Placards at People's Assembly national demonstration Placards at People's Assembly national demonstration. Photo: Steve Eason / Flickr / CC BY-NC 2.0

The failure of neoliberalism is at the heart of the current crisis, only a defiant working-class movement can fight for a fairer alternative, writes Dominic Alexander

Britain’s forty-year experiment with neoliberal economics has brought the country to the point where public services are in desperate crisis, while the government hides in denial. The privatised model of the railway system has utterly failed, while the long, clandestine campaign to break up the NHS through slow privatisation lies behind its current descent into collapse.

The aim of neoliberalism has always been to raise profit rates through minimising the cost of the social infrastructure that capitalism needs in order to function, as well as providing more sectors within which capital can invest to extract profits. This is the reason for the ideological fixation on privatisation. Yet, requiring the extraction of profit from the railways, for example, inevitably makes the service more expensive. This was always one of the contradictions at the heart of the neoliberal programme.

The accumulation of wealth

Britain has gone further down this self-destructive road than many comparable economies, and it is not surprising to find that, by income, it is the most unequal economy in western Europe, with the exception of Italy. According to the Office for National Statistics, the richest 10% of households holds 43% of all the wealth in the United Kingdom, but more precisely, it is the top 1% who dominate that share. The richest 1% of households in the UK, by a different calculation, owns perhaps 24% of the nation’s total wealth. These figures, it has been pointed out, certainly underestimate the underreported assets of this elite. The ONS statistics also do not include business wealth, further minimising the scale of inequality.

Source: Equality Trust

Even given those reservations, the victory of the rich revealed by the numbers is remarkable. Under the neoliberal regime, since 1980 the share of the top 1% of the population in total income rose to a peak of 13% in 2016, double the figure for countries like Belgium and Sweden, for example. Even more strikingly, the share of total wealth of the 0.1% doubled between 1984 and 2013 to reach 9%. Where in the 1950s and 60s, wealth was about three times GDP, this has now ballooned to seven times annual GDP. The country could afford for this to be greatly reduced at the top end.

Neoliberalism has seen a massive redistribution of wealth towards the ruling class. Where the long-term trend of the twentieth century was for levels of inequality to fall, that has gone into reverse over the last forty years. The lion’s share in gains from economic growth has been captured by the top.

Defenders of the neoliberal assault on the working class would argue that it was needed to restore the post-war capitalist golden era of high profit rates and rising prosperity. It failed. In the UK, the recovery from the 2007-8 recession has been the weakest of any previous slump for over a century. We are now in another one of uncertain depth and duration, while being the only one out of the G7 group of advanced economies to be smaller than before the pandemic.

Inflationary neoliberalism

These factors are the basis for the Tories’ intransigent rejection of pay rises in the face of the cost-of-living crisis, alongside the repeatedly debunked theory that wage increases lead to spiralling inflation. Marx showed originally that wage rises lead not to inflation, but rather to a squeeze on profits. This has been proved by history; during the 1970s, wages were consistently catching up with inflation, rather than driving it.

Profits have, however, been rising for many of the great corporations since the pandemic. A report from Unite found that an ‘analysis of the FTSE 350 reveals profit margins for the UK’s biggest listed companies were 73% higher in 2021 than pre-pandemic levels in 2019.’ Even without the energy companies, ‘average profit margins still jumped an astonishing 52%’, and account for 58.7% of inflation in the second half of 2022, taking over from the supply bottlenecks which began the process. The pay of leading business executives ‘leapt a colossal 29% from £2.01 million in 2020 to £2.59 million in 2021’. We are not facing a wage-inflation spiral, we face a profit and wealth glut.

It is not merely greed which motivates the Tories and the ruling class, however. It is their focus on the financial interests of the City of London, and its attractiveness to international capital. In this capitalist strategy, it is essential that the costs of government spending and social infrastructure be minimised to guarantee a low-tax regime. The prosperity of the financial sector, which is the primary driver of Britain’s appalling regional inequalities, does very little for the great majority of the population, even in London. We need desperately to move away from this neoliberal model, and put the living standards of the working-class majority back centre stage. This means wage rises, investment in public services and sustainable infrastructure, and a reversal of privatisation.

Workers’ alternatives

The crisis in the NHS could be solved in large part by removing its internal market, as well as restoring it to a fully public-sector service. Even in 2010, a parliamentary committee found that the internal market cost 14% of the NHS annual budget, compared to 5% administrative costs in the 1980s. All privatisations cost the country billions of pounds; a 2021 RMT report notes that £8.3 billion just in dividends had been paid out by private companies involved in the railways since 1996. Renationalisation across the board would save us money rather than the reverse.

It would not take much to bring in further billions from wealth taxes. The mainstream Tax Justice UK estimates that £37 billion could be raised from a few measures, such as equalising capital-gains tax with income-tax rates, taking national-insurance payments on investment income, and raising a wealth tax of 1% on assets over £10 million. This is small beer; a great deal more than that could be raised from taxing the rich. Additionally, in 1980 corporation tax was 40.11%, and while Britain’s is set to rise to 25% in April, it should rise further.

Claims about the need to close gaping holes in public finances, and hence the unaffordability of pay rises, are just obfuscation. The supposed £50 billion fiscal black hole the Tories used to justify swingeing cuts in the autumn turned out to be an accounting trick, due to changing the rules on how to count the Bank of England’s debt.

Inflation matching pay rises and investment in public services are affordable, but it will take a united fight by the working class to get them. Pay rises were won relatively easily in the 1950s and 60s, when technology-driven productivity was rising, profit rates were high, and trade unions were at their peak in strength. This will be harder, because our demands are being made in the teeth of capitalist crisis.

The answer is not to settle for less, and accept ruling-class priorities, but to make the fight a political one over the nature of our economy and society. For most people, Britain is now a broken country, where basic services no longer work as they should, and impossible choices are faced by too many people. Bold demands that rise to the level of a united campaign for a fundamental change of direction can rally maximum support, and secure more than just a temporary respite from the rolling crises of capitalism.

From this month’s Counterfire freesheet

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Dominic Alexander

Dominic Alexander is a member of Counterfire, for which he is the book review editor. He is a longstanding activist in north London. He is a historian whose work includes the book Saints and Animals in the Middle Ages (2008), a social history of medieval wonder tales, and articles on London’s first revolutionary, William Longbeard, and the revolt of 1196, in Viator 48:3 (2017), and Science and Society 84:3 (July 2020). He is also the author of the Counterfire books, The Limits of Keynesianism (2018) and Trotsky in the Bronze Age (2020).

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