The return of disaster capitalism

A no-deal Brexit is to Johnson and Hunt what the financial crisis was to Cameron and Osborne – an opportunity to rebalance power and wealth in society away from labour and towards capital.

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Almost ten years after the introduction of austerity, Philip Alston, the UN special rapporteur on extreme poverty, visited the UK. His report, published in May, accused the government of breaching its human rights obligations in pursuit of a budget surplus. Alston found that child poverty, homelessness and inequality had all risen dramatically, and that the government had systematically violated the human rights of disabled people – all in order to achieve an objective that made no economic sense.

Alston returned this week to cast an eye over the pledges made by the Conservative leadership contenders, Boris Johnson and Jeremy Hunt. He chastised both candidates for pledging to introduce tax cuts that would constrain economic growth and “dramatically increase inequality”.

While comparisons with Donald Trump are usually reserved for Johnson, Alston accused both candidates of Trumpian approaches to economic policy. Trump’s recent round of tax cuts was sold as an economic stimulus to boost business investment and improve the nation’s economic health. The cuts did little to boost productive investment, and instead created a mini stock-market boom as corporations dished out cash to shareholders or bought up their own stocks.

In spite of the evidence, Hunt has explicitly based his programme of tax cuts on Trump’s – framing them as an economic stimulus to absorb the impact of a no-deal Brexit. He has promised to cut corporation tax from 19 per cent to 12.5 per cent, aligning the UK with Ireland in a global race to the bottom on corporation tax rates.

Johnson, meanwhile, wants to raise the higher-rate income tax threshold from £50,000 to £80,000. Such a move would reduce tax revenues by £9bn and provide the richest 10 per cent in the UK with a tax cut worth on average £2,500.

On the surface, the Johnson-Hunt tax-cut pledges appear to contradict the austerity agenda of their predecessors. David Cameron and George Osborne framed their push for fiscal rectitude as a bid to bring the nation back to growth. Their insistence that the UK was like a household, and had to pay off its debts, proved successful in convincing large parts of the electorate that their prosperity depended on austerity.

But austerity was never about boosting economic growth. Cameron and Osborne used the financial crisis as an opportunity to shrink the state and provide giveaways to their core constituency – wealthy elites. By weakening labour and strengthening the power of capital, austerity prevented the reaction to the financial crisis from developing into a challenge to capitalism itself. 

Austerity represented a form of disaster capitalism – the opportunistic use of a crisis to push forward a free market agenda. It rested on Milton Friedman’s insight that “only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”

Though both Johnson and Hunt appear to be rejecting Cameron and Osborne’s fiscal conservatism, they are disaster capitalists too. A no-deal Brexit is to Johnson and Hunt what the financial crisis was to Cameron and Osborne – an opportunity to rebalance power and wealth in society away from labour and towards capital, while our attention is elsewhere.

Walter Benjamin wrote that the “tradition of the oppressed teaches us that the ‘state of emergency’ in which we live is not the exception but the rule”. Capitalism generates crises, during which elites can break whatever rules they like in pursuit of their free market economic agenda. This ultimately leads to a permanent state of crisis in which liberal norms are ignored. Vladimir Putin recently stated that the liberal rules-based order was breaking down. He had a point: in the battle between liberalism and disaster capitalism, the latter will always win.

However, the next Tory leader will not be facing a liberal – they will be facing a socialist. Socialists recognise that the only way to counter the class project pursued from above is to develop a class project from below that is capable of resisting it.

At the next election, with Johnson the likely prime minister, the public will have a clear choice: socialism or more disaster capitalism. 

Grace Blakeley is the New Statesman’s economics commentator and a research fellow at IPPR. 

This article appears in the 05 July 2019 issue of the New Statesman, The Corbyn delusion