This age of inflation reveals the sickness of the British economy: rentier capitalism | William Davies

IInflation in the UK has reached its highest level in 40 years, largely due to sharp increases in energy and food prices. This fact has caused panic among some commentators and policymakers, who believe the UK is about to relive the inflationary turmoil of the 1970s, and prompted Rishi Sunak Announce A last-minute £15bn “cost of living package” partly funded by a one-off tax on energy companies. Andrew Bailey, governor of the Bank of England, has been the object of anger for advising workers to show “restraint” in wage demands to prevent the wage and price spiral of the 1970s. Currently, the inflation rate is 9%, Employer expectations With just a 3% pay increase this year, Bailey should be able to relax on that front.

Inflation aside, the UK economy in 2022 is starkly different from what it was 40 years ago. In 1982, as manufacturing employment plummeted, the unemployment rate hit a postwar record of more than 3 million. today, Boris Johnson Has a record low unemployment rate. Union coverage was still over 50 percent in 1982; today, it is less than half, and the private sector is almost half. The inability of most workers to collectively negotiate a pay raise is one of the main reasons Bailey sounds so disconnected, and one of the main reasons why comparisons to the 1970s are substandard.

We are not witnessing a repeat of the 1970s and early 1980s. But there are other reasons to consider the relationship between the crisis facing Johnson’s government now and the crisis that Margaret Thatcher faced during her first term. In short, today’s crisis is a legacy of how previous crises were handled.

It is worth remembering that inflation represents This The main economic policy challenge of most of the 1970s. It was inflation that prompted Jim Callaghan’s historic reckoning at the 1976 Labour Party conference that heralded the end of the Keynesian Consensus: “We used to think that you could spend money to get out of recession and get it back by cutting taxes and boosting jobs. Increase employment. Government spending. I can tell you frankly that option no longer exists.” Politicians and experts are divided on tackling inflation, but the urgency to find a solution is widely accepted.

In the political imagination of the New Right in the 1970s by think tanks on both sides of the Atlantic, the problem of inflation was linked to a broader set of social and moral crises: overpowering unions, an overly generous welfare state, weakening entrepreneurship, breaking up families, despise capitalists. From this perspective, what all these issues have in common is a lack of respect for the ultimate value of money. Britain will beat inflation by rediscovering its respect for property, hard work, fiscal discipline and responsibility.

The drugs that Thatcher administered were socially devastating. The doctrine of monetarism, originally proposed by Milton Friedman, holds that the government should target the amount of money in circulation and then set interest rates accordingly, causing interest rates to rise to such punitive levels that Britain is in its worst recession since the 1930s. inflation It eventually fell, but only after entire industrial areas, towns and cities were dragged down. The decline in union membership is both a disruption to union work and an impact on anti-union legislation.

What does this mean today? Looking back on the upheaval of the time, many political economists came to view monetarism as a deliberate political project to restore the supremacy of asset owners and financial elites. After all, it’s clear who is most affected by inflation and who will benefit the most: the creditors and the rich. Only after Thatcher took his life from inflation (and many other factors beyond that) could cities and housing markets start a dramatic upswing, save for John Major’s early turmoil and the 2008 banking crisis , and it has continued since.

Viewed in this light, Thatcherism, as its proponents have always claimed, was less a release of “enterprise” or risk-taking than a release of capital in pursuit of the highest possible return, without regard to any wider social or economic benefit.social and economic geographer in his book “Rentier Capitalism” Brett Christophers It has been shown that the central role of Thatcherian reform was to open up entirely new sources of income that depended little on productivity and much on controlling those who depended on rentiers.

We can see this in outsourcing specialists such as Serco and G4S, who roam around the government sector to secure lucrative long-term contracts, using the force of law to protect themselves from any adverse impact; in private equity funds for basic adults and children’s Abnormal profits are made mainly by squeezing an already disempowered workforce.We can go from house price and rent to Not moored at all from wages. Rent seeking goes far beyond the “market”, extracting income from basic necessities and raising costs.

According to orthodox economic theory, profit is the return a business or investor receives for taking financial risks, including bankruptcy risks. But in a rentier economy like the UK, profits are guaranteed, while risks are eliminated through fair or malicious means. The 2008 bailout of too-big-to-fail banks is emblematic of this false capitalism, in which big rewards are disconnected from any real acceptance of risk.Also, now that retail prices for energy are effectively set by Ofgem, the energy giant’s profits soar such as Shell Must be understood as an official UK government policy, like the rise in house prices after Sunak stamp duty holiday used to be.Although Sunak’s one-time tax on energy companies improved some of the effects of rentier power, but did nothing to weaken the economy’s basic shape.

Some critics wonder if the economic model is even no longer considered “capitalist,” as it has abandoned the high-risk, productivity-enhancing investments that have long been seen as a hallmark of capitalism. Of course, the free language of ‘citizen’ and ‘consumer’, ‘public’ and ‘private’ sector does not feel adequate to describe the cost of living crisis in which we are largely stuck with payment obligations, in accordance with corporate Asking to live without political or economic motives to serve our interests.

In Thatcher’s view, the state has been captured by labor. Today, the problem is quite the opposite: the state now protects some forms of capital so easily that many corporations, funds, and wealthy elites have forgotten what it feels like to be lost. It may well be that much of today’s inflation stems from geopolitical factors (war and Brexit), but until a government is elected to represent the economically vulnerable and take a stand against rentier power, merely living will remain a high-cost exercise for many.