Britain’s Post-Crisis Accumulation Strategy

January 29, 2012

According to today’s Observer, a Swedish company is to be allowed to set up a for-profit school in Britain. Although this development is described as the exploitation of a technicality, actually it seems to reflect the government’s wider strategy for restoring capital accumulation in the wake of the global financial crisis.

Theorists from a number of different traditions, notably Gramscian Marxism and Regulation Theory, point out that capitalist states need to pursue two distinct strategies of rule. One is a political strategy designed to cement the domination of the ruling classes. Since this cannot be achieved through coercion alone, it typically involves trying to win the consent of subordinated social groups through various ideological devices and concessions. The second is an economic strategy, which seeks to provide the conditions for capital accumulation. An accumulation strategy is important because, despite what various free-market theorists may suggest, capitalism does not expand smoothly on its own. Historically, capitalist have needed the state to provide the conditions under which they can realise profit. In early capitalism, the state was required to break up earlier, communal forms of property holding to allow it to be seized and aglomerated and put to productive, profitable use, e.g., the enclosure of scattered, patchwork communal lands to form large-scale agricultural estates. States have also been required to lay the legal foundations for private property and defend it, by force if necessary, from efforts to redistribute it – and so on. In an ideal world (from the elites’ perspective), the accumulation strategy supports the political strategy by providing a flow of material benefits to subordinated groups; and, vice versa, by successfully legitimising the economic system.

A crisis of the sort we have experienced in the last few years requires a fundamental rethinking of both these strategies, because the previous ones have clearly been seen to fail quite dramatically. The failure of the economic strategy is most apparent, but this failure has also plunged the state into a crisis of political strategy, as have a number of related and unrelated developments such as the scandals over MPs’ expenses and the phone hacking scandal. The fact that no party was able to command an overall majority in the 2010 elections illustrates the collective failure of the political class to articulate a compelling strategy, and the continued infighting since is indicative of their continued failure.

So far a lot of the commentary on the Tory-Lib Dem coalition’s economic policy has focused on their programme of public sector cuts, which is designed to cut the massive budget deficit acquired following the nationalisation of private-sector debts incurred in the global financial crisis. Many critics have highlighted how the poor are essentially being made to pay for a crisis which originated in the banking sector and has simply been shifted around. This is of course true, though it is principally a moral criticism. Another critique is that ‘you cannot cut your way out of a recession’. This line reflects the faint ghost of Keynesianism that has been floating around since 2008, the claim being that, since recessions are caused by depressed demand for goods and services, it is irrational to try to climb out of recession by further suppressing demand. Even the IMF and the ratings agencies have recently come around to this rather obvious way of thinking. Some commentators have now begun to ask a more fundamental question: where is future economic growth meant to come from? Which sector(s) is meant to lead the economy out of recession?

It is quite obvious that the government has no real answer to this question. There has been some talk of the need to ‘rebalance’ the economy away from the domination of finance back towards manufacturing. This actually began prior to the 2010 election when Lord Mandelson, a previously fervent admirer of neoliberal deregulation, suddenly announced the need for an ‘industrial policy’ to help support British manufacturing. Since then, the Lib Dems (particularly in the form of Business Secretary Vince Cable) have probably been the most outspoken on this issue, but virtually no real policy initiatives have followed from this rhetoric.

The reason for this is plain enough. Decades of anti-industrial policy have profoundly eroded the basis for profitable manufacturing in Britain. The Thatcher government was content to sacrifice vast amounts of British industry as the price for defeating the trade unions. Manufacturing continued to decline under New Labour as a further million jobs were lost.The Blair administration in particular was seized of the ridiculous notion that it was now possible to ‘live on thin air’, in the words of New Labour guru Charles Leadbetter. The so-called ‘creative industries’ were supposed to be our new leading sector, the view being that we could create wealth by creating and monetising ideas, independently of material production. Consequently, investment in research and development and national infrastructure has been among the worst in Europe. The closure of technical colleges and polytechnics, or their conversion into second-rate universities, has produced a generation of young people without the requisite skills – with degrees in media studies instead of mechanical engineering. Through deregulation, capital has been allowed to avoid the risky business of investing in actually producing things, flowing instead into arcane speculative vehicles. The reality is that the material basis for high-end, high-growth manufacturing does not exist in this country.

Thus, for example, while some on the ‘left’ fanatasise about ‘green industry’ and ‘green jobs’, and the government has put some money towards this goal, the truth is that the vast majority of wind turbines are built abroad (e.g. in Portugal) and would need to be imported. Even if politicians had the balls to push for the construction of a new generation of nuclear power plants, it could not be achieved by British industry because the education system is not producing any graduates in nuclear engineering, and all the important components would need to be manufactured abroad.

So what, then, is going to lead the country out of recession? The truth is probably that the government is still groping for a solution. As Bob Jessop points out, political and accumulation strategies don’t emerge whole and intact in some kind of ‘eureka!’ moment – they are assembled piecemeal through trial and error, and are shaped by reactions to them from other social groups.

However, it is increasingly obvious that the government is groping towards the further privatisation of state assets as a means of providing a channel of capital accumulation. This strategy was first used in a serious way in the 1980s when vast swathes of state-owned industry and infrastructure – coal mines, steel mills, the railways, power generation and distribution, telecommunications, etc – was sold to private companies. Typically, they were let go at rates well below their market value and massive subsisidies continued to be paid to many of their buyers, since this was required to deliver the rates of profit required by private investors. This was legitimised by the political strategy of neoliberalism which claimed that private firms would run these services more efficiently, a claim which now looks totally absurd, particularly in relation to the railways. A further significant privatisation was the sale of council houses to their tenants, again at knock-down prices; this was again legitimised by the claim that private owners would invest more in their homes, but it was largely a (stupendously successful) political bid to gain support from the working class for the Tory programme of privitisation. For the same reason, people were offered the opportunity to purchase shares in the newly-privatised public assets, and thus participate in Thatcher’s dream of a ‘shareholder democracy’, where people participated not as political agents in a common society which might make big decisions about the form political, economic and social life ought to take, but as shareholders voting at annual general meetings on how companies should be governed and how profit should be maximised. Thatcher’s strategy was thus both to open up new avenues for capital accumulation in areas previously barred to it (because of public ownership), and to broaden the social basis for further capital accumulation by creating fringe benefits for a greater segment of the population. By 2010, a sixth of the UK population had investments in the London stock market, directly tying their personal wellbeing into the fate of finance capital, the principal beneficiaries of 1980s deregulation.

Early signs are that David Cameron is groping towards a similar solution to today’s crisis. In a recent speech, he laid the most comprehensive ideological statement yet on the economy, which involved a full-throated defence of free markets and indicated a determination to ‘use this crisis of capitalism to improve markets, not undermine them’. Echoing Thatcher, he laid out his vision for a ‘genuinely popular capitalism, which allows everyone to share in the success of the market… building a nation of shareholders, savers and home-owners’. The speech was long on rhetoric and short on substance, but it outlined a range of concrete measures: tax cuts for entrepreneurs; the ‘reinvigorat[ion] of the right to buy’ (council houses, presumably); and ‘providing new rights for public sector workers to create mutuals and own a stake in their success… opening up new forms of enterprise’.

This last line in particular suggests that there has been greater coherent to the government’s public sector ‘reform’ platform than is often appreciated. One of the first things the government did on taking office was to introduce radical plans for the accelerated privatisation of the National Health Service, where private providers – already given an enforced market share by New Labour reforms – were to be allowed virtually unfettered market access, with the ethos being that it simply did not matter who provided services. The goal of ‘improving markets’ was to be met through new commissioning arrangements via GPs (acting as de facto ‘customers’ on the demand side) and through a new healthcare regulator. Some of the more extreme aspects of this plan have been beaten back through sustained resistance from the public and healthcare professionals, so the market is no longer being opened up quite so radically, but nonetheless, it is being opened up.

Similarly, an early priority was the ‘reform’ of universities. Fees were hiked to a maximum of £9,000 and the Browne Report, which kick-started the reforms, explicitly articulated students as consumers and university education as a service they purchase. The Browne commission was initiated by New Labour, illustrating how such moves are both an extension of earlier part-commercialisation of public services, and how this emerging response to the global financial crisis is broadly shared across the political class, rather than being driven by ‘Tory ideology’ as some deluded individuals on the ‘left’ seem to believe. Government plans essentially established an internal market in British HE in which departments and universities would compete with one another for students and their fees; the ‘winners’ would be allowed to expand while the ‘losers’ would be allowed to go bankrupt. New business opportunities would be opened up by allowing Further Education colleges (many of which are already run entirely along business lines) to provide degree-level courses, and by allowing private providers, such as those existing in the US, to establish for-profit institutions with degree-awarding powers. Again there has been sustained opposition from students, lecturers and much of the general public, which has reportedly led to the white paper containing the more radical aspects of this plan to be shelved. Nonetheless, new market opportunities have been created.

Now a similar picture is also emerging in secondary education. Initially, so-called ‘free schools’ were criticised largely because they would allow middle-class ‘pushy parents’ to establish schools where they could segregate their own kids, drawing them out of and further impoverishing mainstream state education in their local areas. No doubt this was a fair criticism, but in light of today’s news it now looks as if ‘free schools’ were also created to provide an avenue for private companies to establish for-profit schools. Viewed in the light of wider public sector ‘reform’ this looks less like the exploitation of a technicality and more like part of that plan to ‘open up new forms of enterprise’.

Moves like these have been wrapped up with the ideological tropes of the ‘big society’, which is posed as an alternative to the ‘big state’, the idea being that community initiative can flourish if people are allowed to take over and run their own local services. Simplistic criticism has branded the ‘big society’ a mere cover for cuts. Certainly that is part of it: it is easier to say that local community groups will now run local libraries rather than simply closing them all down. But arguably it is more than that. It is part of the wider agenda to open up public services to ‘entrepreneurship’ of various kinds. As Cameron mentioned in his speech, employee-led ‘mutuals’ are already delivering £1bn-worth of healthcare services. His vision is for public servants to convert themselves into ‘social entrepreneurs’, essentially ‘buying’ the bit of the public service they currently staff, and then running it as a business selling services. Gradually the state’s role will be stripped back from being a provider of services, leaving it as a mere commissioner of services from these various ‘providers’.

As the £1bn figure suggests, this trend is not at all new but is an intensification of trends that are already in train. One of the most notorious examples is the Commonwealth Development Corporation. Formerly an arm of the British government’s overseas development agency, the CDC’s investment components were spun out into a private company, Actis, which was then sold at rock-bottom rates to its own employees in 2008. Its value subsequently skyrocketed and its new senior executives were soon paying themselves million-pound salaries; meanwhile its investment priorities shifted from those with maximum benefit for poor people in the third world but which often struggle to raise private capital through the banking system (e.g. agriculture) to projects with the highest profit margins, which have no trouble attracting private investors.

The accumulation strategy the government seems to be groping towards – albeit one beset by some popular (though very uneven) resistance – is attractive because it fits with prevailing ideological currents and economic imperatives. Despite the crisis of capitalism, the notion that markets (albeit presented in the guise of ‘local communities’, ‘medical professionals’, ‘student consumers’, ‘parental choice’, etc) are the most efficient providers of goods and services has essentially gone unchallenged, largely because no systematic alternative has been articulated by any social group, including movements like Occupy Wall Street. Vague blandishments for a ‘moral capitalism’ (a contradiction in terms) are easily wrapped into the government’s programme. The continued privitisation of state assets and public services also meets the overriding imperative of cutting the budget deficit in order to maintain ‘credibility’ in the international bond markets. Dismantling public services is also an easier route to capital accumulation than trying to rebuild the basis for manufacturing. At the same time, it tries to respond to the political crisis of the state by again widening the social basis of support for an intensification of capital accumulation by enlisting more people in market dynamics. Doctors are offered more respect and autonomy if they agree to serve as health commissioners. Students are promised more ‘voice’, enhanced ‘student experience’ and earning power if they choose to spend their fees wisely on the best degree courses. Local communities are offered maintained or even improved public services if they exercise ‘choice’ and organise themselves to become new providers. State employees are offered the opportunity for self-enrichment by ‘mutualising’ their bit of the state. Council tenants are again offered the ‘right to buy’ while low-income families are given a helping hand onto the property ladder. We are all offered shares in the recently-nationalised banks when they are (eventually) re-privatised.

The chance of all this succeeding seems rather slim. In contrast to the 1980s, when many people looked to the Thatcher government as a saviour, resolving the social and economic crisis of the late 1970s, today the overwhelming reaction to any government initiative is profound cynicism. With the experience of previous privatisations people are able to see that – as shown in the Southern Cross scandal, for example, where a company running privatised care homes went bankrupt following real estate speculation to finance its expansion – the provision of public services and the extraction of profit are often contradictory goals. Far from being more efficient, privatised services often still rely on subsidies to deliver profit rates, while simultaneously gouging customers through increased ticket prices or service charges. They can also see that, despite the goal of a ‘shareholding democracy’, the vast majority of gains from earlier privatisations accrued to a very narrow elite who had access to the skills and capital required to exploit the new avenues being opened up; that would be even truer today given the dramatic widening in income inequality since then. All this makes it unlikely that the government can restore a long-lost hegemony.

However, this doesn’t mean that the strategy will be turned aside. The very cynicism that undermines the government applies equally to most efforts to oppose it. Most people do not believe they possess the power, individually or collectively, to resist. More importantly, perhaps, there is no programme of resistance behind which they could throw their weight. The parliamentary opposition is falling over itself to restore its ‘credibility’ in the eyes of the financial class by committing itself to austerity, and its bland, ‘Blue Labour’ calls for ‘moral capitalism’ are easily wrapped into the government’s own agenda. The extra-parliamentary opposition is extraordinarily weak and reactive. The most well-organised force, the trade unions, are concentrated on minimising redundancies and fighting cuts to their pensions – laudable goals but certainly not ones articulated as part of a wider alternative strategy for the economy, politics or society as a whole. Other groups emerging to contest political terrain are marginal. The British Occupy movement is even vaguer in its demand and programme than its American counterpart (which is itself backwards-looking, appearing to long for the restoration of the ‘golden age’ from the 1950s-1970s when the ‘American dream’ could still be realised by the so-called ‘middle class’); in any case, it has certainly failed to inspire or mobilise the broader population, even if they sympathise with its basic impetus.

Until some sort of strategy offering a systematic alternative to the current one is articulated, the likelihood is that the government’s current strategy will stagger onwards, moulded here and there to fit a path of least resistance as popular anger flares, but not substantially deviating from its course. The result is unlikely to be ‘popular capitalism’ but more widespread cynicism and disengagement. Within 10-20 years the welfare state could be so denuded that it offers only skeletal provision for those unable to provide for themselves, while those who do have the ability to pay will lose any incentive to support public services, retreating instead into private provision. Since the welfare state is one of the last, feeble, remaining forms of social solidarity, social cohesion will continue to degrade and, as atomisation proceeds apace, our capacity to affect meaningful change will decline even further.


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