Vol.5 No.20, 04 October 2005

Why are they all saying the same thing?

Margaret Legum

‘What we want is a home-owning, share-owning democracy’ During the political party conference season thirty years ago, it would have been very clear that such a slogan was Tory - standing up for the individual, entrepreneurial culture against the welfare-dependent, taxing and spending Labour Party. Today it is no surprise that it was New Labour’s Chancellor of the Exchequer, Gordon Brown, who came out with what has now become a clique.

Why? Why have the broad political policies and objectives of the Thatcher New Tories become the everyday language of all parties in Europe? Some would say it is because those policies worked so well that even former opponents have had to operate within that framework, leaving current Tories gnashing their teeth as New Labour steals their clothes.

But the truth is that those policies have worked in neither the economic nor the political spheres. Every country in Europe has weakening, often static, GDP growth and rising unemployment, growing under-classes of alienated people, incipient or active societal violence, rising mental illness and domestic crime. Every European government sits on the edge of its seat watching sluggish results from various market sectors, desperate to be able to claim it is doing ‘less worse’ than its neighbours. That is the best any can say.

And, politically, one by one electorates demonstrate sullen resentment. Formerly active political parties atrophy. Forty percent of Britons did not vote in the last election; so Blair’s government is there by courtesy of 25% of the electorate. Europeans who have had referenda about the EU have given the thumbs down: the British government will not even offer one in the foreseeable future. German voters, faced with choice between the status quo and a more extreme version of it, paralysed the democracy.

So it is hard to see how thirty years of current policies can be described as so successful that no other policies are being put before electorates. It is true that some people, and notably the financial sector, have done very well indeed, but others have most definitely not. Why are they not developing new political movements to represent alternatives?

The success of the financial sector provides the clue both to a subtle change in the old slogan, and to the reasons for the cloning of the heart of political policies. ‘Share-owning’ has been added latterly into the aspiration for the ‘owning’ democracy. That is because it has become clear that ownership of shares is today the passport to wealth in a way that employment used to be.

The real reason why party politicians are difficult to tell apart these days is that Thatcher set it up that way. By deregulating the capital market – freeing share capital to seek worldwide the cheapest and tamest labour and the lowest taxes – she ensured that the very first thing all politicians have to do is please people with capital. Capital has neither loyalty nor attachment: its only task is to maximize profits, its raison d’etre. Thatcher gave it the power to make all governments put the financial sector first. The best the Labour Party can do is aspire to spread share ownership.

So what is wrong with a flourishing financial sector? Nothing, if its wealth is used to expand investment in jobs and productive enterprise. But the immense growth in the financial value derives in large part from activities that are aimed at neither. That is, mergers and acquisitions. These involve huge sums of money which add to GDP figures, but affect nothing at the poorer end of the economy.

Ernst and Young’s report for 2004 shows corporate transactions of that kind totalling over $1.5 trillion. Of the companies studied, 88% of Europeans and 96% of Americans were planning mergers and acquisitions. ‘Transactions…are an ever increasing part of the way corporations do business, expand and adapt to change’. They have become part of mainstream corporate operations: the specialised function of deal-making reports direct to the CEO.

India and China are, of course, smack in the middle of that ‘transaction’ lens. ‘Financial capital’ points out the report, ‘is easier to deploy than human capital’. That is, capital is footloose, while people are static. And the paper value added gives the illusion of an increase in wealth.

So what all that means is that much of the success claimed for the current political economy is due to smoke and mirrors behaviour in the financial sector, and it does not reach into the real world where people get jobs, get paid, buy homes and bring up families. It means that the claim that the Thatcherite political economy is now universal because it has worked for everyone is simply not true. But it explains why our own government, like others with radical roots, has so little room to manoeuvre.

It can only end in tears. If popular resentment at particular policies cannot find effective outlet in political alternatives, it will find other outlets. These are dangerous to democracies. They lead to apparently justified state violence. And that is a vicious circle.

Back to previous

© South African New Economics Network 2007. Page generated at 10:15; 03 August 2007