Well, Kwasi Kwarteng, the latest Chancellor of the Exchequer of the latest ‘quasi’ UK government, did not last very long did he? By the way, I am using the term ‘quasi’ in the normal manner used in dictionaries; to describe something that vaguely ‘resembles what it is supposed to be, but actually it is not’. This has been an apt description of UK governments for decades.
The governments of Thatcher, Blair, Brown, Cameron, May, Johnson and now Truss have all tried to convince the people of England, Scotland, Wales and Northern Ireland that they were governing for all of our citizens, when in fact they were not. Pretending to be a government for all whilst actually being a government for a particular class, is thus nothing new. It has been the general posture for UK (and other) governments since soon after the end of the Second World War.
However, this latest pretense, by the Liz and Kwasi duo has been nakedly exposed far quicker than was the case for previous UK governments. Boris spent months denying reality (party gate, Brexit problems) not days. The very radical measures the Kwasi duo proposed to enrich the rich have backfired spectacularly. The proposals caused the gnomes in the financial markets to hedge their investments by pushing up the borrowing costs in various areas of financial investment.
The radical ‘vision’ the Liz and Kwasi team were pursuing was one which they hoped would solve the long term problem of social inequality and economic instability within all neo-liberal democracies. In real terms, the poor are generally getting poorer, the taxes paid by the working and lower middle classes are falling in real terms along with their wages and salaries. At the same time, the demands and costs on the state for tax funded benefits are rising. There is an obvious long term fiscal gap.
So the ill thought out class-based solution to such wealth inequality – by this less than dynamic duo – was to try to promote economic growth, rather than promote wealth redistribution. Their quasi, Kwasi strategy was to increase the incentives for capitalists to invest in UK production and thus increase UK employment. They convinced each other that the fulfillment of this shared ‘vision’ of high growth would result in increased tax revenue and reduced benefits payments. In their fertile ‘imagination’ this in turn would reduce the government borrowing costs and lower the so-called fiscal deficit. The trouble was that very few – if any – in the finance markets (particularly the bond markets) believed this ‘vision’ was anything other than a fantasy and so this sector bumped up the borrowing costs for government and everyone else.
The subsequent bond rate hike not only increased the mortgage payments for existing house owners and new house purchasers, (and for other loans, businesses etc.) but also threatened to destabilise the private pension fund industry. For these latter institutions borrow and lend their pension holders savings on the world financial markets in order to increase their funds, whilst ‘earning’ (?) admin fees and expenses. The governments main banker, the Bank of England stepped in and bought some bonds to temporarily reassure the nervous bond holders these assets would be OK, but refused to continue to do so beyond Friday 14th October.
The result was the reluctant government U turns on its so-called mini- budget items and now the sacking of quasi chancellor Kwasi on that very last day. However the damage the visionaries had already caused was irreversible and no matter what happens now, (U – turns or even somersaults), ordinary peoples lives in the UK will quickly get worse. The accelerated process the ‘gang of two’ started is already working its way around the global financial system and will return to the UK in the form of higher costs of living, possible pension losses and further cuts in public services.
Interestingly, I predict that what will be overlooked in all the current chaos, back-biting, recriminations and media blah, blah, blah, is a crucially important fact. It is that once again, as with the Gnomes of Zurich episode, the EEC exchange mechanism fiasco, the 2008 financial collapse, the influencer’s behind the Brexit referendum and this kick in the stomach for Kwasi and slap in the face for a now bemused looking Lizzi, the financial sector in modern capitalist societies can effectively manipulate governments. The dominance of the global finance sector over political, economic and social affairs enables it to influence and even determine social policies despite the intentions of any government, left right or centre.
The efforts of any future government, Labour, Liberal or Green, – or their equivalents in any country – which does not successfully take on and reduce the absolute and relative power of the financial sector will be deflected, damaged or destroyed by it. Those who promote the idea of campaigning for alternative governments rather than alternative economic systems either have not understood the depth and breadth of the crisis the present system is in or are deliberately misleading their fellow citizens.
First of all, sustained growth is currently impossible because this system based upon capitalism already has a global crisis of relative overproduction. There is already too much global productive capacity for those who can globally afford to buy it. That is why there is a global recession. Secondly, even if that was not the case, future high growth would still be undesirable.
This is because the source of all economic activity, the natural rhythm of the planet; its climate, its ecology, its rainfall and sunshine patterns, its natural method of insect pollination, its water, air and soil quality and its reliance upon many key species to keep the system of nature in balance, have all been substantially undermined by decades of profit-driven growth. In the 21st century, the only rational medium to long term solution for humanity to work toward – in any country – is obvious. It is to switch to a socio-economic system of equitable and sustainable subsistence production.
Further decades of continuous economic growth is neither possible or sustainable. The world needs a system where human satisfaction and pleasure comes from social and community well-being and from saving and nurturing the quality and quantity of all ‘life on earth’. Whereas, working to gain satisfaction from achieving power over others and amassing the greatest possible accumulation of individual wealth is a recipe for even greater social antagonisms and further extinctions.
Roy Ratcliffe (October 2022)