senior management at the Co-operative Bank did the due diligence on Britannia, and decided that the risk was worth taking on. Such a conclusion would rely on an expectation that the UK economy would recover strongly and quickly, and that the turmoil in financial markets would end soon.

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• The Co-operative Group did the due diligence on Britannia and, given this and the deteriorating economic environment and continuing turmoil in financial markets, decided it would rather not take it on, but gave in to pressure from the FSA and government to persuade it to do so.

As far as I’m concerned Option 1 amounts to hubristic foolishness, Option 2 amounts to naive optimism and Option 3 amounts to dangerously craven weakness. The Co-operative Bank was facing a capital shortfall of £1.5bn. I personally cannot see how selling off great chunks of your business (life and general insurance arms), ceasing lending to new business customers, and undermining your brand by introducing external shareholders to what had been considered a ‘mutual alternative’ are going to combine to create a business model that can ride out the problems that remain.

Just about the only shining light for the Co-operative Bank is that, thanks to a reputation for customer service and an ethical stance, it has in the words of Frances Coppola 'an amazing customer base which has been astonishingly loyal'. Some of the Co-operative Bank’s customer base will remain loyal. However, for new customers (of whom there were apparently as many as 100,000 last year) this loyalty will be very shallow. Anecdotally, such customers feel betrayed and are already leaving. Even old and traditionally loyal customers may reconsider their relationship with the Bank following the introduction of shareholders and the associated incentives to maximise short-term profits, not to mention the revelations of previous bad management. If I were a retail customer, I’d certainly be thinking twice. Perhaps more to the point, I’d wager that larger borrowers and investors aren’t feeling too positive about the Co-operative Bank at the moment, and that won’t help them one bit.

But this isn’t the bad news. The bad news is that the UK financial crisis of 2007-8 was not solved, but merely deferred (much like the crisis of the 1970s that lies at the root of our current problems). The problems at the Co-operative Bank are just the beginning. Your money is probably safe (assuming you haven’t got very much), but our financial and economic systems still very much are not. The storm that is coming is as likely to selectively avoid particular ownership models in finance as nature’s storms are to avoid houses on the basis of whether they are owned by the occupier, a landlord or the local authority.
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Are Google and Facebook Natural Monopolies?

Since the furore over some of the biggest companies in the world not paying their taxes I can't be the only person who has made the logical move as an 'ethical capitalist' and looked to take my custom to a competitor. In the case of Starbucks this is relatively easy, and in fact the local coffee shops in our high streets offer more variety and interest, as well as contributing local taxes to pay for the infrastructure we all use. No wonder, then, that even the Daily Mail is celebrating Starbucks' loss of market share to its rival Costa.

Amazon is another matter. As I mentioned in an earlier post, in some respects they are the worst sinner, their lorries pounding our roads that they do their best to avoid paying for. My own solution was ABE books, which was later bought by Amazon, reducing competition in the market for second-hand books. Housmans is still a viable alternative, although given its much smaller scale it cannot bully publishers to sell it books at low prices, and so you will pay for your ethical decision to switch.

But what about Google? If you have one global information system, it follows that there will be one indexing system to help people find their way around it. The programmers who invented the indexing system, the Google algorithm, should be rewarded with gratitude and, if they choose, a hefty fee. But this should be a one-off payment; it should not be used to extract value from those who need to seek information for the rest of time. The Internet is a largely unregulated environment, but even economic theory suggest that, if it is the natural monopoly that a single world-wide information system implies, it should be socially or publicly owned, and controlled by all for social benefit.

I have long been avoiding Facebook for a whole number of reasons which I tend to express with the explanation that I am not prepared to become Mark Zuckerberg's slave. Here is another example of something that it only makes sense to have one of. If everybody in the world wants to search everybody else in the world they do not want to have to look through ten social media networks to find them. Hence the same anti-monopoly arguments apply and by the same relentless logic, Facebook too should be democratised.

Wikipedia is, of course, the honourable exception here, a global encyclopaedia that is created by knowledge gift and whose value is open to all. Can we think of a way of shifting Google and Facebook in the direction of a wiki economic approach? And where are the politicians with the courage to make that happen?
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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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Welfare Cap Will Never Fit Green Head

The electoral timetable is more pronounced than ever since this government introduced fixed-term parliaments. So, two years out from the next general election, Labour have entered the phase of their political messaging chart that is labelled 'reinforce core messages', no longer feeling able to get away with keeping from us their darkest, inner thoughts.

If their approach to welfare is anything to judge by then it is no surprise that they have delayed revealing their true colours for as long as possible. In his speech last week Ed Miliband made clear that, not only is he going to abandon Labour's traditional commitment to the principle of universalism--which he himself has defended eloquently since becoming his party's leader--but they are also going to accept the draconian and illogical welfare cap, a concept introduced into policy-making by the arch-deacon of austerity George Osborne.

The concept itself is oppressive, as though people made choices about being ill or growing old, as if we could somehow make a decision not to become unemployed or to need help in supporting our children. Of course it is these implications that appeal most to Tory policy-makers who have no compassion for those in need, but that Labour should also support them is disgraceful. Most importantly the concept of a welfare cap forces the rationing of funds for the sorts of services that a civilised society demands and, given that the most needy are least able to fight for their rights, it ensures a miserable future for the most vulnerable of our citizens.

As discussed in a recent paper I co-wrote for the Green House thinktank, the most fundamental questions about social policy are about the ownership and distribution of resources. Traditional socialist parties would have accepted this and based their policy on it, but the ability to connect wealth accumulation and the need for redistribution appears to have deserted all but the Greens. Two policies that it draws immediately into the discussions are a land tax and a citizens' income scheme. Together these form a nexus which ensures that those who have acquired assets are forced to share the value of them with the population as a whole: assets are a social resource not a private benefit.

From conservative Switzerland comes hope that the Citizens' Income policy may soon be the subject of serious political debate in a leading democratic nation. Campaigners for a basic income have achieved the 100,000 signatures on their petition which triggers an automatic referendum on the issue within two years. And if Switzerland's particular approach to accumulating wealth is problematic for you, perhaps we could turn our attention to Norway, where oil wealth was not considered as private property, as it was in the UK. The government took a profitable stake in the industry on behalf of its citizens and also taxed private companies' earnings. The result is the largest sovereign wealth fund in the world, commonly known as the Oil Fund, which will pay for the pensions of Norway's citizens.

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