The Cart Tracks of History or why Social Democracy in Europe was so short lived

20131025-111454.jpg

Hannah Arendt when writing about the Russian revolution, stated that societies were doomed to follow in the cart tracks of history. What she was trying to do was explain why Russia that despite the other throw of an oppressive authoritarian government in 1917, had only a brief interlude of parliamentary democracy before Russia reverted to an authoritarian government. Her answer was that Russian society had been schooled in authoritarian instincts throughout the long period of Tsarist rule. All institutions in society were structured along authoritarian lines, people instinctively looked for direction from above and these habits were not easily thrown off. It was the democratic revolution that was alien to Russian society. The seamless evolution of the Tsarist police into the communist secret police, the Cheka, demonstrates how hard it was for a reforming government to throw of the ingrained instincts of centuries.

Since reading Arendt, I have puzzled as to what are the cart tracks of history that UK society is trapped within. Our cart tracks are inequality, social inequality is hard wired into UK society. There was a brief period of Social Democracy in the middle of the twentieth century, but I fear that it will appear as fleeting as the brief period as that of Russian Social Democracy in 1917. What I mean by inequality is a society in which a small privileged group maintains it extreme wealth through impoverishing the rest of society. This group realises that only by denying the majority a fair share of national income can they reserve a disproportionate of national income for themselves.

Economists talk of scarcity when they discuss the means by which society can distribute its wealth to maximise welfare. They believe that only market economy allocate scarce resources in the way that maximises the welfare of all. In the market economy the individual can choose to spend their income as they wish and as only they know their individual wants and desires, they are best placed to maximise their own welfare. If the state interferes by providing say a national health service, it is denying the individual that freedom of choice. They may wish as in the USA to choose what part of their income they devote to health care.

However this analysis is flawed, as it ignores the unequal distribution of income which denies many people the opportunity to exercise their freedom of choice.

Inequality of incomes means more than that some people are richer than others; it means an economy that structured to meet the needs of the well off minority, not those of the less well off majority. The mechanism through which this achieved is choice or in the terms of the economist, effective demand. It is through exercising their extra or excessive purchasing power that they can ensure that the productive capacity of the country is skewed towards serving their interests. An increasingly disproportionate share of this country’s resources are being diverted into producing goods for the super rich. Rolls Royce, Jaguar businesses that supply the super rich are expanding their production, while mass market car manufacturers such as Ford are cutting theirs. It’s the zero sum game, by ensuring that a decreasing share of the national wealth goes to the majority (through falling real wages), they can ensure an ever increasing share of national wealth for themselves.

The housing market exemplifies this trend. Recently a spokesman for a country houses association, spoke about the revival of market in grand country homes. It is no coincidence that this has coincided with a marked decline in the provision of housing for the majority. In England a total 117,190 houses were built in the 12 months prior to September 2012, this compares to the high of 1968 when 425,830 public sector housing units were completed and in which the number of private sector housing units completed were 226,100. The 1960’s were a period of the decline of the grand country house. Many were sold by their owners for commercial use, some converted into flats and the best transferred to National Trust. Evidence suggests that in the UK that housing is the ultimate zero sum game, grand houses for the rich or houses for the majority, but not both.

As an increasingly larger share of national income is going to the well off minority, their refusal to pay taxes has a catastrophic effect on government finances. There are hundreds of tax avoidance schemes available to enable wealthy individuals and business corporations to avoid tax. One accountant estimated that it is possible for a business corporation to pay as little as 2% of its income as tax. Consequently the central government is facing a funding crisis, the proportion of national income that it receives as income from taxation is going down. This is worsened by there being a growing population (particularly of the elderly) which exerts even greater demands on the public sector for services. Given this funding crisis the only solution is to cut services and it is these services that are used by the less well off majority. The wealthy are unaffected by this crisis as they have chosen to opt out of public service provision. In fact it is in their interest to cut spending on health and education services, as it will make possible further tax cuts. Galbraith had a phrase which summed up the current situation, ‘public squalor’ and ‘private affluence’.

This robbery of the private and public purse has to be disguised by an ideology, an ideology that turns a series of squalid ignoble actions into the opposite. The ideology that justifies this robbery is that of celebrity and entrepreneurship, an ideology of achievement. Celebrity is first and foremost an ideology of achievement, the story of the young man from an impoverished background who achieves riches as a famous footballer or the young woman from a similar background who achieves success as a singer. Nobody can deny that they have made their success through there own efforts. However the ideology conflates these stories of individual achievement into a story of achievement which justifies the extreme incomes of the super rich The talent of these individual cannot be denied but what can be denied is their claims to excessive wealth. No individual in entertainment or sport earns the wealth they attain. Society is instead so structured to pay excessively high rewards to certain high achieving individuals. Celebrity has diminished the achievement element for high reward incomes, now it’s sufficient to be a celebrity. Entrepreneurship trades in on the achievement effort, they are meant to be the great movers and shakers who have changed society. Unfortunately all the change many of these movers and shakers achieve is to damage the host society in which they operate. Hedge funds and private equity funds often do little more than loot the company they own and manage. No matter the achievement myth justifies such excessive wealth taking.

Nothing can change without an ideology to counter the achievement myth used to justify the unparalleled wealth of these elites. Religion is one possible counter ideology, an ideology of fairness and charity. There was liberation theology of South America, which however was crushed by the Catholic Church. The social and financial elites retain their control of the Catholic Church. What is not needed so much is not a counter ideology as there are plenty circulating within society, as a social crisis which robs the dominant ideology of its legitimacy and causes a crisis of confidence in the ruling elites. One such past crisis was the Great Depression and the Second World War, which robbed the dominant elite groups of their legitimacy. Having presided over a series of disasters they were powerless to prevent the rise of social democracy. Already the current financial crisis has given rise to new political groupings that threaten the legitimacy of the ruling groups. Usually they are groups of the Far Right, but there are some of the Far Left, both of which threaten the existing order. In Greece there is ‘The Golden Dawn’ and on the left Syriza both new parties representing those excluded from the old elites. It is forgotten that in the end Hitler turned on his aristocratic allies, murdering a number of the officer corp and creating a new army the SS to replace the old aristocratic dominated Germany army.

Unfortunately the ruling elite groups in Europe have the same level of competence as those pre war politicians who were unable to prevent the Great Depression or the war. Catastrophic as both events were, they cleaned the Augean stables of power and a new generation of politicians created a better world. The crisis that is likely to overwhelm the European political leaders is the next financial crisis. Little has been done to remove the flaws in the economy that created the last crisis. London is leading the European Titanic towards the financial iceberg. Although there have been some reforms of the banking system, nothing has been done to change to the financial markets to prevent them from yet again turning a crisis into a catastrophe. New technology systems in fact make it far likelier a greater crash than that of 2008 will occur in the near future, as recent developments in computerised equity trading have the potential to turn small downturns in equity prices to catastrophic downturns.

Is it wrong to characterise the European political leadership as a group of lemmings leading their societies towards the precipice of financial disaster.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s