The state has bailed out capitalism without any restructuring, says Prem Sikka. The only way forward is to change Parliament – but who will?
THE deepening economic crisis provides the clearest evidence that the state is the ultimate sponsor of capitalism. The British Government has provided loans, investments and guarantees of nearly £1.4 billion to rescue the bankrupt banking system. Billions more are being given to car manufacturers and Private Finance Initiative companies. The unprecedented bailout has not been accompanied by reform of capitalism and that will not happen until the electoral system is changed to produce responsive governments.
Not so long ago, the neo-conservatives were telling us we had reached the “end of the state” and that markets were the only way forward. Of course, at the same time, they were busy using the full might of the state to weaken trade unions, erode workers’ rights and re-engineer the society through privatisations, tax cuts for the rich and vast subsidies for railway, farming, electricity, gas and other companies. Now we can all see that the state has been used to privatise profits and socialise losses of the private sector.
The compliant British state has permitted companies to pursue private profits at almost any cost. The result has been the likes of Thalidomide, mad cow disease, foot-and-mouth disease, smoking and food-related diseases. Daily newspapers report that people are being ripped off by supermarkets, airlines, gas, railway, electricity, water, television and phone companies while corporate elites running the regulatory bodies just twiddle their thumbs.
Tax dodging by corporations and their rich controllers is rife. We are all wage slaves and can be patted on the back or stabbed in the back, whenever it suits big business. Employee share of Britain’s gross domestic product has declined from 65.1 per cent in 1976 to 53.4 per cent in 2008.
Unsurprisingly, 13.2 million people live currently below the poverty line. Nearly 2.9 million children live in poverty. Each winter, more than 30,000 pensioners freeze to death because they lack the resources to heat their homes adequately. The state pension in Britain, a major source of income for many people, is among the lowest in Europe. It will get even worse because corporate profits have been swelled by erosion of workers’ pension rights.
The poorest 50 per cent of the population owns just 1 per cent of the wealth. Corporate elites oppose any increase in the national minimum wage and seem to expect people to live on thin air. Despite laws, gender, age and racial discrimination persist in employment. This is the real face of capitalism that has been reinvigorated by bailouts.
These statistics provide a brief glimpse of contemporary class politics. The partisan policies of the state are masked with the claim that the bailout is good for everyone and this will generate prosperity and employment, just at a time when millions of people have lost their jobs. The British state has bailed out one of the most pernicious varieties of capitalism, which exploits people from cradle to grave.
Even Adam Smith was concerned about inequalities and poverty and advocated a key role for the state in providing public services. He argued that humanity, justice and public spirit were the key ingredients of a happy and contented society – a far cry from the capitalism sponsored by the British state.
Some two years into the banking crisis, bank depositors, borrowers and taxpayers have not acquired a single new right to shape the running of financial institutions. The banking crisis has destroyed people’s pensions, jobs, savings, the value of their property and effectively their human rights, but the state has refused to hold a public inquiry into the nature of the crisis.
There has been no attempt to democratise business so that society rather than speculators steer companies. The unconditional bailout will encourage an even more reckless variety of capitalism. Why should company directors behave when the state will transfer the cost of their follies to taxpayers? Without democratisation of corporations, the system that has failed so spectacularly will crash again.
While Karl Marx did not write much about the state, since his time, the state has emerged as a key mechanism for supporting the capitalist system. The difficulty is that, for ideological reasons, the state is prevented from directly owning means of production and so cannot generate revenues to support the aspirations of the people. Its revenues are primarily derived from taxes on wages, profits and savings, and corporate activities play a key part in each.
This has given corporations huge leverage on the policies of the state. Therefore, there is even more reason to develop countervailing institutional structures to check that leverage and provide the moral and intellectual leadership to forge a new common sense.
Anyone familiar with EP Thompson’s work The Making of the English Working Class will know that the working class forged its consciousness through political associations, street theatre, leaflets, pamphlets, music and the arts to challenge the state with a new vision of how more fulfilling lives could be lived.
Paradoxically, in the age of the internet, such possibilities seem distant. Trade unions are weak, the left is divided and the intelligentsia hardly exists. University academics hunger for consultancy and research grants from big companies and are less inclined to challenge their paymasters. Most newspapers, radio and TV stations find it easier to go along with the party line of their controllers and advertisers, the new censors of our time. Most NGOs are single issue organisations and do not present a coherent programme for social, economic and political transformation. So we lack the institutional structures to transform capitalism and the state.
The kind of state and capitalism that we have is linked to the electoral system. Here again, Britain is found wanting. For example, the Scandinavian states are distinguished from others by their focus on social rights. This is partly because of their parliamentary system, which is based on consensus. This means major political parties have to bring environmentalists, feminists and others on board to form a government and thus have to make concessions.
In contrast, Britain’s majoritarian parliamentary system hardly encourages governments to listen to the majority of the people. A handful of marginal seats form the battleground of any general election. A party securing a minority of the votes cast can secure a huge majority in the House of Commons and has no incentive to listen to alternative voices. In any case, the parties are willing to sell their soul to the providers of political donations. Most backbench MPs, despite some notable critics, are just voting fodder and too easily toe the party line.
This system has produced elected dictatorships and a state whose domestic and foreign policies prioritise the interests of big business. Changing the electoral system is a necessary precondition for reshaping the state and capitalism. Sadly, no political party is providing a lead.
Prem Sikka is professor of accounting at Essex University
