Pay up: a banner outside St Paul's Cathedral during the Occupy London protests. Photo: Rex/Matt Lloyd
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Risky business: Peter Wilby on Owen Jones’s The Establishment

Jones is excellent on how the state, supposedly rolled back, has just changed its nature so that, as big as ever, it has become a creature of capital, controlled by the corporate sector.

The Establishment: and How They Get Away With It 
Owen Jones
Allen Lane, 358pp, £16.99

When Lehman Brothers collapsed in 2008, sparking the deepest recession in at least 70 years, it seemed that the end of neo­liberalism, even of capitalism, was close. This was the biggest market failure in history, largely attributable to the dismantling of regulatory structures that had once restrained bankers, traders and speculators. We had long been told by neoliberals that markets were super-efficient vehicles for allocating resources and that, left to themselves, they would deliver prosperity for all. Surely nobody would believe that any longer? Surely the merits of the state, so long reviled as a meddlesome enemy of enterprise and initiative but now compelled to step in and rescue the masters of the universe, would at last be recognised? Surely governments would take control of banks and perhaps other commanding heights of the economy as Labour Party pioneers envisaged? Surely bankers would lose their lavish salaries and bonuses? The party was over, wasn’t it?

It wasn’t. On the contrary, almost nothing changed. What had gone wrong, we were told, was not the market but the state. Its reckless overspending, particularly on welfare, was responsible for the crisis. Governments, not private companies, had borrowed too much. The pain was inflicted on families with modest incomes while, for bankers, the champagne continued to flow. Neoliberalism’s cheerleaders scarcely paused for breath. In 2011, the Institute of Economic Affairs, one of Thatcherism’s original outriders, published a report calling for public expenditure to be cut by half. The state’s main policy response to the crisis was to create more money through quantitative easing (QE) and to give it not to ordinary consumers but to financial institutions. As the Bank of England admitted, the main beneficiaries were those who already held most assets: according to one estimate, the richest 10 per cent gained £322,000 each up to 2012, while the poorest 10 per cent lost £779 each.

How was all this possible? How do the rich in general and bankers in particular get away with it? That is the question Owen Jones attempts to answer. In this, despite thorough and admirably vivid reporting, he only partly succeeds. He is excellent on how the state, supposedly rolled back, has just changed its nature so that, as big as ever, it has become a creature of capital, controlled by the corporate sector. As Jones shows, British capitalism is highly dependent on state largesse and rich corporations are the biggest scroungers of all.

Rail, arms, nuclear energy and (post-crisis) banking are examples of industries that receive big state subsidies. Companies such as Atos, A4e, Serco and G4S make substantial profits from supplying outsourced state services, which do not offer obviously better value for money than when the state ran them. Under the private finance initiative (PFI), hospitals and schools pay large “service fees” to private companies. Chunks of the NHS are now, in effect, being privatised and, if the Tories are returned to power, schools cannot be far behind. Lawyers, accountants and consultants are richly rewarded for drawing up the complex contracts that govern these arrangements.

Jones is good, too, on how the business and political elites have become inter­twined. Donations to party coffers and sponsorship of party conferences and ministers’ pet projects (such as academies) are the tip of a sizeable iceberg. In the first ten months of this coalition government, ministers met corporate representatives 1,537 times against just 130 meetings with trade unionists – and that excludes chats on the phone and informal contact at conferences, parties and dinners. Former ministers and top civil servants take up board positions or consultancies with the same corporations they dealt with in office. Ministerial advisers and quangocrats, many of whom used to come from academia, trade unions and consumer groups, are increasingly from the corporate sector. Big accountancy firms help to design tax policy and then advise clients on how to get round the rules. The tax collector, HMRC, has developed cosy relationships with those same firms so that, according to the Tax Justice Network campaigner Richard Murphy, the global financial elite has “captured” both the writing of tax laws and the policing of them.

One of Jones’s interviews was with Douglas Carswell, the right-wing Tory MP who recently defected to Ukip. According to him, Britain is now corporatist rather than capitalist, with “big business and big government getting together and carving up a large slice of the economic pie for their advantage”. Together, they form a new establishment. This establishment gets away with it, Jones writes, because it has a cohesive ideology supported by a media that is largely controlled by corporate interests. Any proposal to clip its wings is “bad for business” and so bad for jobs and national prosperity. New Labour, despite its mildly redistributive policies, was much loved by the business sector because it accepted the establishment’s ideology, along with its cleverly twisted language in which the words “vested interests” mean workers and unions, while “reform” and “modernisation” mean handing over public services to unaccountable private capital.

Yet neoliberalism has palpably failed to deliver the goods, except to an ever-richer elite. Most voters recognise this and, as polls show, support a cap on energy prices, for example, and renationalisation of some essential services. So why aren’t protests against government policies louder and more insistent? Why isn’t blood, at least metaphorically, running in the streets?

This is where Jones doesn’t go quite deep enough. What is missing from his account is how the masses were also captured by neoliberalism and how they bought in to capitalism to such an extent that it became all but impossible to escape. Margaret Thatcher said in 1981 that her aim was to change “the heart and soul of the nation”. The greatest tribute to her success, as she often observed, was that the Labour Party eventually accepted her agenda. In effect, she abolished the British working class, making a working-class lifestyle, in the conventional sense, unsustainable.

This was not only because her economic policies hastened the decline of the manufacturing industries that had provided stable employment. Her legislative programme diminished the unions, which were not only the main instruments through which workers protected and improved their living standards but also the vehicles through which their leaders could emerge, acquiring skills that might lead to parliament and ministerial office. Her discounted sale of council houses, coupled with increased council house rents, transferred more than a million families into the property-owning bourgeoisie. Her abolition of credit controls and weakening of mutualised building societies undermined long-standing habits of financial prudence. Her privatisations compelled families to “shop around” for basic services and seek the best “deals” if they were not to be ripped off.

The same privatisations lured millions, if only temporarily, into owning shares. So, more indirectly, did the destruction of defined-benefit pension schemes, which, along with the abolition of a state second pension (known as “Serps”) and a revised formula for annual state pension rises, left many dependent on the money markets to ensure a secure old age. Thus, almost all of the structures that once gave security to working families were stripped away, forcing them to participate, however marginally, in the individualistic risk-taking of capitalism. The alternative was to drop into what became known as the “underclass”.

Almost everyone above a certain age now trembles at a fall in house values, watches bond and equity prices anxiously and frets over interest rates. Everyone feels locked to some degree in to the neoliberal economy, knowing that, if it crashes, those of modest wealth and income will lose proportionately far more than the plutocrats who exploit them. That explains why the 2008 crisis didn’t lead to a revival of the left, which was in any case woefully short of coherent answers. On the contrary, by exposing the fragility of capitalism, it made most voters keen to avoid further jeopardy.

Yet politics, like most things in life, is cyclical. Contrary to the “end of history” thesis, nothing lasts for ever. The under-thirties do not care about falling house prices or crashing stock markets because they do not have a stake in the neoliberal economy and see little prospect of acquiring one. Owner-occupation has fallen sharply; the proportion of shares owned by individuals is far lower than it was 50 years ago. Members of this generation have nothing to fear and much to gain from steep falls in asset prices. From them, in time, will come support for a new economic order, provided that the left (or even the centre) can produce convincing alternatives.

Jones recalls how, throughout the 1950s and 1960s, neoliberals were dismissed as fantasists and dreamers. Only through the patient marshalling of their case, skilful manipulation of the media and assiduous wooing of politicians, opinion-formers and rich donors did they eventually turn the tide. Paradoxically, it is to their story that the left must now look for hope and inspiration. 

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 03 September 2014 issue of the New Statesman, The summer of blood

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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.