Beyond the Budget: we need a major economic transformation

Simon Barrow
By Simon Barrow
19 Mar 2014

The overall impact of the 2014 budget through its tax and benefit changes will be to strengthen the position of the better off and worsen the position of those who are struggling, while condemning many to poverty through the straitjacket imposed on welfare. That was the verdict of John Dickie, head of the Child Poverty Action Group (CPAG) in Scotland, in a tight, coherent analysis for the BBC this afternoon.

Ed Miliband's rhetoric in response to George Osborne was robust. His question, 'Whose recovery is it?' is one many anti-poverty campaigners and others have been asking for some time -- in addition to asking whether a recovery in statistics is the same as 'getting better'. Whether his party, or any of the other main ones, can really offer anything different is another matter. (Shadow chancellor Ed Balls has confirmed that Labour will vote for the benefit cap when the Commons debates it next week.)

Right now, the entire system based at Westminster is failing adequately to comprehend and address, let alone tackle, the really big issues in which economy is a major factor.

For a start, Mr Osborne is now borrowing £190 billion more than he was planning in 2010. That's part of the immense cost of failed austerity. The deficit would not be a problem if resources were being spent wisely. On the contrary, public spending can (as it has done historically) reduce long-term debt, the toxic portion of which is felt in ordinary households, while increasing production so that the capacity to pay for what we need is increased. But this will not happen if you are misspending vast sums on bailing out financial institutions that you do not properly control and regulate, if you are misdirecting social spending to subsidise low wages and lack of housing, pouring money into Trident, failing to claim billions in tax revenue, kidding yourself about the true costs of underemployment, and losing businesses and opportunities because of a squeeze on loans. And as far as critique goes, that's just a start.

The key point here is that public investment in productive and social endeavour or support is not the big difficulty as far as our economy is concerned; it is actually part of the solution to the deep financial and associated problems we continue to face, as the 'Green New Deal' economists have pointed out.

The real problem is unaccountable, speculative and hoarded capital going to the wrong people and places at a time when it is desperately needed to invest in change, to move beyond carbon dependence, to reinvigorate economic activity, to protect those most vulnerable in times of austerity and transition, and to build a society where we are interdependent for well-being rather than divided between haves, have nots and have yachts.

Government is not powerless. It can act on these issues. That is important. 'State control' in some centralised, bureaucratic way is of course no more desirable than rampaging market forces out of synch with real production, needs and democratic processes. One retards, the other fundamentally distorts. One fails to generate enough, the other passes what is produced to a tiny minority who are often (some would say mostly) not using it for the public and common good but accumulating it to no socially useful purpose.

Appropriate government intervention, as part of a mix of responses, should not be about featherbedding either state ossification or private greed. It should be proactive, enterprising and socially as well as environmentally and economically transformative in both intent and form, engaging as many economic actors as possible. Everyone needs a stake, instead of the prosperous being given carrots and the majority being hit with sticks.

That means, in a wider sense, rethinking what really constitutes 'domestic product' and 'national product', incidentally – what counts, what we value, what we regard as beneficial to our social, ecological and economic flourishing, and how we measure that.

In place of neoliberalism or a return to centralism, we need pro-social fiscal and monetary policies, people's ownership or control through local, civic and democratic mechanisms, more genuinely social enterprise and incentives, more and better cooperatives, thriving community businesses, distributive taxes, major land reform, asset sharing schemes, a revival of local democracy and accountability, and alternative financial institutions…. Not to mention a new, improved Bretton Woods internationally.

These are among the myriad ways in which economy can be appropriately socialised and humanised. It is this which government should be promoting. At present the coalition is mostly doing the opposite, while the official opposition remains timid and tied into a Westminster consensus which falls well short of what is needed when it is not heading in entirely the wrong direction.

The old 'state versus market' paradigms do not work and are merely used to thwart change and to avoid the more fundamental questions. Late capitalism remains in crisis (for those who prop up the people at the apex, for the excluded and for the planet), but top-down, command-and-control policies cannot work either. The economy needs to be transformed on an 'all of us first' (Common Weal) basis from the grassroots up, with regional, national and supranational government working to support measures that make this possible.

The People's Assembly Against Austerity says in its petition to the Chancellor: "The Government should reverse damaging austerity, and replace it with a new set of policies providing us with a fair, sustainable and secure future. We will no longer tolerate politicians looking out for themselves and for the rich and powerful. Our political representatives must start governing in the interests of the majority."

That is right. It also illustrates the economic dimension of our set of democratic deficits in the UK and Europe, based on the hegemony of corporate interests over popular ones. Put crudely, big bucks regularly placed into the hands of a few buy far more than the aggregation of individual votes we all have once every few years, given the limited parliamentary political economy we are working with. That is why the popular and constitutional revolution that has been brewing in Scotland around the independence debate could be so important in fomenting much-needed political change across these islands as a whole. The current British state and its guardianship is simply not working for much of Britain. It needs to be replaced by confederalism and genuine, properly resourced localism (not the kind that passes problems down to those least able to afford them).

On the economic front, the petition for a "people's budget" produced by the People's Assembly Against Austerity is perhaps framed rather too much in 'old left' terms, which switch off many who want to see neither a return to an unrecoverable past nor a perpetuation of neoliberal globalisation. Nevertheless, its concerns are central to a fresh economic approach.

Among the proposals being put forward by the PA (with some elaboration and amplification from me) are:

* Making key public services services community owned and controlled, and removing the distortion of private profiteering from health, education and social services.

* A statutory living wage, the abolition of enforced zero hour contracts, and an end to blanket wage freezes – part of tackling the low wage culture which is stunting proper economic development and costing huge amounts in collateral.

* Investment in building social housing, the abolition of the bedroom tax and effective control of private rents. This can be part of achieving a balanced housing market (involving a mix of ownership, private renting and social or cooperative housing) that gives people real choices at different stages in life and avoids the damage inflicted on the whole economy by unsustainable price inflation in the purchasing sector.

* Effective action to stop massive tax avoidance by rich individuals and large companies.

* A reversal of the policy of public spending cuts which hits investment and vital social programmes while failing to tackle the real mountain of financial and private debt.

* The introduction of the Financial Transaction tax (FTT), a micro-tax on FTs (the so-called Robin Hood tax), as backed in part by even the IMF and European governments.

* Largescale investment in creating green jobs, products, processes and services to transition away from the carbon-dependent economy.

* Increases in welfare and pensions being at least related to inflation. This needs to be part of a much wider restructuring of welfare in a positive direction based on an economy of caregiving and receiving, as the Rev Dr John Gillibrand will suggest in his Swansea lecture on 24 March (http://www.ekklesia.co.uk/node/20279). As our friends at the Centre for Welfare Reform say: "the welfare state is a good thing, it's just designed wrong - let's make it better."

* An end to the scapegoating of migrants or those on benefits, in or out of work. People of all and different backgrounds are the key to success, not our enemies. We need to tackle downward wage spirals and the causes of forced people movements (inequality, war, poverty, human rights abuses, climate change) on their own terms, not divide human beings and devalue their work and contribution because of national or ethnic boundaries.

* A democratic banking system, localised and community oriented wherever possible, with a significant public stake and direction, accompanied by monetary reform.

* An end to costly military adventurism and Trident, redirecting arms spending to productive and social purposes.

More widely, as the Green New Deal economists (a cross-party and non-party group associated with NEF) point out, the global economy is still facing a ‘triple crunch’. That is, a combination of a credit-fuelled financial crisis, accelerating climate change and the looming peak in oil production. The threat and opportunity here is massive. Business as usual cannot and should not be an option.

Surprisingly to some, the churches, along with other civil actors, could have an important role to play in rethinking the larger (as well as the local) economic architecture. As part of its own engagement with policy work on alternative economics, financial reconstruction and the economy of the churches, Ekklesia believes that the São Paulo Statement: International Financial Transformation for the Economy of Life, produced by the Global Ecumenical Conference on a New International Financial and Economic Architecture, remains of fundamental importance in a wider conversation -- one to which civil society organisations and think-tanks will also have an important role in contributing over the next few years.

Notes:

[1] The People's Assembly: http://www.thepeoplesassembly.org.uk/

[2] What is neoliberalism? CorpWatch: http://www.corpwatch.org/article.php?id=376

[3] John Gillibrand: Equality for disabled people requires quality public services: http://www.ekklesia.co.uk/node/20279

[4] Common Weal: http://allofusfirst.org

[5] International financial transformation for the economy of life: http://www.ekklesia.co.uk/node/19965

[6] Political economist Ann Pettifor's illuminating little digital book, Just Money: How society can break the despotic power of finance, is introduced here: http://www.ekklesia.co.uk/node/19919

[7] Centre for Welfare Reform: http://www.centreforwelfarereform.org

[8] Not a recovery but a relapse, NEF research shows: http://www.ekklesia.co.uk/node/20299

[9] Ekklesia's 2014 Budget coverage: http://www.ekklesia.co.uk/budget2014

[10] On Twitter, follow the hashtag: #Budget2014

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© Simon Barrow is co-director of Ekklesia. Follow him on Twitter at @simonbarrow

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