Economics is the method; the object is to change the soul.
Margaret Thatcher
IT CAN BE difficult to pinpoint the precise moment that today’s prevailing economic orthodoxy emerged. Not least because its guiding ideas are rooted in power structures that were shaped by and have survived waves of preceding concepts. However, the spread of the ideology we now know as neo-liberalism accelerated in the late 1970s, and Britain was right at the forefront of that process.
During this period, growth had begun to slow, and the demise of the Bretton Woods system initiated a radical reordering of the global financial landscape, while the collapse of the Soviet Union a decade later prompted widespread hostility to state-led economic models. The turmoil associated with these developments – coupled with a collapse of confidence in social democracy and centralised economic planning – paved the way for a new elite strategy.
Though the contemporary neo-liberal model is most closely associated with Western liberal democracies, its first testing ground was arguably Chile under the CLA-backed dictator General Augusto Pinochet. Alongside a series of gross human rights violations, Pinochet embarked on far-reaching economic reforms inspired by the free-market godfather Milton Friedman, and with a zealous group of Chilean economists known as the ‘Chicago Boys’. Pinochet was characteristically ruthless in carrying out his reforms. He advocated deregulation, the privatisation of publicly-owned assets like pensions, and attacking workers’ rights – policies that would go on to become painfully familiar responses to subsequent economic crises. Friedman hailed the economic reforms a success, describing them as a ‘miracle’.
Chile became a laboratory of free-market reforms and, during the Thatcher-Reagan era, its example was adopted as a vehicle to propel the radical ideas forward. As with any theory, neo-liberalism can be elusive. It has been applied unevenly, developed and regressed in different places and times, and moulded all the while by its surroundings. But, at its core, it envisages an approach where markets are the primary means of organising, not only our economy, but also our society, expressed through its key pillars of deregulation and privatisation.
The role of the state, then, is primarily to nurture market forces, and in turn drastically and deliberately shrink the role of government, which is seen as a barrier to market growth at best, and an expression of communism at worst. The markets themselves are thought of as natural forces, and – unlike actual natural forces, which are regarded as fair game in the eyes of the markets – the so-called natural status of the markets means that they must be left entirely untouched. The infamous ‘trickle-down’ theory stipulates that a system benefiting the rich – characterised by tax cuts for corporations, high earners and asset owners – will eventually be of benefit to us all. In that sense, we just need to let ‘nature’ take its course.
In seeing the market as the primary means of organising society, the values of collectivism and universalism that were dominant during the post-war era have been corroded and replaced with market values like individualism and competition. Indeed, Thatcher herself famously said:
They are casting their problems at society. And, you know, there’s no such thing as society. There are individual men and women and there are families. And no government can do anything except through people, and people must look after themselves first (8 April 2013).
The perceived hierarchy of human rights neatly illustrates the attack on society in the name of competitive individualism. Facilitated by a fear of collectivism associated with the Cold War, many market-based economies of the West stress the benefits of civil and political rights – which were seen to symbolize a lack of state interference – while social, economic and cultural rights, such as housing, are left to linger. There are obvious inconsistencies in this approach, not least that the court system, for instance, which is meant to guarantee our political and civil rights, requires significant state intervention in order to operate.
Nevertheless, in constructing a hierarchy of rights, supporters have been able to build a sleek and corrosive narrative that goes something like this: if individuals with political and civil rights work hard, they will earn enough to gain access to the luxuries of social, economic and cultural rights, like housing and education. Telling people that hard work alone creates wealth, that wealth equates to success and that ultimately human rights should be denied to people that are not wealthy might be wrong, but it suits the neo-liberal belief that the poor are responsible for their poverty. Stating that hard work alone creates wealth conveniently bypasses structural reasons for poverty and inequality, ignores evidence that some of the hardest jobs pay the least and overlooks the collective nature of wealth creation.
Author and activist George Monbiot summed up this conscious effort to shape culture when he wrote:
so pervasive has neo-liberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power.
It was designed as an all-encompassing reimagining of culture and society, a model built to be so pervasive that it shields itself from criticism, deflecting blame to sections of society oppressed by the model itself. This logic has become more and more pronounced in the years following the 2008 global financial crisis.
The crisis should have been a wake-up call. Yet, in spite of significant protests and resistance from civil society, the collapse of the global economy was largely seized on as an opportunity to turbocharge financialization. Amid the panic, the right was more prepared than the left and floundering governments were told that ‘there was no alternative’ to spending cuts. Shock and awe programmes of austerity were implemented, aided by international financial institutions, some governments, ring-wing think tanks and corporate lobbyists. Again, the UK was at the forefront of this project.
One irony of the small state approach is that it often involves costly state interventions to rescue the economy – the financial sector, in particular. From September 2007 to December 2009, the Labour Government ploughed £137 billion of public money in loans and capital in a bid to stabilise the financial system. In 2010, the coalition Government embarked on a ruthless austerity programme to ‘balance the books’ on the backs of the poor by slashing expenditure to vital services while claiming that ‘we’re all in this together’. In a quick-fire sale, the coalition privatised public assets like the Post Office, removing our stake in maintaining an institution dating back hundreds of years. Since then, the Conservatives have quietly rolled back much of the little financial regulation introduced following the crisis, and requirements for trade union action have been tightened.
In so many ways, the shock doctrine policies shaping the UK’s response to 2008 were a textbook example of what the ‘Chicago Boys’ had envisioned all those years ago in Chile.
Ten years on from the crisis and several years into an on-going austerity programme, many of the fiscal targets initially identified have been ditched and the economic recovery that was promised has not materialised. The UK is on track for the longest fall in living standards since records began, and the biggest increase in inequality since Thatcher. Last year, the Trussell Trust gave people in crisis a staggering 1,332,952 three-day emergency food supplies, up by over a million since austerity was first rolled out.
In an act of social violence, the welfare state has not just been slashed under austerity, but rather weaponised to target and harm the marginalised groups it was designed to protect. The Women’s Budget Group stated that by 2020, households headed by women such as lone parents and single female pensioners will be about 20 per cent worse-off on average. Moreover, disabled people on social security have been hit with one million sanctions since austerity began. The situation is so dire that a UN inquiry in 2017 concluded that austerity policies amount to ‘systematic violations’ of the rights of people with disabilities.
Meanwhile, a decade on from the crisis, the UK financial sector is behaving as if nothing has happened. More than three-quarters of the EU’s top-paid bankers and asset managers were UK-based, with 15 bankers and ten executives earning over €10 million. Staggeringly, research from the Sheffield Political Economy Research Institute (SPERI) found that a swollen City of London inflicted a cumulative £4.5 trillion hit on the British economy between 1995 and 2015. That is, two-and-a-half years’ economic output. All the while, inequality between the richest 1 per cent and the rest of us continues to rise, as the Equality and Human Rights Commission predicts that without remedial action, the UK will become a ‘two-speed society’.
Scotland’s place in all of this is complicated. On the one hand, our economic framework is, to a certain extent, predisposed by our place in the UK. In that sense, we reap the seeds sown in the Thatcher era, and our communities have undoubtedly been shaped by the market values that have dominated British politics for decades, hammered home with post-crash austerity. Yet the Scottish electorate were not won over by Thatcherism, and our voting record since has broadly reflected this. Moreover, devolution has changed the nature of our relationship with this model and, while some areas were accepted, there are clear examples of resistance.
Scotland’s relationship with universalism hints at a lasting commitment to the post-War consensus. Premised on the notion that we as a collective society ensure that everyone can access basic services and rights, universalism is an enemy of the market society. In contrast to the neo-liberal hierarchy of rights – where the wealthy are afforded ‘luxuries’ as a reward for their perceived hard work – universalism protects and enhances the status of the poor by deconstructing inferiority tiers and relationships based on inequality.
When a person arrives at a pharmacy to collect a prescription, their class status is not enquired about, and the stigma attached to that enquiry and the differential treatment that follows is broken. Like the founding principles of the NHS, it is free at the point of use for all. Similarly, free tuition fees not only mean that class barriers are reduced by deconstructing a system where working-class students are shackled with tens of thousands of pounds of debt over a lifetime. Education is seen as something shared, not a commodity for individuals to purchase. The most recent example of universalism in practice has been the Scottish Government’s baby box initiative, which was rolled out at a time when the UK Government was slashing universal child tax credits. Baby boxes provide each baby in Scotland – regardless of their family’s income or wealth – with essential items for their new-born; an idea inspired by our Finnish neighbours.
Indeed, one of the most effective moves that Scotland could make is to not compare our journey with the UK as a benchmark of success. As with Finland’s baby boxes, other countries are carving their own path and should act as our inspiration – many coastal communities globally thrive in balanced and diversified economies. The challenges faced by post-industrial cities are being faced by cities in similar predicaments abroad, and remote islands may be taking different approaches to sustainability that we could take inspiration from and vice versa.
This point is particularly true given that, even among our neighbours and allies, the UK is somewhat unusual. Alongside the dominance of finance in our economy, a 2002 Treasury encomium revealed that between 1980 and 1996, Britain accounted for an astounding 40 per cent of the total value of privatised assets in the OECD (Open Democracy, 2013). That is not to say that Britain is unique in its trajectory, but rather that it aggressively pushed the boat out. Take corporation tax. While the OECD average is 23.5 per cent (our neighbours in Germany and France sit at 30 and 33 per cent respectively) UK corporation tax sits at just 19 per cent, with potential further cuts lined up in the near future.
None of this happened in isolation. Our current dysfunctional economic model is the product of a concerted 40-year campaign by free-market ideologues, those that directly benefit from the steady accumulation of wealth and those paid to lobby on behalf of vested interests.
If Scotland is going to continue to shape its own path, it needs to be acutely aware of what it is up against. Fortunately, for all the money and power thrown at promoting free-market ideology, notions of collectivism and society have fought back. And that fact is a powerful reminder that the prevailing model does not represent the ‘natural order of things’, and that there is, in fact, an alternative. We just need to be ready to pursue it.