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The New Depression

The business and political elite are flying blind. This is the mother of all economic crises. It has

We are living through a crisis which, from the collapse of Northern Rock and the first intimations of the credit crunch, nobody has been able to understand, let alone grasp its potential ramifications. Each attempt to deal with the crisis has rapidly been consumed by an irresistible and ever-worsening reality. So it was with Northern Rock. So it was with the attempt to recapitalise the banks. And so it will be with the latest gamut of measures. The British government – like every other government – is perpetually on the back foot, constantly running to catch up. There are two reasons. First, the underlying scale of the crisis is so great and so unfamiliar – and, furthermore, often concealed within the balance sheets of the banks and other financial institutions. Second, the crisis has undermined all the ideological assumptions that have underpinned government policy and political discourse over the past 30 years. As a result, the political and business elite are flying blind. This is the mother of all postwar crises, which has barely started and remains out of control. Its end – the timing and the complexion – is unknown.

Crises that change the course of history and transform political assumptions are rare events. The last came in the second half of the 1970s, triggered by the Opec oil price spike and a dramatic rise in inflation, which marked the end of the long postwar boom. Its political consequences were far-reaching: the closure of the social democratic era, the rise of neoliberalism, the discrediting of the state, the embrace of the market, the undermining of the public ethos and the espousal of rampant individualism. For the next 30 years, neoliberalism - the belief in the market rather then the state, the individual rather than the social - exercised a hegemonic influence over British politics, with the creation of New Labour signalling an abject surrender to the new orthodoxy.

The modalities of this present crisis are entirely different. Extreme as they may have appeared to be at the time, the economic travails of the 1970s were progressive rather than cataclysmic. The old system did not hit the wall, but became increasingly mired and ineffectual. What swept the social democratic era away was not the force de frappe of an irresistible crisis but that it was accompanied by the steady rise of a new ideology and political force in Thatcherism - and Reaganism in the United States - and its victory in the 1979 general election.

In contrast, the financial meltdown of 2007-2008 demolished the neoliberal era and its assumptions with a suddenness and irresistibility that was breathtaking. The political class, from New Labour to the Conservatives, is standing naked. They are still clinging to the wreckage of their old ideas while acknowledging in the next breath that these no longer work. The financial crisis is a matter of force majeure; political ideas and discourse change much more slowly, even when it is obvious that the old ways of thinking have become obsolete. Meanwhile, there is no political alternative waiting in the wings, refining its radical ideas in think tanks ready to storm the citadels of power as there was in the 1970s, notwithstanding the fact that think tanks are now far thicker on the ground. Instead, it has been the mainstream which senses that neoliberalism no longer works, fatally undermined by events and, ultimately, the author of its own downfall. This crisis will have the most profound and far-reaching political consequences and will in due course transform the political landscape, but it remains entirely unclear in what ways and when that might be.

In all these senses the financial meltdown has far more in common with the Great Depression than the Great Inflation. When the financial crisis consumed Wall Street in 1929 and proceeded to undermine the real economy, engulfing Europe in the process, it was not accompanied by a radical shift towards Keynesianism, but rather a reassertion of sound finance orthodoxy, followed in due course by the adoption of protectionism. The political mainstream as represented by Labour's Ramsay MacDonald and Philip Snowden and the Conservative Stanley Baldwin all sang from the same hymn sheet. Only Keynes and a faction of the Liberal Party enunciated a plausible alternative. Eventually a programme of fiscal deficits and public works was pursued by Franklin D Roosevelt in the United States, but in Britain Keynesianism was not properly embraced until rearmament and the approach of war. Indeed, it was not until 1945 that the combined legacy of war and the Depression belatedly resulted in a fundamental political realignment and the birth of the social democratic era.

The Grim Reaper has finally spoken:

a boom pumped up by credit steroids and a bust that takes us back to the 1930s

Since the financial meltdown dramatically intensified in September 2008, Gordon Brown has managed to ride the economic storm rather more successfully than the Conservatives, or, for that matter, than Tony Blair would have done. It is Vincent Cable, the Liberal Democrats' econo­mics spokesman, however, who has indubitably emerged as the political sage, unafraid of confronting neoliberalism's shibboleths, demonstrating a clarity of mind and the political courage to tell things as they are, in a way that has escaped all other prominent politicians. Although Brown was the economic architect of the past decade and was responsible, more than anyone else, for its excesses and was shaping up to be a rather disastrous Prime Minister, he displayed last autumn, at least initially, an agility of mind and nimbleness of foot that defied the expectations of those who believed he was capable of neither. He revelled in the sense of purpose and vision offered by the crisis, seemingly prepared to jettison the thinking that had imbued his previous decade as chancellor.

But Package Part I, widely hailed at the time and imitated elsewhere, proved woefully inadequate, and the financial system remains frozen. Meanwhile the waters are rising up the Good Ship UK, threatening to transform the banking crisis into a fiscal and currency crisis. It seems unlikely that, if that should happen, Brown will survive the next election.

Even if it does not happen, Brown faces a serious problem about his own past role, because Britain’s crisis has been greatly exacerbated by the soft-touch regulation, easy credit, runaway house inflation and overexpansion of financial services over which he presided and for which he is accountable. So far he has refused to admit or accept responsibility for his actions – he initially had the temerity (or foolhardiness) to argue that the UK was better placed than other countries to deal with the credit crunch, even though it has become abundantly clear since that the very opposite was the case. So while Brown remains in denial, the plausibility of his new turn, and his understanding of what is entailed, must be seriously doubted.

Indeed, after its initial boldness, the government now seems trapped by its past actions and its former ways of thinking. Brown's failure to accept the need to nationalise the banks suggests the limits of his new-found political courage, and his inability to embrace the logic and imperatives of the new situation. He is still a prisoner of his old timidity and his conversion to the neoliberal cause. It is his good fortune that the Cameron Conservatives have been hugely wanting in their response to the financial meltdown. Having spent his first years as leader of the opposition seeking to reassure the country of his centrist credentials, David Cameron, at the first whiff of gunfire, has turned on his heels, rejected Keynesianism and, at the very moment when events have shown Thatcherism to be deeply flawed and historically out of time, headed back to the Thatcherite womb of sound finance, arguing that a government must balance its books and that deficit financing, Keynesian-style, is reckless and irresponsible.

But all this, it must be said, is the small change of politics. The crisis threatens in time to sweep away the political world as we know it and those who fail to grasp its magnitude and meaning. Far more is at stake than the fortunes of a few leaders, be their name Brown or Cameron. Who knows where things will be this time next month, let alone next year or, indeed, in 2012? The financial meltdown now rapidly plunging the western world into what increasingly looks like a depression is the first great crisis of globalisation. There was plenty of warning. The Asian financial crisis of 1997-98 proved a salutary lesson about the dangers posed by huge capital movements that were subject to precious little regulatory control. Three economies capsized (South Korea, Thailand and Indonesia) and others stood on the brink.

There were other earlier warning signs, notably Mexico in 1995, when GDP fell by 9 per cent and industrial production by 15 per cent, following a run on the peso. These crises were blamed on the immaturity and fecklessness of national governments - in the case of east Asia on so-called crony capitalism (which, incidentally, prompts the question of how we should describe Anglo-American capitalism) - which the International Monetary Fund obliged to engage in swingeing cuts in public expenditure as a condition of their bailouts.

Yet what if such a crisis were to be no longer confined to the peripheries of global capitalism but instead struck at its heartlands? Now we know the answer. The crisis has enveloped the whole world like an uncontrollable virus, spreading from the US and within a handful of months assuming global proportions, at the same time mutating with frightening speed from a financial crisis into a fully fledged economic crisis. In so doing, it has undermined the foundations on which the present era of globalisation has been built, namely scant regulation, the free movement of capital, a bloated financial sector and immense reward for greed, thereby bringing into question the survival of globalisation as we now know it.

Enormous international flows of unregulated capital have capsized the international financial system - with disastrous consequences for the real economy - in a manner akin to the effect of a roll-on, roll-off ferry shipping too much water. We can now see the cost of free-market capitalism and light-touch regulation. Iceland may provide an extreme example of the consequences of the credit crunch but it also illustrates the dangers facing the more vulnerable economies, the UK included, in a deregulated world where the market rules: a small, open economy; a large, internationally exposed banking sector; an independent currency that is not a serious global reserve currency (of which there are only three); and limited fiscal strength. These propositions have constituted the core economic beliefs - from Thatcher and Lawson to Blair and Brown - that have informed policymaking over the past three decades and without which, it was claimed ad nauseam, an economy could not succeed. Heavy-handed regulation and an overbearing state would serve only to frighten off capital and condemn a country to slow growth, stagnation and global marginality. Now we know the fallaciousness of these claims and the consequences of "letting the market decide".

Like Iceland, albeit not as extremely, Britain has been living in a fool's paradise. A failure to regulate the banks and other financial institutions in any meaningful fashion allowed bankers to behave in a grossly irresponsible and avaricious fashion; a boom that was made possible only by a government-enabled credit binge in which people borrowed recklessly; a bloated financial sector that grew to represent over 8 per cent of the total economy and which was found to have been built on foundations of sand; an overvalued currency that made manufacturing exports uncompetitive and thereby resulted in an unnecessary and counterproductive contraction in the manufacturing sector which must now be reversed; an absurd belief that boom and bust had been banished for ever, allowing the banks to turn a blind eye to the inflating of various asset bubbles and display a profound ignorance of the history of capitalism; a persistently chronic current account deficit that can no longer be compensated for by inward capital flows; monstrous salaries for those at the top of the financial and corporate tree, which were justified in terms of a trickle-down effect that remained a chimera, and as the reward for risk which was, in fact, a reward for greed and failure; growing inequality, which was justified in the name of a more competitive economy accompanied by declining social mobility in the cause of an open and flexible labour market; and, finally, the mushrooming of what can only be described as systemic corruption on a mega-scale as the state ignored the gargantuan abuses of those who ran the banks and other financial institutions, while regulatory authorities willingly colluded in their excesses.

This is the sad story of the New Labour era.

The ultimate cost of this debacle as yet remains unknown. What began as a financial crisis is threatening, as the government seeks to bail out a bankrupt financial sector, to become a currency crisis, with foreign investors concerned about the effects this might have on the value of sterling, and perhaps even worse, ultimately a sovereign debt crisis, with growing doubts about the UK’s financial viability. Until there is some end in sight to the financial crisis, and a line can be drawn under the banks’ indebtedness, we will not know the answer to these questions. One thing is clear, however: whatever the limitations of the social democratic era, it was never responsible for such an all-enveloping and cataclysmic crisis as the one that the neoliberal era – and the Thatcherites and New Labour – have managed to produce. After all the boasting about the virtues of the Anglo-American model of capitalism, the Grim Reaper has finally spoken: a boom pumped up by credit steroids and a bust that takes us back to the 1930s.

There are two key aspects to this crisis: national and global, with the latter promising to be rather solutions are concerned, we are in uncharted territory, with close to zero interest rates, a Keynesian-style fiscal boost that may prove inadequate to the task and could well fail, a hugely indebted financial sector that threatens to leave us with an enormous future tax burden and a greatly expanded national debt. All of this, furthermore, must be addressed in the context of an open-market regime which is very different from those of previous eras, and which could render Keynesian-style national solutions ineffectual. What would greatly assist any national recovery is a co-ordinated global response to the crisis; in other words, global co-operation at the highest level. This cannot be ruled out, but it would be a brave person that would bet on it. It was exactly the lack of international co-operation that bedevilled recovery in the 1930s and eventually led to the Balkanisation of the world into regional currency and trading blocs.

The most important single question in this context is the relationship between the US and China. Will the Obama administration be able to resist the slippery slope of creeping protectionism? Will arguments over the revaluation of the Chinese renminbi be resolved amicably? If the answer is in the negative, then the global outlook will be very bleak indeed and so, also, as a result, will be the prognosis for national recoveries. Indeed, the prospects would look disturbingly like those of the 1930s, with growing international antagonism and friction and a continuingly intractable crisis at a national level, with only the very slowest of recoveries.

Around the world there is growing evidence by the week of a resort to national solutions at the expense of others: measures to subsidise industries that are in severe difficulties; the Buy American clause that was inserted by the House of Representatives into Barack Obama's latest package (though since weakened); the industrial action in Britain against foreign workers; the withdrawal of banks to their national homes; the attack by Timothy Geithner, the US treasury secretary, on China as a currency manipulator. No Rubicon has been crossed but the warning signs are clear. A retreat into protectionism and beggar-thy-neighbour policies will deliver the world into a second Great Depression.

So what will be the political effects of the financial meltdown? Some are already evident. Just as the Great Inflation of the 1970s played to the tunes and concerns of the right, with its invocation of the market, the New Depression suggests the opposite, the inherent limitations of the market and the indispensability of the state. Indeed, the speed with which the neoliberal refrains and invocations have unravelled has been breathtaking. The single most discredited aspect of the social democratic legacy was nationalisation, and yet the government, with the most extreme reluctance, has been obliged to nationalise Northern Rock and partially nationalise the Royal Bank of Scotland and the merged Lloyds TSB and HBOS. Who would have ever imagined, at any point during the past 30 years, that no less than the financial commanding heights of neoliberalism would have ended up in the hands of the state, with precious little opposition from anyone except a few disgruntled shareholders? Even now, however, the Labour government, still trapped in the ideological straitjacket of New Labour and displaying extreme timidity in the face of powerful vested interests, which has always been a New Labour characteristic, is running scared of the inevitable logic of the situation, namely that all the high-street banks should be taken into public hands until the mess is sorted out. Anything else leaves the public responsible for all the debts and risks, while the banks continue to be answerable to the very different interests of their shareholders. But such is the fury and depth of the crisis that this scenario is highly likely.

The state is experiencing an extraordinary revival. The credit crunch is the most catastrophic example of market failure since 1945. It became almost immediately obvious to wide sections of society that there was only one institution that could potentially sort out the mess: the state. Far from being a rational distributor of resources, the market had proved the opposite. Far from bankers and financial traders embodying the public interest, they have been exposed as irresponsible and dangerous risk-takers whose primary motivation was voracious greed. If trade unionists and the nationalised industries were the demons of the 1970s, bankers and the financial sector have assumed the mantle of public enemy number one in the late Noughties. In fact, the irresponsibility of bankers, and the damage they have inflicted on the economy, hugely exceeds anything that the unions could possibly be held responsible for in an earlier era. Meanwhile, the fallen heroes of the pre-Thatcher era, most notably Keynes, are duly being exhumed, restored to their rightful position, and pored over for their ability to throw light on the present impasse and what might be done; if the recession turns into a depression, Marx will once again become required reading.

This political shift is not just a British phenomenon, but a more general western one. The most striking feature of President Obama's inaugural speech was the way in which it embraced and legitimised African Americans for the first time in American history. But it also had another powerful theme, namely its invocation of the public interest and public service. After decades during which American political discourse has been dominated by the language of individualism and the market, it came as a shock to hear a US president articulate a very different kind of philosophy, renouncing private greed in favour of the public good. Obama's election can in part be seen as a response to the failure of the neoliberal era, as well as of Bush's neoconservative agenda; certainly his election represents a remarkable shift to the left in US politics, in contrast not just to Bush, but every recent US president, including Reagan, Bush Sr and Clinton. That Obama is the first African-American president also represents a remarkable redrawing of the political landscape. There is no more powerful - nor difficult - way of redefining society or to embrace a new form of representivity than to include a racial minority that has been excluded.

This brings us finally to what might be the longer-term global consequences of the crisis. Again, we are inevitably stumbling around in the dark because so much depends on whether the recession metamorphoses into a fully fledged depression and in what way and shape the world eventually emerges from the debacle. That said, two key points can be made. First, the credit crunch signals the demise of the Anglo-American, neoliberal model of capitalism, which has exercised a hegemonic influence over western capitalism and been the blueprint for globalisation since 1980. Because of its catastrophic failure there seems very little chance of its resurrection. The process of recovery - whenever that might be - will be accompanied by an overriding concern to ensure that the events of 2007-2009 are not repeated in the future, just as happened in the US in the 1930s with the strict regulatory framework that was introduced for the banks after their comprehensive failure in 1929. This will include the search for a new global regulatory framework that controls and constrains international movements of capital, as well as strict controls over the financial sector at a national level. A new set of political priorities - and with it a new political language - will be born.

Meanwhile, the influence and prestige that the US, and to a far lesser extent Britain, have enjoyed will vaporise in the same manner as their neoliberal model. Their 30-year project has failed and they will be obliged to pay the price in their reputation and the esteem in which they are held. The countries of the former Soviet Union and the casualties of the Asian financial crisis that were forced to swallow the neoliberal medicine will have good reason to feel aggrieved and resentful. The west has been forthright in accusing the non-western world of corruption. The financial meltdown suggests that the west has been guilty of huge hypocrisy. Systemic corruption has lain at the heart of the western financial system. An entirely disproportionate and extortionate level of bonuses has ensured the enormous enrichment of top executives in the financial sector, all in the name of reward for success, when in fact it was the reward for failure. In addition, we have had the collusion of the credit-ratings agencies; a regulatory system characterised by its failure to act as any kind of constraint; and governments that ensured the continuation of this web of relationships and applauded its achievements. The corruption was on a breathtaking scale as evidenced by the size of the bailouts required to rescue the banks. It will be difficult for western governments to make these kinds of accusations of others in the future. That Obama represents such a voice of hope will help to mitigate the inevitable ill-will towards the US, but this should not be exaggerated amid the euphoria surrounding developments in Washington.

The second point is more far-reaching. It is doubtful whether we can still describe ourselves as living in the American era or, indeed, the Age of the West. If not yet quite over, both are certainly drawing to a close, and it seems likely that the effect of the financial meltdown will be to accelerate the rise of China as a global power. The contrast between the situation in China and that in the US could hardly be greater, even though it has been partially obscured by the depressive effect of the western recession on Chinese exports and on China’s growth rate. While the US economy is contracting, China’s grew at roughly 9 per cent in 2008 and is projected to grow at about 6 per cent in 2009. Its banks, far from bankrupt like their US counterparts, are cash-rich. China enjoys a large current account surplus, the government’s finances are in good order and the national debt is small. This is a crisis that emanates from the US and whose impact on China has been essentially indirect, through the contraction of western markets. It is the American model that has failed, not the Chinese.

One of the factors that intensified the Great Depression, and indeed was part cause of it, was Britain's growing inability to continue in its role as the world's leading financial power, which culminated in the collapse of the gold standard in 1931. It was not until after the war, however, that the US became sufficiently dominant to replace Britain and act as the mainstay of a new financial system at the heart of which was the dollar. The same kind of problem is evident now: the US is no longer strong enough to act as the world's financial centre, but its obvious successor, namely China, is not yet ready to assume that mantle. This will undoubtedly make the search for a global solution to the present crisis more difficult and more protracted.

Martin Jacques's new column will be published fortnightly in the New Statesman. His book "When China Rules the World: the Rise of the Middle Kingdom and the End of the Western World" will be published in June (Allen Lane, £25)

the global downturn in numbers

    0.5%

    IMF prediction for global growth in 2009 - worst since WWII

    Up to 40 million

    Number of people who will lose their jobs this year, according to the International Labour Organisation

    $9.7trn

    Total pledged by the US alone towards solving the crisis

    3.6%

    Proportion of GDP pledged by the G7 and BRICs countries towards fixing the crisis (1.5% this year)

    2.3m

    Number of US properties that received a default notice or were repossessed in 2008. In the UK, 45,000 homes were repossessed - another 75,000 are expected to be taken in 2009

    14

    Number of major global banks which collapsed, were sold or were nationalised during 2008

    200,000

    Number of European companies expected to fail this year; an additional 62,000 are expected to fail in the United States. These figures represent record levels of insolvency

    52%

    Increase in UK company failures between late 2007 and late 2008

    14%

    Drop in level of Chinese exports during January

    1%

    Current UK interest rates (down from 5% in October 2008). In the US, rates have fallen to between 0 and 0.25%

How the crisis unfolded

13 September 2007 Run on Northern Rock begins when it is revealed that the bank has requested emergency support from the Bank of England

21 January 2008 FTSE suffers worst falls since 11 September 2001

February 2008 Northern Rock nationalised

17 March 2008 JP Morgan Chase takes over the US investment bank Bear Stearns

12 July Mortgage lender IndyMac collapses - second biggest US bank in history to fail

9 August 2007 European Central Bank pumps ?95bn into banking market

7 September Financial authorities step in to rescue Fannie Mae and Freddie Mac

9 September Bradford & Bingley becomes second British bank to be nationalised

15 September Lehman Brothers files for bankruptcy

16 September AIG, biggest insurance firm in the US, receives $85bn rescue package

3 October 2008 US government announces $700bn Troubled Assets Relief Programme

8 October UK launches its first bank bailout plan, making £50bn available

October 2008 Iceland's banks collapse. IMF extends £1.4bn ($2.1bn) loan a month later

24 November Alistair Darling announces a temporary cut in VAT from 17.5 to 15 per cent

23 January 2009 UK enters recession

28 January US Congress passes Barack Obama's $819bn stimulus package

5 February UK Monetary Policy Committee votes to cut interest rates to 1 per cent - the lowest in over three centuries

Michael Harvey

Martin Jacques is a journalist and academic. He is currently a visiting fellow at the London School of Economics Asia Research Centre and at the National University of Singapore. Jacques previously edited Marxism Today and co-founded the think-tank Demos in 1993. He writes the World Citizen column for the New Statesman. His new book on the rise of China, When China Rules the World, will be published in June.

This article first appeared in the 16 February 2009 issue of the New Statesman, The New Depression

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The working class revolts

In the spirit of William Cobbett, a young writer travels by bicycle through Britain’s former industrial heartlands before and after the vote for Brexit.

One recent afternoon I set out on my old Raleigh bike on a tour of post-Brexit Britain. Two years earlier I had travelled the country on my bike as I researched a book. Now, after the vote for Brexit, I began another journey, this time with an even stronger sense of political disorientation. I wanted to discover what had become of the euphoria and, indeed, anger so present after the referendum of 23 June. For two weeks I cycled through the ex-industrial towns and cities of the Midlands and the north of England, two of the regions I visited in 2014.

My method then had been basic and, to some, ill-advised. Over the four months I cycled, I either wild-camped or stayed in the homes of people who had heard about my venture by word of mouth, or whom I’d met along the road, and I asked people, simply: “What is life like here?” I received a bewildering range of responses, from ­worries about wages or what world their children might inherit, to explanations about ecological and community projects built on a sense of renewal and hope. I encountered generosity and insight into different ways of life in Britain, and last summer published my findings as Island Story, a travelogue in the spirit of William Cobbett and Orwell.

Many of the areas I had written about are now readily associated with Brexit, such as Barnsley (68 per cent Leave), the former mining town in South Yorkshire. Covering the immediate aftermath of the referendum, Channel 4 News sent a crew there. Its report featured a local man who explained why he had voted Leave: “It’s not about trade or Europe or anything like that, it’s all about immigration. It’s to stop the Muslims coming into the country, simple as that.”

The presentation of what people in this town or Sheffield and Wakefield nearby had called “Barnsley Man” had been a sore point. In Sheffield (51 per cent Leave) Allie, an artist and teacher, felt it absolved the wealthier south of responsibility, even though the south had voted in far greater numbers to leave. Barnsley Man – old, white, working class, ignorant, racist, and unable to speak without losing his temper – was a sign of a prevailing narrative of Brexit as a catastrophic revolt by a misinformed and alienated northern working class, an explanation that became increasingly unsatisfactory as I travelled and talked to people.

“Damn good thing it were, too,” said one former miner at a working men’s club, as we discussed Barnsley’s vote to leave. Some agreed, others shook their head. I had passed “Vote Leave” stickers plastered on the walls of a derelict social club, and encountered common justifications that cited uncontrolled eastern European migration, resulting in the loss of local jobs. But people’s concerns were not about immigration itself, or cultural identity; rather, they centred on low wages and employment. “There’s nowt round ’ere ’cept call centres,” said Rory, a young betting-shop worker.

Many customer-service centres operate in the nearby Dearne Valley. The work is insecure, stressful and subject to a demeaning level of surveillance (call response rates, targets met, time spent in the toilet). Other sources of employment include distribution warehouses and factories of several major clothes retailers. I was told repeatedly that these companies recruited and bussed in Polish workers from Warsaw to work on a seasonal basis for low pay, at the expense of local people.

“I’ve been trying to take it to the papers,” a young woman said to me as the issue was raised in the back room of the Red Shed, the Labour club in Wakefield, West Yorkshire (66 per cent Leave). She had become aware of the practice of bussing in through a friend at one factory, but my later research showed that it’s an open secret. One must attribute some validity to such stories, at least in terms of how local people feel. They hint at the complex and contradictory stories and motivations behind Brexit in former industrial areas such as these.

“It’s divide and rule,” said a woman who had earlier told me about her involvement in the miners’ strike pickets thirty years earlier. “We have to fight to push up their wage, and challenge the bosses.”

 

***

 

In what the political economist William Davies calls a “shadow welfare state”, many people across the north are employed in poorly paid call-centre or service-sector jobs, subsidised by in-work tax credits. Child and working-tax credits, implemented by the New Labour government, in effect benefit low-wage employers as much as workers, and cost the state £30bn a year. A further £9.3bn in housing benefits was paid to private landlords last year. Though tax credits and housing benefits provide a lifeline to workers and their families struggling to make ends meet, they do nothing to address the underlying problems of low wages or unemployment, or the need for a new public strategy to encourage higher-skilled, higher-waged work.

Cycling from one former industrial town to the next, I observed that the primary contributions to the built environment in the past three decades or so are the retail park and out-of-town supermarket. Like the call centre or the distribution warehouse, they are the principal points of Britain’s service sector, and are enabled by unskilled local workforces on state-subsidised low wages and the complex logistics of globalised trade. Spread across Britain and similar in appearance everywhere, these bland structures signal the possibilities and pitfalls of state investment guided by short-term economic gain.

Workers are increasingly caught in a cycle of insecure and unpredictable shift patterns, thanks to zero-hours contracts. This makes claiming housing benefit difficult, and includes spells of unemployment during which credit cards, payday loans or borrowing from friends and family become the main means of subsistence. A recent Trades Union Congress report found that 3.2 million households were in “problem debt”, spending more than 25 per cent of their household income on unsecured debt repayments. Of this number, 1.6 million households are in “extreme debt”, handing over more than 40 per cent of their earnings to creditors. Some of the poorest households choose not to join the electoral register, fearing that their details will be shared with debt collection agencies, and are thus locked out of political representation.

In the wilted yet cheerful seaside town of Morecambe, Sonya painted a stark picture of her work as a private lettings agent. Over £9.3bn of public money was paid to private landlords in housing benefit last year, a doubling over ten years, and far more expensive than building affordable accommodation. Sonya’s tenants are “trapped” in cycles of poverty and debt, with no obvious reprieve or refuge. “What good are food banks when people can’t afford to pay their gas or electricity to heat the food?” she said.

Although such stories illustrate the UK’s gaping wealth inequalities, they also show the dismal progress in some areas in the quarter-century since John Major’s pledge of a “classless” society and the infamous (mis)quote of John Prescott that “we are all middle class now”. The political effects of such social shifts have not yet fully come to light. The surge in support for Ukip across the ex-industrial north and east over 2014-15 has been stalled, for now, by uncertainty about the party’s leadership since Nigel Farage’s resignation. But I was struck by a pessimism in these communities, so many of which felt overwhelmed by an unfair fate. The horizons of political possibility had been hemmed in by the miseries of economic hardship.

Many I met felt untouched by politics, perhaps because politicians of all stripes rarely speak with any insight into the difficult decisions involved in juggling household debt, or the mixed feelings involved in claiming benefits. It has become a banality to invoke the Stakhanovite image of “hard-working families”; less often do we hear directly from these individuals, with the occasional exception of exploitative TV series such as Channel 4’s Benefits Street or The Great British Benefits Handout (Channel 5).

On the road, few people spoke about political leaders, and Labour’s spate of self-flaying in its second leadership election since May 2015 prompted indifference or disappointment. Talk of Trident or renationalising the trains may be too theoretical, even middle class, in places where basic poverty is an elementary concern. Usually, luminaries on the left, such as the polemicist Owen Jones, address the comfortably converted, gathered punctually in town halls, immune from the debate among the depoliticised masses in the pubs, supermarkets and bedrooms of this island.

 

 

***

 

Cycling around Britain, I would set out most days without knowing where I’d end up. Such nomadism came not without stresses. But it was a fair exchange for serendipity – sunset conversations with shepherds along Loch Eriboll, blue jokes in the lock-ins of Liverpool and Dalmellington, or the drama of lugging a weighty steel mule up the steeps of Snowdonia and the eye-watering wonder of plunging down the other side.

I had no map, and sometimes relied on the tent and a discreet field or park for a place to kip, but more often I found contacts through a blog and social media. Pulling over on street corners or stopping at fast-food outlets, supermarkets and pubs, I would mine passers-by for clues.

As I travelled through Northamptonshire, Lincolnshire and Yorkshire, I listened to people projecting the effects of austerity on to migrants. In Corby, Scottish workers told me that Poles had “overrun” the area. “I just don’t like the ones claiming [benefits],” said a barmaid in one town-centre pub. Others such as Ashgar, a former steelworker in Rotherham, blamed the “greed” of “London” or factory owners for the loss of local steel jobs, rather than any government policy or trend towards deindustrialisation.

Stories of feeling left behind by the economic development of “London” were common. “London” had privatised industries and utilities, and cut funding from communities to prop up a corrupt banking system while people outside the capital were sanctioned for minor or non-existent benefit improprieties. “London” had imposed a narrow political and cultural vision on the rest of the country which gave communities no great say in how they were governed. To many of the people I met, the word “London” carried the same negative connotation as “neoliberalism” or “globalisation”, and had a similar meaning.

The chain stores may stock the latest cheap gadgets and clothes from the Far East, but for many communities the loss of jobs, community buildings, social care and affordable rents has been too high a price to pay. Voting Leave became a kind of protest button, pushed in anger at decades-long disempowerment. Brexit, a largely English independence movement ostensibly against the EU, is at times indistinguishable from a movement for independence from “London”. Voters judged that the potential hardships associated with leaving were a price worth paying to regain sovereignty from the capital.

In Nottingham (51 per cent Leave), David talked of friends in his home town of Long Eaton, Derbyshire, who had voted overwhelmingly in favour of Brexit. “A whole two generations of massively disenfranchised people put two fingers up to the elite,” he said. To Jeremy Corbyn’s chagrin, many Brexiteers live in safe Labour seats.

For the painter John Wilkinson, the problem was clear: “In England it is already yesterday.” Among left-wing artists in the exhibition “Fighting for Crumbs” in Sheffield, the mood was disillusioned yet reactive. In these pessimistic visions, the future seemed lost or abandoned. Beside Wilkinson’s paintings were photos by Connor Matheson capturing teenage ravers, food banks, Grimethorpe miners celebrating Thatcher’s death, and more mundane moments amid allotments and council estates festooned with St George flags. Reconstructions of the past seemed to preoccupy many people, as they struggled to identify new sources of pride in their decaying environment.

Dependency on benefits to subsist in boring, insecure or difficult low-wage work does not inspire gratitude. Writing in June in the London Review of Books, James Meek made a similar observation about farmers, many of whom supported Brexit even though they are heavily reliant on EU subsidies to augment the plummeting prices paid by supermarkets. “It’s an unholy mess that’s developing,” said Eden, as we spoke on his sheep-rearing smallholding beside a large Argos distribution centre in Darlington, on Teesside. Globalisation has reduced prices and forced many farmers into a race to the bottom. “People want to blame the poor for the situation they find themselves in,” he said.

But it’s not only farmers who feel beleaguered, their pride or way of life tested by recent developments. The collapse of manufacturing, mining and steel since the late 1970s has resulted in what Jeremy Seabrook, interviewing people in the West Midlands last summer, called “unhealed social and psychological lesions of class”. In his book Cut Out: Living Without Welfare, Seabrook argues that these areas were not given the chance to grieve for the industries they have lost and around which generations of communities had developed.

Travelling through the same parts, I found it common to hear of cities spoken about in the past tense. In Wolverhampton it was locks and furniture; Nottingham, bicycles and lace; in Bradford and Halifax, textiles. Each town had its trade. “It’s got a lovely history,” said Ian in Wolverhampton. “Shame it’s a s***hole now.” For there is no belonging or co-ownership in the glut of retail parks left behind, nor in the finance sector or on the property ladder. “We used to make things,” said Steve in Derby, using his own city’s economic uncertainties as a symbol of something broader.

Emma, a part-time teacher working in the Midlands in Tipton and Dudley, told me about young mothers to whom she taught basic budgeting and childcare. “People complain about scrounging . . . Most people I meet, they’re just trying to get by.”

The Brexit vote has exposed rather than initiated this incoherence. If a shared sense of place or identity is defined by making or doing, then those who cannot make or do – from welfare recipients to foreign nationals who use the NHS – become, in the eyes of some, despised. Two implications follow. First, pride in work correlates to a misleading notion of a “traditional working class”, readily linked to manual work, social conservatism and older age, such as that of Barnsley Man. This understanding of class as primarily cultural (through which the concept of a beleaguered, mythically homogeneous “white working class” often arises) obscures what is the original and more obvious economic definition of “the working class”: those who must work, will work, or have had to work full-time for a basic living. Class is no longer clear.

A second implication of pride in work emerges in how this is internalised where such work isn’t readily available, as in Barnsley or Rotherham, or the struggling former industrial cities of the north-east, such as Ashington and Middlesbrough, or Newport in south Wales. In Langley Moor, County Durham, Clarissa and her daughter told me about the high suicide rate among young men. Elsewhere I heard tales told, in hushed tones, of brothers, fathers and friends who had taken their own lives – each for different reasons, but so often in places bereft of investment and hope. Where communities, certainties and “jobs for life” are disarrayed by forces so distant and complex they might well be confused with fate, the individual effects can be terrible.

 

 

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Pessimistic narratives of decline and “Broken Britain” are tedious, and also stand as obstacles to imagining political alternatives. Seismic changes to the fundaments of the United Kingdom will have consequences over the coming decades, but exactly how so remains unclear. Absent from most of the debate during the Brexit campaign was a discussion about the future of the political union between not only Britain and Europe, but also the UK’s member states. What kind of society do, say, the English desire? How will it be powered, how will its people house and employ themselves, and how will it be governed?

Across my post-Brexit journey, I quizzed people about the kinds of political transformation they would like to see. In Nottingham, I heard compelling arguments for a universal basic income and a 30-hour working week, aided by automation and progressive taxation. In Sheffield, the artists Glen Stoker and Anna Chrystal Stephens invited me on a group trespass of a patch of derelict wasteland near the city centre. Discussions about what this site could become in public hands led to wider questions about who owns much of Britain. In Manchester (60 per cent Remain), Jen enthused about rediscovering politics along with neighbours in her community and Steve refused to acknowledge what some would call realism – the necessity of compromising one’s political intentions. In Liverpool (58 per cent Remain), Brian, an indefatigable trade unionist, debated with international students the need to invest in green energy.

All were inspired by developments in Scotland, where a very different-natured independence campaign has led to lasting discussions about a progressive and better future for all. Instead of reactions against low wages, or perceptions of immigration or the effects of austerity, here there are ­discussions about renewable power, buying back local land into common ownership, as well as rediscovering local histories and the Scots Gaelic tongue.

Is it naively idealistic to imagine that the same could happen here, elsewhere in our post-Brexit land? Perhaps, but within such hope lies the motivation to act.

J D Taylor’s book “Island Story: Journeys Through Unfamiliar Britain” is published by Repeater

This article first appeared in the 02 February 2017 issue of the New Statesman, American carnage