It probably hasn’t escaped your notice that something has gone wrong with the way Britain works.
We’re sitting in what is, at best, the middle of the deepest recession in history. At worst, we’re just at the beginning of it, and it’ll last about 10 more years.
But beyond that, we’re also experiencing a crisis of institutions. Parliament, newspapers, police, banks and all of the pillars of a good society are shown to be corrupt and fetid.
And sometimes it’s hard to work out how we came to this, and what we could do to resolve it. Especially if you’re not a regular consumer of proper news – by which I mean actual news about actual events which actually matter, rather than Adele’s baby and Rooney’s hair. But I guess if you’re a consumer of non-news, nothing about this blog will change your mind, so I’m not going to bother talking to you.
The world is very complex, and although it would be lovely to point at one person and say “he is to blame”, it doesn’t work like that. But I’m going to try to identify a few key moments which have led to where we are now, and then explain how I would go about reversing those decisions and beginning to rebuild a functioning, democratic, sustainable and fair world.
Debt is the big problem we face. Listen to today’s politicians (of every stripe) and they’ll tell you the same story: we’re in terrible debt and need to solve the problem urgently.
But if you stop for a moment and look at the facts, you may find you come to a different conclusion. Our debt levels now are fairly low by any historical measure. Debt is measured as a percentage of gross domestic product (GDP), which is the amount our nation generates each year. At the moment debt is at 66% of GDP.
But that’s lower than it’s been for 208 of the last 250 years. Or to put it another way, we’re doing better today than we have for 4 out of every 5 years since 1761. Yes, it’s true that our debts are big, but no bigger than normal. And at any time, those levels of debt are managed perfectly well.
In fact, it’s absolutely insane to attempt to repay the debts in a decade. Many of the debts are in the form of long-term gilts, a type of bond which is repaid over 100 years. So why are we attempting to cut debt by 25% over 5 years? To stick to our agreed repayment terms we have to pay only 1% per year.
That means we can cut spending by only 1% (rather than the 18% the government is planning), and still manage our debts in a perfectly normal way.
Of course, we also need to tackle the deficit – the difference between the amount we earn and the amount we spend. But in recessions, deficits always grow. That’s the very definition of a recession! So it’s crazy to even attempt austerity right now.
In fact the International Monetary Fund (IMF) researched 176 attempts at austerity since 1970, and every single one of them failed to generate growth, and actually led to higher debts and worst economic performance. George Osborne acts as though there is no evidence to counter his policies, but the opposite is the truth.
The correct thing to do is spend money. We’re not broke because money has vanished: we’re broke because people have stopped spending it. When this happens, recession becomes inevitable, because the money I spend is your wage, and vice versa. If we both stop spending because of a recession, we cause that recession.
You can’t expect Joe Public to suddenly decide to end the recession and start spending – he needs to feel confident enough to buy a sofa or go on holiday. But if the government spends, that means Joe Public’s customers suddenly have some money to spend. So his wages are secure. And then he can spend the money which pays my wages, and your wages, and everyone else’s wages.
When the recession is over, the government will have done it’s job, and can stop spending and start to pay off the debts it incurred.
And that’s how you fix a recession. It’s not difficult. We’ve known this since the Breton Woods conference, which fixed the Great Depression of the 1920-1930s. It’s the way every recession is fixed.
This won’t happen under the Tories because the majority of the party is in awe of Mrs Thatcher, and can’t accept that her policies could only ever work in the very short-term.
Thatcher made several decisions that appeared to generate huge wealth very quickly. But in actual fact, they simply reallocated wealth from the past and the future. They generated almost nothing.
She sold off national assets into which the country had invested massive amounts of money and effort. This freed up a huge wodge of money in the short-term, and made the mid-80s feel like a very exciting and successful time. But it was basically selling the family jewels off, and at a rock-bottom price too.
BT, for example, was sold for (at today’s value) £7billion. But in the previous 25 years the nation had invested £310billion in telecoms. And in the 25 years since it was sold, BT made average profits of nearly £6billion per year.
Thatcher made no attempt to recoup the investment, which should have made the country around £4 billion per year. She just gave that away to private owners
Add that £4billion per year to the £6billion per year profits which are now private (but were once public) and you’ll see that just the privatisation of BT has cost us £460billion over the last 25 years – which is almost our entire national debt. And Tories also privatised gas, electricity, water, trains and everything else they could get their hands on. BT is a drop in the ocean of how much was thrown down the drain in the 80s.
The total cost to the country isn’t in £billions, it’s in £trillions. But because it was politically very successful, the Tories yearn for a return to those exciting days of mass privatisation. They don’t look at the long-term damage caused, or ask whether privatisation brought any actual competition or improvements in services. Is BT really better now than it was in 1980? Are the trains?
Similarly, the 80s saw what is euphemistically called a “revolution” in social housing, which actually means the nation’s social housing stock was sold off for 25% of its value, and laws were passed that made it illegal to replace that social housing. Result: disaster.
First of all there’s the social cost: before 1980 most social housing was occupied by people of mixed income: lower and middle class people living together. But when social housing was flogged off, the middle-class occupiers could afford to buy. The poor couldn’t.
The lack of replacement housing caused values to rise, so owners suddenly felt wealthy; and another “revolution” in banking – which I’ll come to later – meant the middle-class owners of former council housing could get cheap mortgages and move out. They left behind a rump of very poor people in ghettos of social housing, which quickly became sink estates. In fact, not just sink estates, but water-down-a-sink estates, circling the drain and getting worse with every cycle.
House prices continued to rise, inflated artificially by cheap money and lack of supply, and putting home ownership out of the reach of 40% of the population. That’s 2 out of every 5 people who will never be able to buy a home.
Lack of houses led to a boom in renting, and “relaxation” of mortgage laws meant people could suddenly get multiple buy-to-let mortgages, further restricting housing supply and driving a boom in prices – and making it even harder for the young to buy.
Lack of rent control (because that’s “anti-business”) meant that in time, even rents became unaffordable. So the state stepped in with housing benefit, which is supposed to be a support for the poor. But in fact it doesn’t go to the poor, it goes to the rich who own many homes. So your tax money is funding millionaire property speculators.
All of this in a country which Thatcher wanted to turn into a “home owning democracy”.
Home owning is a laugh, but so is democracy. That’s been undermined by another “innovation”, the explosion in private media.
It started with – yes, you guessed it – Thatcher coming to a secret meeting with Murdoch at a meeting in Checkers in the early 80s, at which she agreed to let NewsCorp take over huge swathes of the British press without reference to the Monopolies Commission. She placed the majority of British reporting into the hands of a tax-avoiding man with a specific agenda: Murdoch simultaneously launched Sky, whose core appeal was sport. He spotted that people like sport, so he bought it all. If you want to see sport, you need Sky.
To promote this, he used his new dominance of all British press to shift the purpose of newspapers from the reporting of news to the reporting of sport. Holding our democratic leaders to account became a minority occupation of the press, and in the vacuum of proper investigation and reporting, leaders (of all parties) felt less and less accountable to the public. Decisions were made which were no longer in the interest of the public, because the public stopped caring – they were too busy being distracted by Rooney’s hair and Adele’s baby.
As they became more and more detached from the electorate, politicians withdrew into the safe company of a smaller and smaller coterie of people, from an increasingly rarefied strata of society. Instead of rubbing shoulders with voters, our leader rubbed shoulders with financiers and PR men. It reached its apogee with the election of David Cameron, a former PR agent for a TV company who is the privately educated son of a tax-avoiding stockbroker.
MPs of all stripe mixed solely with this set, and began to see that sort of wealth and social isolation as the norm. Their only friends were bankers and the very wealthy, so they did what we all do: looked after their friends. If your pals ask a favour, you look favourably upon it. That’s how, at the bidding of banks, Thatcher came to remove currency limits and abolish regulations which limited what the banks could do.
In essence, she privatised the creation of money.
Since Roman times, the creation of new money has been the sole right of the state. But in the 1980s Thatcher handed that right over to the banks. And boy oh boy, did they abuse it.
Traditionally, when you went to a bank to ask for a loan, the bank took depositors’ money and lent it to you with interest. If it was a big loan – for example, the kind of massive loans being handled by investment bankers – it would often be the bank shareholders’ own money which was being loaned, and they took a careful note of how it was spent to ensure they saw returns. It was in the interests of the bank to make sure the businesses they invested in were successful, and the whole economy grew in a relatively stable way. Only the Bank of England could create new money, and they controlled it carefully to avoid inflation.
But the so-called “Big Bang” under Thatcher destroyed all that. Now, when you asked for a loan, the bank simply “created” that money on a computer. It was theoretical money only. And bankers didn’t take care of theoretical money, so stopped caring if their loans performed any social function. It’s easier to asset-strip a company than to build it, so that’s what they did. The actions of banks eviscerated manufacturing and the real economy, and systematically demolished whole swathes of industry.
And because money could be created for free, everything that could be bought got more and more expensive. We didn’t call it “inflation”, we called it a boom. But it was inflation.
The rich didn’t notice the inflation, because their earnings spiralled out of control. But you’ll have noticed, because your wages stagnated. Since 1978, wages for the lowest paid 99% of Uk citizens – that’s almost certainly you – have not risen at all, in spite rises in productivity and a typical rate of economic growth of 3.3%. That means that over 30 years the amount of wealth has almost doubled, but 99% of people haven’t seen any of that wealth – it’s all been gobbled up by the richest 1%.
In fact, not just the richest 1%. The biggest culprits are the richest 0.001%. In Britain, that’s fewer than 1000 individuals, and since 2008 – the start of the present crisis – their wealth has increased – increased – by £414 billion. That’s nearly 5x the entire amount of money the government wants to cut. It’s not a crisis caused by debt, but by massive redistribution of wealth from the poor to the rich. Robin Hood in reverse.
These are the people who have wrapped themselves around our democracy, and made every major leader believe that sort of wealth is the norm. Corruption, needless to say, has become rife. If the whole economy is for sale, as it has been since Thatcher, what’s to stop those hyper-rich people from buying democracy too? And they have. When did you last year any political leader argue for redistributive taxation to get the 99% to share one iota of the money? It just doesn’t happen, not even from so-called “left-wing” parties. Not even from beacons of hope like Obama. The poor can get poorer, because that’s what they expect. But the rich can never be allowed to get poorer – their income and wealth must always be protected, and any attempt to put limits on their ability to fleece the rest of us is condemned as “anti-buiness”.
Having such a massive influence over our elected leaders has meant the oligarchs have been able to influence policies in a million ways. They’ve undermined proper oversight of the banking industry, leading to fraud, corruption, theft, mis-selling, and as we’ve learned in the last couple of weeks, money-laundering from drug empires and the Iranian nuclear industry, at the same time as they were fixing the interest that you and I pay on over £1 trillion of loans and agreements. That’s every mortgage, car loan, student loan and business investment, in every country, for years.
That’s the biggest fraud in history. It’s almost impossible to imagine a fraud bigger. What else is there left to be defrauded?
Not content with screwing our lives, the rich moved onto screwing our nations. They instructed the current government to sell off the NHS, police and schools. You think the coalition hasn’t been instructed? Look at Andrew Lansley, Jeremy Hunt and Michael Gove, who all accepted money from so-called “independent think tanks” which get 100% funding from companies which will benefit directly from the “out-sourcing” (i.e. privatisation) of schools, hospitals and police forces. Watch this space – they’ll all get lucrative directorships when they leave office. It’s corruption by anybody’s definition.
And all the while, in the background, tame politicians to turn a blind eye to tax havens, which, since the 70s, have allowed the top 0.001% to steal at least $21 trillion from us.
Yes, they stole it. It wasn’t tax-reduction or clever accounting; it was theft. If I don’t pay my tax, I have stolen money from every other tax payer, who has to make up the difference. But the wealthy have stolen an amount that is so large it’s virtually impossible to comprehend it. So let me put it into context:
- $21 trillion is more than the total amount of money owned by the whole of Europe, and if repaid it could immediately – overnight – clear the debt crisis and fix the entire world economy.
- If we taxed the interest on $21 trillion at 30% – just the interest – every year it would generate more than double the total amount that the USA and Europe spend on aid to the 3rd world.
- It’s more than the total cost of the Iraq and Afghan wars.
- It’s the equivalent of giving every worker in the USA and Europe a 3% tax cut for the whole of the last 30 years.
If you think Jimmy Carr has been a bit naughty, maybe now you have a bit of context.
Think politicians had no suspicions? Of course they did. No proof, perhaps, but only because they turned away when the proof wandered around the room wearing a pink tutu and blowing a trumpet.
Similarly, the type of media corruption and phone hacking now being investigated by Leveson must have been obvious to those who mix in those circles. I don’t know anybody famous, but even I knew it was happening over 10 years ago (a friend of a friend in a major newspaper published told me it was common practice). If it’s reaching my ears, is it really believable that Cameron, Brown, Blair, Major and Thatcher had no idea?
Money and idiotic free-market ideology has brought us to this, and sadly the only solutions our political leaders seem willing to countenance is more free-market ideology.
So what can we do? Well, I have some ideas.
First, we need to separate money from politics. I’m not saying politicians are taking bribes, but on retirement they routinely offered executive posts with the very corporations they’re responsible for safeguarding. That must be banned. If it means we have to pay former politicians £50k per year for life, so be it. It would be much cheaper.
Similarly, the state must pay for politics, rather than let it be bought by corporations. The amount British parties spend is so little that it’s the equivalent of 50p per year from each voter. It’s not just a small price to pay, it’s a ridiculously small price to pay.
We must build more homes, and we must start now. In London alone there is a deficit of almost 500,000 homes. We need social housing, with mixed communities, so that managers and workers can once again be placed in the same environment, and learn to understand each other again.
Building a lot of houses would create a lot of jobs. It would also cause house prices to fall. I’m sorry, but tough shit – your home isn’t really worth what you thought it was. For 1000 years house prices rose with inflation, it’s only since the artificially created bubbles of 1980 onwards that people have got used to the idea that their home is a financial asset. If it’s doubled in value, that’s at the expense of the whole economy, just as much as bankers taking bonuses of £100 million is at the expense of the economy. It’s time to accept that you need to repay your part. The nation, the economy, and your children’s future opportunities depend on it.
Phew, what a fucking disgrace. But it can be fixed.
Firstly, we need to urgently break up banks. We need smaller banks for the real economy, and lots of them. We need regional banks, whose role should be to boost Scotland, the North East, or wherever they are. They do this with investment in actual industries, not by betting on the weather and skimming off a fat profit.
Secondly, we need to re-introduce a relationship between the amount of assets a bank has and the amount it can loan, or “leverage” as it’s known. You, for example, can borrow around 3.5x your annual earnings when you buy a home, a leverage of 3.5-to-1. But many banks have leverage of 35-to-1. It’s nuts, especially as none of that money actually exists. Hard though it is to believe, 5 years into the crisis, and banks are still allowed to create their own money out of thin air. Does anyone else think Osborne might be influenced a little too much by the people he’s paid to referee?
Third, bankers must go to prison. Not a few middle-men, but those in charge too. There’s a legal principle that ignorance, in the eyes of the law, is not an excuse. So there is no excuse for the head of Barclays or HSBC to say “we didn’t know”. They should know. That’s their job. They get paid £10million a year to know, so if the didn’t know they’re criminal and incompetent.
We need urgent international agreements to outlaw tax havens. Simple as that. I know international agreements are a nightmare to reach, and it might take 10 years, but we need to start right now.
And in the meantime, we need to send a bill to any company which avoids its tax. If, for example, Vodafone has paid tax of 2% this year, the government should just send a bill for the services the state provides to Vodafone: the cost of roads for their cars, police to protect their premises, education and health and public transport and housing for their employees, bin collections, fire services, telecoms infrastructure etc. When Vodafone get an unavoidable bill for £6 billion, they might decide it’s cheaper to just pay the tax.
I hadn’t mentioned it much above, but it matters: we must make it illegal to speculate on some resources, because they’re too important for people to bet on them.
Speculation skims off entirely normal, legitimate profits, forcing up prices to fund the money that the speculators want to make.
But we’re speculating so much on food that the cost of staples like milk and rice are now beyond the purse of the poorest 10%. That’s 600 million people being forced into starvation so that a few thousand speculators can make money.
It must be outlawed by international agreement.
Another one I hadn’t mentioned, but the corrupting power of corporations is undermining measures to tackle catastrophic environmental devastation. This summer has been a prime example of it, and it’s getting worse every year. Thousands died in the USA, and in the UK hundreds were killed, made homeless, or had vital farm-land destroyed. And that’s just what it’s doing to people – it’s doing much worse things to the non-human population of this planet.
Space is very big. Even travelling at the speed of light it would take us over 10,000 years to get to the nearest planet that we guess might – might – be able to support human life. This is the only planet there is, and we’re fucking it up. We need to manage population urgently, and we need to build an economy which is biased towards sustainability, not raping the natural world for the short-term financial gain of a few billionaires.
Corrupting power of money
We must, must, must stop this. It’s the single greatest problem, and the one which causes all of the others. There must be complete transparency of all public officials, and there needs to be a full-time department of ombudsmen whose job it is to continuously scrutinise all payments, lobbying and influence. The press has failed, and will continue to do so.