Taking Stock

On his last tour of Europe and the Middle East In 2016, Barack Obama, the President of the US at the time, stated: “We are fortunate to be living in the most peaceful, most prosperous, most progressive era in human history… If you had to choose a moment in time to be born, any time in human history, and you didn’t know ahead of time what nationality you were or what gender or what your economic status might be, you’d choose today…”. In The New York Times, Nicholas Kristof declared that by many measures, “2016 was the best year in the history of humanity”, with falling global inequality, child mortality roughly half of what it had been as recently as 1990, and 300,000 more people gaining access to electricity each day. Philip Collins (a former speechwriter for Tony Blair) provided an end-of-year summary of reasons to be cheerful: during 2016, he noted, the proportion of the world’s population living in extreme poverty had fallen below 10% for the first time and global carbon emissions from fossil fuels had failed to rise for the third year running. We may add to this:

So, despite many crises, all of the above leaves the impression that the system works just fine – in fact, things have never been better[1]. To get a more complete picture, it may be worthwhile considering what is usually not mentioned in these optimistic accounts, and also carefully examine the validity of some of the above claims.

Are things really better?

There is no doubt that, economically speaking, things are getting better in some countries like China, but this is not really the case in most countries where neo-liberalism has put down its roots. In fact, they are getting slowly and steadily worse – we are just getting used to it, like a frog that sits in a pot of water that is slowly heated until it eventually gets cooked. On average, living standards in the West have stagnated since the 1980s or got worse. The real income of most people has either remained the same or gone down (although the income of the small proportion forming the financial ‘elite’ has increased enormously). More children throughout the world now learn to read and write, but in the US there have been no gains in literacy for 17 years-olds since 1971, while education costs have soared. According to an OECD (the Organisation for Economic Cooperation and Development) survey, the US and the UK (as well as some other countries in which neo-liberal ideas have made strides), are falling behind other countries in terms of academic achievement. The West has been politically eroded too, as politicians have lost the ability to control the system (no more Teddy or Franklin Roosevelt). We do live longer, but mostly due to changes in lifestyle and a lack of global wars and epidemics (that is, until COVID-19). Mental and physical health provision to the general population has been in decline (with the exception of the Affordable Act Care 2010 in the US and its short but turbulent history). The US ranks just 43rd in life expectancy and seems to be falling, and the lifespan of those at the bottom is no better than in countries like Pakistan or Sudan. According to Department of Health figures, the health gap between the rich and the poor is growing dramatically in England too.

None of this has happened by chance. Let’s look at some economic, political, social and environmental consequences of the particular trajectory that capitalism has taken in the last few decades.

Economic

  • Inequality: In recent decades, wealth has steadily accumulated in the hands of a small number of people, while the rest have had to work more for less (effectively becoming poorer). We are now approaching late 19th-century levels of wealth concentration (the greatest in human history). A mere 85 people are valued collectively at 1 trillion dollars, which is how much the 3.5 billion people at the bottom out together have. Just 1% of the world’s population now owns more wealth than the other 99%. That inequality has risen in recent years is not an accident. As Marx observed, the closer you get to a free market economy, the greater the concentration of wealth at the top. The claim that the accumulated wealth will ‘trickle down’ has never materialised. Even Margaret Teacher admitted towards the end of her life that she was disappointed with this failure. In fact, there hasn’t been a trickle-down but a trickle-up, a flow of cash running upwards into the wealth reservoir of the super-rich.
  • Degradation of work is another economic consequence, as evidenced by an increase in job insecurity, worsening of work conditions and low protection. The International Labour Organization (ILO) reported that the global unemployment rate stabilised in 2018 (at nearly 200 million persons) after a rise in 2016. However, it was predicted that decent work deficits will stay at high levels and vulnerable employment would be still growing in many parts of the world. The numbers of the working poor is estimated at five million people in 2018/19. Half of the workers in South Asia and two-thirds of those in sub-Saharan Africa live in extreme or moderate poverty. In the UK, a record 60% of those in poverty are in working families. This amounts to, according to a Joseph Rowntree Foundation report, four million workers. Research from the charity Shelter suggests that as many as 41% of homeless households are in work. According to the California Housing Partnership, average rents in Los Angeles County have increased by 32% since 2000, while average household incomes for those renting have fallen by 3% when adjusted for inflation. Those on the lowest incomes are spending 70% of their income on rent, leaving little for food and other needs. These are the people with jobs. Having a job is no longer an indicator of being outside poverty. Closing borders to economic migrants, an aging population, and the pandemic upheaval (2020-21) are likely to cause a temporary shortage of workforce and even a wage-increase, but this is not going to last long, unless some deep restructuring takes place.
  • Global poverty: what about those claims of reducing global poverty and hunger? The final report on the United Nations Millennium Development Goals (MDGs) concluded that the project was “the most successful anti-poverty movement in history”. Two key claims underpin this narrative: that global poverty has been cut in half, and that global hunger has been nearly halved since 1990. In reality, around four billion people remain in poverty today, and around two billion remain hungry – more than ever before in history, and between two and four times what we are led to believe (Hickel, 2016). The MDGs have used targeted statistical manipulation, changed the criteria for poverty and hunger, and kept quiet about the reduction in poverty and hunger being due to rapid economic growth in China. In fact, the gap between the global North and the South has roughly tripled since the 1960s (ibid., 2017). If China is excluded, between 1981 and 2010, poverty (measured as a daily income of $1.25 or less) remained the same, at about one billion people. However, if poverty is taken as a daily income of below $2.50, the numbers slightly increased, and if the poverty line is drawn at $5 a day, the number of people caught in it increased from just over three billion to more than four billion (ibid.). According to a UN report, global hunger has also increased in recent years. Interestingly, poverty in some developed countries shot up even more in these decades. In the US, homelessness is on the increase. For example, in Los Angeles, it jumped 23% in 2017 to almost 60,000 people. The largest economy in the world also has one of the highest levels of child poverty among developed nations. Child poverty has risen in the aftermath of the recession in the UK too, with about four million – or 30% – of young people now classified as poor.
  • Inflationary pressures: only a few decades ago, being a millionaire was a big deal. Now we talk about trillions, and there are many billionaires – being a millionaire doesn’t mean much anymore. You may wonder why this gargantuan increase in the supply of money does not create inflation. This is because MV = PY. M is equal to the supply of money; V is the velocity of money (or the average number of times each dollar/pound/euro is spent); P is the average price of goods and services; and Y, the total quantity of all goods and services sold during the time period in question. Let’s translate this into the real world. Most big money, and consequently the inflation bubble, are contained in financial markets and assets such as houses, capital gains and luxury items. So, M is increasing enormously but V is kept low! In other words, the money supply is out of control but is contained in a bubble within which a small percentage of the very rich live. The consequence is that we are in an absurd situation: the justification for the neo-liberal agenda, ‘the wealth will trickle down’, had better not be true (which it isn’t anyway). If it were, it would cause huge inflation. Even if only a fraction of the accumulated wealth reached ordinary people, it would significantly increase the velocity of money, resulting in serious inflation. So, it is not only that the wealth doesn’t trickle down because the rich do not spend or invest enough of it into the real economies; it should not and cannot trickle down as it would bring down the whole system. Continuing with things as they are, with an ever-widening gap between the super-rich and everybody else is no longer a choice but a necessity – which is why politicians of any creed put up with it.

If you are also interested in the larger picture – how these social processes fit within the evolution and meaning of life as a whole, please visit thesynthesis.info

Political

It is not far-fetched to say that global plutocracy has always been an aim of ‘the market liberalisation’. In his 1938 message to Congress on curbing monopolies, President Franklin Roosevelt warned: “The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism – ownership of government by an individual, by a group, or by any other controlling private power.” This message is acutely relevant today. The increasing inequality gap has led to an erosion of democracy as an ever-smaller group of people (oligarchs and oligarchic corporations) have ever-greater power and influence. In an interview with the Guardian, Winnie Byanyima, former executive director of Oxfam, said: “We want to bring a message from the people in the poorest countries in the world to the forum of the most powerful business and political leaders. The message is that rising inequality is dangerous. It’s bad for growth and it’s bad for governance. We see a concentration of wealth capturing power and leaving ordinary people voiceless and their interests uncared for.”

Social

The aim of capitalist business is profit. The societal aim is bettering the lives of people – this is what all politicians in all countries that have some form of democracy pledge to do (at least before an election). These two aims sometimes coincide, but very often they don’t. In fact, the chasm between them has been rapidly increasing in recent years. We can see that in social defragmentation, the erosion of freedom and the slowing down of social development.

  • Defragmentation: society based on the philosophy of self-interest is not conducive to social cohesion. To quote Marx again, “capitalism severs every connection between human and human except the calculation of naked self-interest in its ruthless efficiency”. This is something that many working people can relate to. Not surprisingly, the sense of defragmentation and alienation in Western societies is endemic. A study by the UK Government’s Social Mobility Commission warns that without radical and urgent reform, the social and economic divisions in British society will widen even further, threatening community cohesion and economic prosperity.
  • The erosion of freedom: citing the social philosopher Andre Gorz (1923–2007), Professor David Harvey, author of A Brief History of Neoliberalism, remarks that societies that boast about freedom as their most cherished value ‘surrender true freedom for the limited freedoms of endless striving to participate in and beat the market’ (in Harvey, 2014, p.270). This seems to manifest itself in number of ways:
    • We are asked to live in a ‘split-personality’ system, in which we are supposed to cherish democracy in politics, but are expected to accept a totally undemocratic, ‘top-down’ environment at work. Unquestioning obedience to whoever happens to be one’s manager or boss is the norm. This is exacerbated in the US, where even one’s access to health services often depends on one’s employment, as the employer provides health insurance that would otherwise be unaffordable.
    • Being treated undemocratically at work and at the same time being trapped by debt (on average, over $10,000 in the US) puts many working people in a position not dissimilar to serfdom. American people work more hours with less vacation time than their counterparts in any other Western industrialised nation. In 2014, Gallup reported that the typical American working week was 47 hours. Coupled with spending more time commuting every day than ever before, this leaves little time for other activities. We may think that it is still much better now than how it was in the time of real serfdom, but even this may not be the case. It is estimated that not only Americans, but modern Britons too, work more hours in the year than medieval peasants did (Boyle & Simms, 2009, Ch. 6).
    • It is often assumed that privatisation increases freedom, but its massive push in recent decades has actually decreased freedom overall. It might have increased the freedom of the very rich, but at the expense of freedom for the vast majority (one example, at a basic level, is the reduced freedom of movement resulting from more enclosures at the expense of public spaces).
    • Our consumer ‘freedom’ often just reinforces a corporate bias. Take the supermarket choice: it seems huge, but most of the products on offer are actually slight variations of the same thing. There are a great deal of barely different options – but the only real difference is the packaging. On the other hand, whole areas of real choice are eliminated (e.g. you can have shelves of various cereals, but try to find one that doesn’t have added sugar). The choice is reduced to what makes a greater profit margin.
    • In countries like the US and the UK, where market fundamentalism has been most fiercely applied, social mobility has also greatly declined. These countries are way below many other nations in this respect. Cutting down on regulations has increased corporations’ freedom to take advantage of workers and customers, but the freedom of ordinary people and social mobility that come from health, education and equal opportunities have been steadily eroded.
    • Even our individual freedom is turning into enslavement by our own desires: when extreme individualism is coupled with extreme consumerism, individual ‘freedom’ turns into slavery to one’s immediate desires, urges and the need for gratification. This, in turn, makes people an easy prey of the system, as it fosters dependency (not only on particular products but on the system itself) – and therefore becomes more difficult to resist.

The irony is inescapable: mixed economies in the decades after the WWII did not reduce but increased democracy and freedom. However, the neo-liberal takeover, the closest approach to Hayek’s own prescription, appears to be a real road to serfdom.

  • Slowed social development: while in its early stages and its peak capitalism provided a fertile ground for social development, it is now becoming an impediment to this. In their relentless pursuit of increased GDP, most societies neglect social development in other respects (cultural, intellectual, emotional, ethical, spiritual, etc.). Politicians and the media go for the lowest common denominator in order to grab as many votes or viewers as they can. Many were in disbelief that Donald Trump received as many votes as he did, but the rise of far-right populism should not be surprising considering all we’ve discussed above. As nothing is standing still, societies that are not developing are not only stagnating but are, in fact, going backwards.

Environmental

There is also, of course, an environmental impact that is out of control. Climate change is the most serious concern, but by no means the only one. We can add to the list degradation of fundamental resources on which life depends (soil, water and air); industrial deforestation and enclosures, often leading to a breakdown or destruction of natural habitats; extinction or depletion of species (e.g. overfishing); the accumulation of waste; pollution; the reduction of biodiversity and the spread of monocultures So, when aforementioned Philip Collins cheers because global carbon emissions from fossil fuels didn’t rise for the third year running, it is like saying it is great news when somebody who smokes two packets of cigarettes a day didn’t increase their intake for three years. This is not a glass half full, this is a glass with a few drops at the bottom that are fast evaporating.

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Why does it still seem relatively ok?

Despite all of these global challenges, many people in the West still live more or less normal lives. How is that possible? In short, because they live out of the past, the future and thin air:

  • The past: if wealth has been accumulated for several centuries, it is not surprising that it can sustain most of the population for a few decades. Indeed, in order to maintain their living standards, many people rely on previously accumulated wealth (parental help, earlier savings, inheritance, etc). In other words, those who can, draw from the past and can still live well. For others, there is always borrowing.
  • The future: one short-term ‘solution’ that maintains the illusion that things are ok is debt. Amid soaring inequality and stagnant wages, in 2020, consumer credit totalled 4.2 trillion dollars, way beyond the mere 2.6 trillion dollars just before the 2008 financial crash. Contrary to the belief that individual irresponsibility drives debt accumulation, research shows that structural inequalities play a key role. In a 2014 study, Demos senior policy analyst Amy Traub found that there is “little evidence that households with credit card debt are less responsible in their spending habits than households that do not have accumulated debt. Instead, we see that, among similarly situated low- and middle-income households of working age, factors like education, value of assets to fall back on, insurance coverage, and whether a household member has lost a job, are among the foremost predictors of whether a household will accumulate credit card debt.”
  • Thin air: the mother of all ‘too big to fail’ cases is not a bank, or a corporation, or even a country. It is the dollar. Being effectively the world’s reserve currency, the currencies – and, consequently, the economies – of most countries are dependent upon the dollar and nobody is prepared to shake the boat. Those who try are discouraged or even forcibly removed (such as the late leader of Libya, Colonel Gaddafi, who, just before his downfall, tried to create a pan-African currency that would have been independent from the dollar). And yet, the dollar is nothing more than thin air. The US is the most indebted country in the world, by far. However, creating dollars out of thin air, as in the case of quantitative easing, keeps the American economy (and consequently the world economy) still alive, albeit on a drip. This can last as long as everybody believes in the sanctity of the dollar, so the effort is put into making sure that we do through massaging the figures. Let’s now examine some of the ‘good news’ claims around this.

Massaging the figures

A lot has been done to hide the negative consequences of market ‘liberalisation’. Here are some examples:

  • One stark case is inflation and GDP. Nowadays, we are presented with distorted figures of inflation and modest economic growth. Due to the way GDP is now measured, drug dealing and selling stolen cars also contribute to its increase; by the same token, growth may be the result of financial sector dealings, while the real economy is in decline. Similarly, you can have the appearance of low inflation if you keep down only the prices of the items that are used to calculate inflation. The most common measure of inflation in the western world is the Consumer Price Index (CPI) – a measure of the cost of an imaginary basket of goods and services. So, for example, some items, such as the cost of food or, say, cleaning services have not risen much in real terms in the last two decades or so. But the fact that house prices and rental levels have rocketed simply does not count! Controlling the prices of the relevant items is not always easy though, so many creative devices, such as substitution, weighting and so called hedonics are used. Without getting into too much detail, one example will illustrate this: if a television’s specification is improved but the TV is sold for the same price as the previous year’s model, it will be calculated that it is cheaper for inflation and more expensive for GDP – thus reducing inflation and increasing GDP at the same time. Why go to so much trouble to pull the wool over people’s eyes? Because, as always with the economy, inflation has two components: one is an increase in prices and the other is psychological: people’s expectations of future inflation. If this is high, people tend to spend more, as they believe they can get more now for the same amount of money than they will in the future – fuelling inflation further. So, you keep inflation in check by making people believe that inflation is low, and if you need to massage the figures for that purpose, so be it!
  • We are also told that unemployment is falling (in the US and the UK in particular), but this may be an illusion. Research by Sheffield Hallam Universityrevealed that UK unemployment is three times higher than the official count of those out of work claiming benefits, thanks to people who come under the broader definition of unemployment used by the Labour Force Survey, or are receiving incapacity benefits. There are more part-time jobs, temporary jobs and zero-hour contract jobs. At the moment, ‘working’ is defined, rather conveniently, as doing more than an hour’s paid work per week. There are many people who work too few hours against their wishes and there are so-called discouraged workers – people who have given up looking for work and do not bother to declare their status, as provisions for the unemployed in many countries have been reduced. The International Labour Organization claims that only a quarter of workers worldwide are on permanent contracts. The remaining three quarters are employed on temporary or short-term contracts, working informally, often without any contract, are self-employed or in unpaid jobs. Furthermore, even full-time and permanent jobs are insecure and those employed are paid (in real terms) less than people a generation ago for the same job. Young people are especially vulnerable: From Australia to Canada, they work harder and begin families and settle into their own homes later – if at all – with debt as well as job and pension insecurities not experienced to such a degree by their parents.
  • The poverty we discussed above is yet another instance. To present a rosier picture, the World Bank simply changed the way it measures poverty. In the year 2020, when the former US President Trump declared, in his usual bombastic style, that the US has the “best economy in history”, the country saw the largest increase in poverty on record.

Maintaining optimism is important though. If we all stopped believing in the system (e.g. if we stopped believing in fiat money and tried to exchange it for gold or tangible goods), the system would instantly collapse. An example of this is the run on the banks that everybody is so scared of. Who wants that? Besides, some things have genuinely got better – and not only for the elite. It is worth examining, though, to what extent the system deserves plaudits for it.

Talking about good news

How and why some things have got better is a very interesting and complex question, to which we cannot fully do justice here. Instead, a broad brush will be used to discern several reasons that are deemed decisive:

  • Short-term solutions can bring short-term benefits: if investment is diverted from the infrastructure, public education and health, as well as other common goods and services that require long-term commitment, this may, at least for a while, provide an illusion that things are not just fine but getting better.
  • Many things that have improved have nothing to do with the system. Modern technologies are one example (e.g. relatively accessible mobile phones have had a significant impact on improving health and education in some remote parts of the world). These developments were taking place even before neo-liberalism took hold and would be with us even if it hadn’t. It is likely, though, that they would depend less on monopolies or near monopolies.
  • Some things are better not because of, but despite the system. An unintentional consequence of neo-liberalism and corporate capitalism is that they are uniting many disparate groups in resistance and attempts to create alternative ways of social life. There are now many dots in every part of the world where people are operating on different principles (e.g. the number of co-ops in the US is growing faster than anywhere else in the world). We will talk more in the following chapters about these dots and the positive changes they are bringing.
  • The proliferation of NGOs has also had, by and large a positive impact (although, it is fair to say, not always).
  • There are even individuals coming from the very heart of the system (Tom Steyer, Warren Buffett, George Soros, Bill Gates), who are transcending the system in their own ways and contributing to some positive changes.
  • Many countries that have prospered in recent decades, are those that either didn’t embrace this ideology, or did so very selectively. Meanwhile, some African and South American countries have been shedding the shackles imposed on them by the WB and IMF. Even democracies that embraced neo-liberalism have made moves away from that ideology, which had a positive social and environmental impact. It is hard to say if this is too little, too late.
  • Last but not least, it would be unfair to claim that neo-liberalism is all bad news. Even an ideology of selfishness can have a silver lining and produce some common good. Some of it has been intentional (e.g. improved efficiency), and some unintentional (e.g. the closure of many coal mines in the UK by Margaret Thatcher, which had some positive impact on the environment and pollution, although she didn’t do it for that reason). In those places where the state (or unions) had excessive control and power, reducing ‘red tape’, opening up the market, and greater involvement of the private sector has been beneficial when applied in a measured way. The problem with neo-liberalism is not that it is all bad, but that it is inconsistent (opportunistic in applying its own principles) and that it has pushed the system too far in a particular direction, unleashing forces that can no longer be controlled. After all, even in Stalin’s Soviet Union, some things improved. The real question is: does the silver lining overweigh the negative effect of this stage of capitalism. This is even more pertinent to the future than the present. Should we be optimistic about the future?

A history lesson about optimism

It is in our nature to seek optimism. Even those who frowned upon austerity measures, Brexit or Donald Trump’s presidency tended to see them as the manifestations of temporary adjustments and democratic processes rather than as the signs of decay. However, we need to distinguish between two kinds of optimism: passive and active. Take a substance user who is experiencing pain in their chest. A passive optimist would say it will go away. An active optimist would say if I change my lifestyle, things will get better. The trouble is that the system we live in encourages passive optimism (no real change) and many succumb to it. It is particularly common to have displays of this type of optimism before a major crisis. In his last State of the Union Address, US President Calvin Coolidge said:

In the domestic field there is tranquillity and contentment, harmonious relations between management and wage earner, freedom from industrial strife, and the highest record of years of prosperity… The country can regard the present with satisfaction and anticipate the future with optimism.

This was in 1928, less than a year before the biggest-ever economic crisis shook the world, and the US in particular. A year before the second-worst crisis, in 2007–8, Gordon Brown, the Prime Minister of the UK at that time, was adamant when addressing parliament that there would be ”…no return to boom and bust”, while President George W. Bush, in State of the Union address, 2006, declared:

Our economy is healthy and vigorous, and growing faster than other major industrialized nations… the American people have turned in an economic performance that is the envy of the world.

This is not just an accident or the result of ignorance. In times of economic or political uncertainty, it is an imperative to maintain optimism. But, as the economist Hyman Minsky (1919–96) pointed out, optimism fuels over-confidence, and over-confidence leads to boom and bust. True, some steps in regulating the market (especially the financial sector) and reversing neo-liberal policies have been slowly taking place. But is this enough or are we heading towards another, perhaps even worse crisis?

[1] This is also Steven Pincker’s conclusion in his book Enlightenment Now, but his ideological bias distorts some otherwise fascinating datasets. For a balanced and sobering examination of his claims, see this article by Jeremy Lent.

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