Jeremy Corbyn was labelled an “extremist” by mainstream media for wanting to redistribute wealth and bring services back into public ownership. But the reality is that Britain’s entrenched economic model is extreme. Last month, Professor Colin Mayer of the British Academy, the country’s oldest humanities and social sciences institute, told the BBC that “The UK has a particularly extreme form of capitalism and ownership.” This, he said, was largely due to short-term profiting at the expense of a longer-term social vision.
Funded by billionaires and with a cabinet full of millionaires and multimillionaires, the establishment’s political faction known as the Conservative party now has free reign to pass and revoke all sorts of laws in the interests of its backers.
Decades of lost wages and inequality
Economic extremism is the core of the Tory philosophy.
In November 2013, Boris Johnson, told the Centre for Policy Studies that inequality is getting worse, adding: “some measure of inequality is essential for the spirit of envy and keeping up with the Joneses that is, like greed, a valuable spur to economic activity.” Deregulatory shocks to the system keep the deserving at the top of the game, he said: “The harder you shake the pack, the easier it will be for some cornflakes to get to the top … Thatcher gave it another good shake in the 1980s” by selling off council houses. Successive Tory governments have induced periodic, systemic shake-ups. Johnson is likely to do the same.
Take wages, for example. According to data from the Office for National statistics, Britain’s post-War Labour government raised the value of salaries and wages by 11.7%. By 1958, successive Tory governments had reduced the value to just 3.1%. By the time Labour left office in 1979, the value was 17.3%. Under Thatcher, it sank to 6.6% and down to 2.5 under John Major. The value of wages and salaries never recovered during the neoliberal Tony Blair years (1997-2007), and by 2015 with the Tories in power again, it was lower than under Thatcher.
The Institute for Fiscal Studies notes that “The share of income going to the 1% richest households has nearly tripled in the last four decades, from 3% in the late 1970s to around 8% today.” As we’ve seen, wages for the majority have stagnated. But for the top earners, pay has gone through the roof. The average CEO salary in 2017 was 145 times that of the average worker, up from 47 times higher in 1998.
We can’t pretend that government policy is unrelated to this inequality. The Telegraph recalls that Thatcher reduced the rate of top income tax from 83% to 60% and then down again to 40% in 1988. “This change alone more than tripled the value of top executive’s after-tax pay within a decade.” It seems very likely that the Thatcherite Johnson will continue the trend. Consider the individuals in his cabinet and their ideological backgrounds.
An investigation by the Guardian found that many of the “free market” ideologues now in the Johnson cabinet were inspired by right-wing, often US-based think-tanks.
According to his biography, by the time he was 25, Chancellor Sajid Javid was Vice President of Chase Manhattan. He then worked for Deutsche Bank. Euromoney reports that Javid was “responsible for all cash and derivative credit trading, collateralized debt obligation (CDOs), securitization, structured finance and convertibles and for the commodities business.” Investors, including Arco Capital, tried to sue Deutsche Bank for securities fraud, by which time Javid had jumped ship for the safe Tory seat of Bromsgrove.
In addition to Javid, Leader of the Commons and Somerset Management Capital co-founder Jacob Rees-Mogg, Business, Energy and Industrial Strategy Minister Kwasi Kwarteng, Home Sec. Priti Patel, and Foreign Sec. Dominic Raab (who believes that housing and social security are not a human right), were all members of or associated with an entity called the Free Enterprise Group. Founded by Johnson’s Int. Trade Sec. Liz Truss, the organisation describes itself as “a leading association of free-market orientated Conservative Members of Parliament.”
This kind of thinking created the latest Tory manifesto, notable for its lack of social care policy. Nigel Edwards, the Chief Executive of the Nuffield Trust, issued a statement in response: “I was bitterly disappointed to see yet more unnecessary delay on social care, without even a policy proposal as a starting point for serious reform.” Edwards concluded that “There is already a cross party consensus that action must be taken, and we don’t need more contemplation of options that are perfectly clear: we need action.”
The Resolution Foundation is a think-tank set up to tackle middle- and lower-class poverty and relative poverty. In response to the manifesto, it estimated that by the time the Tories call another general election in 2024, child poverty will hit a 60-year high of 34 percent if trends persist, affecting an additional 1.3 million children (approx.).
Bloomberg reports that in late-June, the Tories sought £500,000 from the City. Boris Johnson alone is reported to have raised £400,000 for his leadership bid prior to the December general election. According to Reuters, in the first fortnight of the election campaign, the Tories “smashed the record,” raising £8.6m compared to Labour’s £3.7m. The same kind of financial institutions that helped Johnson into power—asset managers, banks, hedge funds, insurers, liquidity firms, pension companies—have contributed to Britain’s acute form of capitalist extremism.
The financial services sector makes up nearly 7 percent of GDP, generates £132bn in revenue per annum, and pays just £29bn in taxes. Soon to be free of EU market regulations, the mega-rich sitting at the top of these businesses—the top “cornflakes” in Johnson’s analogy—can make even more money at the expense of the broader public, as seen in the de-industralised Midlands and North.
It has been widely predicted that the kind of Brexit promoted by certain hedge funds will hurt the so-called real economy of goods and services; in which some 80% of the workforce participate. But certain kinds of financial services are predicted to do just fine. At the moment, EU regulations, such as the Markets in Financial Instruments Directives I & II, have priced research separately from broker services. Hedge funds have thus dumped the extra costs onto investors. But in post-Brexit Britain, they will no longer have to worry as the regulations will be ripped up.
The major worries will come from those in towns and communities in which the Tories will continue to disinvest, whose elderly won’t get the care they need and whose children will continue to be nourished by foodbanks.