Where next for Occupy Wall Street? Conspiracy theory and the financial crisis

There has clearly been a concerted effort by a wealthy elite to bring us to our current state of pla

Conspiracy theorists have long said that the financial crisis is not a failure of regulation, of taking the eye off the ball, but rather a Machiavellian exercise that has been implemented over many years by free market liberal capitalists, wanting to erase the state and let the market work its wonders.

I want so badly to believe that it wasn't planned, that it was simply stupidity, lack of leadership and a too-big system out of control. But two events last week have finally brought me closer to believing the conspiracy brigade. First was the shocking admission from a City trader on the BBC that "Goldman Sachs rules the world", which rapidly went viral on the internet for its sheer bold-faced honesty. Even the conspiracy theorists thought it was a yes-men stunt, and couldn't possibly be true.

But the exposure of a secret letter from the European Central Bank to Berlusconi -- in which they press for action to privatise public services and overhaul the unions in order to "restore the confidence of the markets", was the final bit of evidence that convinced me.

Of course, I wasn't naïve. I knew that free marketeers were trying to dismantle the state and take over everything -- I just didn't think that it could be so well-mastered and designed, by campaign strategists of the highest order.

As a campaigner, I know when we plot a campaign strategy, its important to take the long-view. We design the opening up of political space through mobilisation and other tactics, and we build in opportunities to take advantage of key political moments. We make sure we identify and inform allies on the inside. And hopefully, after a few years, we will have won our case. But whereas the campaigns I have worked on are about fighting for human rights and the environment, the free marketeers' campaign was to overturn a system that values public goods over private enterprise, replacing it with one that values the wealthy and sees the poor as entirely expendable. Whereas the former might be based on a three or five year horizon, theirs had a 50 + year timeline. And it's finally coming to fruition on a global scale.

You can imagine Milton Friedman and a few other men sitting around a smoke-filled room at the Chicago School of Economics, back in the late 1960s, mapping out a political future with a severe global crisis at just the right moment, so that their dream of a state-free-future would become a reality. "Let's pick a country to start out with and learn some lessons," they might have said. So they started with Chile in the 1970s, pitching themselves as economic experts, and advising then dictator Pinochet to cut public spending and let the corporate sector takeover. No matter that the result was inflation of 375 per cent and 30 per cent unemployment, while eradicating the middle classes.

"This is the pain they have to endure" Friedman and his cronies said at the time. "We'll need a few more countries to strengthen our power," they might have strategised in the review a few years later, in the same, presumably smoke-filled room.

Throughout the 1980s, they worked their way through a few more developing countries as an experiment (for these colonial outposts were easy to sacrifice), as their disciples spread into the Bretton Woods institutions and beyond. They implemented their "lessons learned" (prioritise debt repayment, strip assets, privatise public services, increase wealth for the few).

"We'll need to have more influence," they would have agreed, as they infiltrated the right and the left alike -- the US Republicans and Democrats, the Conservative and Labour parties over here -- ensuring that their economic and policy advisors went through a constant revolving door with big business. They would put forward their advocates in every aspect of political and monetary policy. Now we see "expert" groups comprised of ex-Goldman Sachs bankers in Europe informing regulations on the finance sector.

And when they thought about mobilising, they could do no better than the Tea Party and its various incarnations, not to mention the long-standing think-tanks that celebrate "free enterprise", like the Adam Smith Institute or its US-based cousin, the American Enterprise Institute.

So, decades later, many of the original campaigners now long gone, you can see their offspring enjoying a whisky, a round of golf, a ride on their yacht, toasting their success. The master plan is finally taking hold in the US and Europe, the global economic crisis almost certainly a design of their cadre's original making.

Is it all a conspiracy? Chaos theory, of course, is a counter-balance to this line of thinking, but the point is, in fact, moot. There has clearly been a fairly concerted effort by the hands of a wealthy elite to bring us to our current state of play.

The question is, do we simply accept their interim victory as a fait accompli? Or can we learn from their lessons? Like any real campaigner, I'm not prepared to accept defeat, even one of this magnitude. I'm inspired by the Occupy Wall Street movement taking off in the US, but simply showing dissent isn't enough. Let's learn from the right. We now need to take a long-term, strategic view, mapping out not just what we don't like and want to change, but also who we need to influence, and precisely how.

This is not a short-term project. But the sooner we do this, the more likely we will, in our old age, still be enjoying public services, watching our children have access to education, drinking clean water under green trees and a clean sky, and looking back on a campaign well fought and well won.

Deborah Doane is the Director of the World Development Movement

Photo: Getty Images
Show Hide image

The twelve tricks in George Osborne's spending review

All Chancellors use chicanery, and George Osborne is no exception.

There is no great shame to a wheeze: George Osborne is no more or less partial to them than other Chancellors before him. Politicians have been wheezing away since history began. Wheezes aren’t even necessarily bad policy: sometimes they’re sensible as well as slightly sneaky. And we shouldn’t overstate their significance: the biggest changes announced yesterday were described in a clear, honest and non-wheezy way.

But it’s fun to try to spot the wheezes. Here are some we’ve found so far.


  1. Give people less time to pay their tax bills. Yesterday the Chancellor announced tax rises that will raise, in total, a net £5.5bn in 2019-20. A sixth of that total – £900m – results from the announcement that, from April 2019, anyone paying Capital Gains Tax (CGT) on the sale of a house will have to cough up within 30 days. Has the Chancellor made a strategic decision to increase taxes to pay for public services? Not really – he’s just moved some tax forward from the subsequent year to help his numbers stack up, at the price of bigger hassle for people who are selling houses. Not necessarily a bad thing – but a classic wheeze.


  1. Dress up a spending cut as a minor bureaucratic change. The Treasury yesterday announced what sounds like a sensible administrative change to the Government’s scheme for automatically enrolling people into pensions: “to simplify the administration of automatic enrolment for the smallest employers in particular, the next two phases of minimum contribution rate increases will be aligned to the tax years”. Nice of them to reduce bureaucratic hassle for the smallest employers. This also happens to save the Government £450m in 2018-19, because instead of paying an increased subsidy into people’s pensions from January 2018, it will do it from April 2018.


  1. “Tuck under”.  The phrase “tucking under” is a Whitehall term of art, best illustrated with an example. We learnt yesterday that “DfID [the Department for International Development] will remain the UK’s primary channel for aid, but to respond to the changing world, more aid will be administered by other government departments, drawing on their complementary skills.” That sounds like great joined-up government. It also, conveniently, means that the Government can continue to meet its target of keeping overseas aid at 0.7% of Gross National Income, without having to increase DfID’s budget at the same rate as GNI: instead, other departments pick up the slack. Those bits of other departments’ budgets have thus been “tucked under” the ODA protection. See also: the Government is “protecting” the schools budget in real terms, while slashing around £600m from the funding it gives to local authorities to support schools, so that schools will now have to buy those services from their “protected” funding – thus “tucking” the £600m “under” the protected schools budget. (See also: in the last Parliament, the Government asked the NHS to contribute to social care funding, thus “tucking” some social care “under” the protected health budget.)


  1. Cumulative numbers. Most of the figures used in the Spending Review are “in-year” figures: when the Government says it is giving £10bn more to the NHS, it means that the NHS will get £10bn more in 2019-20 than it got in 2015-16. Then you read something like: “The Spending Review and Autumn Statement provides investment of over £1.3 billion up to 2019-20 to attract new teachers into the profession.” That’s not £1.3bn per year – it’s the cumulative figure over four years.


  1. Deploy weasel words. The government is protecting “the national base rate per student for 16-19 year olds”. Sounds great – and it will be written up in many places as “Government protects 16-19 education”. But the word “base” is doing a lot of work here. Schools and colleges that educate 16-19 year olds currently get a lot of funding on top of the “base rate” – such as extra funding for disadvantaged students. Plans for that funding have not yet been revealed.


  1. Pretend to hypothecate a tax. The Chancellor announced yesterday that – because the EU won’t allow him to reduce the ‘tampon tax’ – he’ll instead use the proceeds of that tax to pay for grants to women’s charities. This sounds great – but all he’s really saying is that, among all the many other millions of pounds of grants issued by the government to various causes, £15m will be given to some women’s charities, which might have got that funding anyway. It’s not real hypothecation: it’s not as if women’s charities will get more if there’s a spike in tampon sales. See also: announcing that local authorities can raise council tax so long as they use it to pay for social care – LAs would probably have spent just as much on social care anyway (and other services would have suffered).


  1. Shave away a small fraction of a big commitment. The Conservative party made great play in the election campaign of its commitment to provide 30 hours of free childcare to 3 and 4 year olds in working families. In the July Budget, it made more great play of re-committing to this. Yesterday, it announced that “working families” excluded any parent working less than the equivalent of 16 hours at the minimum wage, or more than £100,000. That sounds like a fairly small change – but it saves the Government £125m in 2020.


  1. Turn a grant into a loan. If government gives someone a grant, that is counted as spending and increases the public sector deficit. If instead the government gives someone a loan, that doesn’t count against the deficit, because it’s assumed that the loan will be paid back (so the loan is like an asset which the Government is holding). Recently we’ve seen a lot of government grants turning into loans – in the July Budget it was student maintenance grants; yesterday it was bursaries for trainee nurses.


  1. “Reverse” a decision that hasn’t happened yet. In 2012 the Government announced that, from April 2016, it would remove the 3% “diesel supplement” that puts a higher tax on company cars that use diesel than on others. Yesterday, it cancelled this, saving over £265m per year for the rest of the Parliament. People complain less about you cancelling a tax cut when you haven’t done the tax cut yet. (Perhaps this doesn’t qualify as a full wheeze, but there’s something wheezy about it.)


  1. “Protect” things in cash terms. If you really want to protect an area of spending, you should at least increase it in line with inflation, so that it can still buy the same amount of stuff. This government – like the Coalition before it – enjoys protecting things only in cash terms. Examples yesterday included the basic rate of funding per 16-19 year old in education, and the entire children’s services budget.


  1. Freeze things in cash terms. Yesterday the government announced that the repayment threshold on student loans – the level above which ex-students must start paying back their loans – will remain frozen in cash terms for 5 years, instead of increasing with earnings (which is what has happened to date). This saves the Government £200m in 2019-20. In a particularly bold move, the Government has even applied this rule to loans that have already been issued – changing the terms on which students took out the loans in the first place.


  1. Hide all these wheezes in sweeping statements. The first chapter of the Spending Review tells us that “£3 billion [of reduction in the deficit] is being delivered through reforms such as Making Tax Digital and further measures to tackle tax avoidance.” The innocuous phrase “reforms such as” covers the bringing forward of £900m in Capital Gains Tax (see number 1 above) and the £450m saved by delaying automatic enrolment into pensions (see number 2 above).

Catherine Colebrook is chief economist at the Institute for Public Policy Research