Ten years ago, the world economy ground to a halt in the wake of the biggest financial crash in the history of capitalism. The vastly overinflated atmospheric layer of global credit had burst.
The banks and the entire financial system were in trouble, big trouble. Bear Stearns and Northern Rock led the collapse. Then on September 15th 2008, Lehman Brothers was let go. An unprecedented economic crisis followed. Trade all but stopped. Shipping contracts dropped by 95% by the end of the year.
No-one, it seemed, knew what to do.
Except Gordon Brown. Against prevailing advice, Blair’s replacement as New Labour’s prime minister famously stepped in, and in his own words ‘saved the world’s banking system’. How? He led and co-ordinated the process of many governments pouring money into the banks to prevent their collapse. The global capitalist economy was put into special measures and its been there ever since. Brown rescued capital. The system was in a terminal condition, but the alternative was neither primed nor ready to go. The process Brown started, paired with ‘austerity’ for most, would see title to unimaginably large quantities of value transferred to a shrinkingly small handful of the now rich as Croesus elite by impoverishing the world’s working people.
For decades, nation-states, companies and individuals had been force-fed credit creating a world enslaved by debt. It began with IMF loans to countries in economic trouble, and World Bank loans to countries for capital projects. It spread to feed investment by the expanding network of profit-hungry brand-dependent corporations, to buy now, pay later hire purchase to support consumption of their products. Hire purchase gave way to credit cards, mortgages, secured and unsecured loans and from there to a vast market in insanely profitable ‘derivatives’. These were – and are today – financial products derived, but increasingly distant from an underlying reality in the production of valuable commodities built by people at work.
The more the economy grew, the greater became the need for credit. The bigger the reservoir of credit became, the faster was the economic growth needed to sustain it. Until the tipping point. From 2004, fearing the impact of inflation, the US Federal Reserve Bank started a series of interest rate increases. It meant that people on low incomes could no longer afford the payments on their mortgage loans and credit card bills. Defaults on repayments followed. The house of cards toppled and fell.
Today, the analysts are once again reading the runes, scouring the statistics in search of any hint of the possibility of a new crash. The signs are ominous. From Argentina to Turkey – so-called emerging markets – the foreign debt burden is overwhelming economies. Italy is about to join the queue. In the UK, the credit-driven economy has placed many households in an impossible, hand-to-mouth existence.
What many are seeing is a different threat altogether – the growing likelihood of a Jeremy Corbyn-led Labour government intent on carrying out its manifesto promises. Quelle horreur!
Corbyn seems quite unlike Brown who was opposed to renationalising the railways. So the forces are gathering to stop him in his tracks, or better perhaps to move the points and switch him to another direction. False friends are popping up all over the place. Take the Institute of Public Policy Research for instance, which has published a major report Prosperity and Justice for all – A plan for a new economy timed for the run up to the Labour party conference.
The IPPR’s claim to be ‘the UK’s pre-eminent progressive think tank’ leads some to suggest that it is left-leaning, even supportive of Corbyn. It is certainly well-funded with support from a wide range of organisations and individuals. The biggest chunk – 36% – comes from companies including Big Pharma, Big Oil, Lloyd’s Bank and AirBnB. But who are its guiding lights? Matthew Taylor was its director between 1998 and 2003 when he was appointed as head of Blair’s Number 10 Policy Unit. He is listed now as one of the IPPR’s biggest funders. Lord Adonis, another member of Blair’s policy unit, is chair of the Trustees. In 2016, Tom Kibasi, a partner at consulting firm McKinsey & Company took over as director from Nick Pearce. Guess what! Pearce was head of Gordon Brown’s Number Policy Unit when he replaced Blair.
Left-leaning friends of Corbyn? I don’t think so.
Together with the 2017 interim report Time for Change, A New Vision for the British Economy, the new publication is a remarkably clever piece of deception. It comes with the blessing of the IPPR’s high sounding Commission on Economic Justice whose members include business and trades union leaders, community organisers, senior academics, civil servants and last but certainly not least, the Archbishop of Canterbury. The very definition of the great and the good. The report’s detailed analysis of the ills that have beset the British economy would convince anyone. But beware! This work is built on a number of assumptions that can trap the unwary.
The most important is that capitalism is the only game in town. Sure it has its faults, but the argument is that there are and can be many different kinds of capitalism. The task the IPPR’s team set themselves is to rethink, go beyond a simple rebranding, to come up with a new version in the name of justice for all. Rethinking capitalism is a key theme of Professor Mariana Mazzucato, a member of the Commission and one-time economic advisor to Corbyn’s Labour. And she’s a promoter of the Entrepreneurial State, emphasising the importance of investment by government to economic success. She’s a world-class big hitter on economic policy. Her ideas, which are central to the IPPR’s mission, leave no room for the prospect of superseding, replacing, or in any way going beyond the broken-down, worn-out, dangerously destructive system founded upon private ownership and profit.
Here is the IPPR’s bold objective:
Fundamental reform has happened twice before in the last century. Following the Great Depression of the 1930s, and then again after the economic stagnation of the 1970s, major changes in economic thinking and policy occurred. Ten years after the financial crisis, it is time for a comparable ‘paradigm shift’ today.
But the Report’s predetermined, bottom-line intent, which constrains all of its thinking is to give the capitalist mode of production a new lease of life.
And something else pretty important seems to have evaded the notice of the participants. You might even call it ‘the elephant in the room’.
Both of the last century ‘fundamental reforms’, or ‘paradigm shifts’ they aspire to emulate required international discussion, agreement and co-ordinated action. The first was signed by 44 country delegates in 1944 at the United Nations Monetary and Financial Conference, in Bretton Woods. Those post-war arrangements broke down following US president Nixon’s decision to terminate dollar-gold convertibility. Into the vacuum that followed stepped the new age of neoliberalism.
There’s nothing in the report that even acknowledges the existence of the global economy or the power of the transnational corporations. There’s only a worry about the UK’s lack of competitiveness.
This blinkered view surely reflects the newly emerging demands of capital at the breakdown of its neoliberal phase. Just as with the national preoccupation that produced Trump, setting countries against each other, heading into trade war and beyond, the underlying need is for the destruction of excess productive capacity – hence the tariffs on steel, aluminium and a lengthening list of other tradeable commodities.
The IPPR is right about one thing. A new paradigm shift is required, and urgently if humanity is to deal with, and survive the mounting environmentally catastrophic consequences of capitalist production. But it won’t be achieved within the constraints of that broken system.
As the flashing lights of a new financial crash move from amber towards red – and with central banks unable to arrange another bail-out – the claim by Corbyn and shadow chancellor John McDonnell that the present economic system is broken is irrefutable. Mapping out a transition beyond neoliberal, or any other brand of capitalism is the critical task they face at the forthcoming Labour Party conference.
To develop the struggle, the RDM is calling on organisations and campaigns to work together to plan a Convention Against Neoliberalism (CAN) in 2019 to map out a road beyond the present system and how best to support a Corbyn-led government.
An initial planning group will convene in Wigan on November 24. Each participating group can submit proposals for circulation in advance, and discussion on the day. For more details and an invite, email email@example.com. As a contribution to the debate, the RDM has published ‘Time’s Up for Neoliberalism’, which you can download here.