Conservative Party Chairman Jake Berry
Is The Sun, Britain’s biggest selling newspaper, about to switch its support from Tory to Labour? It wouldn’t be the first time. After owner Rupert Murdoch was assiduously courted by Tony Blair in the late nineties, with John Major’s Conservative government eating itself alive, it did just that to deliver a Labour landslide in 1997. 1 2
You may recall Peter Mandelson – still flushed with victory not only over the Tories but his own party’s left wing – saying that so long as they pay their taxes, he was “intensely relaxed about people getting filthy rich”. 3 The implication was clear. For all that the ‘trickledown economics’ invoked by Margaret Thatcher to defend soaring inequality had been empirically debunked by advances in technologies for collecting and crunching big data, this party kingmaker 4 was still a true believer.
Yesterday, October 2, The Sun wrote:
PEOPLE struggling with spiralling costs should find a better-paid job or cut back on their spending, the Tory chair Jake Berry has said. He told Sky News yesterday: “People know when they get their bills, they can either cut their consumption or get higher salaries or higher wages, and go out there and get that new job.
“That’s the approach the Government is taking in trying to create growth.”
Labour deputy Angela Rayner last night said: “These comments show just how out of touch with reality Liz Truss’s Tories are.” She added: “Jake Berry thinks people consigned to low pay can simply magically upgrade to a higher wage job.”
“While the Tories arrogantly blame working people and tell them once again to ‘get on your bike’, Labour has a plan to end work poverty with a genuine living wage for all.”
That last I doubt, given Labour’s ideological inability to acknowledge, not selectively but in its entirety, the state Britain is in; its car crash Brexit, 5 privatised energy sector and – even by the West’s standards – hyper-financialised rentier economy compounding more general problems of a FIRE led West now perilously exposed by China rising, and of blowback from an economic war on Russia in which Europe’s interests have been subordinated to America’s. Still less, after thirty months in which its only coherent policy has been that of purging its left elements, does it have any credible answers. But these are subjects for other posts. This is about the economic fairy tales guiding government policy.
Before getting to those, however, let’s stay a while longer with the arrogant certainties not only of Jake Berry, who you may recall had a walk-on part in the Rupa Huq affair, but those who now hold high office. Two days ago The Times, another Murdoch organ, said this:
A tendency to arrogance – but also undoubted cleverness – is a common theme that many people who have worked with the new chancellor seem to report. This was the case even among fellow Tories, before he angered them with his politically and economically explosive mini-budget.
One former cabinet minister who worked with Kwarteng as business secretary described him as having “the concentration span of a gnat” and an inability to sit through anything other than very short meetings. “He was never remotely interested in other people’s point of view,” the former minister said.
“I found him very odd to deal with … but there is an intellectual arrogance about Kwasi and Liz [Truss] and Jacob [Rees-Mogg] and those four to five people at the top. They genuinely do think they are cleverer than anyone else and that other people’s views are slightly tiresome.”A second former cabinet minister told another MP just last week they had found him “extremely difficult” to get on with.
And a third Tory MP who has worked closely with Kwarteng called him “the worst combination of laziness and arrogance” …
On the Tory front bench: Chris Philp, Liz Truss, Kwasi Kwarteng, Simon Clarke, Chloe Smith
But it is a guest writer in The Guardian who offered the most insightful assessment of that lazy arrogance. Former Tory MP Nick Boles began a September 29 opinion piece with this:
Liz Truss and Kwasi Kwarteng possess a level of intellectual self-confidence usually found among undergraduates. They always have. Since 2010, when all three of us were first elected, they have known what they believe – and have viewed those who didn’t agree with them, or didn’t share their unshakeable certainty, with amiable contempt.
[These are] people who despise compromise and lack all humility. Every decision they have made in the past few weeks has its roots in the book they published as newly elected MPs, Britannia Unchained. At the time it was viewed by most MPs and commentators as a harmless, if needlessly provocative, attempt by some young thrusters from the Conservative party’s right wing to get noticed. But ideas that survive the editorial process of a political publication can cause serious harm when crudely applied without regard to evidence or context. Having imbibed a simplistic version of Ronald Reagan and Margaret Thatcher’s economic doctrines in their late teens, they have never asked themselves how likely it is that the same recipes will work 30 years later.
Policy wonks are often dazzled by the simplicity and clarity of an intellectual theory. I know because, like the prime minister, before entering parliament I was one. But real life and a modern economy do not conform to ideological constructs. The UK is dealing with an unprecedented combination of challenges: an ageing workforce, an energy supply shock caused by a European war, the sudden erection of trade barriers between British businesses and their largest export market, and supply chains that have been upended by a global pandemic. Claiming that cutting taxes on the richest individuals and largest companies will lead to a surge in economic growth betrays a wilful naivety.
If you look at the evidence, and evaluate the relative performance of advanced economies over the past 15 years, as the Resolution Foundation’s Economy 2030 inquiry recently did, you discover that low rates of taxation do not automatically produce high rates of growth in productivity, GDP per capita or living standards. What does is sustained and substantial investment by government and businesses in infrastructure and research, the adoption of new technologies and the improvement of workers’ technical skills. The sobering truth is that for most of the past 30 years, government and businesses in the UK have done far too little of any of this. With their obsessive focus on tax rates and deregulation, Truss and Kwarteng seem to have learned nothing from the superior performance of the countries most similar to our own – France, Germany, the Netherlands – in the three decades since their ideological heroes left office.
There’s a good deal I could take issue with in the above, but as a picture of the messianic gleam in the zealot’s eye – window on that brand of ideological certainty which transcends mere facts, let alone reason – it’s the best I’ve read. And as you see, I’ve consulted Tory media no less than those of liberal stripe.
But since all three of the above extracts – respectively, Sun, Times and Guardian – appeared, the Tory Party Conference has handed TrussTweng its head on a platter. The Daily Mail today:
The Lady IS for turning! Liz Truss and Kwasi Kwarteng DROP plan to axe top 45p tax rate saying ‘we have listened’ after huge Tory revolt led by Michael Gove – but Chancellor insists it WASN’T a mistake and refuses to rule out MORE U-turns
- The Government has U-turned on the 45p tax rate row after following a huge Tory revolt over the move
- Prime Minister Liz Truss and Chancellor Kwasi Kwarteng backtracked amid threat of losing Commons vote
- U-turn on the policy viewed as the price of shoring up Tory support for the rest of the mini-Budget measures
Liz Truss and Kwasi Kwarteng today executed an extraordinary U-turn on plans to scrap the top rate of tax to head off a massive Tory revolt.
The PM and Chancellor will no longer axe the 45p rate for people earning more than £150,000 a year after it became clear dozens of MPs would refuse to back the move in the Commons.
‘We get it and we have listened,’ Mr Kwarteng posted on Twitter. ‘It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country’ …
… [Kwarteng] refused to say the word ‘sorry’, but said: ‘There is humility and contrition… I am happy to own it’ … He also dodged as he was pressed on whether there could be more U-turns.
The Pound surged nearly a cent against the dollar to $1.12 on the news, although it drifted down again afterwards. That is close to the level it was before the mini-Budget was announced on September 23 – sending it to an all-time low of $1.03.
The huge shift followed Michael Gove and Grant Shapps putting themselves at the head of the rebellion, warning the measure would be a ‘massive distraction’ and politically toxic …
Only yesterday Ms Truss took to broadcast studios to defend the plan and deny there would be a rethink – although she was also accused of throwing Mr Kwarteng ‘under the bus’ by saying he had made the decision to go ahead …
We shouldn’t be surprised at Truss distancing herself from Kwarteng. As I noted in my last post but one, she personifies Groucho Marx’s quip:
I got principles. And if you don’t like ’em; well, I got others …
Twitter this morning
Nor should we be fooled by the entry of Michael Gove as a voice of sanity and moderation. He is concerned with the optics. As indeed are Tory backbenchers, and not just those holding red wall seats and by that fact acutely vulnerable to a backswing in 2024. Not that we can rule out, in the case of Michael Gove – himself no stranger to o’erweening pride – those jealousies and vitriolic rivalries which periodically burst into the open in his party.
Me, I note the lousy economics. In the third of my Michael Hudson posts I wrote:
As globalised capital-labour relations shift value creation southwards, exploitation in the north takes the form of rising indebtedness by the many to the few in rents, mortgages, student loans, regressive taxation, and insurance. That last sheds light on mounting pressure to privatise European healthcare in line with an inefficient but – for the 0.1% – lucrative US model. Most of the pressure is covert, as in cuts to Britain’s NHS in the name of an ‘austerity’ missold, to an electorate of induced economic illiteracy, through homely but specious analogies with household budgeting. In the immiseration which ensues, injections of private cash – up front and headlined, while the small print houses eyewatering repayment terms – are hailed as lifelines. Emphasis added.
If ‘trickledown’ is the first of the economic fairy tales I have in mind, another is that the material problems confronting British capitalism can be reduced to the psychological one of its workers being, as Truss et al have it in Britannia Unchained, “among the worst idlers in the world“. A third is given in the extract immediately above: that Britain’s economy can be usefully likened to that of a household, in which belts must be tightened in straitened times.
In this case the three fairy tales combine with mutually reinforcing effect. Add in the detached arrogance of Truss, Kwarteng and Berry 6 and it’s small wonder that Tory backbenchers fear for their seats. 7 Below is a comment on Richard Murphy’s blog yesterday, October 2. Mr Murphy is a tax specialist and champion of a modern monetary theory which, for all the political naivety of many of its advocates, 8 is streets ahead, in intellectual coherence and rigour, of mainstream orthodoxy. 9
So here’s what one Ian Stevenson had to say below the line:
Jake Berry, Conservative Party Chairman: “I don’t think it’s unreasonable to say that the public sector should look at its expenses in the same way that every single household is doing in this country.”
What we’ve heard from the government is there’s going to be a drive to trim fat in terms of government expenditure.”
The economic illiteracy is staggering. The Paradox of Thrift as Keynes explained it. If the public and private sector both cut spending, both experience a loss of income.
When there are not enough doctors and nurses, when teachers are helping kids to buy a lunch even though their own salaries have fallen in real terms, I think we can say, ‘there is no fat.’
And with that economic illiteracy, the heartlessness served up as realism is equally staggering.
* * *
- At least, Murdoch and his Sun opined that they’d handed victory to New Labour in ’97. A more cautious assessment would be that Murdoch had been shrewd enough to see the winds of change and back a winner. Either way, the portents for the current government – which, unlike capitalism, will itself be thrown under a bus if so required – are not good, though in ’97 the EU was a serious bone of contention between Major and Murdoch.
- For why the West’s lack of independent media, due not just to a Murdoch or Rothermere but more fundamentally to advertising dependence, gives the lie to a democracy heavily oversold, see Britain decides!
- Mandelson later voiced his regret over this remark, made on October 23, 1998 to the FT’s David Wighton. It’s not clear whether he regretted its ‘poor optics’, as the spinmeisters who owe so much to him would now say – or its substance.
- If Murdoch’s switch of allegiance had made him Britain’s ‘kingmaker’, a parallel shift from Gordon Brown to Tony Blair had shown Mandelson to be Labour’s.
- I have fundamental criticisms, set out in other posts, of the EU as an imperialist bloc but I voted Remain – with peg on nose – long before the full enormity of Brexit’s manner of implementation had become clear. My issue with fellow Remainers was always with the sneering contempt of so many of their number for the millions shafted by globalisation in its EU forms. Given their blinkeredly idPolitics, the sneerers had no way of fathoming the Leavers’ motives, so read them as racism and xenophobia, period.
- An earlier version of this post attributed to Berry a remark that it was “living in a fool’s paradise” to suppose that Britain’s “very large welfare state” would not have to be cut. In fact the remark was made by levelling up secretary Simon Clarke.
- While Clarke’s call for welfare cuts may be too hot for today, he and others like him have the important task of pushing back the frontiers of ‘thinkability’ to prepare tomorrow’s ground.
- The naivety of many MMT advocates shows in two ways. One is to suppose implicitly, as leading light Stephanie Kelton repeatedly does in her otherwise useful, The Deficit Myth, that those who rule a capitalist economy would want full employment. They would not, since unemployment exerts a downward pressure on wages. The other is the degree to which those who declare, quite correctly, that a sovereign nation with a fiat currency can never run out of money show spectacular lack of awareness of how states like Britain and more especially the USA can do QE without inflationary consequences and/or runs on that currency. That said, I know of one MMT fellow traveller – Michael Hudson – who is guilty of neither.
- See Richard Murphy’s other post yesterday, on the wishes of Liz Truss and Simon Clark to see a “simpler” – read: even more regressive – tax system in Britain.
Its as if the present bunch of turkeys had been set to make Starmer & Co. look good. To what purpose?
UK Inc’s Plan B, I guess. The unprecedentedly vile attacks on Corbyn restored Labour to that status, the better to maintain the semblance of meaningful choice at the polling booth.
One of the very obvious problems arising from the contradiction between the built into the paradigm feature of a bias against full employment – to keep wages down – and the fantastical notion (pushed by Jake Berry) that sufficient higher paid jobs exist for everyone struggling if only they would get off their idle backsides and look for these fictional, non-existent, high paying jobs is that of incentives.
The point of going out to work is, according to this Micky Mouse doctrine, is to earn a living.
At a minimum to earn a living requires that earnings are sufficient to cover the non-luxury basics – shelter, energy, sustenance and clothes on your back.
Once these basics are covered any extra earnings can be used for ‘luxuries’ – like better quality shelter, food, clothes and other extras.
However, after nearly five decades of applying these raving fantasies of Hayak, Rand et al we seem to be rapidly reaching the stage in which for a significant section (perhaps even a majority) of the populace (or should we be using the term’ Kings Subjects’?) it is becoming simply impossible to ‘earn a living’ via the employment market.
– below inflation wage settlements increasingly being imposed by employers across the Country without any attempt at collective bargaining with recognised Unions (see for example the Postal & Telecom Workers) – whilst at the same time changing working conditions to cut off any opportunities to earn extra money (like the Postal workers voluntary option to earn extra Saturday payment delivering junk mail which is now compulsory but without the previous extra payment)
– rising energy and transport costs (along with the redundancies as firms go under from those costs)
– rising food costs
– higher mortgage rates
and so on, it seems the Feudal rentier model may be reaching the point in which it creates a disincentive to ‘earn a living’ for more and more people.
When income earnings by going to work are not simply meeting the requirements for the basics but are actually costing those going to work more – via the debt required to service the increasingly capricious appetite of an economic model based not on productive Capitalism but Financial rent seeking – the equation becomes a no brainer.
When its costing more to go to work than you can earn in order to live and you are getting deeper into debt to service parasitical rentier finance by going to work the incentive is inverted. By not working you are certainly not earning a living but at the same time you are not getting deeper into debt.
Apparently, humans learn nothing from history; the European history of the past 500 years is a continuous lurching between state monopolies and laissez faire crony capitalism (any “laissez faire” surely descends into crony capitalism and monopolies in no time); the government-created monopolies of trading companies and sweet wines gave way to privateers building business empires; and the rise of labour movements gave birth to government monopolies again (British Airways, etc); then came Thatcher, the public face of an oligarchy determined to claw back some of the pie shared with the labour… and now the British rail is a government monopoly again!
It is not about who owns the things, but it is about how the profit is shared. A private monopoly can be forced to share the profit with the government, or a public monopoly can be allowed to bankrupt the government, both are in the ways how things are run – or rather, for whose profits the things are run. But all said and done, modern economies being huge, the companies also tend to be huge; it is anyone’s call how such entities should be regulated – or left to the whims of their owners.
But some very long terms trends are clear: a modern economy must have all the three sectors: agriculture, industries and services; a modern society must provide as many services as public commodities as possible; and a modern society needs to have a say in how income is distributed.
100% government owned economy, as planned by the central bank digital currencies, is not something new, nor what the Soviets invented. Such societies existed in the Bronze Age. Bronze Age governments were control freaks. They decided what every subject must do, provided the tools and raw material, collected back the entire output, and allotted them goods and services as the local bureaucrat deemed fit. It was called the Palace Economy. And it was found to be massively inefficient in times of crisis, and most crises were their own making. Finally the whole system collapsed, plunging the human history into a dark age (the first recorded Dark Age). It took them another 2000 years, and the invention of money (whereby everybody can value everybody else’s contribution to the society; under the earlier system only the bureaucrats (they were priests also) alone assessed and paid everyone’s contribution). And so Rome arose. And Rome failed when the oligarchs discovered they could carve out the economy into personal fiefs. Feudalism did not arise after the Fall of Rome; the rise of feudalism lead to the Fall of Rome, just like the rise of net-feudalism, promoted so ably by Thatcher and Reagan, leads to the fall of America and Europe. Another plunge into the dark ages, another 2000 years wasted. Then came our Industrial Age. And it is now collapsing in Europe.
The issue of whether the government should have a say in wages, or should set minimum wages, can be seen much clearly without ideological blinkers. (For all those gender-sensitive persons, in the following passages, ‘he’ includes ‘she’ and vice versa).
A man’s working life is about 40 years – from age 20 to age 60. It may be extended by another ten years at most.
In these 40 years, he must earn enough to cover the following categories of expenditures:
1. His upkeep and fitness: food, shelter, clothes, health, etc; (for those with non-working spouse, this expenditure is doubled), and the costs of the common services provided by the society – paid through taxes.
2. A partial repayment of the costs of raising him up – in the form of taking care of the parents (the parents may or may not contribute something towards this)
3. Savings for his old age – raising his own children and savings for future (here also, the children may or may not contribute)
All the expenditures fall under these three categories. There may be some nit-picking about which category and expense falls in, but the broad strokes are undeniable.
NOW, IF a person cannot earn to cover these expenditures, IT FALLS ON his relatives on friends at first, and then on the wider society next.
If a person cannot earn for his upkeep, he borrows; or his family chips in something. In the final count, he starts begging, whereby the society takes care of his living costs.
If a person abandons his parents, then the relatives may chip in, and finally the government steps in, provides some relief, and collects it from the society through taxes…
And the same thing in his old age: if he does not have money to take care of himself, the society bears the cost.
And in all these, society bearing the cost makes the least efficient way of spending; because the society needs to spend money on collecting the cost also. Therefore it is better, as much as possible, to make a man earn for his needs; because if he fails, the burden falls on the whole society.
When an employer shortchanges the employee in his wages, the profits go to the employer, but the resulting burden on the employee is passed on to the whole society.
Now it may make sense why a society should ensure everyone gets paid adequately.