Tuesday, 23 September 2014
The Alternative to Broken Markets and Austerity
Andrew Fisher, author of The Failed Experiment ... and how to build an economy that works
Last night I spoke at a Labour conference fringe meeting about the alternative to broken markets and austerity. I'll blog more on the discussion that followed the presentations by Mariana Mazzucato and Michael Meacher, but for now here is a rough note of what I said:
I was hoping that Ed Balls would have made this meeting redundant by setting out in his speech earlier a vision that we could all unite around ... sadly not.
So what's the alternative? Simple, it's democracy.
I'll come back to what I mean by that but I think first that we have to understand the crash - it was a crash caused by broken markets.
The banking and financial markets, the housing market and the labour market. Three interlinked broken markets.
They were broken - and remain broken - because they don't operate in the public interest and there is nothing forcing them to do so.
The finance sector was weakly regulated. It operated in the interests of a few. "The decadent international but individualistic capitalism ... is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous. And it does not deliver the goods. In short, we dislike it, and we are beginning to despise it". That quote is from 1933, by John Maynard Keynes following the great depression. It resonates again today.
The housing market is the story of housing become an investment opportunity rather than a home. The displacement of need and its replacement with greed. In London, where I live the average house price is now 14 times the average annual wage. How could any average earner, even an average earning couple afford the sort of mortgage that would be necessary?
And finally the labour market, which due to the anti-union laws leading to falling collective bargaining, and deregulation that sees rising zero hours contracts, mean wages have fallen dramatically as a share of national income over the last generation - and have been falling in real terms for a decade.
And there has been a bailout of each broken market - in fact an ongoing bailout:
The banking sector was bailed out with £1.3 trillion of cash and guarantees. It continues to be bailed out through quantitative easing and schemes like help to buy.
The housing market is bailed out to the tune of £25 billion every year - a subsidy increasingly for private landlords necessitated by the failure to build for need. Help to buy is a bailout for buyers too who may not otherwise be able to meet the exorbitant cost of housing.
The labour market too is in a state of permanent bailout: with tax credits and housing benefit an annual subsidy for wages that do not meet living costs. New housing benefit claims are increasingly from in-work households.
And these systematic bailouts don't end there: the rail industry receives around three times as much public subsidy as in the days of British Rail, the privatised water industry has produced high executive pay, high dividends for a generation, higher bills and is now getting tax breaks to upgrade the infrastructure it bought on the cheap a generation ago (see Thames Water case study). Likewise the privatised energy companies have failed to invest in renewables and we see new subsidies for fracking and nuclear to pay for that failure.
So ultimately we have to choose: between democracy and the markets.
More precisely, do we want to continue this systematised bailout of broken markets or do we want a government that builds systems to work in the public interest.
Our energy, water, transport, banking, work and housing systems are failing. Unless we start challenging and then changing them we face ongoing austerity - because that is the choice: do we want a society to work for people or people to work for the benefit of the profiteers?
In a democracy we have to fix broken markets and build a system that works in the public interest. That's what my book is about: dumping the failed experiment and building an economy that works.