ourEconomy: Opinion

Will Biden lead a progressive revival or a populist backlash?

If the left wants to prevent a neoliberal dystopia, it must stop offering to patch over inequalities and instead dismantle rentier capitalism.

Guy Standing
16 December 2020, 12.51pm
Bernie Sanders and Joe Biden during the South Carolina Democratic debate in Charleston 25 February, 2020
Photo by Josh Morgan/USA TODAY Network/SIPA USA/PA Images

Will the election of Joe Biden lead into a new progressive era? This is being asked all over the world. In Britain, Keir Starmer wants to model Labour on Biden’s “path to victory”, which he described in a Guardian article as “paved by a broad coalition” based on what people most value – “family, community and security”. That statement could come from any political party, and hardly differentiates progressives from conservatives.

What is most remarkable about the US election is that someone as discredited and narcissistic as Donald Trump could receive 74 million votes, 11 million more than in 2016, after egregiously mishandling a pandemic that has killed over 300,000 Americans.

Bernie Sanders, also writing in the Guardian, says that Democrats must appeal to “working families”, and offer a standard package of social democrat policies, all sensible. Both Starmer and Sanders seem to offer a new version of Third Wayism. Progressives who have watched the spectacles of Trumpism or Brexit are entitled to ask whether this will be anything like enough to reverse the populist tide.

We are confronted by a transformation crisis, accentuated by the pandemic and its accompanying slump. To recall a comment by William Beveridge in his epoch-defining report of 1942, it is “a time for revolutions, not for patching”. Yet the left is offering patching.

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Promising an agenda based on what was a progressive vision of the post-1945 era in today’s era of rentier capitalism will only appeal to about 40% of ‘families’ who gain from such social democrat policies and only be electorally successful if the right is worn out or egregiously corrupt and incompetent. It will not enthuse the precariat enough to become politically active. They will do what they did in 2016 in the US and in Britain’s Brexit referendum; stay at home.

Rentier capitalism

Today’s global economy is one of rentier capitalism, in which more income and wealth flows to the possessors of property – physical, financial and intellectual. Dismantling rentier capitalism is indispensable for progressive politics. It will be harder because of the ongoing geo-political transformation, in which China is displacing the declining hegemon, the US, while OECD countries adjust to their shrinking industrial base.

Dismantling it will be harder because the plutocracy based around finance is so powerful. A stark indicator of finance’s extraordinary power is that financial assets in Britain are valued at over 1,000% of GDP and are over 500% in the US, France, Canada and Japan, and nearing that elsewhere. None of the shopping list of policies offered by Sanders, Biden or Starmer – if he followed them – would dent that. If progressive political parties promised to rein in finance, the financial institutions and plutocrats would pour funds into right-wing parties that would shamelessly promise to protect “family, community and security”, with more tax cuts and “law and order”. But the left must be courageous in taming financialisation.

The problem is compounded by knowledge of how the globalised system of rentier capitalism operates. Wages in real terms have stagnated in OECD countries, including Britain and the US, for the past three decades, with short upward spurts amid a secular decline. The decline has been greater than it appears, because more people have been pushed into the precariat, for whom wages are erratic, uncertain and not backed by non-wage benefits and entitlements.

Given globalisation, as long as social incomes are lower in China and other emerging market economies and as long as finance and corporate capital can switch production and investment fast, the decline in living standards for those relying on wages will continue. Higher minimum wages and stronger unions can do some good. But not much. Meanwhile, governments of the centre left as well as right will quietly allow welfare benefits for those at the lower end of society to decline and become more punitive, as happened under New Labour and Clinton’s Third Way. Those relying on benefits tend to be excluded in the mantra of “hardworking families”.

Reflecting financialisation, household and corporate debt were unprecedentedly high before the pandemic struck – with household debt standing at more than 150% of GDP in the US and corporate debt at more than 70%, for instance – and have grown worse. Millions more are on the edge of homelessness, showing rising morbidity and acute distress, linked to increasing domestic violence, suicides and mental illness.

Building a progressive coalition

Embedded in rentier capitalism, will the Biden bounce amount to a sustainable, progressive revival? It is unlikely. The only way to build a progressive coalition is to offer an agenda and vision tailored to the emerging mass class. That has always been the case in moments of transformation. It must be based on structural changes that could not be co-opted by the political right or undermined by the power of the plutocracy in funding a false prospectus. It must be a vision that enthuses by offering a revival of the sense of a future that is different from the past and that will appeal to the precariat. As such, it would not be shaped by priority being given to the core of supporters of a figure such as Trump or Boris Johnson.

Although Starmer’s Labour has been wafer-thin on policy, reaching out to what I have called the Atavists seems intentional. Starmer’s head of policy is Claire Ainsley, hired by him on the basis of her book The New Working Class, which argues that Labour’s policies should be led by public attitudes and older working-class people who value “nostalgia”. This would give up on the left’s raison d’être through the ages, which is to offer a vision of a future that differs from the past, with a leadership trying to shape public opinion, rather than be led by it.

If you merely try to articulate what focus groups and the media depict as today’s beliefs, you might appeal to the median voter, but the race for political success will then come down to a selling game in the next electoral cycle. This is a timid, unconfident, unprincipled approach. You will not overcome the stay-at-home tendency. A warning signal is that while Labour has climbed in the opinion polls, it has been haemorrhaging thousands of members, even before Starmer’s spat with Jeremy Corbyn.

‘Even when evidence revealed that the furlough scheme increased inequality, Labour persisted in supporting it’

During the COVID-19 shutdowns, Labour enthusiastically supported the government’s furlough scheme, and demanded that it should continue. A progressive opposition should have asked the question that any progressive movement should ask: does this increase or reduce inequality? If it increases it, we should propose alternatives.

Undoubtedly, the furlough scheme increases labour market inequality; giving three or four times as much to higher-income earners as to those in the precariat, and scarcely anything to those on the margins. It is subject to high and predictable fraud, with greater ease for members of the salariat to cheat. Even when evidence revealed that, Labour persisted in supporting the furlough scheme. This suggests that it lacks an anchor of progressive values. It recalls New Labour, epitomised by Peter Mandelson and Tony Blair’s rejection of concern over inequality. Under them and the Conservatives, private wealth has risen from 300% of GDP to over 700%. There is only one rich country where income and wealth inequalities are greater: the United States.

As argued previously in openDemocracy, income and wealth inequality are much greater than conventional statistics reveal. Building a new income distribution system that reverses the trend towards greater inequality should be top priority. Raising the minimum wage, while welcome, would do little for the precariat and nothing to tackle the structural reasons for inequality.

If Starmer wants to prioritise “security”, the only way to do so would be to move towards a basic income as the foundation of a new distribution system. But he and his colleagues are resolutely opposed to even considering that, in fear of being attacked by the Conservatives. They merely say that Universal Credit must be improved. This is the most regressive social policy of the past century, with its spiteful conditionalities and sanctions, high exclusion errors and poverty traps. As with the welfare system in the US, it has even become a major cause of indebtedness, providing insecurity to its intended recipients. No progressive should be giving it the time of day. But Labour lacks the courage to oppose it resolutely. Timidity rules.

Timidity holds back progressives

The left, globally, must devise a strategy to dismantle rentier capitalism. Yet there appears to be no recognition that this is the problem. Among the priorities should be a comprehensive critique of the vast subsidies given to special interests. According to Treasury statistics, tax reliefs and subsidies come to £430 billion a year. Most have no moral or economic justification, and are regressive. Furthermore, there is an urgent need to develop a strategy to weaken intellectual property rights. It is absurd that big corporations can string together patents that give them monopoly profits for twenty years, or in the case of pharmaceuticals forty years.

While developing a plan to build a new income distribution system, including an overhaul of the tax system, the primary issue should be developing a strategy for addressing the ecological crisis. Clearly Biden’s Democrats will be vastly better with this than Trump, and Labour could only be better than the Conservatives. But the crisis poses a problem for traditionally social democrat parties.

They believe in economic growth and maximising jobs. So far, whenever a conflict between jobs and ecology arises, labour unions on which they depend opt unerringly for jobs. Social democrats are trying to shift ground by offering “green jobs”. But there are ample reasons for scepticism.

Neoliberal risk to eco crisis

There is a danger that they will not be able to identify enough decent green jobs and that more resource depletion and global warming effects will be shifted into the blue economy, which the European Investment Bank, the European Commission and the World Wildlife Fund predict will create more income and jobs than the terrestrial economy by 2030. The social democratic left seems oblivious to the fact that the growth model it has favoured for decades has created a marine ecosystem crisis of epic proportions.

There is a corresponding danger that Labour, as well as Biden’s Democrats, will persist with a neoliberal economics approach to the ecological crisis. This is based on attempting to value ‘natural capital’; the belief that if a market value can be placed on all of nature then incentives can be designed to conserve the valuable bits. Critics have exposed the errors of this approach. There is no avoiding a reassessment of economic growth per se. Social democrats seem unable to address the ‘de-growth’ movement or its rationale.

This leads to what progressives should be doing on fiscal policy. The need for tax reform and a higher overall tax take has never been greater. Where does Labour stand? We simply do not know, or even know whether its leaders are taking the need seriously.

Progressives must advocate for a wealth transfer tax and, above all, a high carbon tax. There is an open door. In the US, over 3,600 economists signed a statement in favour of carbon taxes coupled with carbon dividends, a form of basic income. In Britain, that could be funded by a commons capital fund based on pollution levies.

Industrialising education

Then there is the crucial area of educational reform. Here again, social democrats have been collaborators in creating what is a cause of their loss of support. As part of the Third Way model, neo-liberal economics were extended to all levels of education. Social democrats inhaled the view that schooling and universities should be designed to create ‘human capital’; preparing people for the job market, to be good jobholders. They have seen ‘the education industry’ as an extension of the market economy. This is a new philistinism.

One is entitled to think that, as this marginalises subjects and thinking not geared towards producing human capital and jobholders, the teaching of culture, history, literature and civics will be neglected. As an academic, I can testify that this is precisely what has happened. A result is a citizenry ill-prepared to withstand the appeal of populists selling simplistic slogans. Is there any sign that progressives want to reform the education system, or have policies to do so? Neither Biden nor Sanders have shown any.

One could extend this critique. There is nothing transformative on offer. I hope I am wrong to think that progressive creativity will be shunned in a complacency induced by Biden’s victory, and that this will not be a period of re-heated Third Wayism. The omens are not good.

The precariat should lead the revolt to strengthen the backbones of those who are in a position to develop transformative alternatives. If they do not or cannot, the Biden bounce will be a blip, and populism will soon have another chance to forge a dystopia that none of us should want.

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