A fairer society means breaking the big business stranglehold on politics

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Labour’s challenge to fight inequalities and rebuild democracy rests on addressing Britain’s ‘finance curse’

If the next Labour leader wants a fairer society, they must break the big business stranglehold on politics.

by Nick Dearden Re-posted from openDemocracy 10.09.15

In just a few weeks, the Labour leadership contest has substantially shifted the political debate in Britain, challenging the policy of austerity, raising inequality as the defining issue of our times, highlighting the erosion of democracy.

Fighting inequality and rebuilding democracy depend on breaking the stranglehold of big business and finance on politics in this country.  And this means reassessing Britain’s role in the world, because the prestige of this country is based upon London as a financial hub and a corporate HQ.

We live in an offshore centre for corporate interests, and this has not only fuelled poverty and inequality around the world, it has done so at home too.  Britain’s prestige has not translated into benefits for ordinary citizens here.  Despite this, political leaders have for decades failed to tackle the vested interests that have captured this country.

If they want to really change Britain, top of the list for the next Labour leader is the dependence of our economy on finance.  We have a ‘finance curse’, in the same way oil-rich nations can develop a ‘resource curse’.  Far from harnessing resources to build a fairer society, finance’s dominance has undercut other sectors of our economy.  Today, governments of every shade jump to the tune of finance, as we experiment in ever greater forms of deregulation, allowing the banks to transform everything we value into a derivative to be gambled on.

Britain has been captured by financial interests, which use this island to avoid taxes globally, to unsustainably inflate debt bubbles, and to speculate on the air we breathe.  There is no path to rebuilding democracy which doesn’t involve an almighty battle to ‘tame the City’ – with robust mechanisms to make companies pay their taxes internationally, levy taxes on speculation, restrict stock market listings, cancel unjust debts and reform the Corporation of London.

But finance is only the most obvious case of corporate capture in Britain.  In fact big business has a stranglehold on our politics.  On the one hand our government is aggressively pushing forward a ‘new generation’ of trade agreements like the EU-US investment deal known as TTIP.  TTIP threatens to water down social and environmental standards across the board, seeing such regulations as little more than ‘trade obstacles’.  TTIP will even give multinational corporations a special ‘right’ to sue our government for passing laws which threaten their profits.

On the other hand the British government is obstructing attempts by Latin American countries to hold multinational companies accountable for abusing real human rights, meaning that people have no access to effective legal redress for harm done to them by British-based corporations.  So far is the British state in the pocket of corporate interests that even our aid budget is used to privatise and deregulate economies in Africa, Asia and Latin America.  Aid money is thrown at free market think tanks to privatise energy supplies; agribusiness conglomerates get a helping hand to control seed markets; education multinationals find new markets in some of the poorest countries on the planet.

The rule of multinational corporations, which places a higher value on profit than human rights, is a key factor driving inequality. Combatting inequality means the next Labour leader needs to be prepared to use the British veto in Europe to halt TTIP and its sister deals, limit the influence of multinational corporations over the UK political process, establish a commission to tackle corporate abuse of workers’ rights and environmental sustainability, and overhaul the aid budget as a form of redistributive taxation which can help countries across the world develop decent public services.

These proposals form part of a manifesto of policies which we launch today, the first step in beginning to rebuild our democracy and properly fight inequality.  It also includes reducing carbon emissions and giving substantial reparations to help developing countries build democratically-controlled energy systems in low carbon economies.  And supporting small scale, organic agriculture, rather than industrial farming.

If we really want a fairer society, there is no alternative to taking on vested interests.  We can’t just decide to exercise a ‘nicer’ form of global power, because our power is built on a base that necessarily erodes democracy.  A powerful financial sector, unfair trade practices, ideologically-driven privatisation, and many other policies, which we inflict on the world, also serve to make our own country more unequal.  So these policies must be changed not just for the millions of people around the world affected, but for the British people too.

True, it may make our country less ‘important’ at the top table, but that is a price well worth paying for a fairer world, and a happier society

This article is cross posted from Global Justice Now and appears here.

This article is published under a Creative Commons Attribution-NonCommercial 4.0 International licence. If you have any queries about republishing please contact us. Please check individual images for licensing details.

Antidote to Osborne’s fairytale economics

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Panel of leading economists discuss and debate the true state of the economy and the lies underpinning the Government’s austerity programme.

The panel includes:
Owen Jones, Journalist
James Meadway, Senior Economist, New Economics Foundation
Ann Pettifor, Prime Economics
Micheal Burke, Economist
Chaired by:
Christine Blower, General Secretary, NUT

This economic briefing was recorded just a few days ahead of George Osborne’s Autumn Statement… but none of the panellists came close to anticipating the level of hubris, triumphalism and double-dealing that accompanied the Osborne Autumn Statement.  It was a truly breath-taking performance!

Find out the real effects and intent of austerity that George Osborne and the Government don’t want you to know…

 

The People’s Assembly Against Austerity – Economic Briefing – 27.11.14

Implications of TTIP for Financial Regulation of the Banks

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This excellent 6 minute video clip indicates the role of the City of London (the most criminogenic of global financial centres) in lobbying for the EU-US Free Trade Agreement, otherwise known as TTIP (TransAtlantic Trade and Investment Partnership).
To date, the critical focus of opposition groups has been the watering down of European consumer standards, under pressure from the US.  However, leaked documents are now showing that it is a two-way street.  The EU is evidently trying to protect the European banks from the stronger American Financial regulations.  Nevertheless (and unmentioned in this clip) the American Chamber of Commerce is also using TTIP as an opportunity to push for the higher US financial service regulations to be watered down.
As Lori Wallach says in the video clip, the pressure from lobbyists, on both sides of the Atlantic, is to lower regulatory standards across the board.

Leaked documents on TTIP

Mrs Thatcher was not the wicked witch of the west …

The original story of the ‘Wonderful Wizard of Oz’ was allegorical… the wicked witch of the west represented the US West Coast banks of the 1890s… and the wicked witch of the east, the East Coast banks. (See the Money Reform Party‘s explanation below.)

However, there are unquestionably parallels between the role of the banks in the 1890s depression in America and Mrs Thatcher’s continuing impact on the UK of 2013.  As Francis O’Grady said at the Northern TUC conferencethe economic and social disasters facing the people of Britain today can all be traced back to Thatcher’s rule … and the coalition government is hell-bent on completing what she started.

Specifically in regard to the banks, Mrs Thatcher built upon the policies set in place by Barber, Heath’s Chancellor, abolishing banking regulations and facilitating the financial sector’s freedom to wreak the present havoc.  But rather than being one of the banking witches, Mrs Thatcher was the banks’ minion.

In fact, Mrs Thatcher doesn’t seem to have realised until far too late, that she was letting the genie out of the bottle of banking regulations:

The irony was that most of Mrs. Thatcher’s friends and heroes were businessmen, manufacturers who made or dealt in products, not financial manipulators. But inevitably, her privatization policy led her to rely on the City financiers. Her autobiography and that of Nigel Lawson reflect their growing annoyance and even fury with the way in which the bank underwriters chosen to advise the government turned privatization into a vehicle to grow rich very fast. Mr. Lawson is scathing as to the the City institutions’ lack of competence, exceeded only by their greed (always pointing out how much more venal their global partners were, to be sure). But once the government had chosen these institutions as its partner, the die was cast. It was unable to find a way to control the underwriters, and feared to disengage.

http://www.nakedcapitalism.com/2013/04/michael-hudson-thatchers-legacy-of-failed-privatizations.html#jgWVO1V5v3DC8DFg.99

It was pretty inevitable that trusting bank underwriters as advisors, the ultimate beneficiary of Mrs Thatcher’s privatisation would be the City of London:

.. the square mile of financial institutions that obtained the quickest benefits and turned the program into something rather unanticipated by Mrs. Thatcher and Mr. Lawson. The rentiers for their part seem to have perceived the Thatchers and Friedmans as pawns, an advance infantry of promoters wrapping austerity economics in populist garb – policies that otherwise would have been difficult (if not impossible) to sell to voters.

http://www.nakedcapitalism.com/2013/04/michael-hudson-thatchers-legacy-of-failed-privatizations.html#jgWVO1V5v3DC8DFg.99

As Owen Jones writes in the Independent:

History is not one grand soap-opera, in which Great Men (and they are – unlike Lady Thatcher – mostly deemed to be men) at the top pull huge levers that dictate the fate of millions. “Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances already given and transmitted from the past,” Karl Marx wrote over 160 years ago. 

Michael Hudson explains the purpose of Monetarism, the economic theory used to justify Mrs Thatcher’s political platform of privatisation:

Ostensibly a theory of money and prices, monetarism became an ideology to attack government spending and organized labor. The theory’s guiding idea was that price levels could be determined by controlling the money supply – by the central bank managing the rate at which government deficits were monetized. Meanwhile, wage-push inflation could be countered by taking legal steps to break the power of unions to strike and to declare boycotts. The effect was to remove economic planning from the hands of government. The vacuum would be filled by global investment bankers. Efficient management was to take the form of maximizing stock-market gains, not the promotion of full employment and other non-market social welfare objectives….

The real reason why monetarists seek to control the Treasury or Finance Department and the central bank in every country is to achieve their political ends. From their position in these financial control centers, they put the brakes on government operations across the board, or promote other pet policies. Monetarist doctrine provides the ideological wrapping to present this control as a form of idealism and individualism.

http://www.nakedcapitalism.com/2013/04/michael-hudson-thatchers-legacy-of-failed-privatizations.html#jgWVO1V5v3DC8DFg.99

The solution is provided by the Money Reform Party:

Money does not have to be based on debt, nor indeed does it have to be based on precious metals. Real wealth is the goods and services that people create for each other. Money is merely a means of exchange. It could be created by HM Treasury and spent on providing public services, saving us all a modicum of taxation, and then the economy would not have to be saddled with large debts.

The Wonderful Wizard of Oz

Courtesy of the Money Reform Party

The Wonderful Wizard of Oz was first published in Chicago in 1900. Its author, L. Frank Baum, was the editor of a South Dakota newspaper and a supporter of William Jennings Bryan who stood three times, unsuccessfully, as a U.S. Presidential candidate for the Democratic Party.

The particular concern of both Baum and Bryan was the nature of the money supply then prevalent in the United States, and in the Mid-Western States in particular.

In America during the 1890s, as in Britain, there had been a severe depression. Many businesses had gone bankrupt, farmers forced to sell up, factories closed and workers made unemployed. True, some farms in the Mid-West were suffering from drought, but most were still capable of growing food; the businesses and factories were still capable of providing the things that people needed; the workers still wanted to work to provide those things, and people would still want the goods and services produced if they had the money to buy them.

The money in the USA then, as now, was entirely created by the private banking system. The pretence existed then that money was based on gold. (Even now some people still think that it is!) The major banks, based on the East and West coasts, could vary the amount of money in circulation, lending more to encourage commercial activity, then fore-closing on loans to put people out of business, enabling the banks to acquire their businesses cheaply.

Baum and Bryan wanted money to be based on silver, not gold, as silver was more readily available in the Mid-West, where it was mined. Such a money supply could not be manipulated by the banks. So the story of the Wizard of Oz starts with a cyclone in the form of imagined electoral success for Bryan…

Dorothy, a sort of proverbial ‘Everywoman’, lands on the Wicked Witch of the East (the East-coast bankers), killing her, so freeing the Munchkins, the down-trodden poor, but the Wicked Witch of the West (the West-coast bankers) remains loose.

To deal with her and to get back to Kansas (normality), the Good Witch of the North, representing the electorate of the North (this is less than 40 years after the civil war), tells Dorothy to seek out the Wizard of Oz (‘oz’ being short for ounce, the means of weighing both gold and silver). She also gives her a pair of silver slippers (as they were in the book – they became ruby ones in the film). Only these silver slippers will enable her to remain safe on the yellow-brick road, representing the bankers’ gold standard, as she heads towards the Emerald City, representing Washington DC.

On her journey, Dorothy encounters a Scarecrow, representing the farmers, who do not have the wit to understand how they can end up losing their farms to the banks, even though they work hard to grow the food to feed a hungry nation. If only they could think it through!

Next, she encounters a Tin Woodsman, representing the industrial workers, rusted as solid as the factories of the 1890s depression, and who have lost the sense of compassion and co-operation to work together to help each other during hard times. Also, a spell cast upon him by the Wicked Witch of the East meant that every time he swung his axe, he chopped off a bit of himself – he downsized!

Then the growing party encounters a Cowardly Lion, representing the politicians. These have the power, through the power of Congress and the Constitution, to confront the Wicked Witches, representing the banks, but they lack the courage to do so.

Dorothy is able to motivate these three potent forces and leads them all towards the Emerald City, whence ‘greenbacks’ had once come, and an encounter with the omnipotent and wonderful Wizard of Oz.

The Wizard of Oz is initially quite majestic and apparently awesome, but he turns out to be a little man without the power that people assume he possesses. He does, of course, represent the President of the United States. With the Wizard’s illusion of power shattered, he is replaced by the Scarecrow who would ‘be another Lincoln’.

The Wicked Witch of the West, fearful for her own power, then attempts to destroy Dorothy but is herself dissolved in a bucket of water, as rain relieves the Mid-West drought, saves the farmers’ livelihoods and prevents repossession by the banks.

The Good Witch of the South, representing the Southern electorate, tells Dorothy that her silver slippers, silver-based money, are so powerful that anything she wishes for is possible, even without the help of the Wizard. Dorothy wishes to go home. There all is now well, because the land has a stable and abundant money supply.

 

Still a Pertinent Message

So ends this famous modern American ‘fairy-tale’. Its true message has been lost to the mists of time and the demands of Hollywood, but its message is no less pertinent now than when it was written.

William Jennings Bryan was neither the first nor the last American politician to try to reform the US money supply. In fact, two money reformers achieved the office of President and attempted to put money reform into action, but just like in the Oz story, the ‘Most Powerful Man in the World’ was not as powerful as people believed.

In 1865, Abraham Lincoln introduced the original ‘greenbacks’, which were paper money issued by the US Government, largely to pay for the Federal war effort during the civil war. It was ‘fiat’ money, money made legal tender by Act of Congress. Unfortunately, Lincoln died suddenly a few weeks later and his plans died with him.

In 1963, John F. Kennedy issued Executive Order 11110 which would have removed the power of money creation from all US private banks, including the privately-owned Federal Reserve, and invested that power in the US Government. Unfortunately, Kennedy died suddenly a few weeks later and his plans died with him.

 

The Problems of Debt

In the USA 100% of the money supply is created by the private banks. In Britain the figure is over 97%. In the rest of the world, the figure is estimated to be over 95%. All this money is created as a debt. It is created when people borrow money, as banks do not lend existing money; they just create new money out of thin air to lend.

Money created as a debt by the banks bears a charge of interest. This increases the amount of money that the economy owes by an amount greater than the amount in existence. This means that the economy is a saddled with a debt that can never be paid off, merely passed around like a game of Pass-the-Parcel in a Belfast pub. It is like a game of musical chairs, where someone has to lose out.

A Solution

Money does not have to be based on debt, nor indeed does it have to be based on precious metals. Real wealth is the goods and services that people create for each other. Money is merely a means of exchange. It could be created by HM Treasury and spent on providing public services, saving us all a modicum of taxation, and then the economy would not have to be saddled with large debts.

 

The Money Reform Party

Like Baum and Bryan, the Money Reform Party recognises that the money supply is a political issue. The MRP has been created expressly to educate the British people about the money supply so that, through the greater awareness of the electorate (good witches, scarecrows, tin-woodsmen and Munchkins all), our cowardly lions… sorry, our politicians will no longer be able to ignore this vital issue.

Postscript:

The Wizard of Oz is an allegorical tale just begging to be used ..  Martin Rowson’s latest cartoon succeeds brilliantly in depicting Cameron as ‘Dorothy’, Fat cat (the bankers) as ‘Toto’ leading the way; Osborne as ‘the lion with no courage’, IDS as the ‘straw man with no brain’ and they carry aloft the ‘tin man with no heart’, Mrs Thatcher.  All dancing along the ‘yellow brick road’ of the BBCs timidity in playing the Munchkin song ‘Ding dong, the witch is dead’… but the BBCs ‘yellow brick road’ could also stand for the non-reporting of Lansley’s privatisation of the NHS; the true impact of the Benefit cuts; Gove’s education plans; the 30% cuts in local government; Osborne’s lies about the economy…  And the true nature of ‘money’ disguised by Margaret Thatcher’s ideology of ‘Monetarism’.