Foreword to the hardback edition by Mark Thomas
Mark Thomas, comedian and political activist.
19 March 2014: Budget Day, though not so much a Budget as class war waged with a calculator. Chancellor of the Exchequer George Osborne stands outside Number 11 Downing Street posing for the traditional photo call, holding the famous red briefcase containing his speech with a slightly awkward expression on his face, the look of a man lifting his own luggage for the first time. Arm rigid and knuckles white around the handle he seems about to ask, “… Er … Whose job is this? …” He smiles, nods at the press and confidently leaves to deliver his fiscal medicine in the House of Commons.
Every Budget speech ever given in Parliament is subject to the principles of reverse technology: if you look at who benefits from a Budget then you can see the voters the Chancellor is trying to woe. Osborne’s is no different but when he announced a cut in bingo tax and 1p off the price of a pint of beer he revealed his limitations as well as his aspirations, and those of his party. Conservative Chairman Grant Shapps MP infamously tweeted: ’Cutting the bingo tax and beer duty to help hardworking people to do more of the things they enjoy.’ Oh uncontained delight! Bingo and beer. Let every flat cap on every whippet be thrown into the air with gay abandon. Let every walrus moustache on the lip of every hardworking man be wiped clear of foaming ale so all may cry, “Gawd bless Mister Osborne!” He could not have been more patronising if he announced a tax break on racing pigeons.
Class is what defines this Coalition Cabinet above all else, its massed ranks of millionaires and ex-Etonians who have no grasp of everyday reality for working people. It is almost as if we have returned to the 1930s where the rich were our masters and betters and the poor knew their place. In the 21st century we are governed by people who think Downton Abbey is a documentary. In a world of millionaires and Etonians it must be effortless to use the two classic Conservative strategies deployed in the face of rising poverty: (1) deny the facts; (2) blame the poor.
The explosion of people using food banks was greeted with derision by Lord Norman Tebbit, who insinuated that this was an example of a something-for-nothing culture, implying that there is no poverty, just greed. That those in crisis and facing destitution are just greedy kids running after free sweets thrown into the air in a playground.
Privilege and dogma have framed the Conservatives’ thinking as they mount the greatest ever assault upon the welfare state and the poor since World War II. The poor simply do not matter; they are casualties of ideology. If the facts don’t fit the credo, the facts are wrong.
It does not even seem to matter to Osborne that the one task he asked the electorate to judge him by has been beyond his reach, namely to eliminate the budget deficit by 2015. On 19 March 2014 he announced new predictions for the elimination of the deficit by 2019 and more public spending cuts. Maybe the one real task he is judging himself by is the Tories getting elected with a working majority in 2015, this time without the hindrance of having to help the Lib Dems put up some bunting every now and again.
We are in the middle of cult-based economic experiment where the rich have fixed their world but not ours.
So I am delighted to scribble these ill-constructed words for the author Mary O’Hara. This book contains things the Conservative-led Coalition hates. It has facts. The author actually made the unforgivable faux pas of listening to the unheard voices, the poor, the huddled masses; those who would in a better world seek shelter beneath the wing of a caring state. This book gives voice to those at the bottom of the heap, those who struggle to just exist.
This book is ammunition. Use it.
FOREWORD TO THE PAPERBACK EDITION BY PROFESSOR MARK BLYTH, Author of Austerity: The History of a Dangerous Idea
Its hard to get Americans to think of welfare spending as anything other than handouts to the poor that are supported by Democrats and opposed by Republicans. Yet if welfare is defined in this way, the US spends almost nothing, as a percentage of its federal budget, on welfare. President Clinton (Democrat) famously “ended welfare as we know it” in 1996. In fact, the US spends more on parks and recreation at a federal level than does on cash transfers to poor households. But you would never know that from the rhetoric of ‘welfare dependency’ and ‘government handouts’ that clutters the American media landscape.
In the UK welfare spending has been similarly mythologized for political ends. A discourse of ‘strivers versus skivers’ that pits the low-paid and marginally-employed against the unemployed and disabled has sprung from febrile minds of the governing Conservative Party, their Liberal Democrat partners, and their media allies, which has taken deep roots. Indeed, you might get the impression from reading the newspapers in the UK that half the country is on welfare and no one actually works. But, as is the case in the US, the numbers tell a different story. Almost half of all welfare expenditure (46 percent) goes on a state pension scheme for old people. They vote, so they don’t get their benefits cut. The bit that might be thought of as welfare – cash-transfers to the unemployed and the disabled - constitutes only 15 percent of the UK’s social spending, which is itself a small proportion of the total budget once pensions areexcluded. And yet these areas have been cut the deepest, causing immense social hardship and long-term developmental damage to adults and children up and down the UK, all of which O’Hara documents using the harrowing words of those most affected.
But while the words move us, the numbers detailed in O’Hara’s book shock even more. Under the guise of ‘restoring sound finance’ to the UK’s budget in the aftermath of the financial crisis (using the absurd comparison to the situation of Greece in 2010 to justify its actions) the UK government has cut nearly £75.2 billion from its social spending, with cash benefits and local government employment taking 50 percent of the hit. £28.3 billion (37.6 percent) of those cuts have targeted disabled people under the guise of ‘labor market activation.’ In addition nearly 600,000 public sector workers have been fired and the reemergence of urban poverty on a scale, in some communities, not seen since before World War Two, has become a fact of life for millions of Britons. Shockingly, there are five times as many WORKING families below the poverty line today in the UK than there were in the 1970s, despite all the reforms to labor markets and welfare institutions since the 1970s that were supposed to exactly these people better off. The reality is that, especially since the onset of these spending cuts, real wages have fallen nearly 10 percent, while inflation in core items such as food and fuel ran in double figures, thereby squeezing family budgets all the harder.
Put simply, when I walk around the UK today, outside of the London housing bubble, and the financial perma-party of the capital’s ‘well-to-do,’ I see a society transformed from the ‘haves and have-nots’ I grew up with in Scotland, to what might be called the ‘have it all and screw-the-poor’ society of today. I used to think Mrs. Thatcher did a good number on the working classes of the UK. It turns out that I hadn’t seen anything yet. Not content with their evisceration of the social safety net to date, the Conservative government has committed to reducing state spending, if they are re-elected in 2015, to the level that last pertained in 1958. Why, for goodness sake, especially if the rationale for all this was to build a better society and a more efficient Britain, would anyone think this is a good idea? How can you run a 21st Century economy with mid-Twentieth Century levels of public investment? Last time I checked school classrooms in 1958 didn’t have computers or WLAN networks. They do now, and if we want British children to have a chance in the economy of the future, how are we going to give them that chance while driving their parents into poverty through cuts and chronically low wagesand spending on their kids’ education like its 1958?
Yet what makes all this even more absurd is that austerity in the UK is, on a macroeconomic level, a mirage. As Simon Wren Lewis and Jonathan Portes have both noted, UK austerity was effectively put on hold in late 2011. Specifically, real government consumption went from -0.1 percent in 2011 to +2.6 percent in 2012. This policy of not cutting government spending, except in local government employment and social spending, which as I noted already is a small part of overall spending, was given a further boost by a fall in the UK savings rate in 2012. Combined with theUK governments decision to put the UK financial sector back together again, more cheap funding for banks, and mortgage assistance for the already well-to-do, this pumped up a new housing bubble which gave a consequent wealth boost to the already wealthy.2 The rest of the country, where the spending cuts are concentrated, saw no such ‘recovery.’
So the UK has a policy mix where central government consumption has increased, but social spending and regional government spending has decreased, which makes no sense at all since the boost on one side of the balance sheet is offset by the cuts on the other. These policies have simply delayed recovery by creating fiscal drag where there didn’t need to be any, and they were rendered unnecessary by Quantitative Easing (QE) by the Bank of England, a policy that stabilized the UK’s public debt level by late 2011. (Don’t tell the children, but QE is basically the cancellation of government debt – so if you can do that trick you really don’t need to be tight fiscally unless you really just want to.) These cuts are by any measure then petty, vindictive, targeted upon the weakest members of society, and have zero fiscal value. So why would any reasonable government pursue such policies? One answer is that the government is inherently unreasonable, and that may have merit. But I would go with another one.
Austerity in the UK is the politics of distraction writ large. Behind the UK’s ballooning deficits in 2008 lay, not the ‘over’-spending of the prior Labour government (which was real, but minor), but the giant hole in the finances created by the global financial crisis. The UK was taking nearly 40 percent of its taxes out of the financial sector in 2007 when it went bust. The UK taxpayer then bailed out sector while the accompanying recession blew a hole in the deficit that led to new debts being issued to cover the shortfall. To patch up this hole in the finances, the government could have went after the folks that benefitted from this taxpayer-funded insurance, the financial sector and the top 20 percent of the UK’s income distribution whose assets constitute the financial sector’s liabilities and vice versa. But that would have meant going after the rich, the powerful, and the people who pay most of the taxes given the astonishingly skewed British income distribution. So another set of payers had to be found. And who better than those least able to organize to defend themselves? Perhaps those least able to argue back against the claim that they were ‘cheaters,’ ‘leeches’ and ‘skivers.’ Those at the bottom of the income distribution who are too poor to pay taxes and too bust trying to make ends meet to vote or influence politics, even in the best of times. In the language of finance the UK government executed a class-specific put-option, bailing out the rich with the incomes of the poor. After all, its not as if the poor had earned it had they? These were handouts, which is quite unlike those bankers that got bailed-out and kept their jobs. Really. They were the ‘strivers.’
The ‘skivers’ would foot the bill.
So in time-honored tradition the British elite practiced a ‘divide and conquer’ strategy to cover its tracks, pitting those barely making ends meet against those with no means at all. And as the ‘strivers’ turned on the ‘skivers’ the top twenty percent (really, the top one percent and the 19 percent hanging on to a middle class income while paying 40 percent tax) were made whole at the expense of both groups. Not wanting to offend this pivotal segment of British society, the opposition Labour Party the traditional defenders of Britain’s poorest who know these policies are economic nonsense, have pledged to keep the cuts going to rid the country of its greatest evil – its 4 percent budget deficit. Never let mere facts, as they say, get in the way of an electorally useful ideology.
But why should Americans care about any of this? After all, America has no welfare state? But it does, and it’s being whittled away too. The American welfare is submerged, and it mainly benefits the middle classes. Tax credits, subsidized state university tuition, Pell grants, college savings tax plans, these are all ‘welfare’ by a different name and they make a middle class possible. Just as O’Hara and I both used the British welfare state to climb out of poverty and go to university (and in doing so pay-back over our lifetimes far more in tax that the cost of the welfare transfers that fed, clothed and educated us) so Americans rely on their welfare institutions to do the same – they just don’t call them that.
But they are just that. The ideology of austerity has already taken aim at these programs and they are under threat. Have a look at Wisconsin or Kansas to see what I mean. So if you want to understand just how bad it can get, read this book. It shows you want happens to millions of people when those at the top get to turn the screws on those at the bottom to cover their tracks, albeit with a British accent. The UK has cut further and faster at a federal level that Congressional Republicans could ever imagine.
If you want to see what their preferred future looks like – read on. It’s ugly. It’s heartless. It’s fiscally absurd. But fiscal sense was never the point. It’s just a cover for what we used to call class warfare. But this time it’s the war of the rich against the poor.