Sunday, January 25, 2009

This time don't blame it on the Unions

Unlike in the Seventies, today's massive downturn has nothing to do with 'striking unionists'. It's taking place in the most business-friendly set up Britain's enjoyed since the 19th century.

The Independent on Sunday today quotes Government sources predicting a return to 70s flavoured three-day working weeks as a last ditch attempt to avoid mass unemployment ("Britain is facing return of three day week"). It makes for good headlines. Say the word 'crisis' and comparisons to the Seventies are immediately drawn.

But if the Winter of Discontent and the rise of Thatcherism are always explained as the inevitable result of decades of strong unionism, nationalised industries, high taxes and overregulation, today's massive downturn is something else altogether. Like Nick Cohen wrote in last week's Observer, "today's crash cannot be blamed on striking trade unionists". If you consider lower income tax at the top, weak trade unions, the explosion of casual work, the availability of cheap foreign labour, City de-regulation, tax avoidance and excessive pay at the top, in 2009 Britain is going bankrupt after two consecutive decades of the most solidly business-friendly and worker-unfriendly economic set-up since the 19th century.

Let's have a look at each factor.

After reaching its top at 83% in 1974, the top rate of income tax was brought down by the Tories to 40 per cent, amongst the lowest in Europe. When Labour got in they made sure they'd leave it untouched. In the meantime, they were extremely generous in setting their capital gains tax rates.

Between 1979 and 1982, City de-regulation saw the abolition of exchange controls and the end of restrictions on lending and hire purchases. Mrs Thatcher revealed in her memoirs that she took "the greatest personal pleasure in their removal".

Mass privatisations remained the order of the day for three consistent decades. Zealous neo-liberal ideology was thinly concealed by calls for 'efficiency' and 'choice', with the prescription that a state burdened with the management of industries, utility companies and railways would always be bad.

And then there's the Trade Unions. The Tory governments of the 1980s proudly introduced several anti-Union pieces of legislation which, in spite of election pledges to the contrary, New Labour never tried to modify. In 1999, official statistics showed that strike activity in the UK was "at its lowest level since records began" in the late 19th century, placing Britain amongst 'low-strike' EU countries.

It may be a coincidence but, more than anywhere else in Europe, the waning of unionisation in Britain coincided with the galloping casualisation of the labour market. From 13 million members in 1979, Union affiliates went down to just over 7 million in 2000. According to the Department of Trade and Industry, only one in six employees in the private sector were union members in 2006. Right when they were most needed, the Unions were pushed to the side by the dominant discourse.

And in fact, the last thirty years saw the notion of permanent employment becoming a privilege. 'Flexibility' became the word every self-respecting politician had to reel off in public. Translated into plain English, that meant the thriving of temping and agency work.

The continuing closure of the manufacturing industry was partly offset by the availability of lower paid employment in the service sector. They may have been on a temporary contract and 40 per cent their original salary, but like a Blairite automata would have told you, they were not on the dole. Skills and training on offer in the days of manufacturing were replaced by the call centre or temping agency. Those who've had the misfortune of working there know that these are places who leave you hating the rest of humanity for the rest of your life without teaching you a trade.

For all the patronising talk of a working class replaced by 'knowledge workers' and organised labour unseated by "self-assured freelancers setting their own terms and running their own lives as they stride from job to job" (to quote Nick Cohen's Pretty Straight Guys), truth is Britain quickly became a nation of low-wage sales assistants, data input clerks, receptionists and call centre workers doing the longest hours in Europe. Yet flicking through the papers in the years of Cool Britannia, negotiating your way past big-brother-o-meters and pop-idol-latests, the general feeling was one of a classless society where we were all freelancers, at worst, and wealth creators, at best.

Blair was always happy to boast that Britain was enjoying the lowest unemployment rate since the Seventies. What he never said though, is that -unlike thirty years before- a huge percentage of people in employment were not on liveable wages, parked as they were in the thin wedge of flexible work. And if truth is anything to go by, a BBC report brought the revelation that unemployment in 2007 was actually higher, at 5.5%, than it was in 1979.
Not to mention that UK-based companies have enjoyed for a few years the added opportunity of cutting more costs and making even more money by offshoring entire departments to countries were labour is cheaper.

Think of all the utility companies, banks and insurances who answer the phone from India or Bangladesh. That was unheard of twenty years ago.

The Feelgood Britannia years saw the country towering over its European rivals in terms of executive pay and bonuses. As Polly Toynbee and David Walker wrote in their book Unjust Rewards, "pay for top executives has been rising by many multiples more than the average pay". In 2006-7 chief executives' pay in the FTSE 100 companies "soared by 37% over the previous year". "In that year national average pay increased by 4% while the chancellor, Gordon Brown, insisted that public sector pay increases be held at 2%".

The UK financial set-up meant tycoons and zillionaires were invited in with open arms and both eyes turned blindly towards tax avoidance and tax havens.

To give you an idea of the dominant discourse in pre-credit crunch Britain, consider how discreet New Labour remained in the face of the devastating effect the non-dom tax avoiders had on the London housing market, where tens of thousands of ordinary families were being priced out by the new arrivals.

Compare it with how Blair and his government likened the firefighters' wage demands in 2002 to the apocalypse, warning that it would cause "terrible damage to the rest of the economy", while the Tories went as far as brandishing the FBU "a bunch of idiots" and a "disgrace to their country". The double standard in rhetoric was outstanding.

Banks netted year-on-year record profits (Barclays' in 2006 were 35% up on 2005, and a similar trend was met by all major British banks until the crisis kicked in) which coincided with the staggering expansion of credit. During the Feelgood years, total de-regulation meant the UK became the country where more credit cards were dished out than hot meals. In 2006 it was reported that "two-thirds of EU credit card debt [was] British". Anybody, casual workers, students, people on the dole, even dogs were generously offered credit.

De-regulation, the service economy, profiteering, low tax, weak Unions, banks running riot, casualisation and the end of permanent employment. When you look at those factors altogether, it dawns how the prophets of neo-liberalism, 'the end of history' and all that bollocks may need a new set of scapegoats this time.


Johnny T said...

I'm surprised this hasn't been made into a stronger point by the press. The political differences are enormous yet this crisis is at risk of being worse than the late-70s one.

Big business have enjoyed a feast for the best part of twenty years. WHat more could they have wanted? Any step forward and it'd have been Dickens' workhouses.

The crisis isn't their fault either, per se. It's the fault of the banks and how they managed their conduct, and of the successive governments that made it possible.

But you're right. This time no cries against "SOcialist Britain" and the striking unions are feasible. Maybe Melanie Phillips will. But she would anyway.

Anonymous said...

At the turn of the century Blair & Brown were both turning up at EU meetings lecturing other countries on alleged British financial superiority:

Now we know full well their uppiness was purely based on:

a wildly over-inflated housing market;
astronomically high household debt;
an overblown, over-leveraged City of London (massively dependent on foreign capital)

Madam Miaow said...

Excellent post, Claude. A very useful snapshot of where we are now and why. Thanks.