‘Inherited mess’ part 2: the myth of the ‘clean-up’ – who would a Tory ‘recovery’ actually benefit?

I spent most of last weekend out of reach of a decent internet connection, and reading Naomi Klein’s very, very excellent ‘The Shock Doctrine’. In it, she shows emphatically how the disciples of Milton Friedman, the architect of the neo-liberal ‘small-state’ economic vogue that has dominated world economics over the past few decades, deliberately use crises as an opportunity to push through ‘reforms’ that people would never tolerate under other circumstances. These ‘reforms’ strip away cherished public provisions and replace them with private enterprise that costs more and does little but funnel public wealth into a small number of private and corporate bank accounts.

Adherents of Friedman’s doctrines are shameless, openly referring to natural disasters such as tsunamis and Hurricane Katrina as ‘opportunities’, and using these to implement massive privatisations while the victims of the disasters are reeling from shock. Similarly, the events of 9/11 were an ‘opportunity’ to strip away civic rights and make fortunes from ‘security’, foreign wars and the subsequent reconstruction, exploitation of natural resources etc.

It’s a compelling read, and if you have a few quid to spare I’d highly recommend this book for an eye-opening education about the tactics and world-view of the so-called ‘elite’. The ‘shock doctrine’ of the title is a means of de-constructing people’s deeply-held views in order to make its unpalatable replacement seem acceptable.

As you’ll know if you’ve read my blog post ‘The Myth of the Inherited Mess’, I believe this government is using the same kind of tactic to push through its Friedmanite ideological agenda – to strip away the welfare state, the NHS, public and private-sector benefits of ordinary people for the enrichment of a small ‘elite’ – all by blaming Labour for ‘leaving a deficit mess’ that the coalition has to ‘clean up’, and frightening the populace into thinking it’s the only option. The coalition, especially its Tory component, claims that its program of spending cuts is the only way to create an economic recovery, that the pain now will benefit everyone in the long run – and of course, that ‘we’re all in it together’.

Well, my weekend reading inspired me to do a little research of my own, once I was within reach of a decent WiFi signal, to see what the facts say about the coalition’s claims. If you like, you can think of this as ‘The Myth of the Inherited Mess, part 2’ – but what I found out stands in its own right as a judgment on both the ideology of the Tory neoliberals and as a debunking of the myth of their claim that what they’re doing may hurt now, but it’s for everyone’s good in the long run.

As you know if you’ve visited this blog before, I like graphs. The right graph can show things – things that might otherwise look obscure – with a clarity little else can match. There are a few below that will be very revealing. But first, a very brief preamble concerning Milton Friedman and his followers.

Friedman has been dead for some years now, but as far as slash & burn, ‘riches for the elite’ businessmen and politicians are concerned, he was the economic ‘Messiah’. Friedman advocated a ‘bare minimum’ state provision and a ‘blitzkrieg’ program of forced privatisation to get public resources into private hands before the rest of the populace could react. He believed that ‘free’ markets are the best and only way to run things properly, and that government should not interfere.

His early ‘clients’ included brutal dictators like Augusto Pinochet of Chile, but the first leaders from the political ‘mainstream’ to put his ideas into practice were Margaret Thatcher (a bosom-buddy of Pinochet) and Ronald Reagan, whose policies of deregulation, tax-cutting and public-spending cuts were right out of Friedman’s playbook. Conservatives ever since, in both the UK and the US, have admired Thatcher and Reagan as models of how such policies supposedly free ‘wealth-creators’ to make money and in doing so to create economic growth that benefits all of us.

So much for the history lesson. If the theme of tax cuts, spending cuts, the slashing of state welfare provisions to make space for private profit etc sounds familiar, you’re absolutely right. David Cameron, George Osborne, Andrew Lansley and co are very much the ideological descendants of Thatcher and Reagan. They’d probably even happily admit it. So, let’s look at the policies of their ‘illustrious’ predecessors and ask the key question: did they work? First, some graphs:


This graph shows the income of the top 1% of US earners compared to the incomes of the middle 60% of earners and the bottom 20%, since 1979 but adjusted for inflation (so a ‘dollar’ in 1979 stays equivalent to a dollar in 2007). Three things are striking, at least to me. Firstly,  the dramatic upturn in the fortunes of the top 1% begins in 1981, the year that Reagan became US president. Second, it has continued steeply since, with only occasional blips due to stock-market slides (the rich tend to invest in shares a lot). Third, the incomes of middle and low earners have remained almost exactly unchanged – in other words, wage increases for the vast majority of people in the US have merely kept pace with inflation over a period of almost 30 years, while the incomes of the richest have increased massively. This graph doesn’t show the whole picture. The incomes of the richest 0.1% increased even faster than those of the 1%:


Now for the UK:


This graph shows similar data, but over a slightly longer period – the 40 years leading up to 2008, again adjusted for inflation. The change is less steep than in the US (though that will change if the Tories are able to implement their wish-list!), but it tells a similar story. For a 10-year period, incomes of the lower-paid more or less kept pace with those of the highest earners. And then – from the year in which Margaret Thatcher came to power – the incomes of the richest suddenly accelerate far faster than those of everyone else. So, the first two mainstream implementers of Friedman’s principles both triggered a massive and continuing increase in the income of the wealthiest at the expense of the majority of the populace. (For all its faults, New Labour put the brakes on the acceleration after a couple of years in power, but never reversed the trend.)

I’ve been unable to find equivalent graphs for the period since David Cameron became Prime Minister, but without question the incomes of the richest have once again accelerated away from those of the rest of us. The recent Sunday Times Rich List for 2012 showed that, over the past 3 years – a period when the UK economy stagnated and then declined, when the wages of ordinary people have been eroded in real terms by inflation and by vast increases in the cost of fuel, household utilities, education costs, increased VAT and other factors –  the wealth of the richest 1000 people in the UK increased by £155 billion, while executive salaries have gone up far in excess of inflation, as the graph below shows:


How is this growth funded? It comes at massive cost to the rest of us. One more graph:


Again, this is a graph for the US, as I couldn’t find comparable information specific to the UK, but the principle is clear – and it shows what will become even more applicable in the UK than it already is, if this government gets its way. This graph shows the increase in the ratio of household debt to household income, alongside the increase in the wealth of the richest. With the exception of a couple of upward surges in the wealth of the richest, caused by stock-market ‘bubbles’, the rate of increase in their wealth matches the increase in the indebtedness of the rest of us. The rich get richer as the ordinary population gets loaded with debt. It’s a parasitic relationship more than a symbiotic one.

The pattern is clear. The slash & burn, Friedmanite policies that Cameron & co want to impose on the UK will not bring growth that benefits everyone. All they will do is suck money out of the UK economy and pour it into the coffers of a small ‘elite’ that is already rich and will get massively richer, at the expense of the rest of us.

Don’t fall for the spin, don’t fall for the rhetoric, the false promises, the false assurances that they have our best interests at heart. And especially, don’t fall for the lie that ‘we’re all in it together’. The Tory component of the coalition, along with its rich and corporate backers not only want to maintain an already-unequal status quo – they want to extend it further and faster, to get even richer while the rest of us pay and lose the public services we treasure. These policies won’t bring growth, but in growth or recession the Friedmanites get richer. Unless we say ‘enough‘ – and refuse to let them fool us any longer.

(Petition to call for a motion of no-confidence in the coalition government: http://www.gopetition.com/petitions/petition-for-a-motion-of-no-confidence-in-the-uk-coalit.html – please sign and get as many people as possible to do the same.)


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