Wednesday, May 12, 2010

U.K: Old ‘New’ Britain

By Julio Godoy
Republished courtesy of
IDN-InDepth NewsAnalysis

LONDON (IDN) – Critics of post-modernism say that this “condition”, as David Harvey once aptly put it, is marked by the aim of “having the best possible narrative” of history. That is, for post-modernity the content of the historical analysis is no longer interesting – it is the words that you use for it that count.

If this is true, then the spin doctors around Anthony Blair were convinced, albeit mediocre, post-modernists when they re-baptised their party “new” Labour and used similar pedestrian prefixes to re-name good old Britain.

It was 1997. Britain was still ruled by the Thatcherites, without the Iron Lady. Judging by the policies applied by the “new” Labour government, what Peter Mandelson – “the prince of darkness”, as friends and foes called him, for good reasons – and other spin doctors had in mind at the time was the continuation of Thatcherism by other means.

Thirteen years later there is nothing new either about the Labour party or about Britain. At the general elections May 6, “new” Labour lost 90 seats, and for sure the government. The global financial and real estate crisis hit Britain particularly hard due to the hegemonic role financial trade plays in the British economy, and to the speculation that had inflated the housing sector in the country. All in all, both the new Labour party and New Britain look now very old indeed.

Following the decision taken in 1986 by the government of Margaret Thatcher, of totally deregulating financial markets (the big bang), the British economy became highly one-sided. The City of London, with its myriads of banks, investment and hedge funds, became the country’s economic core, to the detriment of the real sector.

Instead of industrial engineers, the country has now financial wizards – the self-proclaimed masters of the universe who believed they could become very rich out of nothing, only by trading securities from one bank to another.

At the beginning of the Thatcher era, the economic indicators were bad enough to predict the worst. As historian Jim Tomlinson puts it, economic policy under Thatcher can best be called “‘adventurist’, based on strikingly little analysis of its possible consequences.”

But the deep recession of the early 1980s caused by this adventurism came to an end, and by the mid 1990s, many believed that Thatcher had found the magic recipe to actually renew Britain. Typical of this belief was the conclusion drawn by economist Nicholas Craft.

In a 1998 paper, Craft wrote: “The long period of Conservative government has left long-term growth prospects in Britain better than would have seemed possible 18 years ago and, combined with a slowdown in competitor countries, may even permit the reversal of relative economic decline vis-à-vis Europe in future.”

Curiously, but perhaps not so casually, Craft also commented that “most of the government’s macro-economic gambles failed miserably.” But, he added, “micro-economic radicalism paid off handsomely through privatisation, improved industrial relations, and de-coupling the UK from the European tendency to excessive government budgets.”

Only few sceptics saw the dark side of the compounded effects of “micro-economic radicalism” and “macro-economic gambles” – as expressed in the manipulation of the figures of unemployment and the wrong impression given by growth indicators, which hid mass poverty, social injustice, and a deterioration of life conditions for those who did not work for a bank, were not lawyers, football players, or members of the old aristocracy.


Among the few doubters were institutions like UNICEF and Save the Children, which documented the level of child poverty: The proportion of children living in poverty grew from one in ten in 1979 to one in three in 1998.

Today, 30 per cent of the children in Britain live in poverty. The country has one of the worst rates of child poverty in the industrialised world. The majority (59 per cent) of the poor children live in a household where at least one adult works. Some 57 per cent of the poor children also live in a household headed by a couple. That is, poor British children are poor in spite of growing up in intact families.

All this was known to those who wanted to know. Anthony Blair, for instance.

In a speech in 1999, he had promised to eradicate child poverty by 2020. He even called it "our historic aim – that ours is the first generation to end child poverty for ever". The government would, he promised, "break the cycle of disadvantage so that children born into poverty are not condemned to social exclusion and deprivation".

Gordon Brown later echoed the same sentiment, describing child poverty as "a scar on the soul of Britain". Busy with lying about Iraq, Blair and Brown abjectly failed to heal the scar on the British soul. By 2008, that is, just before the global financial crisis hit London, nearly four million children were living in poverty in “new” Britain. For this and many other reasons, Tony Judt was right when he called Blair “the garden gnome in the English park of oblivion”.

Other sceptics were Mike Brewer, Luke Sibieta, and Liam Wren-Lewis, authors of a study released in 2008 by the Institute fro Fiscal Studies on social justice in Britain, which in a clinical way showed the social disarray caused by Thatcherism.

On the one hand, they measured how the ‘Gini coefficient’ evolved since 1979 – jumping from 0.25 then to 0.35 by 2005. That is, within 16 years, Britain had become an unequal society. The other side of child poverty was the high concentration of wealth. Brewer et al. also documented this enormous concentration of wealth with other figures.

“In 2004-05,” they wrote, “there were … 422,000 very rich adults with before-tax incomes between £100,000 and £350,000 in today’s prices. There were also about 47,000 very, very rich individuals with incomes above £350,000 in today’s prices – about 31 times the income received by the average taxpayer in Great Britain in 2004-05.” Income inequality, they concluded, is currently at its highest levels since the late 1940s.


By 2010, the truth about old “new” Britain is so evident, that even those who were once blinded by the lame lights of neo-liberalism can no longer ignore it.

Another British economist, Paul Collier, observed that “the last decade of British growth was completely illusionary”. Yet another British economist, Robert Skidelsky, of world reputation for his biographic work on John Maynard Keynes, complained that “during the last ten years, the market of collateralised debt obligations in the City of London was the most important economic sector in Britain.”

Collateralised debt obligations! The junk bonds responsible for the present financial catastrophe in the first place! Skidelsky concluded: The British economic collapse is the failure of an ideology – that of radical market liberalism – and not only of its implementation. Even Adair Turner, the head of the Financial Service Authorities, now dares to say that “some of the activities which went on in the trading rooms of some banks in the run up to the financial crisis (are) socially useless.”

With British sarcasm, Turner went on to point out that “the argument that (financial innovations and credit derivatives) created great allocative efficiency benefits via market completion was hugely overstated.”

In the face of the evidence, Lord Turner could have been more straightforward and say that financial innovations and many bank activities are social and economic noxious. At least he concluded that Britain “need(s) to challenge radically some of the assumptions of the last 30 years", which have been "deep-rooted drivers of financial instability".

A most tardy wisdom, indeed. For, Britain was for many years the living example that the great poison of deregulated capitalism is as much about volatility as it is about inequality. As a London commentator put it recently, deregulated capitalism “is … destructive of the social fabric, ratcheting up unemployment, destroying neighbourhoods, provoking tensions which feed into political extremism and violence.”

Rather a late condemnation of a system that left many on the sidelines during the mendacious years of Thatcherism and ‘Blairism’.

See also Sydney Irresistible and Mike Hitchen Unleashed
Putting principles before profits