Since Plato there has been a thread of fear running through Western political thought. The foreboding that, in putting the poor in the saddle, democracy would lead to a fatal redistribution of wealth. Thatcherism in Britain fed on this sense of apprehension: the feeling that government redistribution from rich to poor had placed handcuffs on business, and the creation of wealth. It is a political dogma that conservatives cannot let go of. UK Chancellor George Osborne’s belief that government spending was “crowding out” private sector investment springs from the same source.
Niall Ferguson’s Reith lecture is founded on this primal fear. But he neglects one small fact. That poor and rich have swapped roles. In recent decades conservatives have become so successful at combating this supposed defect of democracy that now in western states, all boasting universal suffrage, redistribution works in the opposite direction. From poor to rich. Or to be more accurate, from the majority to a rich minority.
The ubiquity of corporate welfare in the UK, as shown in part one, is such that its presence can longer be politely hidden. As an example consider the Bank of England’s "funding for lending" scheme which will offer cut-price loans to banks, in exchange for some of their toxic assets such as credit card debt – “assets” which will be transferred to care of the government, otherwise known as the taxpayer. The scheme is worth £80 billion: just £3 billion less than the £83 billion cuts in public spending which the Conservatives are implementing in order, they say, to eliminate the government’s fiscal deficit. Cuts, equivalent to taking 19% from the budget of every government department, which will have a palpable effect on the welfare of people, as opposed to corporations, in Britain.
In continental Europe, the story is similar, and sometimes even more blatant. Spain ran a budget surplus prior to the economic crisis. Nevertheless the right-wing Spanish government of Mariano Rajoy is forcing through a €65 billion austerity package in order to pay for another €100 billion bail-out of insolvent banks.
Don’t Call it Democracy
Many people now experience government as a racket, shovelling money with alacrity down the throats of banks and corporations, but denying, with stony-hearted glee, basic support to people when they need it most. In Britain, you can pay national insurance and tax for decades, but if you fall ill you find that the “benefit”, which you have paid for, is time-limited for a year. That is, if you are considered ill enough to qualify for benefit at all.
The honest conclusion from all this is that we don’t live in democracies. We live in “polyarchies” – countries with universal suffrage and fair elections but where a privileged class ensures that, whoever wins, it benefits from government spending and tax avoidance. Former New York Times foreign correspondent Chris Hedges describes our political domicile as a “corporate state”.
But it’s also true that, in these polyarchies, the people who present themselves as fiscal conservatives aren’t conservative at all.
Top of Niall Ferguson’s list of wasteful US government programmes to be culled, come Medicare and Medicaid. They are ways in which the government pays for the cost of medical treatment for people on low incomes and the retired. And it’s true the costs are rising exorbitantly. But that is because these programmes pay for huge cost of private, as opposed to socialised, medicine. A recent international study illustrated the size of the expense. A routine visit to the doctors, the study found, cost $23 in France compared to $89 in the US. The price of an angiogram – a scan to see whether arteries in your heart are blocked – was $789 in America, compared to $35 in Canada.
So one way to seriously reduce the costs to the taxpayer, a sensible person might conclude, would be to create a public health system, resembling the French system, for instance. The “public option” is supported by 65% of Americans, opinion polls say. But to conservatives like Ferguson, the thought is simply verboten. (Actually what Americans got in the recent health care reform was compulsory registration with private medical insurers, a compromise that ensures costs go on rising and that says a lot about the pointlessness of American liberalism.)
The idea of using taxpayers’ money to subsidise the private sector is such an unthought of feature of conservative strategy, that it is almost a reflex, rarely rising to consciousness. The possibility that costs might be reduced to the taxpayer by challenging private sector structures cannot be contemplated.
In Britain, the 2012 Health and Social Care Act will compel the National Health Service in England to commission services from the private sector. The cost to the public of this new market has been put at £20 billion a year. According to the authors of The Plot Against the NHS, “Each consortium [now clinical commissioning group] will have to employ a team of commissioners to negotiate contracts, monitor their performance, accountants to pay all the bills, lawyers to vet contracts and conduct court cases over disputes, team to vet drugs prescribed by GPs, and check their referrals to specialists and the treatments proposed by specialists. It will also need an advertising and PR department. Every hospital and chain of clinics will need the same.”
The Act, the largest reorganisation of the NHS in its history, has been introduced by the Conservatives in the face of deep opposition, and whilst they inflict £83 billion spending cuts elsewhere. The symmetry with the interests of corporations, regardless of the financial cost to the public, is unmissable. According to health researcher Alyson Pollock, the private health care industry does not want a purely private market. “Its interests lie,” she says, “in becoming for-profit providers in a basic health care system funded out of taxation.” And, at a time of austerity, they are getting what they want.
The similarity between the fate of the de-nationalised railways in Britain and the awaiting fate of the NHS has been noted. An equally inconvenient truth is that re-nationalisation of the railways has been estimated to save £1.2 billion a year. And yet, despite this policy having overwhelming public support, all the main political parties, Conservative, Liberal Democrat and Labour, each one fervently committed to saving public money, reject re-nationalisation. When it comes to derailing the corporate gravy train, our fiscal conservatives magically transform themselves into fiscal incontinents.
You might draw the conclusion that Leftism is the only option that makes financial sense.
Niall Ferguson ends his lecture with the now familiar conservative lament that, at root, people caused the economic crisis themselves. “As our economic difficulties have worsened, we voters have struggled to find the appropriate scapegoat,” he tells us. We blame politicians, “but we also like to blame bankers and financial markets, as if their reckless lending was to blame for our reckless borrowing. We bay for tougher regulation, though not of ourselves.”
This is clearly meant to be a rhetorical flourish but there is, actually, a simple way of “regulating ourselves”, a method that has been used, often quite brutally, by conservatives in government for decades. The method is interest rates, the price of lending money. The government, or the central bank, sets the rate, and banks and other financial institutions set their rate at similar levels. Government interest rates, in the US and UK, are at historic lows. At 0.5% in the UK, the interest rate is at the lowest level since the Bank of England was formed in 1694. Savers suffer because the interest they get is lower than inflation, while borrowing and spending are officially encouraged.
As far as the state is concerned, Ferguson believes that "you can't solve a problem of extensive debt with more debt”.
But with the wider economy, apparently you can.
If conservatives, such as Ferguson, had the courage of their professed convictions, they would argue that interest rates should rise, to say 8 or 10%. This would reward and encourage saving and discourage the binge borrowers whose reckless behaviour plunged the economy into such dire straits. But I don’t hear any calls to raise interest rates. In 2011, David Cameron did plan to tell the Conservative Party conference that people should pay off their credit card debt. But when the speech was leaked, it was pointed out that if his advice was followed, consumer spending would drop by a quarter and GDP by 15%. The speech was rewritten.
The only conclusion to draw from this silence is that continued borrowing, by consumers and banks, is saving the economy from completely collapsing. In other words, the response to the bursting of a huge credit bubble is to strain to create another one. I’m not an economic historian but that doesn’t look sustainable to me.
As far as conservative thought is concerned, the light is beginning to get in.