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Labour's challenge: to rescue capitalism from its own arrogance Labour's challenge: to rescue capitalism from its own arrogance
(35 minutes later)
A few weeks ago a Letters to the Editor contributor from Hertfordshire suggested that since the fall of the Berlin Wall in 1989, global society’s elites have lost the “healthy sense of fear” they felt towards their fellow citizens for 200 years after the French Revolution. They would be wise, he wrote, to recover it before angry peasants burn down their chateaux again.A few weeks ago a Letters to the Editor contributor from Hertfordshire suggested that since the fall of the Berlin Wall in 1989, global society’s elites have lost the “healthy sense of fear” they felt towards their fellow citizens for 200 years after the French Revolution. They would be wise, he wrote, to recover it before angry peasants burn down their chateaux again.
It’s an unremarkable sentiment, though less frequently aired than it should be in these unequal times when tax dodging corporate executives and reckless bankers are so publicly brazen in their defence of malpractices that cheat customer, taxpayer and shareholder. Just watch a few sessions of evidence to the Commons public accounts committee on BBC Parliament if you still need convincing. It’s an unremarkable sentiment, though less frequently aired than it should be in these unequal times, when tax-dodging corporate executives and reckless bankers are so publicly brazen in their defence of malpractices that cheat customer, taxpayer and shareholder. Just watch a few sessions of evidence to the Commons public accounts committee on BBC Parliament if you still need convincing.
What was striking was that Michael Williams’s warning from Letchworth was the lead item, not on the Guardian’s letters page, but in the Financial Times, at £2.70 a copy itself a decidedly elite organ. What was striking was that Michael Williams’s warning from Letchworth was the lead item, not on the Guardian’s letters page, but in the Financial Times – at £2.70 a copy, itself a decidedly elite organ.
Being smarter than the average tabloid, FT writers on business, politics and economics are more sensitive to these issues than you might expect. When Rupert Murdoch was trying to buy the paper at one stage, he would complain it was very left-wing. It was not a problem with the Wall Street Journal, which he bought instead, though WSJ reporters I used to deal with loved to subvert the paper’s overly ideological editorial line by parading inconvenient facts. Being smarter than the average tabloid, FT writers on business, politics and economics are more sensitive to these issues than you might expect. When Rupert Murdoch was trying to buy the paper at one stage, he would complain it was very leftwing. It was not a problem with the Wall Street Journal, which he bought instead, though WSJ reporters I used to deal with loved to subvert the paper’s overly ideological editorial line by parading inconvenient facts.
Letchworth’s Williams pointed out what all respectable Victorians knew and feared after the revolution of 1789 overthrew the absolutist but incompetent French monarchy and rapidly descended into bloodshed and war. Even when reactionary monarchies were restored after 1815, successive liberal revolutions – successful or not – kept elites nervous about the Jacobin Terror, the more so after 1848 and the updated version of the alarm, Karl Marx’s “spectre of communism haunting Europe”.Letchworth’s Williams pointed out what all respectable Victorians knew and feared after the revolution of 1789 overthrew the absolutist but incompetent French monarchy and rapidly descended into bloodshed and war. Even when reactionary monarchies were restored after 1815, successive liberal revolutions – successful or not – kept elites nervous about the Jacobin Terror, the more so after 1848 and the updated version of the alarm, Karl Marx’s “spectre of communism haunting Europe”.
Despite the bloody failure of the Paris Commune (1871) and the abortive Russian revolution of 1905, the spectre remained real and present until the USSR crumbled. Unease was accentuated by a terrorist bomb-throwing fringe (much like today’s jihadis) whose assassination of the heir to the Austrian throne at Sarajevo in 1914 triggered the first world war. That event exploded the whole rickety edifice of old Europe.Despite the bloody failure of the Paris Commune (1871) and the abortive Russian revolution of 1905, the spectre remained real and present until the USSR crumbled. Unease was accentuated by a terrorist bomb-throwing fringe (much like today’s jihadis) whose assassination of the heir to the Austrian throne at Sarajevo in 1914 triggered the first world war. That event exploded the whole rickety edifice of old Europe.
We still inhabit its glossy but shaky ruins, trying to restore a stable, prosperous order via the EU. But the spectre of Bolshevism, more precisely of the Red Army on the river Elbe after 1945, helped to keep capitalist excess in check. Communism may not have done its own citizens as much good as admirers predicted, but it helped do wonders for workers of the world elsewhere.We still inhabit its glossy but shaky ruins, trying to restore a stable, prosperous order via the EU. But the spectre of Bolshevism, more precisely of the Red Army on the river Elbe after 1945, helped to keep capitalist excess in check. Communism may not have done its own citizens as much good as admirers predicted, but it helped do wonders for workers of the world elsewhere.
As the French economist Thomas Piketty wrote in his updated version of Marx’s Capital – it’s also a very long book – labour took an unprecedented share of the economic cake in the post-war decades. Conspicuous wealth declined, though we should also recognize that this “golden age” was unfair, for instance to women and minorities, in its own way too. As the French economist Thomas Piketty wrote in his updated version of Marx’s Capital – it’s also a very long book – labour took an unprecedented share of the economic cake in the postwar decades. Conspicuous wealth declined, though we should also recognise that this “golden age” was unfair, for instance to women and minorities, in its own way too.
But was that period of progress an aberration or a foretaste of the fairer world to come? Looking at the long patterns of economic history – there was virtually no growth at all in Europe for 1,000 years after the fall of Rome – Piketty concluded it would be the former unless states now take robust and coordinated steps to tax, not just income, but capital.But was that period of progress an aberration or a foretaste of the fairer world to come? Looking at the long patterns of economic history – there was virtually no growth at all in Europe for 1,000 years after the fall of Rome – Piketty concluded it would be the former unless states now take robust and coordinated steps to tax, not just income, but capital.
Otherwise wages would grow by 1% a year while capital grows by a steady 2%. Compound interest is cumulatively brutal so the divide between the rich and the rest of us is growing. Between 1975 and 2012 47% of the growth in US pre-tax incomes went to the 1%. Who says so? Not the shadow chancellor, John McDonnell, but the OECD. Otherwise wages would grow by 1% a year while capital would grow by a steady 2%. Compound interest is cumulatively brutal so the divide between the rich and the rest of us is growing. Between 1975 and 2012 47% of the growth in US pre-tax incomes went to the 1%. Who says so? Not the shadow chancellor, John McDonnell, but the OECD.
Related: The end of capitalism has begunRelated: The end of capitalism has begun
As we all know elites are now perceived to have failed their electorates across the democratic spectrum of advanced economies on unfairness, both of opportunity and income, but not just on that. They are seen to be a mixture of complacent, incompetent and corrupt. But the catalyst in many places has been large-scale immigration and the pressures it places on fast-changing societies. As we all know, elites are now perceived to have failed their electorates across the democratic spectrum of advanced economies on unfairness, both of opportunity and income, but not just on that. They are seen to be a mixture of complacent, incompetent and corrupt. But the catalyst in many places has been large-scale immigration and the pressures it places on fast-changing societies.
The mix varies between countries; it also embraces radical regimes, for instance in Venezuela where the Chavista legacy is incompetent and corrupt, and in more moderately reformist Brazil where the hitherto successful Workers party regime is in dire trouble too. The mix varies between countries; it also embraces radical regimes, for instance in Venezuela, where the Chavista legacy is incompetent and corrupt, and in more moderately reformist Brazil, where the hitherto successful Workers party regime is in dire trouble too.
Is the anger in Rio and São Paulo a revolt of the streets, as a Brazilian judge (“listen to the street”) injudiciously said this week in defence of his own ruling? Or are the elites enlisting gullible citizens in support of their own privileges, as the American Right seems to be doing (do I mean overdoing?) with Donald Trump? Is the anger in Rio and São Paulo a revolt of the streets, as a Brazilian judge (“listen to the street”) injudiciously said this week in defence of his own ruling? Or are the elites enlisting gullible citizens in support of their own privileges, as the American right seems to be doing (do I mean overdoing?) with Donald Trump?
As the Labour MP and historian Tristram Hunt wittily put it, the modern Tea Party is just like the original one in Boston in 1773 – the rich organising a mob to help stop them paying their taxes. Don’t laugh. Rich newspapers here incite their poor readers to demand abolition of inheritance tax to benefit the proprietor, while blaming the poor for being welfare spongers. “Robin Hoods in reverse,” as the writer James Meek puts it.As the Labour MP and historian Tristram Hunt wittily put it, the modern Tea Party is just like the original one in Boston in 1773 – the rich organising a mob to help stop them paying their taxes. Don’t laugh. Rich newspapers here incite their poor readers to demand abolition of inheritance tax to benefit the proprietor, while blaming the poor for being welfare spongers. “Robin Hoods in reverse,” as the writer James Meek puts it.
In office as Labour leader and since leaving it Ed Miliband has tried (paywall) to marshal forces and arguments to get public support behind attempts to tackle this burning issue. Not least serious, he says, is how inequality has bad economic and social consequences for wider society, not just for its zero-hours victims.In office as Labour leader and since leaving it Ed Miliband has tried (paywall) to marshal forces and arguments to get public support behind attempts to tackle this burning issue. Not least serious, he says, is how inequality has bad economic and social consequences for wider society, not just for its zero-hours victims.
Jeremy Corbyn and McDonnell have both made recent speeches – here and here – exposing the hollow rhetoric of “popular capitalism” and “trickle down” theory (more trickle up, says McDonnell). They are groping towards an analysis of society that voters can recognise, plus workable remedies, “tunes people can whistle”, as someone once put it. Miliband’s idea of “predistribution” of incomes – caps on bonuses, a decent minimum wage, etc – never recovered from being a clunky word.Jeremy Corbyn and McDonnell have both made recent speeches – here and here – exposing the hollow rhetoric of “popular capitalism” and “trickle down” theory (more trickle up, says McDonnell). They are groping towards an analysis of society that voters can recognise, plus workable remedies, “tunes people can whistle”, as someone once put it. Miliband’s idea of “predistribution” of incomes – caps on bonuses, a decent minimum wage, etc – never recovered from being a clunky word.
So it’s a work in progress that requires plausible policies and greater trust than currently exists both within Labour’s ranks and with voters. Everyone knows the problems but the Tories certainly have problems too, which ought to be an opportunity to be seized. If Corbyn fails – as he was seen to do so this week – nastier alternatives will thrive. He seems to have done better at PMQs on Wednesday.So it’s a work in progress that requires plausible policies and greater trust than currently exists both within Labour’s ranks and with voters. Everyone knows the problems but the Tories certainly have problems too, which ought to be an opportunity to be seized. If Corbyn fails – as he was seen to do so this week – nastier alternatives will thrive. He seems to have done better at PMQs on Wednesday.
If it’s any consolation, on the very day that Letchworth’s Michael Williams was warning of elite complacency the FT’s chief economic pundit, Martin Wolf, no revolutionary, listed his own priorities (paywall) for restoring confidence between elites and voters. They included an end to Europe’s excess austerity that has reduced aggregate demand since 2008; a curb on the financial sector and shareholder power; better real competition and regulation of big business; restored control over mass immigration into Europe and the US; and fairer (ie higher) taxation of the rich.If it’s any consolation, on the very day that Letchworth’s Michael Williams was warning of elite complacency the FT’s chief economic pundit, Martin Wolf, no revolutionary, listed his own priorities (paywall) for restoring confidence between elites and voters. They included an end to Europe’s excess austerity that has reduced aggregate demand since 2008; a curb on the financial sector and shareholder power; better real competition and regulation of big business; restored control over mass immigration into Europe and the US; and fairer (ie higher) taxation of the rich.
It’s not the Corbyn project’s declared ambition to rescue capitalism from its own stupidity, as FDR’s New Deal did in the US of the 1930s (the rich hated him for it too), but perhaps it should be. Labour would find more friends. It needs them.It’s not the Corbyn project’s declared ambition to rescue capitalism from its own stupidity, as FDR’s New Deal did in the US of the 1930s (the rich hated him for it too), but perhaps it should be. Labour would find more friends. It needs them.