There was precious little debate in the House of Commons, let alone in the country, prior to the Major government signing up to the 8th round of the GATT (General Agreement on Trade and Tariffs) treaty in Uruguay in 1994. This treaty extended the scope of the previous one beyond manufactured goods to cover services, agriculture and intellectual property, including services such as health, education and other public provision, and environmental ones such as GM foods, nuclear power and agribusiness.
Implicit in this treaty was the intention to dismantle the welfare state and privatise public services; the US arguing that it was unfair trade that their private providers of health, employment protection and education had no access to European markets because of the state provision.
However, it was recognized that such a process would have to be implemented slowly and by stealth because of the popularity of the welfare state. We are now seeing the end-game of that process being implemented by the Tory/LD government. The Welfare Reform bill, which will benefit private employment protection insurers, passed into legislation at the beginning of March. The Health and Social Care bill sets up the conditions which will eventually lead to further privatisation and a two tier US type of health provision; with private involvement intended at all levels from commissioning, insurance, private health providers, hospitals and financial devices for maximizing GPs budgets. A similar process is in place with the little discussed changes to state education. Nuclear energy is very much on the agenda in spite of the lack of economic or environmental case, and there are murmurings again about pushing for GM crops to be grown in the UK.
Ostensibly, the intention of the treaty was to protect and regulate free-trade between nations, but its impact was designed to elevate the rights of transnational corporations above that of the participating nations; thereby diminishing democracy, human rights, protection of the environment, and preserving the wealth of those who created the organisation… those who we now call the 1%.
The World Trade Organisation (WTO) was set up to arbitrate trade disputes. However, not only is that arbitration process secret and non-adversarial but inevitably the decisions are in favour of the corporations under the guise of protecting free-trade. Furthermore, it is not a level playing field. The US, as the most powerful of the participating nations could, and has, continued to protect its own industries/agriculture and ‘dump’ its goods on smaller nations, undermining their home markets. Retaliation by the smaller nation is limited to excluding the US which in many instances constitutes no great sanction. (1)
The WTO is an important part of the triumvirate of global players undermining democracy and national sovereignty, with the US as puppet master.
Margaret Thatcher was instrumental in the setting up of the Uruguay round of the GATS treaty and the establishment WTO … but it was also the Thatcher government who was responsible for creating the UK roots of the current banking crisis and recession. In 1979 exchange controls were lifted; and in 1986, with ‘Big Bang’, all controls over consumer credit were abolished and housing finance was de-regulated. In concert with the Reagan administration in the US, globalization of the world’s trade and financial sectors was effected.
With the advent of Globalization with its fundamentalist insistence upon open markets and free access for capital without restraints, there were suddenly no regulations to bind the Financial Class, no taxes they could not avoid and no political process they could not buy. It was a freedom from any notion of obligation, care or concern for anybody but themselves. It was a perversion of the very word freedom. They could vote wherever they chose, buy citizenship wherever they felt like it and pay only those taxes they found convenient and have no loyalty to anyone or anywhere. They were ‘free’.
Michael Meacher MP writes:
The charge sheet against the banks is that they have used these powers — particularly in the neoliberal era since 1980 — recklessly and in self-interest, which has done huge long-term harm to Britain’s economy…This has been a significant cause of Britain’s long-term decline… British manufacturing, the lifeblood of the economy, has been systematically hollowed out….
The City has relentlessly driven short-termism at the expense of market share. The UK banks have used their control of the money supply to regularly generate unsustainable asset bubbles which destabilise industry and, when they crash, beggar the taxpayer. They have engineered a massive mis-allocation of global capital into tax havens which, worldwide, now shelter over £11trn of global wealth. They have exacerbated inequalities between the super-rich and the rest, the growing disparities between regions, and the crowding out of manufacturing by finance…
So what should be done? Above all, control over the money supply must be brought back into the public domain.
So the Thatcher government’s policies are directly implicated in the genesis of the present situation… the intervening governments having done nothing to regulate the financial sector, and having continued the process of stealth privatisation of public services.
According to David Harvey, there was a tipping point in 1987, when even the US government realised that it was not sufficiently powerful to oppose the Bond markets. (2) The capacity of the financial markets to withdraw funds from any country and cause interest rates to rise, means that the financial elites are able to act as a ‘virtual’ parliament, able to coerce governments into abandoning legislation adverse to their interests.
It has taken only three decades of globalization, privatisation and de-regulation to bring the UK to the current parlous state:
The re-creation of the conditions of the Great depression; mass unemployment; the hollowing out of the UK manufacturing base; the north-south divide; the removal of an adequate safety net for the elderly, unemployed, sick or disabled; the recreation of a two tier provision of health and education; the lack of action on climate change or oil-dependency….and the re-accumulation of wealth back to the 1%.
Graph 1 shows clearly how the percentage of total pre-tax income for the top 1% of US wage earners is now back at 1920 level but the same graph could be drawn for the UK.
So how have the transnationals or ‘giant’ corporations not wasted a ‘good crisis’?
Put simply, there has been a great lie which has been perpetuated and maintained by a collusion between right-wing politicians and the media .. the supposed ‘mess’ that New Labour left in 2010. (3)(4)
It is a verifiable lie to blame government spending on public services for the consequences of the global banking crisis. It is solely the size of the financial sector debt which pushes up the total UK debt to nearly 1000% of GDP. The debt did not result from government over-spending but from privatisation of banking profits and socialization of their losses (5).
However on the basis of that lie, the resolution of the banking crisis has been successfully redefined as a need to cut back once and for all, the welfare state and public spending. The means of imposing such austerity is by dramatically cutting benefits and the opening up of public services to privatisation… which makes no absolutely no sense in the stated policy of diminishing the structural deficit … but just happens to be the desired objective of the 1994 GATT treaty.
‘Redefinition’, secrecy and distraction are characteristic of current global politics, and it is notable that the interests of corporate power are hardly discussed in comparison to the focus on the financial markets.
Colin Crouch describes in his book ‘The strange non-death of neoliberalism’ (6) … ‘The confrontation between the market and the state that seems to dominate political conflict … conceals the existence of this third force which is more potent than either and transforms the workings of both.’
‘At the heart of the conundrum is the fact that …. neoliberalism is nothing like as devoted to free-markets as is claimed. It is rather devoted to the domination of public life by the giant corporation.’
Colin Crouch contends that neoliberalism is emerging from the financial collapse more powerful than ever, because of a ‘comfortable accommodation’ between the state, the market and the ‘giant’ corporation. Corporate power makes it its business to bind them all together in an essentially hidden market-state-corporation triad.
Colin Crouch further argues that several factors have determined the power of the ‘giant’ corporations:
The lobbying power of firms whose donations are of growing importance to cash-hungry politicians and parties;
The weakening of competitive forces by firms large enough to shape and dominate their markets;
The power over public policy exercised by corporations whose contracts for public services deliver special relationships with government;
The moral initiative grasped by enterprises that devise their own agendas of corporate social responsibility.
Democratic politics and ‘the free-market’ are both weakened by these processes.
The power over public policy exercised by corporations was explored by Think Left in the case of the employment protection insurer Unum’s involvement with the Welfare Reform bill (7). This example evidences the likely similar conditions for the development of government policy in health, education, energy and agricultural policies, and indicates the vested interest of those corporations.
So, Unum warns people to get insured against the cuts in benefits … of which they, Unum, were major architects …. either directly as advisory consultants, or through their funding of psychiatrists who created the intellectual framework, the funding of think tanks and academics who in turn recommend policies to the DWP, and by offering ‘jobs for the boys’.
There has been many revelations of the ‘revolving door’ whereby politicians receive political donations, directorships, moving on into employment in think tanks funded by corporations and finally to be directly employed by the corporations themselves. Similar relationships may be observed for ex-civil servants. Corporations second employees into ministries as advisors and provide secondments for civil servants. Vast sums are spent on lobbying, and corporations are brought in to advise ministers directly. Specific mention should also be made of the global management consultancies like KPMG, Mckinseys and Boston Global, who advise government on how to privatise public services and who will profit enormously from providing training and commissioning for the GPs under the Health and Social Care bill. (8))
In this manner, corporations do not just exert pressure on the political process but have become major insider participants in framing the legislation according to their needs.
So why are the corporations so keen to be involved in providing health, education and public services?
Essentially, there is another lie. The UK’s economic problems stem from lack of demand – not as we are constantly told by high tax rates, corporation tax, red tape or lack of investment:
The current shortfall of investment has nothing to do with high tax rates and everything to do with insufficient demand to meet potential supply. Cutting corporate taxes will simply make the situation worse as more wealth gushes upwards into the hands of the 1 per cent, and it goes to corporations that are letting it sit idle. As Shaxson points out, corporate tax cuts at this stage will be as effective as pushing on a piece of string….
British corporations are awash with cash. According to Deloitte, non-financial companies held £731.4 billion in the third quarter of 2011 – the highest ever….
”Corporations have all this cash because they are not investing: the opportunities are not there. They are hunkering down, spending less than they are earning, while the government is spending more than it is earning (and thus running deficits).”
This is shown by analagous US data in Graph 2.
As Richard Murphy writes in his book ‘The Courageous State’:
‘.. (W)hy invest in businesses when something so much more attractive – the outsourced tax stream of a government as anxious as possible to give it away…. It is much easier to make profits from the certain commodities that people are always going to need, such as health, education, local government services, the utilities and so on that were once the preserve of government.’ (9)
Worryingly in terms of the future of UK public services, Michael Hudson writes:
For today’s financial planners the short run effectively has become the only aim. Running a corporation has become mainly a financial task whose objective is to raise the company’s stock price by mergers and acquisitions, using earnings to buy one’s own equity, arranging debt leveraging and orchestrating global intra-corporate “book” pricing so as to take profits into tax havens.
Financial managers are more likely to downsize operations and scale back research and development than to expand employment and production so as to leave more income to pay dividends and interest. The economy’s debt burden is made heavier by deflationary policies that keep expansion on a short-term leash, and to encourage, rather than tax, rentier income and debt financing.
In conclusion, the aim of Thatcherism to reconstitute the economic and social relations of the post-war consensus is coming into fruition under the Tory-LD coalition.
“Democracy has been hollowed out. We have seen in the last 30 years or so, the total demise of those occupations for those in the U.K. population who had few or no qualifications. The mining industry, the shipyards and car factories, heavy and light engineering, the merchant navy, product assembly, and so on. We are seeing the dismantling of the welfare state … and all because the Government is controlled by what is good for big corporations and finance .. not what is good for the people.”
To resist or reverse this situation, it is an imperative to cut through the misinformation and lack of information which is available. The hidden underlying agenda must be uncovered so that it can be confronted. The Spartacus movement opposing the Welfare Reform bill evidenced the power of twitter and online research by crowd sourcing. The virtual world can also facilitate international collaboration. In order to preserve and protect this vital resource all government/corporate attempts to control the internet must be resisted. http://aclj.org/free-speech-2/new-government-attempts-control-stifle-internet
(1) Noam Chomsky explains the World Trade Organization. http://video.google.com/videoplay?docid=5785830866015923087
(2) The End of Capitalism? – David Harvey (Penn Humanities Forum, 30 Nov 2011)
(6) Colin Crouch (2011) ‘The strange non-death of neoliberalism.’ Polity Press, 65 Bridge Street Cambridge C2 1UR, UK
(9) Richard Murphy (2011) ‘The Courageous State – Rethinking Economics, society and the Role of Government.’ Searching Finance ltd., 8 Whitehall Road, London W7 2JE, UK