It’s a pleasure to be addressing you today from inside the Old Lady of Threadneedle Street, particularly as, the mid-70s, I worked in the shadow of the Bank, as a messenger for the Manufacturers Hanover Trust at their offices just next door in Princes Street.
I loved the freedom that came with that job. Not only was I out of the sight of my bosses for most of the day, but it also gave me plenty of opportunities to nip into Harlequin Records on Cheapside. I’d guess anyone who remembers that place – or even recalls the joy of hanging out in a record shop – would be retired by now, but it was a haven for a teenage music fan like myself. It was while spending a lunch hour at Harlequin that I heard an Elvis Costello record for the first time.
Then as now, the Bank of England is an imposing presence. As I hurried by, I would often wonder what lay behind those big black doors. Glinting piles of gold bullion? A secret stash of ever-elusive 1934 pennies? Roaring furnaces where disgraced commissionaires shoveled brown ten bob notes into vast incinerators? But I never, in my wildest dreams, imagined that the Bank contained a magic money tree. I don’t know if any members of the Money Tree Policy Committee are here this afternoon, or perhaps someone from the Dealing Room who gets to press the big red ALLOCATE button to make the magic happen? Maybe we’ll do a selfie together later, our forefingers to the fore?
The world has changed in myriad ways over the 40 years since I was running messages around the City. This was long before the days of email and electronic transfers – it even predates the invention of the fax machine. While my colleagues and I delivered packages by hand, the bank relied on skilled telex operators to send documents to and from our New York HQ.
The pace of technological change is so fast that telex has been forgotten, but changes in global economy have been just as rapid. When I worked in Princes Street, Europe was divided into two economic bloc – capitalism in the west and communism in the east. No one could then imagine that situation coming to an end without nuclear war. Yet it did, and peaceably too. Since then, capitalism has developed in ways unimaginable during the years of the Cold War.
Because I hadn’t studied politics at school – I never went to university – I had a lot of catching up to do in the 80s. One of the best sources of information I found was ‘A Dictionary of Political Thought’ by Roger Scruton. Whenever I came across a term I didn’t recognise or someone mentioned a political philosopher I’d never heard of, I’d turn to Scruton for a concise over-view. Hegel, for instance, was to be found between hedonism and hegemony – and a little bit of knowledge about all three came in handy during that period. However, reading it again today I find it remarkable that, although written in the mid-80s, Scruton’s book has no entry for ‘globalisation’.
When Scruton wrote his dictionary, Labour was still, more or less, the democratic socialist party that had created the post-war consensus. However, as the decade ended, its politics shifted to a form of social democracy and when Blair was elected in 1997, New Labour brought a light touch managerialism to economic policy. Marxism fell out of fashion but, frustratingly, the problems that Marx wrote about were still not being addressed. I began to wonder if poets might have a role to play in finding a new way to articulate the struggle for a better society? Music can’t change the world – trust me I’ve tried – but it can offer different perspectives on the situation you find yourself in.
I started trying to get my bearings in the post-ideological world by going back to first principles; People understood my ideas much better if I spoke about wanting to live in a compassionate society rather than a socialist one, with all the historical baggage that implied. I identified cynicism as the greatest enemy of those of us who want to create a better world, greater than even capitalism or conservatism; And I began to see the route to genuine social change as being less about conquering the commanding heights of the economy and more about empowering the individual to hold the status quo to account.
Throughout history, accountability has been at the heart of the great struggles for freedom. Magna Carta holds an iconic place in our nation’s story as the first attempt to hold absolute power to account.
In the 16th century, the Reformation challenged the unaccountable authority of the Pope. The English Revolution of the 1640s took on the divine right of kings, and saw parliament take the unprecedented step of putting Charles I on trial, ultimately executing him in order to establish the principle that no one should be above the law.
The English republic failed and monarchy was restored, but absolutism was again challenged in 1688, when executive power passed to parliament. In 1848, the first working class movement in the world, the Chartists, demanded that government be accountable to every man over the age of 21. Fifty years later, suffragists were demanding the same rights for women.
The late 19th century also saw the rise of trade unions, seeking greater accountability in the workplace. The Labour Party grew out of that movement and the post-war consensus was a product of the labour movement’s struggle to hold capitalism to account.
At a time when use of the term ‘centrist’ can easily cause outrage among the twitterati, you won’t be surprised to hear that I’m no longer sure about the 21st century definition of socialism. Looking for a label I feel comfortable with in these non-ideological times, I’ve come to describe myself as a progressive – someone who believes that society should be re-organised so that everyone gets access to the means by which to realise their full potential.
My old Trotskyist mates would laugh out loud at such a broad definition – mainly because no one ever said such a thing during the Russian Revolution. But that was then and this is now and I’m trying to find a way to build solidarity, not above the din of a factory floor, but in the highly atomised environment of social media.
In the febrile atmosphere that infects so much online discourse, freedom has become untethered from its function as a universal principle that protects the individual, and is instead often grabbed as fig leaf by those seeking license to post abusive vitriol.
Such people regard liberty as the ultimate right, when it is in fact just one of the three pillars that guarantee our freedom. Liberty is the most precious because it empowers us to think, speak and act as we wish. But if your liberty is to be more than just a form of privilege, then you must recognise and uphold the right of everyone else to think, speak and act as they wish. Equality is a principle that requires the individual to reciprocate the rights that they claim for themselves.
However, if these two pillars of freedom are not to destabilise one another, they must be strengthened by a third – the right to hold others to account. Whereas liberty empowers the individual and equality requires reciprocity, accountability combines both to create a virtuous circle in which freedom can be exercised by all.
Identifying accountability as the key engine of social change has led me to campaign for a democratic upper house in parliament, regional devolution for England, the introduction of proportional representation at Westminster and Scottish self determination through independence. This not a debate that runs along traditional party lines. I’ve discovered allies among my old foes and found ardent foes among my usual allies.
This may be a sign of the times. Ideology has been scrubbed out of retail politics to such an extent that some even claim there’s no longer such a thing as left or right, that more contemporary labels are required if we hope to identify current political polarities. One argument pits the adherents of an open society against those who favour tightly controlled borders. Another claims the divide is between those who feel deeply connected with somewhere particular and those who feel comfortable just about anywhere.
There is still a red versus blue scenario, but confusingly, the reds are Trump supporters and the blues are Democrats.
If I were to describe those who most aggressively oppose my progressive agenda, I’d say they tended to believe in a natural order to society, built on what they define as ‘traditional values’.
This narrative allows them to not only explain why society is structured the way it is – “things have always been this way” – but it also absolves them of any responsibility for its iniquities – “because their is nothing that we can do about it”. And while the traditionalist will freely admit that there are problems within society, they invariably seek to blame them on people who are a threat to “our traditional way of doing things” – immigrants; millennials; the EU; Islam.
The progressive response is to say that there are indeed deep problems within our society, but they are systemic, the result of choices that we have made. If we work together, we can make better choices, ones that benefit the whole of society and not just those whose position in the power structure relies on ‘traditional values’.
This notion of a society in which we are bound by rules that are on one hand unwritten, yet on the other are not to be challenged, finds an echo in neoliberalism, the belief that the free market offers the best method for distributing resources because it acts as a self-regulating mechanism with a tendency towards equilibrium. Margaret Thatcher was an adherent of this creed and, under her premiership, the economic model that Britain had been pursuing since 1945, with its emphasis on public ownership, social provision and redistribution of wealth was dismantled.
Deregulation was the order of the day. Rules that ensured profits were fairly shared among stakeholders were weakened. The right of workers to bargain for their wages was undermined. Industries that had supported communities for generations were scrapped. During Thatcher’s first term, 25% of UK manufacturing was lost.
By the end of the 20th century, technological advances had begun to limit the ability of the nation state to control its own economy. Governments wedded to free market solutions ceded sovereignty to the bond markets and turned a blind eye to the increasing use of tax havens. Whereas, in the 1970s, companies remitted an average of 10% of their profits to shareholders, by 2010 the figure was over 60%.
During the same period, the curbing of trade union rights led to a starling rise in pay differentials. In 1970, CEO’s in US companies earned 25 times more than their average worker. In 2016, that figure had risen tenfold to over 270 times the pay of their average employee. And despite mounting evidence of an environmental crisis, year on year growth remains the goal of neoliberalism.
Sadly Thatcher’s agenda wasn’t challenged when she was deposed in 1990. All three of Britain’s main in political parties spent much of the following decade telling voters that they could have both lower taxes AND better public services. And people were susceptible to that message, even though they knew it was a lie.
The neoliberal consensus came off the rails in 2008 when banks, seeking ever-higher returns for speculators, over extended themselves. When the dust finally settled, someone should have stood up and offered a way to run the economy that works for everyone, not just just the 1%.
Unfortunately, the light touch dogma of the free market was so deeply ingrained within British political thinking that the traditional defenders of working people were unable to suggest anything other than the bailing out of those banks that had caused the crash. While this undoubtedly saved ordinary citizens from a great deal of financial pain, an attempt to return to business as usual via an extended period of austerity has caused a great deal of misery.
Now the national debt is high because government spending is out of control because the majority of benefits go to people in work because the government is forced to subsidise wages to ensure that people have enough money to live on because workers have no way to put pressure on wages because unions are marginalised and protections abandoned because they interfere with the ability of companies to make a profit.
We’ve seen banks nationalised when they fail, only to be sold off when they become profitable – socialism for the bankers, capitalism for the rest of us. Unethical use of tax havens allow companies make billions of pounds in profits, yet pay very little in corporation tax. And now we find ourselves in the unprecedented situation were interest rates are kept at near zero and central banks are creating free money, little of which makes it through to the real economy.
Some would say we’re facing a crisis of capitalism, but I would argue that it is a crisis of accountability. For the neoliberal theory of economics to be credible, the invisible hand of the free market requires consequences in order to function. Yet we find ourselves in a situation where the largest economy in the world is led by a man whose entire career has been built on avoiding the consequences of his actions.
Donald Trump’s behaviour has led the former FBI director James Comey to declare “we are experiencing a dangerous time in our country, with a political environment where basic facts are disputed, fundamental truth is questioned, lying in normalised and unethical behaviour is ignored, excused or rewarded”.
Trump is the product of a corporate ‘greed is good’ culture that shrugs off responsibility, rejects regulation and eschews civility. The question we’re all asking ourselves is how far will he go? For now, he’s a volatile twitter user with nuclear weapons and a congressional majority to back him up, but he may well be deprived of the latter come November, when the American electorate give their verdict on him in the mid-term elections.
However, if Trump seeks to avoid accountability by firing special prosecutor Robert Mueller, currently investigating Russian influence on the election, then his presidency will slide into autocracy. That would be a serious challenge to the American constitution at the best of times, but with authoritarianism on the rise around the world, the dangers for democracy are immense.
Since 1945, the United States and its European allies have promoted liberal democracy and free markets hand in hand as the best method for creating growth among emerging economies. The stimulus for this was the existence of an alternative economic model promoted by the Soviet Union.
No matter how bad western economies performed, they maintained the upper hand in this struggle, due to the fact that the Soviet economy relied on a narrow ideological system to function. Unable to respond to consumer demand, this fundamental flaw led ultimately to the collapse of the Soviet Union and a sense of vindication in the west. Some even declared that, since liberal democracy had triumphed, the great struggles of history were over.
However, another alternative economic model has emerged to challenge the complacency of the west. While maintaining a veneer of Maoist ideology, the Chinese Communist Party has developed a command economy geared towards consumerism. In the late 1980s, their stated aim was to make China a semi-industrialised country by the centenary of the Chinese Republic in 2048.
Now they claim China will be a fully developed nation by that date and all the evidence points towards the realisation of that goal. China already outstrips the world in terms of manufacturing and exports and is expected to overtake the US to become the world’s largest economy in the next decade.
Observers estimate that, by 2020, there will be over 400m consumers in China with a household income of between $16,000 and $32,000, a middle class larger than the entire population of the US. This economic success has been achieved under a one-party system which keeps tight control on freedom of expression, assembly, association and religion. Communist Party Chairman Xi Jinping recently scrapped presidential term limits, making himself president for life.
In the past, the west had used the promise of trade to encourage emerging economies to introduce democratic reforms – we will offer you access to our goods and markets in return for the introduction of free and fair multi-party elections. Now Xi Jinping can offer a different model, one that does not require the implementation of pluralist democracy in order to trade with the world’s most successful economy.
For despots around the world, the temptation to make deals with a major trading partner who doesn’t demand that you recognise basic human rights is attractive. Some unstable nations may be tempted to turn their back on democracy and deal with their economic difficulties by following China’s example of rapid economic growth through authoritarian rule.
The rise of China comes at a critical time for western democracies. In the wake of the 2008 crash, electorates have recoiled from globalisation in favour of a nationalist populism that demands a withdrawal from the global economy: ‘America First’, Brexit, Victor Orban in Hungary, the Front National in France, the AFD in Germany. As the liberal democracies become increasingly rejectionist, China stands ready to fill the gap, reaching out to developing economies around the world, offering trade and infrastructure via its ‘Belt and Road’ initiative.
As momentum begins to tilt away from the western democracies, another authoritarian regime can be found actively encouraging the process. Russia takes delight in pouring petrol on the wildfire of cynicism over the motives of the political class that flared up in the wake of the 2008 crash. The Kremlin spends a great deal of time spreading conspiracy theories, sock puppet opinions and downright lies with the aim of undermining confidence in liberal democracy.
When the President of the United States, seemingly also determined to destabilise the free press and faith in elections, uses the term ‘fake news’ on a daily basis, it becomes increasingly difficult to discern the narrative, never mind the truth.
Like the free market, liberal democracy is held up as a self-regulating mechanism for achieving an equilibrium. However, in recent decades, corporate capture has narrowed the choice at the ballot box to such an extent that electorates are now willing to vote for extremists if they believe doing so will deliver the change they want to see. Many feel that it is the only way to get their voices heard.
If we hope to counter this drift away from pluralist democracy, we have to find a way to make people believe that they have real agency over their lives. The best antidote to authoritarianism is accountability.
The traditional way to achieve accountability is through the ballot box and we can take practical steps to enhance engagement: decentralisation; a voting system that makes everyone’s vote count; grassroots civic education.
Giving citizens a sense of agency over the economy is harder to envisage, because it runs contrary to the way we conceive markets should function. But then, chopping off the king’s head was contrary to the way England had been governed for centuries before they tried it in 1649.
The first step needs to be an admission that the light touch approach to the economy hasn’t delivered for the majority of people.
The idea that creating money would encourage the wealthy to spend their windfall in the real economy for the benefit of all has proved as much a chimera as the trickle down economics of the 1980s. What has been stimulated is a rise in the price of assets. In that sense, quantatitive easing (QE) has benefited those who already have the most, leaving working people in general and the young in particular struggling to achieve their aspirations. Wealth has been redistributed upwards.
It didn’t have to be this way. The decision to begin pumping money into the economy was taken in a moment of crisis and had the desired effect of stabilising the UK economy. However, when it became clear that this new money was not reaching all parts of society, corrective action should have been taken.
QE could have been used to fund hospitals, schools and social housing. It could have created a public investment bank with the specific aim of lending money to small and medium businesses. But that would require directing the economy, a notion that runs contrary to neoliberal thinking.
Instead, it’s been left to the market to decide how to utilise this new money. And I hope you don’t think I’m being rude when I point out that this hasn’t produced the outcome that the Bank had hoped for.
The failure to predict the crash of 2008 was a terrible shock to an industry that relies on confidence to make money. Without any real consequences to restrain them, morally or legislatively, speculators drove the market over the edge.
QE was introduced to make corporations feel secure again, but the real economy is still reeling from the sucker punch of the crash. There may not be a mob on the streets demanding the overthrow of capitalism, but don’t take that as a sign that the system doesn’t desperately need reforming.
During the Reformation, the people of England didn’t like the unaccountable power of the Papacy, so they broke with Rome. They didn’t abolish Christianity, they made it more local and ultimately more conducive to their way of life.
Capitalism needs to undergo a similar reformation, to create an economy that is more accountable to the consumers on whom it relies for real growth. Policy should be directed at making them feel secure – in employment, in health and in tenancy – and that can’t be achieved in our easy hire, easy fire economy.
Now, I’m not an economist and there are undoubtedly plenty of people here in the room who may have more simple and practical methods by which genuine reform could be achieved. But I feel it would be churlish of me to highlight problems without offering a few suggestions of my own about how we might address them.
The priorities within corporate governance need to be rebalanced. Limits should be placed on the percentage of profits remitted to shareholders, with equal priority given to investment and wages. To ensure that the spoils are fairly divided, worker participation on company boards should be mandatory.
The right of workers to freely bargain for pay and conditions should be statutory and extend to part time work.
Long term investors should be incentivised, while short term speculation, especially the gaming of the market by high frequency traders, should be discouraged.
The focus of taxation should to move towards assets, for instance through the introduction of a land value tax. Tax wealth more than income.
Sustainable growth should be targeted through investment in green manufacturing and the encouragement of co-operatives.
Public need should take priority over private profit in house building, education, health care, transport and utilities.
Over the past decade, capitalism has encroached on democracy through the promotion of instruments such as investor-state dispute settlements. Facebook’s abuse of personal data suggests that, in the digital age, relying on the invisible hand of the market to regulate corporate responsibility is no longer an option.
The financial sector defines freedom as fewer regulations.
For the rest of us, real freedom demands accountability,
To that end, Tony Benn had five questions that he asked whenever he met a powerful person, say a Rupert Murdoch or a Mark Zuckerberg. He originally developed them as a test to determine whether a society was sufficiently democratic. But if we hope to counter the lure of authoritarianism and create a new settlement that puts people before profits, we need to apply these telling questions to capitalism as well, as the first steps towards understanding the true nature of our economy:
What power do you have?
Where did you get it?
In whose interests do you exercise it?
To whom are you accountable?
And how do we get rid of you?
Speech to One Bank Flagship Seminar at the Bank of England, London 19/4/18