Saturday, 31 May 2014

A world turned upside down

ANDREW FISHER, author of a new book The Failed Experiment... and how to build an economy that works, argues it's time to challenge our economic model
THERE seemed to be a belief in my parents' generation that things inevitably got better: people got better off, working conditions became less brutal, each generation had more opportunities than the last, and technological advance made our lives easier.

I was born in 1979. That was the year when things changed. People didn't know it at the time, but some long-running trends went into reverse. Unemployment across the whole of the UK had not risen above one million between 1945 and 1978. Since the election of the Thatcher government in 1979 it has never been below 1.5 million.

For years, since the 1920s on some measures, the UK had been becoming a more equal society. That changed, and inequality shot up in the 1980s and 1990s, with the rate of growing inequality only slowed, not reversed, by the New Labour years. Since the coalition was elected more than an extra million people live in poverty – and last year the number of families using food banks trebled.

The beliefs have been crushed that each generation would be better off than the last, and that technological advance would benefit us all. I don't believe this was a delusion of the baby-boomer generation, but there had become a delusion that such social advance was natural and inevitable.

In an economy captured by corporate interests, the immense technological advances in our lifetimes have been used to cut wages and lay off workers, rather than increase pay and reduce hours. At the same time, politicians handed over vast swathes of our economy to be exploited for profit. Growing up, the phrase 'fuel poverty' had not been coined but energy companies have been making a mint from jacking up prices. Since privatisation, water bills and rail fares have also risen way above inflation.

And the tax system has been transformed. High taxes on big earners were cut, while the VAT consumer tax has doubled for us all. Corporation tax was 52% when I was born, next year it will be cut again to 20%. Taxes on petrol, alcohol and cigarettes have hit the poorest hardest. What was a tax system that redressed inequality is now a tax system that reinforces inequality.

I don't blame you if you don't pay much attention to the economy. The hourly updates from BBC News 24 on the performance of the FTSE index, that GDP rose by 0.8% in the last quarter, the annual profit statement of a multinational corporation, and the besuited men who tell us these figures with great reverence – it all seems rather remote, a bit irrelevant to our everyday lives.

It is. But that isn't the economy – in fact they are pretty useless measures of the things that matter to us, our friends, family and our community. I expect that, like me, you are more concerned about whether there are enough jobs for you and yours than the prices of shares on the London stock exchange. Likewise if the pound in your pocket is no longer meeting your monthly costs then George Osborne crowing over 0.8% growth feels rather like your neighbour telling you how sunny it is as the bailiffs evict you.

So our first job in building an economy that works for us has got to be to define what matters in the economy: improving average living standards; reducing poverty and inequality; providing work for all who need it; reducing tax avoidance and evasion; and ensuring our economy is stable and environmentally sustainable.

The reality is that economics is politics (OK, politics with a bit of maths). If you hand over responsibility for the economy to bankers, city traders, and big business, then you get an economy that, unsurprisingly, operates in the interests of bankers, city traders, and big business.

We need to democratise our economy so that we have an economy where people, not share dividends, matter most. How do we do it? As trade unionists we should know the answer better than anyone: we have to organise, campaign and cause trouble until it's easier for those in power to give us what we want than to deny us.

Every democratic gain, every freedom from exploitation that has been won has been won through organised collective action. In the best traditions of our movement we should educate, agitate and organise!

Wednesday, 28 May 2014

Christine Lagarde invokes Marx at 'Inclusive Capitalism' conference

Ben Chacko in the Morning Star

INTERNATIONAL Monetary Fund boss Christine Lagarde raised the ghost of Karl Marx yesterday at a London conference of the super-rich on “inclusive capitalism.”

The managing director cited the founder of scientific socialism’s insight that capitalism “carried the seeds of its own destruction” while addressing an audience of corporate tycoons at the Mansion House and Guildhall.

Business bigwigs who jointly manage £17.8 trillion were invited by the City of London and financier EL Rothschild to discuss how repeated crises, mass unemployment and spiralling inequality were undermining confidence in the capitalist order.

But the well-heeled guests had little to offer by way of reform except vague allusions to “corporate responsibility” and praise for wealthy philanthropists.

Ms Lagarde said she feared that “massive excess, rising social tensions and growing political disillusion” were costing “trust in leaders, in institutions, in the free market itself.”

She called for “rewards for all within a market economy.”

Marx Library chairman Alex Gordon said Ms Lagarde was “fond of appropriating Marx” without having read or understood his work.

“Marx predicted the failure of the IMF to ‘civilise’ capitalism. Marx wrote that bourgeois society ‘is like the sorcerer no longer able to control the powers of the nether world he has called up by his spells. Not only has the bourgeoisie forged the weapons that bring death to itself, it has called into existence the men who are to wield those weapons, the modern working class’,” Mr Gordon said.

Speakers at the shindig included Prince Charles, who intoned pieties about capitalism serving “the concerns of humanity rather than the other way around.”

But Left Economics Advisory Panel co-founder Andrew Fisher said: “Capitalism is necessarily exclusive. Only a few can hold capital in any meaningful quantity.

“If you want an inclusive society you need to democratise the economy — and that is called socialism, not capitalism.”

Saturday, 24 May 2014

The corporate stranglehold on the UK economy

At PCS Annual Delegate Conference in Brighton, John McDonnell MP, Andrew Fisher and Ann Pettifor spoke at a fringe meeting 'The economy we've got ... and the economy we need'. Their contributions were wide-ranging, but one thing was in common: big corporations are taking us for a ride ... and over-charging us for that ride!

John McDonnell spoke first and described a "corporate kleptocracy" in which four outsourcing companies: G4S, Serco, Atos and Capita have made huge profits from public contracts - massively expanding their share price, despite a slew of scandal and corruption. In the case of G4S fraudulently claiming for tagging people, and mismanaging Oakwood prison.

John also referred to the revolving door in Westminster through which corporate secondees are placed in government departments, and senior civil servants and ministers leave to pursue lucrative directorships at the companies to which they awarded contracts.

Andrew Fisher built on McDonnell's "corporate kleptocracy", saying that privatisation had led to huge profits for big business, seven figure salaries and bonuses for directors. He contrasted this with how privatisation had meant higher bills for water, electricity and gas, and higher rail fares - yet workers saw job cuts and attacks on pay and pensions.

This, said Andrew, accounted for the huge underinvestment in UK industry because our infrastructure on energy, housing and rail lags far behind the rest of Europe as our private owners just sweat the assets they got on the cheap, rather than invest for the long-term. Andrew ended by saying that we need "an economy as if people mattered, not as if only oligarchs matter".

Ann Pettifor derided "rentier capitalism" - using the example of Glazers who had bought Manchester United by loading it with debt - and repaid that debt through fans paying high prices for season tickets, TV contracts to watch them, and for the replica shirts. This was even more perverse said Ann when you see little children in Africa wearing the shirts knowing how much they've paid for them, so that the Glazers can pay their debts.

These are people who don't live here, "they live in the stratosphere", said Ann - a phrase that relates both to their stratospheric wealth and to the Florida residency. Many similar rentiers do live here, said Ann, but they "pay £50,000 a year to avoid their taxes and register as non-domiciles".

Following their contributions, there was a good discussion with delegates, who showed a real appetite for more political and economic discussion and for ideas about how to organise against corporate abuse. Many delegates also bought copies of Andrew and Ann's new books 'The Failed Experiment' and 'Just Money'.

Thursday, 22 May 2014

The economics of privatisation and public ownership

Below is the written-up version of my speaking notes from the Brighton Festival Fringe event 'Is It Time to Re-Nationalise UK plc?', organised by Sussex LRC, that I spoke at on Tuesday 20 May 

Tony Benn said "democracy transferred power from the wallet to the ballot, from the marketplace to the polling station. What people couldn't afford to buy for themselves they could vote for instead".

And if you look at the consensus set out by the Attlee government, that was delivered - the NHS, comprehensive education, the welfare state, council housing, etc.

But that went into reverse under the Thatcher government and since.  

'Privatisation is a key driver of inequality' 

Privatisation is a key driver of inequality: assets that have been funded by us all collectively are transferred to private owners.

Profits for a few, so a few at the top get super-rich - the big shareholders and the overpaid directors of these privatised companies.

A few at the top get rich. But what happens to the workers? Well, part of how a few at the top get rich is by exploiting their own staff: cutting wages, scrapping or diluting the benefits of pension schemes, cutting jobs.

Take the example of Qinetiq: In 2007, the 10 most senior managers gained £107.5m on a total investment of £540,000 in the company’s shares. The return of 19,990% on their investment was described as “excessive” by the National Audit Office. In 2009, Qinetiq offered its staff a pay freeze.

In the Thatcher era alone, so before the railways or Royal Mail was privatised, nearly a million workers were transferred from the public sector to the private sector.

And it's not just workers that are exploited: consumers are too. Look at water, rail, electricity and gas. In each of those industries prices have risen above the rate of inflation post-privatisation.

But privatisation, we were told in the 1980s, was about building 'popular capitalism' and a 'shareholder democracy'.

In 1997, after 18 years of Conservative rule, UK individuals owned 16.5% of UK company shares. In 1975, UK individuals had held more than double that: 37.5%. 

Economic desperation 

But privatisation isn't only an ideological project, it's often an act of pragmatic desperation. When governments are trashing the economy, they privatise.

Thatcher's government yes was ideological, but it also was trashing the economy. The revenue from privatisations helped her government balance the books.

By 1992, two-thirds of all the state-owned industries in 1979 had been sold off. In the year following Thatcher's departure, the government was running a growing deficit - though privatisation revenues reduced this by a third.

As her long-serving Chancellor Nigel Lawson said, "proceeds from privatisation - and for that matter council house sales - were bound to dry up once all the saleable assets had been realised."

This was asset-stripping. It's like paying your rent in a furnished flat by selling off the furniture - totally unsustainable and likely to come back to haunt you. Harold MacMillan, Tory prime minister form 1957-63 called it "selling off the family silver".

But it wasn't just the Thatcher and Major governments that turned to privatisation out of economic desperation.  When the financial crisis hit, New Labour proposed in 2009 to privatise Royal Mail, the Tote, the Royal Mint, the Ordnance Survey, the Student Loan Book and the Channel Tunnel Rail Link - a list the coalition government is currently working its way through. 

Public ownership 

The Attlee Government came to power in 1945 with national debt over 200% of GDP (about four times what Osborne inherited in 2010). Yet they nationalised coal, steel, rail, gas, electricity, water, road haulage, civil aviation and more. How? They gave the former owners Treasury bonds in exchange for shares.

Today there should be a simple test: if it's too important to fail, it should be in public ownership. If the government would have to bail it out if it collapsed then it's ours.

But we should go further to extend public ownership and collective ownership in all its forms.

We should give workers the right to co-operativise their companies. A simple majority in a ballot and the company is transferred from private to co-operative ownership.

And the right to buy-out. So if a company is put up for sale, or a takeover attempted, then workers' have the first option to buy it out.

We need to transfer power back from the marketplace, from the wallet - into the hands of the many not the few.

Tuesday, 20 May 2014

I applied the public interest test to the big pharma deal and Pfizer failed

Prem Sikka

The furore over US pharmaceuticals giant Pfizer’s attempted takeover of UK rival AstraZeneca continues. AstraZeneca has now rejected Pfizer’s “final” offer, as it says the proposed deal “undervalues the company and its attractive prospects”. This is fine – the law empowers shareholders to pursue the best return on their investment – but what about the other big stakeholder in a major business in an important industry: the public?

Some have suggested that such mergers of large corporations should be subjected to a public interest test.
There’s no single definition of the “public interest”. Laws, such as those relating to Freedom of Information, prioritise the public interest but let judges decide on its meaning. In practice, judges have often applied a common sense understanding of the term, to prioritise the welfare of those directly affected by the decision and society generally.

This same principle could be applied to the Pfizer case. To pass the public interest test, a big merger would have to safeguard jobs, maintain competition, protect tax revenues, and ensure that the new company was socially responsible.

Well, I’ve applied the public interest test to the deal: Pfizer does not come out well.

Job protection

Pfizer has promised to keep one-fifth of its combined research and development (R&D) in the UK though it admits that jobs would be lost elsewhere. Pfizer has reneged on previous job assurances. The sale of Pfizer’s R&D facility in Sandwich, credited with developing Viagra, resulted in the loss of 1,500 jobs.

The price of previous Pfizer takeovers has been paid by workers. Since 2005, some 55,000 jobs have disappeared at various Pfizer units. All this helps to meet market expectations of earnings and performance related remuneration targets for executives. Employees provide blood, sweat, brains and brawn to enable companies to generate profits, but have no say in the takeover bazaars.

Prices and choices

Last year, Pfizer and AstraZeneca reported global sales of US$51.5 billion and US$25.7 billion respectively. The combination of the two would create a new giant with plenty of resources to lobby policymakers and subvert public choices.

The merger would reduce competition and possible incentives for innovation. It would reduce choice of medicine suppliers for hospitals, the elderly and the unwell. Drug companies already exploit their market power and have overcharged the National Health Service (NHS) by millions of pounds. The UK’s Serious Fraud Office has been utterly ineffective in bringing drug companies to book.

Tax revenues

Pfizer benefits from investment in social infrastructure, but does not like paying taxes. For the period 2010 to 2012, it had global profits of $43 billion, but paid no US corporation tax. This caused the US Securities and Exchange Commission (SEC) to ask the company to explain its accounting practices. In particular, the SEC was curious about the fact Pfizer recorded high profits abroad but losses at home, when 40% of its total sales and 50% of its assets are in the US.

For the period 2010-2012, Pfizer had sales of around £5 billion in the UK. It paid £118m in corporation tax, though the UK government gave it £184m in tax credits. The labyrinth of nearly 200 subsidiaries in tax havens, such as Jersey and, Delaware, is central to Pfizer’s global tax strategy. In common with many other companies, it uses royalty payments and intragroup pricing techniques to shift profits to jurisdictions with low tax rates, or even no taxes at all.

Social responsibility

Pfizer has been a repeat offender. In 2004, a Pfizer subsidiary paid a fine of US$430m to settle charges that it illegally marketed epilepsy drug Neurontin. In 2009, Pfizer paid a fine of US$2.3 billion – about three weeks of its sales revenue – to resolve criminal and civil liability arising from the illegal promotion of painkilling drug Bextra and three other medicines for purposes not approved by the US Food and Drug Administration.

In 2012, the SEC charged Pfizer for bribing health care professionals in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company’s pharmaceutical products. Pfizer paid US$60.2m to settle the charges. In December 2012, Pfizer reached a US$43m settlement with 33 US states over allegations of fraudulent marketing and sales of its drugs Zyvox and Lyrica. In July 2013, another Pfizer subsidiary paid a fine of US$491m relating to unlawful marketing of the immunosuppressive drug Rapamune. Pfizer said that the offences occurred before its acquisition of the subsidiary.

In May 2014, US regulators fined it US$410,000 for not having proper air pollution controls to prevent leaks of methylene chloride gas. Pfizer has admitted carrying out tests for Viagra that involved removing the foreskins of the anaesthetised dogs and then giving them shocks with electrodes inserted into the centre of their penises. People for the Ethical Treatment of Animals (PETA) claims that in 2011 alone Pfizer experimented on 51,682 animals. It claims that thousands of animals were subjected to painful experiments and were denied pain relief.

What to do?

Pfizer’s practices are unlikely to easily pass any robust public interest test. Perhaps it is no different from any other company as it relentlessly sacrifices employees, consumer care and social welfare to pursue private profits.

There is no easy cure for these institutionalised processes, but we could start by empowering employees to approve takeovers of all large companies, as they always bear the cost of merger games. This would be consistent with Section 172 of the Companies Act 2006 which requires directors to have regard for the interests of employees.

A public panel of stakeholders should apply the public interest test to see whether the protagonists ought to be accorded further privileges. This panel should have regard for employment, taxes, customer care and social welfare, among other things. If it did its job, such a panel would ensure a deal that didn’t serve the public would never even make it to a vote in AstraZeneca’s boardroom.

Sunday, 18 May 2014

It's boardrooms not Brussels, UKIP

Andrew Fisher argues the UK has lost more power to boardrooms than to Brussels

On his regular slot on BBC Question Time on 8 May this year, Nigel Farage outlined UKIP's message simply, 'We want our democracy back'.

The message from UKIP is clear and consistent: the UK's democracy is diminished by the fact that powers once possessed by the UK government are now exercised by the European Union.

This is unarguably true - though the extent is hotly contested - but while UKIP gets hot under the collar about the powers allegedly undemocratically exercised by Brussels, it is silent on the far greater powers that successive governments have surrendered not to Brussels, but to boardrooms.

EU powers
One UKIP poster claims that 75% of our laws are made in Brussels. The reality is somewhat different - in fact this well-researched factcheck site tests the claims of a Tory MEP, UKIP's Farage, and even Prime Minister David Cameron - and finds them all to be exaggerating. It concludes that: "something in the region of 10-20% would be a fair guess for the UK."

Furthermore the indepedent FullFact website helpfully reproduces this graphic showing the origins of various types of legislation - which shows just 14% of Acts of Parliament and 14% of UK regulations initiated by Parliament are EU-driven. But 53% of all regulations do come from Europe (much related to food and agriculture).

Nevertheless, with only limited regulations and oversight, the unaccountable boardrooms of various transnational corporations run our energy, railways, postal services, water, forensic science and have an growing influence in our increasingly marketised universities, colleges, schools, hospitals, probation service, police and security, prisons, and even the welfare state.

Budget power
The UK's contribution to the EU was £17.2 billion last year. But that was offset by the £3.3 billion UK rebate and the £5.2 billion funds that the UK receives - making a net contribution of £8.6 billion (government figures).

The real seats of power in the UK?
The turnover of the UK energy sector alone was £20.6 billion in 2011 (according to industry body Energy UK). According to Ofwat (see figure 2 on p.7), the UK water industry turnover is £10 billion, and according to rail operator Stagecoach, the UK rail industry has total costs of £12 billion (£6 billion funded by your fares).

From just these three privatised sectors nearly three times as much is spent than the UK's gross contribution to the EU - and seven times our net contribution. Please also bear in mind that in addition the following companies have also been privatised in the last 30 years: British Petroleum, British Telecommunications, Royal Mail, Cable & Wireless, Enterprise Oil, British Airways, British Aerospace, Britoil, Amersham International, Fairey Engineering, Girobank, Ferranti, National Freight, International Aeradio, British National Oil Corporation - to name a few...

To some extent the EU has strong claim to democratic mandate. A referendum was won (in 1975) committing us to membership of the European Economic Community (EEC, later EC then EU).

A little over two-thirds of the UK electorate voted to join the EU's predecessor, on a 65% turnout (higher than the 2001 and 2005 general elections - and equal to the 2010 general election).

No referendum was ever held to remove from democratic control our water, electricity, gas, telecommunications, railways or, most recently, postal services.

The EU also has internal democracy. We vote for members of the European Parliament every five years, and the elected UK government of the day appoints an EU Commissioner, and sends minsters as delegates to the Council of Europe.

No democratic mechanism operates in any of the privatised utility companies or in any industry formerly controlled run under government control.

Public opinion
Democracy roughly translates from its Greek origins as 'the people rule'. So how enraged are people that the EU has taken some power away from the UK government? As its name suggests, UKIP believes the UK should pull out of the EU - a view shared by 39% of the public according to a March 2014 opinion poll (41% wanted to stay in the EU). Similarly an April poll found that 35% wanted to stay and just 32% wanted to leave.

Compare this with the concern people have that too much power has been handed to boardrooms: according to a YouGov poll 67% want the recently privatised Royal Mail in public ownership (22% against); 66% want the railways renationalised (23% against); and 68% want the energy companies under government control (21% against).

This too is reflected in the views of UKIP members, who are far more keen on the renationalisation of privatised industry than Tory or even Lib Dem voters. UKIP voters want the railways back by a margin of 73% to 21% and the energy companies nationally-owned again by a whopping 78% to 16%.

Conclusion: The UKIP fraud
Nigel Farage is therefore correctly reflecting public opinion when he says 'We want our democracy back' - but he's mistaken about both where the public want it back from and where our democracy has actually gone. It's boardrooms not Brussels, UKIP.

There are undoubtedly flaws with the EU, its democratic mechanisms and support among European citizens - but that is true of national governments too, who likewise underwhelm.

The real hypocrisy of the UKIP leadership is its failure to articulate any concern about the far greater democratic powers that have been surrendered by successive governments to boardrooms - whose powers over our lives (just those gained through privatisations in the last 35 years) are far greater than those held in Brussels.

Ironically then, rather than reflecting their own voters' concerns, UKIP wants to hand over more of our democratic say to the private sector. The NHS should be privatised, according to Paul Nuttall, UKIP's Deputy Leader and an MEP for north west England. Opinion polling shows 84% of UKIP voters want the NHS run in the public sector (only 10% want it privatised).

Tuesday, 13 May 2014

Is It Time to Re-nationalise UK PLC?

Sussex LRC event at the Brighton Festival Fringe

Tuesday 20 May
Community Base (South Wing entrance), Queens Road, Brighton

Join Labour MP and LRC National Chair John McDonnell MP, CWU union activist Maria Exall, LEAP economics' Andrew Fisher - whose new book "The Failed Experiment... and how to build an economy that works" will just have been published, and RMT union Executive member Janine Booth

Discuss if we should stop outsourcing public services, bring council services back in-house, and put industries like energy, rail and telecoms back into public ownership.

Tickets: £4 waged; £2 concessions (Free for PCS members whose conference is on at the Brighton Centre). Refreshments will be available. Doors open 6.30pm.

Full details on how to buy your tickets available via If you want to pay by credit or debit card, please use Brighton Fringe Box Office is now open to Friends of the Fringe and opens to the general public on 5 March.

Read the 2008 LEAP pamphlet 'Building the new common sense: social ownership in the 21st century' with contributions from Bob Crow, Maria Exall, Andrew Fisher, John McDonnell MP and others

Download the LRC flyer 'The Myths of Privatisation' and 'Privatisation is THEFT'.

Monday, 12 May 2014

John Smith ... it could have been very different for workers

On the 20th anniversary of the sudden death of Labour leader John Smith, Andrew Fisher remembers his commitment to workers' rights and economic intervention

Addressing Labour Party conference in 1993, John Smith pledged:
"Our charter of employment rights will give all working people basic rights that will come into force from the first day of their employment. We will give the same legal rights to every worker, part-time or full-time, temporary or permanent.

"We will give every working man and woman the right to protection against unfair dismissal, and access to health and safety protection. And every worker will have the right to join a trade union and have the right to union recognition."
The speech is worth reading in full. But I want to concentrate on the above paragraphs for a moment.

The Agency Workers' Directive, agreed by a triumvirate of the government, CBI and TUC in the dying days of the last Labour government, reneged on that historic pledge of employment rights from day one. Instead, agency workers are only granted some limited equal rights after 12 weeks.

Likewise, Blair's 1999 Employment Act did not give every worker the right to join a trade union - only those in workplaces with 21 or more employees.

Today, the current government has diluted the protection against unfair dismissal. For those who started their employment after April 2012, you have to have been employed for two years before you have the right not to be unfairly dismissed. And even after this inordinate qualifying period, workers now face deterrent fees to even bring their case.

Instead of a "charter for workers' rights", as John Smith phrased it to the TUC in the same year, we have today a charter for workers' exploitation.

There was also a recognition that government should have an industrial strategy that commits to full employment.

"This commitment to the goal of full employment is central to our economic approach. It means using not just interest rates - which now even the IMF believe should be cut - but all the instruments of economic policy to go for growth, jobs and investment. It means what we, as democratic socialists, have always believed, that it is the duty of Government to match unmet needs with unused resources."

Given Smith wanted to use interest rates, we can deduce from this that Smith would not have allowed Brown to fulfil Nigel Lawson's aim of making the Bank of England independent. But more importantly neither would he have allowed the sort of rhetoric we heard from Blair, Hutton, Purnell and Byrne demonising welfare claimants. After all, "it is the duty of Government to match unmet needs with unused resources" - so unemployment is a government failure, not a personal one.

This is not to say that life under a John Smith-led government would have seen a workers' paradise created. As John McDonnell MP put it:
"Smith came from the right-wing tradition within the party but he was Labour. You couldn't contest that he was a traditional Labour, social-democratic politician. And he was committed to the elements of the Labour Party which represent the 'broad church' coalition."
Some see Miliband in a similar mould to Smith. If so, he could do a lot worse than read John Smith's 1993 party conference speech, and make similar commitments for a Miliband government.

Saturday, 10 May 2014

"Housing is a right. Amassing wealth is not"

Tackling the housing crisis won't be easy, but half-measures won't do ... Andrew Fisher sets out the policies a Labour government should implement.

Piketty's basic rule applies to the housing market. Housing's return on capital is exceeding growth - and has been for a long time. From 2001 to 2011 UK house prices rose by 94% while wages rose by just 29%. As housing became more unaffordable for the many, its ownership became more concentrated in the hands of the few.

According to the Royal Institute of Chartered Surveyors (RICS) there is no end in sight to this trend - with house prices on a "firmly upward trend", having risen by 10.9% in the last year according to Nationwide (8.5% according to Halifax), and RICS forecasting that house prices will rise by an average of 6% in the each of the next five years. No one is expecting either wage or economic growth to be anywhere near that.

So as a nation we are collectively participating in a giant game of Monopoly - the money and property is being concentrated and more and more are being left behind. This is the inevitable consequence of the shift from the Attlee welfare capitalism settlement to the Thatcher free market capitalist settlement. Under this shift housing has gone from a home to an investment opportunity.

The carnage of this policy is evident - 1.8 million families languish on coucil waiting lists - and the crisis is even more acute in London. Many of these people will be living in overcrowded or temporary accommodation - damaging children's life chances, causing huge stress, and disrupting their lives.

Ed Miliband's proposals this week, to scrap letting fees, make 3 year rental agreements the standard, and to limit increases within those period are all welcome. But are they enough?

Moneyweek tells us that, "Right now, what the private rental market needs more than ever is private institutional investment". I disagree, what the private rental market needs more than ever is regulating and replacing.

So Ed Miliband's other housing commitment to date - to have the UK building 200,000 new homes a year by 2020 - needs a one word tweak with the insertion of 'council' between 'new' and 'homes'. Labour must promise to a mass programme of council housing.

By building council housing, rather than just private housing (to buy or to let), you can target building in areas where there is need (and to meet the needs of those in need), stipulate minimum standards, and most importantly set rents at a rate that reflects affordability rather than profit maximisation. Lower rents also mean a saving for the taxpayer, through lower housing benefit payments.

The market - however subsidised or encouraged - cannot solve the housing crisis. It caused it. As Labour MP Jeremy Corbyn wrote in an excellent analysis of the crisis and Miliband's proposals, "The real issues are housing supply and the cost of the private rented sector."

Stabilising housing rental costs at their current levels - the best that Miliband's proposals could achieve - is not sufficient at a time when landlords are attempting to evict 525 households every day. Both 'social' and private landlords are recording more than double-digit increases in applying to the courts for repossession orders.

Of course many of these evictions are being made by local authorities due to the bedroom tax and the benefit cap. Labour, like the SNP in Scotland, has vowed to scrap the bedroom tax, but remains supportive of the benefit cap. So Labour should vow to scrap the benefit cap too.

But none of the above will address the affordability crisis now - and it needs addressing. Since 2010 alone, rent levels have gone up by more than £1000 a year in London. LSL estimates that the average rent across the UK rose 11.5% in real terms between 2009 and 2012. In January this year, Shelter reported one in 11 households were worried about being able to pay the rent or mortgage this month. So Labour must give councils the power to control rents in their area, so that councils help tenants to stay in their homes.

Labour should also introduce powers fr local authorities to bring in a Land Value Tax on empty properties and undeveloped brownfield sites to encourage them to be brought into use, with revenues hypothecated to fund new council house building. A wealth tax to fund social need - Piketty would be proud.

But Labour also needs joined-up policies. The housing crisis of affordability is also due to low wages - which need a living wage, and an end to exploitative zero hour contracts. Tax changes to stop the effective subsidising of buy-to-let landlords, as recommended by the Intergenerational Foundation, should also be implemented.

At the basis of all these policies must be one simple principle: "Housing is a right. Amassing wealth is not."

Friday, 9 May 2014

Democracy and the blame game

Andrew Fisher, author of a new book that argues politicians rather than bankers should take most of the blame for 2008 financial collapse, analyses recent polling data

There was some good news for the Labour Party yesterday as polling data showed 53.3% of the electorate blamed the bankers the most for the crash, while only 33.9% blamed the last Labour government. A further 12.8% blamed previous Conservative governments.
Who do Labour voters blame for the crash?

Among Labour voters the figures show an even stronger 63.8% blame the bankers and 26.7% blame previous Conservative governments, while just 9.5% blame the last Labour government.

Ed Balls' message, delivered at 2011 Labour Conference (one that can't be repeated often enough), seems to have got through
"It wasn't too many police officers or nurses or teachers here in Britain that bankrupted Lehman Brothers in New York"
But if Labour voters do blame the bankers (and Lib Dem voters do even more so at 77.0%), then the logical question is 'what should be done?' - and that brings us back to politicians.

If we just simply 'blame the bankers' then surely there is an onus on politicians to do something about it. As Neil Foster points out, "a separate poll for Class by YouGov in October 2013 found finding only 22% of voters believed ‘enough has been done to avoid another banking crash like 2008 happening in the future’.

Likewise if one quarter of Labour voters blame the previous Conservative governments (Thatcher and Major) - then that leads to the inevitable question of why didn't the last Labour government do something to reverse their actions in 13 years of government?

Labour supporters and today's Labour shadow cabinet have to have an answer to that too. 

The polling data there is the safe space for Labour today to have a proper analysis of the crash, what went wrong, and what needs to be done to put it right. That should involve some mea culpa, and some analysis of the failed policies of the Thatcher and Major governments.

So why do I - out of step with public opinion, and with Labour voters - argue that politicians rather than bankers should take most of the blame? 

Because ultimately if the bankers are deregulated and lauded as the masters of the economy I don't think it's surprising that they behave in a profit-maximising, yet socially reckless, selfish way. I blame politicians because - throughout the 80s, 90s, and 00s - they removed regulation after regulation on the finance sector, from high street credit, to building societies, banks and the markets. The whole economy was re-shaped in the interests of the finance sector - and politicians of successive governments did that.

My fear is that if we 'blame bankers' (and don't get me wrong they deserve their share of opprobrium) we disempower our democracy. We say 'the bankers did it', as if that's a sound analysis. But it's too easy then to overlook the fact that politicians created the space for them to do it. And, more importantly, that politicians could put it right too.

In The Failed Experiment I argue that blaming the bankers is not enough. But nor will partisan attacks on the failures of Conservative or Labour governments. Instead, the problem is the post-Thatcher political consensus which says the market knows best, and politicians should get out of the way.

I want politicians in the way, I want to praise them when they get things right, but I also want to hold them accountable when they fail. And the crash was not just a banking failure, but a political failure too - and one that is also yet to be resolved.

Tuesday, 6 May 2014

An Economy As If People Mattered

ANDREW FISHER argues in his new book that the failed economic model can be fixed by a transfer of power to workers

From the May Day edition of the Morning Star

Let me take you to a place you might like.  

The UK is more equal than at any point in its history. Not by coincidence, trade union membership is just over double what it is today and corporation tax is also slightly more than double what it is today. 

The share of national wealth going to workers’ wages is higher, unemployment is lower and for those out of work, unemployment benefit is substantially higher too, as is the basic state pension. 

Taxation is clearly redistributive, and only around three in 20 workers aren’t covered by collective bargaining agreements.

This was the 1970s. But you don’t often hear about it. Instead, the popular portrayal of the period is as an almost prehistoric era, before the dynamism of entrepreneurial creativity unleashed by the Thatcher government swept away a decade of industrial strife and inefficiency.

For Thatcher’s government, weakening workers was a key part of their programme. They wanted to take the force out of the labour force. 

To a large extent they did, and her successor governments have maintained her legacy.

But didn’t this make our economy more dynamic, make labour more efficient, and spark an entrepreneurial spirit in us all?

Well, no. In fact, as I show in my new book The Failed Experiment ... and How to Build an Economy That Works, the attack on workers under the Thatcher government was one of the causes of the economic crash and the continued inability of our economy to recover or to improve living standards.

We have to ask the question: what is the economy for? Think about that question, because until you can answer it, you have no political framework whatsoever. 

In all my years of canvassing for the Labour Party, from West Sussex to West Yorkshire, I’ve never heard a single voter express their concern for the FTSE or the level of GDP growth. 

Yet, if you beamed down to Earth from another planet, you would think that was the only thing that mattered. The BBC tells us hourly how the FTSE index is doing, and politicians of all parties are obsessed by whether the economy is up by 0.9 per cent or down by 0.2 per cent. 

But even on that latter measure our economy has got worse. Between 1955 and the election of the Thatcher government, UK growth averaged 3.0 per cent a year. From 1979 until 2013, it has averaged just 2.1 per cent. If growth is what matters, the modern UK economy is an abject failure.

So what has choked off growth? Essentially, we have seen capitalism become cannibalism. And part of what these zombie capitalists have been consuming is workers’ power to consume. 

By cutting workers’ wages in real terms, workers are less able to buy the goods and services that give us economic growth. 

As their wages fall they rely on credit to maintain spending levels, and if their job goes then they default on their debts, which is bad news for banks — and indeed was a large part of the reason for the crash.

In Tony Blair’s years as prime minister, a period of economic boom, the incomes of the richest 0.1 per cent increased by 83 per cent, while the 90 per cent at the bottom saw just 18 per cent growth. 

Today in the UK, the richest 10 per cent have an income 13.8 times larger than the poorest 10 per cent. That same figure for France is 9.1 times, in Germany it’s 6.9 and in Japan just 4.5. 

The accumulation of wealth at the top makes a mockery of free-market trickle-down advocates. Instead wealth has been sucked up in a vacuum effect. Like in the board game Monopoly, one player ends up with all the money and property leaving everyone else bankrupt.

So we need to transfer power from the boardroom to the shop floor or “from the wallet to the ballot,” as Tony Benn said. 

If technology means fewer work hours are needed there are two choices. The first is that the employer cuts the excess workers and increases profits.

The second option is that working hours are cut but pay rates maintained, and profits stay the same. You may never have heard of the second option.

We live in a society in which the right of profit is pre-eminent. Landlords can charge what they like but your benefits will be capped, employers can axe your job and make you lose your home but protest outside one of their homes and the government will set up an inquiry into the trauma your trade union tactics caused.

If we want something better we need an economy built as if people mattered. That means people having rights. Here’s three for starters:

1. Profitable companies cannot make people redundant; they can retrain them and redeploy them, or they can cut hours while maintaining pay levels
2. We all have a right not to live in poverty. That means the minimum wage becomes a living wage — as Bob Crow said, “anything else just institutionalises poverty and lets cash-rich companies and their shareholders off the hook.” It also means boosting the basic state pension and benefit levels
3. Workers should have the right to co-operativise their company by simple majority vote in a ballot. If the workers vote for it, the company becomes a workers’ co-op and the owners are either bought out or given Treasury bonds (which is how the Attlee government nationalised numerous industries).

You may ask who will deliver an economy as if people mattered? The answer is the same as it ever has been: we will deliver it together or it won’t be delivered at all. Trade unions win because of collective strength. The rich have vast wealth, the workers have vast numbers. If we organise, we can win.

Andrew Fisher is LEAP economics co-ordinator and author of The Failed Experiment...and How to Build an Economy That Works, published on May 20 and available to pre-order with a 10 per cent discount at:

Sunday, 4 May 2014

When neoliberalism clashes with nationalism ...

Andrew Fisher on the reaction to Pfizer's attempts to take over AstraZeneca

Ministers are panicking. A US pharmaceutical giant is attempting to take over a UK pharmaceutical giant. Both Pfizer (US) and AstraZeneca (UK) are part of the Big 6 Pharma companies.

Surely this is a case of the free market in action though? Why are the free market advocates of Cameron's Tories and orange book Liberals getting wound up by this perfectly normal corporate activity?

It is made all the more odd since part of the reason for Pfizer's offer is to take advantage of the UK's tax haven status, as our corporation tax rate of 21% (falling to 20% next year) is far lower than the US rate of 35%. This is exactly what Osborne wanted when he set out his strategy at the 2012 Budget, a lower UK corporation tax rate was "an advertisement for investment and jobs in Britain". (Richard Murphy sets out a brilliant critique of tax competition in relation to the Pfizer deal here).

The problem for Osborne and the government is that there are fears this takeover would mean less investment or jobs in Britain. So Business Secretary Vince Cable has been trying to gain commitments from Pfizer to continue investment in UK research facilities and the maintenance of UK jobs.

Today, Labour leader Ed Miliband has entered the fray with a letter to David Cameron, in which he says "we also all recognise that too often in recent years major takeovers have failed to deliver the promised benefits".

Miliband is referring to the previous experience of US food giant Kraft taking over UK food giant CadburySchweppes. At the time of takeover in 2010, Kraft promised to keep a Bristol factory open. But just a week after the deal went through, Kraft backtracked and said it would close the plant. That's the free market though, right?

Miliband advocates "a stronger public interest test" for corporate takeovers in his letter. This may be less surprising coming from Miliband since state intervention in the market, for the public interest, as become the key theme of his leadership, including the print media post-Leveson, in the energy markets, and most recently with regard to home rentals (while continuing to tease over the railways).

But why are the free market enthusiasts, who have scorned Miliband's above interjections (at least initially), been spooked by Pfizer? Well because this is the point at which nationalism and neoliberalism clash. By nationalism, I mean the laudable democratic and electoral concerns about what is in the interests of UK's people - our jobs, industries and living standards. But I also mean the nationalistic pompous concern that the UK should be seen to be a world leader in some industries, an international player, which allows UK politicians to bask in the reflected corporate glory - and the concerns that Johnny Foreigner might take over a well known British brand.

The BBC reports that: "Pfizer told Mr Cameron it would go ahead with Astra's planned research and development (R&D) base in Cambridge, and retain its Macclesfield manufacturing facilities. Pfizer also pledged that if the deal went ahead, 20% of the combined company's R&D workforce would be based in the UK".

But the BBC also adds that: "The US firm said its commitments would be valid for five years, unless circumstances changed significantly" (my emphasis). In light of the Kraft takeover, I'm sure I won't be the only one concerned that Pfizer's words might melt in the mouth like Cadbury's chocolate.

This concern also afflicted the Thatcher government when they privatised BP. As I document in my new book, The Failed Experiment ... and how to build an economy that works:
"when BP was fully privatised in the late 1980s, significant consternation was caused when the emir of Kuwait bought a significant shareholding in the company. BP was not just another privatisation. Oil made the economy go around and the Thatcher government did not want a Middle Eastern government to have sway over the UK in such a crucial area. The free market ideology of the Thatcher government butted up against the nationalism of her party. The Prime Minister, Chancellor and Foreign Secretary all met to devise a way to keep privatised BP in the hands of “one of us”, as Thatcher might have said – and so a UK buyer was found. The government recognised the need for strategic control of a national asset, even as it was selling it off. This highlights a great contradiction"
But the national credentials of AstraZeneca are not really that strong - only one-eighth of their workforce is UK based (though a not insignificant 6,700 are UK jobs). And the secret of the pharmaceutical industry has been to generate huge profits by patenting state or state-funded or state-subsidised research and selling it back to public healthcare systems at a lavish profit.

In any sane economy, the pharmaceutical industry would be publicly owned - and neither would the patents that price sometimes vital medicines out of the reach of the poorest in the world and cause rationing in public healthcare systems. The pharmaceutical industry is both too important to fail and too important to be left in the hands of unaccountable profit-maximising corporate interests.

To any politician dedicated to the public interest this would be obvious. But today's politicians are either captured by corporate interests or too impotent to act. For the latter there's always Viagra, produced by Pfizer ... although I'm not convinced there is a drug on the market to stiffen resolve.