July 28, 2017

Horse 2302 - Inequality and No Responsibility

Rising income and weath inequality is hollowing out the middle class around the developed world. Creating vast armies of working poor and leading to stagnant economies and political polarisation. It is the pre-eminent issue of our time. 
There's no question about that. The economic model that has delivered the inequality is trickledown economics which is basically tax cuts for the rich, deregulation for the powerful and wage suppression for the rest. 

Unquestionably. Capitalism needs to be saved from itself. That's what people like the Governor of the Bank of England are saying. It's what the financial institutions around the world are saying. Capitalism is thoroughly discredited at the moment because it's produced rampant income and wealth inequality. 
I've talked about inequality all of my political life but what I've discovered when I was Treasurer was just the extent to which powerful vested interests would try and drive policy to make outcomes even more unequal. 
- Wayne Swan, 7.30 program, ABC1, 26th July 2017.

Former Treasurer Wayne Swan is one of the more interesting politicians of the last two decades in that he has spent a great deal of time in office trying to speak to the underlying structures and motives of how an economy and government works, rather than just manipulating it for political power.
He stepped into the position of Shadow Treasurer under Mark Latham and continued to be there under in the Shadow Cabinets of Kim Beazley and Kevin Rudd before taking on the role proper when Labor won government in 2007. Bizarrely, he ended up being the proper person for the job of Treasurer during the Global Financial Crisis of 2008 and continued right through the premierships of Rudd, Gillard, and Rudd again.

The above interview from earlier in the week, will probably go unremarked on by most of the media, because as someone who has returned to the backbench, unless you say something shocking, obscene or ridiculous, very little will be said of it at all. There is something of value here and it's part of a longer, deeper and perhaps far more troubling and worrying story which is yet to come.

Before I begin this though, I present a brief history of governance and power.
I can't speak for contexts beyond the UK, the US, and Australia because I'm not really all that familiar with the political history of countries beyond those but the wider historical narrative seems to draw mostly consistent parallels, so perhaps I needn't worry.

Prior to about 1832 and the Reform Acts, the only people who had any right to vote and any say in the executive of the nation was the landed gentry and a very select group of men who wielded influence. In total this amounted to know more than about 2% of the population. Following the passage of the Combinations Acts, which made it illegal for workers to combine into blocks of negotiating power, the once dormant working class of working people began to rise up and complain about their ill treatment. This resulted in the rise of the chartists, the trade unions, and the suffragette movement, until eventually the franchise was gradually extended wider still and wider.
At the same time, capital had shifted from direct ownership of the land and the abomination that is direct ownership of people as slaves, and into machinery and manufactory equipment. During the latter half of the nineteenth century and the opening of the twentieth century, the various groups that had pushed into the franchise began to exert political power to make conditions safer for people to work in.
Politically though, the class that owned capital and royalty above them, were moving towards nationalism and in 1914, a bloody mess which lasted for four years was triggered by the assassination of an archduke of a country which was mostly irrelevant and brought into play a whole bunch of treaties and counter treaties.
In some parts of Europe, the working class managed to usurp the previous class of capital and morph into them with the rise of state communism and sovietism, but capital continued to run mostly unfettered until there was a massive and sudden collapse of demand and credit which resulted in the Great Depression. This was only really truly broken by a second wave of nationalism, the rise of facists taking control of political power and a second bloody mess.

The welfare state as we know it only came after the capital class had been sufficiently degraded so that it longer exclusively controlled political power. The simple and rather basic argument was that if full employment could be achieved and utilised in the destruction of people and property on a massive scale, then there was no reason why in peace time that it couldn't be put to use in improving the lot and lives of working people and building property on an equally massive scale.
From the 1970s though, following on from an oil crisis which sent dramatic shocks through credit and aggregate demand, the capital class which had been sufficiently rebuilt in the intervening thirty years, began to reassert itself and set about dismantling the welfare state and privatising anything and everything which had been built. If we move forward yet another thirty years and the direct memory of the two bloody messes which saw the physical destruction of people and capital has almost faded entirely and apart from the lingering problem that the working class still retains the franchise, we are steadily returning to a set of political and economic conditions that existed before the two bloody messes.

The very existence of the welfare state came at a price. 115 million people lay dead across Europe, to fight in an argument which they didn't create and probably shouldn't be held responsible for. At the same time as people were being destroyed, untold millions of dollarpounds were also destroyed when buildings, factories, industries and even entire cities were reduced to smouldering piles of rubble.

The British Labour Party's manifesto of 1945 quite nicely gives a handy summary of what underpins why the welfare state came into existence:

In the years that followed, the "hard-faced men" and their political friends kept control of the Government. They controlled the banks, the mines, the big industries, largely the press and the cinema. They controlled the means by which the people got their living. They controlled the ways by which most of the people learned about the world outside. This happened in all the big industrialised countries.
Great economic blizzards swept the world in those years. The great inter-war slumps were not acts of God or of blind forces. They were the sure and certain result of the concentration of too much economic power in the hands of too few men. These men had only learned how to act in the interest of their own bureaucratically-run private monopolies which may be likened to totalitarian oligarchies within our democratic State. They had and they felt no responsibility to the nation.
Similar forces are at work today. 
-  British Labour Party's Manifesto, 1945

There's an interesting sort of concept in there - responsibility.
One of the things which I find almost galling and certainly gauche is when people want to start asserting their rights. Rights of themselves are fine but if we remember that one of the most fundamental concepts in both economics and indeed politics is the notion that people are selfish and looking out for their rational self interest (and I think irrational a great deal of the time). The idea that we might be responsible to each other as members of a society is almost never discussed and in the grand debate of equality and inequality, or what is reasonable or unreasonable, the expression of responsibility is mysteriously absent.

We are currently witnessing the reassertion of a class of people, who derive their income and power through the accumulation of capital at a faster rate than the ability of working people to generate said capital and because people have an incredible capacity to normalise the world and over attribute their own work to their position, it makes sense that there would be a decoupling of responsibility from power. From the perspective of one who already has power and who controls capital, the natural inclination is to assign morality with results - people are poor because they have failed to perform rather than the effect which results from income and power accumulating faster than people's ability to generate said capital. The abuse of greatness is when it disjoins remorse from power, as it were.
I suspect that as the twenty first century rolls on, that as capital shifts into machinery which replicates intellectual ability, that we will begin to see another period of rising inequality as we saw in the nineteenth century, for precisely the same reason. Only this time, because actual governance has long since shifted away from the state and into board rooms, there probably won't be a replication of similar movements to the chartists, the trade unions, and the suffragette movement.

"had only learned how to act in the interest of their own bureaucratically-run private monopolies which may be likened to totalitarian oligarchies within our democratic State"
- 1945

"tax cuts for the rich, deregulation for the powerful and wage suppression for the rest"
- 2017

I ask you, does 2017 sound suspiciously like 1927?

The only source of power since the beginning of the history of the world, is the ability to control people, the land, and the resources which lie on top and below it. The future story of governance and power will also lie on that same ability. The unanswered question will be to what degree future generations of people can make​ the powerful feel as though they have any responsibility to the nation at all. At the moment, the answer appears to be less and less.

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