When I was in London recently, I was repeatedly assailed with the idea that the…
With the new British Prime Minister now indicating that she will push ahead with Brexit and free the nation from the undemocratic imposts of the increasingly dysfunctional European Union, a view that is apparently ‘poisonous’ to some so-called progressive writers, several pro-Remain economists or economic commentators have realised that the game is up for neo-liberalism in Britain. There have been several articles recently arguing (after bitching about the loss of the Remain vote and repeating the catastrophe mantra) that a new economic paradigm is now called for in Britain, based on its new found sovereignty (after it finally exits). It could, by the way, exit through an Act of Parliament without all the Article 50 palaver if it wanted to. That is just a smokescreen. This idea of a new paradigm being required is exactly what Thomas Fazi and I are working on as part of our current book project which is nearing completion. Today, I consider briefly our view that nationalisation has to return as a key industry policy plank for any aspiring progressive political party.
David Blanchflower, who resigned in a fit of pique from Jeremy Corbyn’s Economic Advisory Committee, wrote in the UK Guardian (July 5, 2016) that – The Brexit vote will kill austerity. I couldn’t agree more.
Blanchflower dumped on Corbyn when he resigned claiming that if Corbyn remained as leader then (his words in quotations, the rest from FT article):
“nobody in their right mind” would serve as governor of the Bank of England, an ambassador, or a member of the Bank’s Monetary Policy Committee.
Really. Well perhaps only those of right mind and approach will now come forward to advise Corbyn on how to follow a truly progressive agenda rather than beat around the neo-liberal bush and worry about fiscal rules etc.
Other Corbyn advisors spat the dummy after the Brexit result was known claiming they were “‘unhappy’ with Corbyn’s role in the EU campaign” and had withdrawn from the Advisory Committee, presumably while the self-serving Blairites got rid of Corbyn and reimposed neo-liberal sanity. Pitiful really.
The only thing the Blairites have done is to empower the Labour Party membership to re-endorse Corbyn and to then turn their attention on de-selecting each and every one of the MPs who have tried to get rid of him, dishonestly using the Brexit issue as a pretext, and thereby ruining their political careers. Could not happen to a better lot!
Then the EAC advisors can resume their positions helping these de-selected MPs form a new party – sort of like the Liberal Democrats or some other wishy washy outfit.
In the Guardian article, Blanchflower rehearsed all the doom and gloom that the Remain campaign tried to pull on the people – no NHS funding, “big house price drop”, “pound has collapsed” (what actually constitutes a collapse?), credit rating downgrades (yep, that always slips in), “negative growth”, Britain will have an “awful state of the public finances” (what the deficit might rise a bit!) and more.
In sum, “believe me they are going to be bad”.
Next stop, is that there will be a “major shock not only to the UK but also to global output”. World recession looming from Brexit. Whew!
And share markets are going to crash! Although the UK Guardian reported yesterday that – US shares hit record high after FTSE 100 enters bull market. Some collapse.
And on July 11, 2016, the news reports came out that the big US companies- Raytheon, Boeing committed to UK despite Brexit – although I guess the Remainers will overlook that inconvenient bit of news.
We read elsewhere that “Boeing has announced plans to establish a new £100m servicing facility in the UK and double its workforce in the country over the next few years” (Source).
We learned that:
The plane-maker, together with the government and other industry players will also help fund some £365m worth of aerospace R&D projects that have been approved by the government as part of the Aerospace Growth Partnership.
Aah the power of the currency to boost aggregate spending and create a high productivity, employment rich future for Britain, without the encumberances of that lot in Brussels.
What Blanchflower did get right though was that:
When a negative shock comes John Maynard Keynes taught us that fiscal and monetary policy has to work together to provide stimulus. That worked incredibly successfully in 2009 as governments threw the economic kitchen sink at the recession. Growth spurted only to be slowed by austerity in 2010. The same is needed this time. All hands to the pumps. Austerity is dead. At last.
And more companies like Boeing will seize the initiative and start investing and developing a broader and more skilled labour base.
“Austerity is dead” though!
The day after (July 6, 2016), Joseph Stiglitz penned a sober view of the implications of Brexit in his article – After the EU vote, it’s time for some clear thinking on trade – where he opined that:
The neoliberal agenda of the last four decades may have been good for the top 1%, but not for the rest.
He, at least, can see that the Brexit decision, which has been blamed on racist and stupid voters, is a flow-on from years of neglect of the basic interests of workers by governments intent on “tilting the political balance towards capital”
He understands that:
… any increase in corporations’ market power is de facto a lowering of real wages – an increase in the inequality that has become a hallmark of most advanced countries today.
He also notes that “Free migration within Europe … [leads to] … depressed wages and higher unemployment, while employers benefit from cheaper labor.”
Combined with “cutbacks in public services” brought on by the relentless austerity mentality of neo-liberal infested governments and we have “the evisceration of the middle class” dened the “benefits of economic growth” while it watch “billions going to save the banks” and the excessive salaries of the banksters.
So after the Brexit vote, Joseph Stiglitz is clear “more neoliberal ideology won’t help … there are alternatives to the current neoliberal arrangements …”
Paul Mason followed up on Monday (July 11, 2015) with his article – The prospect of Brexit Britain turning into a post-global disaster zone is real.
His thesis is similar to the previously noted interventions. He is annoyed about the Brexit vote and predicts doom and gloom.
He correctly notes that Britain has “been running a current account deficit of 7% – a historic high” which relies on foreigners desiring to accumulate financial assets denominated in the pound for its continuation. That is, the trade gap has to be financed through the capital account.
And clearly, if the foreigners reduce their desire to accumulate sterling-denominated financial assets then Britain will have to adjust to a deteriorating real terms of trade and that will be painful for a time.
So if policy shifts within the UK do not entice on-going foreign capital then times will be tough for a while in Britain.
In that context, he is correct in his assessment that what Britain “has to do flies in the face of 30 years of centre-right policy” – that is, the neo-liberal austerity mindset is no guide for what the British government has to do now to revitalise its flagging economy, which now has the additional issue of Brexit uncertainty to deal with.
Paul Mason says that Britain has to “redesign the economy so it produces wealth in a different way” which will involve a combination of tax policy to provide investment incentives, use the currency to build new infrastructure to “to create capacity to grow long-term” and upskill “the workforce, replacing low-wage jobs with machines”.
In other words a “national-centric industrial policy” that was common in the pre neo-liberal era and helped economies around the world achieve much stronger growth rates and wage equity than has been the norm in the ‘free market’ period.
He says the questions that now need to be asked by Britain’s political leaders are:
Competitiveness now is about: what hikes real wages? What boosts investment? What raises productivity? What expands the export sector? These questions all raise another one: who is going to do it?
But it will not be all ‘export-led’ growth mantra that will help Britain adjust. The ‘March of the Makers’ was George Osborne’s mantra – Please read my blog – The March of the Makers – out! – for more discussion on this point.
Britain has a large internal market, a strong manufacturing tradition (to be revived) and a well-educated workforce. Industry policy including nationalisation has to form part of the new domestic focus for the nation.
More about which soon.
And if the Brexit Leave voters are even falling for the Regrexit nonsense, that is being pumped out by various characters who are still bitter they lost because their threats of doom didn’t carry water, they might want to visit the European Council media site and specifically reflect on this announcement from yesterday (July 12, 2015) – Excessive deficit procedure: Council finds that Portugal and Spain have not taken effective action.
The upshot is that the geniuses in the European Commission and the Council have considered these two countries, which are deeply scarred by the austerity imposed upon them by the Stability and Growth Pact (SGP) rules, with entrenched and ridiculously high levels of unemployment and urban and regional decay the result, have to impose even more austerity.
The Council has ratified the Commission’s recommendations under the destructive Excessive deficit procedure, the corrective arm of the SGP, that the governments of Portugal and Spain are not doing enough to ruin the well-being of their nations and so have voted to “trigger sanctions” under the procedure.
The idiots in the Commission will now have some meetings, with plenty of good food and wine presumably on offer to help them with their work, to decide the scale of the “fines” that will be imposed on Spain and Portugal.
The infinitely stupid Slovakian finance minister was quoted as saying “I am sure that we will have a smart, intelligent result at the end”.
What fining these nations for trying to bring some growth to their economies? Or backing down – again – and not fining them and looking even more dysfunctional than before?
Intelligent either way, n’est-ce pas? F*ck, you could not write a story line that was this ridiculous.
Recall that the Commission or Council turned a blind eye last year on Spain’s deficit increases because they knew that they would help the nation grow and would ease the way for the People’s Party to win the December 2015 national election.
The economy did grow as a result of the deficit increases (which, in part, were the result of discretionary stimulus measures adopted by the national and regional governments) but PP didn’t win the election.
Now after a re-run of the election on June 29, 2016 the Commission had determined that they will pillary the nation.
So Brexiters – this is the corrupt, dysfunctional and morally bankrupt club you have voted in your wisdom to leave. A good move.
I also remind readers that the United Nations Human Rights Commission’s Committee on Economic, Social and Cultural Rights on June 24, 2016 released its – Concluding observations on the sixth periodic report of the United Kingdom of Great Britain and Northern Ireland – where it noted that (paragraphs 18 and 19):
The Committee is seriously concerned about the disproportionate adverse impact that austerity measures, introduced since 2010, are having on the enjoyment of economic, social and cultural rights by disadvantaged and marginalized individuals and groups. The Committee is concerned that the State party has not undertaken a comprehensive assessment of the cumulative impact of such measures on the realization of economic, social and cultural rights, in a way that is recognized by civil society and national independent monitoring mechanisms (art. 2, para. 1).
The Committee reminds the State party of its obligations under the Covenant to use the maximum of its available resources, with a view to progressively achieving the full realization of economic, social and cultural rights. The Committee draws the State party’s attention to the recommendations contained in its open letter of 16 May 2012 to States parties on economic, social and cultural rights in the context of the economic and financial crisis, with regard to the criteria for austerity measures. Such measures must be temporary, necessary, proportionate, and not discriminatory and must not disproportionately affect the rights of disadvantaged and marginalized individuals and groups and respect the core content of rights. In that context, the Committee recommends that the State party review its policies and programmes introduced since 2010 and conduct a comprehensive assessment of the cumulative impact of these measures on the enjoyment of economic, social and cultural rights by disadvantaged and marginalized individuals and groups, in particular women, children and persons with disabilities that is recognized by all stakeholders.
Clear enough! The British government under the now defunct Cameron-Osborne administration has been guilty of violating the rights of its own disadvantaged citizens.
Some more elements of the Progressive Manifesto
In the light of the foregoing, I have been writing a bit more of the Part 3 of my next book (with Thomas Fazi), which we are stylising as a ‘Progressive Manifesto’ to guide policy design and policy choices for progressive governments.
It is the final part of the book which, overall, traces the way the Left fell prey to what we call the globalisation myth and started to believe that the state had withered and was powerless in the face of the transnational movements of goods and services and capital flows.
It seeks to address the claims made regularly by social democratic politicians that national economic policy must be acceptable to the global financial markets and compromise the well-being of their citizens as a result.
We hope that the ‘Manifesto’ will empower community groups by demonstrating that the TINA mantra, where these alleged goals of the amorphous global financial markets are prioritised over real goals like full employment, renewable energy and revitalised manufacturing sectors is bereft and a range of policy options, now taboo in this neo-liberal world, are available.
I noted the other day that the topics we will traverse in this Part of the Book will include:
1. Exposition of Modern Monetary Theory (MMT) – of course!
2. The use of regulation versus the price system to engender resource allocation changes – for example, Carbon Taxes (price system) against bans on polluting activities (closure of coal mining etc).
3. Employment guarantees versus income guarantees.
4. The entrepreurial state – the role of government in the innovation process. The concept of brainbelts replacing rust belts and the revitalisation of manufacturing (away from cheap towards smart).
5. Capital and import controls – trade protection.
6. Free trade myths and the gains from fair trade.
7. Financial market regulation and bank reform – reducing the scope for unproductive waste.
8. Dealing with climate change and other environmental problems – changing the growth paradigm into green growth.
9. Wage and productivity policies – redressing the growing gap between real wages growth and productivity growth and the increasing reliance on private credit growth for growth.
10. Reversing income and wealth inequality.
After further research and discussion we have added the following topics (sub-topics) to this list:
1. Arguments to support the re-nationalision of key industries, taking the example of pre-1980s France as a positive case study.
2. Adding to the Job Guarantee discussion an analysis of how it deals with the rise of robotic manufacturing etc.
4. Reconstructing the concept of efficiency in resource usage! The mainstream neo-liberal version of the concept that economists like to repeat ad nauseum seems to think it is efficient to have 25 per cent unemployment (and 50 or more percent youth unemployment) as long as the fiscal balance is in surplus or below some ad hoc threshold. We will show that concept is bereft and present an alternative which ties in with (1) above – the way nationalised industries can expand efficient use of human resources, a component of which includes happiness and income security.
3. Apropos of (1), and (7) in the previous list, further discussion of the need to nationalise the banking system.
5. A discussion which we are calling the ‘re-writing the international framework’, with proposals for redesigning the international funds system, including the dismantling of the IMF and replacing it with a new body that will help poor nations survive balance of payments problems (for example, when they are dependent on imported food or energy). This section will demonstrate that a progressive manifesto that recognises the power of the state also acknowledges the importance of the international dimension – internationalism versus supranationalism!
More coming in the next few weeks as the manuscript unfolds.
For today, some brief notes on nationalisation – which we consider an essential aspect of the need to return to a national industry strategy as described above by Paul Mason (although whether he would agree with our take on it is another matter).
Given the length of this blog already, the following is just a set of notes with more detail coming in a dedicated blog on the topic.
I have written about privatisation, nationalisation and efficiency before (including):
In 2010, the Dissent Magazine carried a marvellous historical account –
Lessons from the Nationalization Nation: State-Owned Enterprises in France – written by Paul Cohen, who specialised in French history.
It provides a strong evidence-base to revitalise the progressive case for nationalisation of key industries, an idea that has been declared taboo by the neo-liberal agenda.
I say taboo but really mean unless it is some bank that needs to be bailed out by governments and the salaries and benefits of its senior management protected. Then it is okay as we saw during the worst days early in the GFC.
But, otherwise, it is taboo. We have to get that straight, don’t we.
The good old “privatise the profits and socialise the losses” – and don’t ask any questions about the latter.
Paul Cohen notes that the usual conception of France among Americans is of a “land of suffocating bureaucracy and high taxes, inefficient nationalized industries and an enormous taxpayer-subsidized public sector … ” and more.
Remember George W. Bush’s famous (albeit rumoured) intonation to the Iraq war liar Tony Blair “The problem with the French is that they don’t have a word for entrepreneur.”
Paul Cohen says that is symptomatic of the US view of the French as being “not entrepreneurial or hardworking enough” etc.
His article presents evidence to refute that construction:
This France is in large part an imaginary place. France today boasts the fifth-largest manufacturing economy in the world; subject to European Union competition and trade rules stricter than American regulations, it is sufficiently attractive to global capital to make it the third leading recipient of foreign direct investment (ahead of Germany and China); its workers are more productive per hour than their American counterparts and less unionized (in 2003, 12.4 percent of eligible workers in the United States were unionized, while only 8.3 percent in France were). hometo the world’s fifth-largest stock exchange, France, with its vaunted engineering schools, has dispatched armies of math whizzes and economists into New York and London investment banks to invent the trading strategies and exotic derivatives that helped get us into the current mess.
But his discussion of the “French model” focuses on the state planning that characterised the post World War II reconstruction of the nation after the devastation of the war.
The centrepiece of that effort was the “wave of nationalizations” spawned by Charles de Gaulle which saw the state take “control of businesses in energy, transportation, and finance.”
The article documents these public takeovers which “transformed the state into a giant economic actor”.
He writes that:
… in 1946, it directly controlled 98 percent of coal production, 95 percent of electricity, 58 percent of the banking sector, 38 percent of automobile production, and 15 percent of total GDP. Beginning with Jean Monnet, the first director of the General Commissariat for Planning, the government managed public enterprises and drafted five-year plans in order to shape long-term economic development.
Recall that it was the vision of Monnet that started the earlier discussion of European integration. His vision was never the neo-liberal nightmare that the monetary union has become.
He wanted a strong state, with sufficient fiscal flexibility to spawn productive enterprise, maintain high levels of employment, growing productivity and strong growth in real wages as a sign that Europe had left behind the horrors inflicted on it by the Germans and the various collaboration regimes.
Modern Europe would be a monstrosity for the likes of Jean Monnet.
At the heart of that vision was the wide scale nationalisation agenda pursued by the French government.
Paul Cohen concludes that:
It was, by any measure, a great success. Nationalized industries and five-year plans may transgress the treasured tenets of neoliberal orthodoxy, but they didn’t stop France from enjoying three decades of sustained economic growth and prosperity. In the period between 1950 and the first oil shock in 1973, recalled in France today as les trente glorieuses (the “thirty glorious years”), its economy grew at the impressive clip of 5 percent a year (while United States growth averaged 3.6 percent), unemployment was virtually unknown (2 percent in France, compared to 4.6 percent in the United States), and French women and men experienced dramatic increases in their standard of living.
That is what the data tells us! But then the neo-liberals will then just claim the data is wrong or the government was lying about the true data.
Paul Cohen says that the “Washington Consensus” (the neo-liberal ideology) has tried very hard to “wipe our national memory clean of the more ecumenical views that prevailed before the 1980s”.
He also notes that while the Right was vehemently opposed in the neo-liberal era to nationalisation and promoted wide-scale privatisation as a path to moral and economic redemption, “the most striking shift of the post-Mitterrand era was the French Left’s rallying to the privatization creed”.
That shift in the Left is the overall topic of our book project.
The way the Left around the world embraced the neo-liberal agenda is the story. And the solution to a more progressive future (and Brexit success) is for the Left to abandon this neo-liberal mindset and recognise that what worked in the Post World War II period will work again if given sufficent resources and planning.
Paul Cohen is correct in concluding that:
The move away from state ownership was not in fact born of a rational economic calculus but rather of specific political choices.
Neo-liberal ideology ruled over facts.
The evidence which I will present in a further blog is that privatisation has largely failed to reduce costs or make service delivery cheaper and of higher quality.
It has certainly redistributed public wealth into a narrow group of private hands.
Paul Cohen says that the nationalised companies in France have performed well considering. They also deliver major advantages to the stae in terms of aid in industrial reorganisation as the need arises.
So public ownership of the French coal industry allowed the company to shift out of coal-fired electricity generation into nuclear power without loss of employment or regional dislocation.
He says that “when the last coal mine in France shuttered its shafts, the company didn’t lay off a single worker” (in 2004).
There were other advantages he lists, which I will leave to you to read about.
Our contention, which I will spell out in more detail is that nationalisation has to return as a key industry policy plank for any aspiring progressive political party.
In Britain, the Labour Party can start with proposing to re-nationalise the railways and take it from there.
More on this theme another day.
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.