The UK Budget of July 2015 could be interpreted as a vainglorious attempt to tell the waves of globalisation to go back. Blatantly utilitarian, with some class smirking, it was designed to benefit the perceived middle class, making the majority happier, at the expense of a minority, with mild raps for the plutocracy and elite, while allowing affluent family friends to keep more of their inherited wealth.
We should reflect on the moralistic project that underpins the budget. Before doing so, consider the economic reasoning behind the headline-making policy of a new national “living wage”, even though the term itself is a misnomer, since it will be neither national nor an amount on which to live in any decency.
The test is whether it can be a means of turning back the waves. That is most unlikely. For a feature of globalisation is that real wages, particularly taking account of the erosion of non-wage benefits, have stagnated or fallen over several decades, particularly for the precariat. Changing that trend would require the government to change the course of the sea.
There are strong reasons for wage declines, which have not been affected by the Budget. Among them is that in the past three decades the labour supply to the global labour market has quadrupled, with more than two billion extra workers expecting wages that are still a fraction of what an average British worker could expect.
With productivity rising much faster in emerging market economies, downward pressure on British wages will continue. Technological change has made it easier to transfer production and employment to where costs are lowest, while successive governments have given huge subsidies to corporations and made the bargaining position of capital much stronger.
Since Bill Clinton vastly expanded them, tax credits have been the rich countries’ way of making a Faustian Bargain to cover up for the fall in wages. That bargain ended in 2008, since when it was only a matter of time before an austerity strategy realised that cuts in tax credits were necessary if an (unnecessary) budget surplus was to be found without too blatant cuts in living standards for the precariat.
Declaring that there will be a national living wage is Osborne telling the waves to go back. Of course, it is a slight of hand, in that the cut in tax credits will leave the precariat and under-class worse off. New Labour’s Faustian Bargain let real wages fall by propping up living standards with increasingly expensive tax credits – some £29 billion a year as of now – putting the burden on the Exchequer, fostering deficits and giving a rising subsidy to capital, to employers. As some of us have argued for years, that route was distortionary, regressive and inefficient.
The new living-wage-plus-tax-credit-cuts approach is at best wishful thinking. A morality tale will be spun around rewarding “work”, which is sadly easy to tell in post-truth politics, especially when the Opposition is led by people who are merely a shadow of the Government.
We should revert to history. There are two interpretations of King Canute’s action. The first is that he was being stupid in ordering his servants to take his throne onto the beach and telling the waves to go back. The second is that he did it to show his court that he had limited powers, and could not be blamed for what was happening. One suspects Osborne sees himself as the second version.
Expect some anecdotal rises in wages, some attributed to our King Canute. But they will be concealing the continued growth of inequality and the continued demonization of the precariat, as benefits shrink and conditionality is intensified. Work rewarded; welfare dependency cut!
Real wages for the precariat will not rise. Had you been in Canute’s court, you could have whispered in his ear that instead of commanding the waves to retreat he could move his throne. Neither New Labour, with its tax credit folly, nor the Tories have accepted a fundamental reality of globalisation. The 20th century income distribution system as such has broken down; a new system must be built. Tax credits were the wrong answer to the wrong question, whereas the new tactics are just crowd-pleasing gestures by a jester.
One should support a national living wage, as long as it applies to everybody equally, not just those above age 25 in certain types of work, which is discriminatory and inequitable. But not too much should be expected from it. One imagines George Osborne at a bar responding to a local businessman muttering about the effect on his business with a smirk: “Well, Jim, these things are awfully hard to enforce, aren’t they?”
The progressive answer to the yawning inequality will surely come eventually, probably only after the utilitarian politics of the Conservatives and Labour has been made even more amoral. The precariat will continue to grow, obtaining neither the living wage nor tax credits nor state benefits that could give dignity and an opportunity to develop occupational security.
Sooner or later a political movement or party must represent those relying on benefits for a dignifying living standard. Now that its spokesperson for Work and Pensions, Rachel Reeves, has said that Labour is not the party of welfare claimants, and Harriet Harman has said Labour should not oppose benefit cuts, there is a vacuum.
But as the precariat grows, as 40% or more of the population need income from outside the labour market in order to escape despondency and insecurity, something will give. As Newton put it, nature hates a vacuum.
Sadly, Labour has lost the courage and will to be a radical party. A progressive party succeeds only when it represents a group in society that is not open to the right. Labour refuses to represent the precariat. Perhaps the Greens can reach the threshold of legitimacy that would enable them to do so. It needs time, perhaps with some crossing-of-the-floor by progressive Labour MPs. It must represent the precariat. Labour does not want to do so.
Part of the resolution of the inequality riddle will be a distribution system in which every legal resident, regardless of labour status, age or marital status will have a basic income. When governments give hundreds of billions of pounds to the financial community, saying it is unaffordable is pathetic.
A basic income would remove the worst of the poverty traps that are a barrier to labour; it would promote ecological and reproductive forms of work that are currently penalised; help combat the commodification of life encouraged by the mish-mash of tax credits and statutory wage instruments; and reduce gender and other demographic inequalities. As our pilots have shown, we know it works. As I among others have long argued, it should be built up via a democratically-run sovereign wealth fund.
Living wages sound great. But without basic income security, they will be a mirage for millions of people as they move uneasily between casual jobs, crowd labour, applying for benefits without success and being on the edge of unsustainable debt. The waves are advancing and only a court jester would think they can be arrested by playing party tricks.
Utilitarianism and Moralism
The wage deceit aside, for those concerned about democracy, the most disquieting aspect of the Budget was its deepening of a moralistic utilitarian politics, one designed to increase the happiness and incomes of a perceived majority living in relatively good economic circumstances while making the lives and insecurity of the perceived minority worse. This crude ‘modal voter’ tactic has been pursued by the two main parties for the past two decades, and has become more moralistic at its core.
This can work for the dominant party if it controls the media and has lots of money with which to manipulate the electorate so as to obtain the support of about a quarter of it. But it is probably unsustainable, since the precariat is growing for structural reasons and is being boosted by the very moralistic policies the government is pursuing.
Consider the latest twists in the moralistic strategy. In the Budget, Osborne announced that from 2017 child tax credits would only be paid for the first two children. The acting leader of the Labour Party, Harriet Harman, announced a few days later that Labour would not oppose the benefit cuts, on the grounds that, according to her, Labour had lost the General Election because of its policy on benefits, a strange tea-leaves reading of an election in which the winners only received the vote of 24% of the electorate. Her statement attested to the moral bankruptcy of Labour. Although several leadership candidates distanced themselves from her stance, she is unlikely to have made the statement without consulting senior colleagues.
Anyhow, the politics played out predictably. The Times, in an effusively laudatory leader on the day after the Budget, said, “Mr.Osborne’s budget was a political tour de force and economically essential.” [“Making Britain Work”, The Times, July 9, 2015, p.21.]
The child benefits policy was part of that Budget. How could it be ‘economically essential’? Why should a third child in a family be treated worse than the other two? This is social engineering and moralistic rationalisation. The reasoning, presumably, is that the poor should not have so many children, and that having three contributes to their poverty. And we responsible people, who support the government, should not have to pay from our ‘hard-earned incomes’ for their fecklessness.
This reasoning makes unproven presumptions at every point. Couples have children for many reasons; some may even have them by mistake. Does that justify punishing them? Worse, does it justify punishing a child because he or she happens to be a couple’s third or fourth? To compound the moralistic thrust, an exception is to be made. A third child could receive benefits if the mother proves it was the result of being raped.
This is revolting. What degree of violent non-consensual sex should be reached before the resultant child becomes eligible? Would the rape have to be proved through being reported to the police, within so many days, and through conviction of the rapist? If the latter, then the probability of obtaining the benefit would be very low, since only 18% of reported rapes actually end in a charge or caution, let alone a conviction. The small print of the policy indicates that the mother must have been “blameless” in the third conception, although one has no idea how this could be defined, let alone proven. The implications are disgusting. One just wants to go into a rage at the nastiness of the minds that came up with the policy.
But there is an additional aspect that is as nasty. Henceforth, a child who happens to be a third or fourth in a family will know that he or she only received child benefits because his mother had been raped, and he or she would probably be worried that friends would find out. This possibility will make it more likely that a mother will not report the rape or sexual violence in the first place, for fear of stigmatisation and worse. The policy is indicative of the triumph of moralism over morality.
The man primarily responsible for the drift to moralistic social policy is the Secretary of State for Work and Pensions and former leader of the Tory Party, Iain Duncan Smith. He possesses a huge landed estate that his family inherited without him doing a day’s work; he has been the recipient of over a million pounds in subsidies from the European CAP, and his Government vetoed a EU proposal to cap the amount paid to large estate owners. In short, he is a man who embodies hypocrisy and class bias.
Duncan Smitth is also famous for using a statement emblazoned on the gate into Auschwitz in a TV interview, when saying “Work helps make you free.” That is why he supports workfare for the precariat. That aside, being a devout converted Catholic, he should ponder his zeal for the denial of benefits for a third child. What is the Catholic position on contraception? They should abstain from sex!
Why have progressive politicians not mocked the moralistic social policy that has been so hegemonic over the last two decades? The failure to articulate an alternative vision and vocabulary is a blight on British democracy.
Youth in the Precariat
Other utilitarian policies announced in the budget were that housing benefit was to be ended for all those aged 18 to 21, the already mean benefit cap would be cut further, along with social rents, and working-age benefits would be frozen for four years. Meanwhile, personal income allowances were to be raised once again, benefiting the salariat.
The headlines were captured by the gimmick of a national ‘living wage’, which will be not nearly enough on which to live. It will apply only to those aged over 25. So youth will lose benefits and not be given a living wage. These are deliberately discriminatory and regressive policies, which will hit the precariat and under-class, which will grow faster as a result.
Even on its own terms, the living wage policy is misleading. Commentators have claimed it will be a 7.5% increase when raised to £7.20 an hour in April 2016. But one cannot say objectively this will be an increase of 7.5%, if only because account must be taken of the effect on the demand for workers earning such a wage. The negative effect on labour prospects by workers in this part of the precariat could be substantial.
Consider just one large group, care workers paid by local councils. If the government cuts its funding of councils or even if it keeps it at present levels (which is unlikely), the rise in the individual wage rate would have to be shared, meaning that fewer workers could be employed or fewer hours provided per worker. There is also the effect of the cut in tax credits, which will lower the average net gain from the 7.5% increase in the wage rate.
Another reason why the living wage will fail to make much difference is that increasingly youth and others in the precariat are not working in fixed workplaces in fixed working hours or being paid by the hour. Rather more are paid on a piece-rate basis and expected to do labour and unpaid work off workplaces outside contractual hours. The trend to crowd labour is accelerating.
A national minimum wage scarcely made any difference. From the time New Labour introduced it until they left office, just seven employers had been charged for failing to pay it. Does anybody seriously believe only a handful had not paid it? Abusing the living wage will be just as easy. And it will bring an additional moral hazard for youths. On reaching the age of 25, some will be eased out of jobs, displaced by others younger than themselves. Youth are unlikely to be fooled for long.
The Productivity Wheeze
A final point of emphasis in the Budget was a revival of concern about productivity. Osborne says it should be raised; he should beware of obtaining what he wants. One of the reasons for the high level of employment is that much of it is fictitious.
Productivity is output divided by input. If you call somebody on a zero-hours contract fully employed, as is the case, you create an artificial reality that sells well in a compliant media as implying lower unemployment than would otherwise be the case. But if somebody on a zero-hours contract has no labour to do and, rather obviously, does not produce anything, productivity is reduced dramatically.
Exactly the same applies to so-called “self-employment”. If most of the huge number now in that status are actually doing odd jobs but counted as full-time “workers”, then measured productivity will be deflated.
The Times, in that leader cited earlier, opined, “Britain’s labour market has outperformed every rival (sic) in terms of job creation but has failed the worst-off and is still insufficiently productive.” It has certainly failed the worst-off, but it has only outperformed others if one accepts that the fiction that all those described as in full-time employment are actually in it.
Productivity could only be raised by jettisoning the fiction. But if those in the fictitious jobs were reclassified as unemployed or chronically underemployed, one senses the moralists would turn on them as part of the feckless precariat.
Where will the moralistic utilitarian politics lead? There is a crisis in British democracy. A government elected by just 24% of the electorate can pursue a deeply divisive and regressive strategy that the leader of the Opposition decrees should not be opposed. Without electoral reform, which the two main parties oppose for cynical opportunistic reasons, there seems every prospect that the utilitarian moralistic policies will continue.
In such a moment, one might be pessimistic. However, as shown by what is happening in some other countries, moralistic hubris can generate its nemesis remarkably quickly. More and more youth are in the precariat; more and more middle-aged people in the salariat are disturbed by their own longer-term prospects and those of their youthful offspring; and more and more of every age group are on the edge of joining the precariat. A lot of people are being mired in insecurity, debt and anxiety. The anger is growing.
Progressive politics makes real progress when a group or class emerges for whom the right cannot speak, when it becomes as large as any other group in society and when leadership voices spring from within it. We are surely nearly at that stage. Go to Spain, Greece or Poland and see what could happen next.
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