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Austerity? Call it class war – and heed this 1944 warning from
a Polish economist
This assault on an entire social contract is what Michał
Kalecki warned about
The single best guide to what happened in Britain last week
was published in 1944. Naturally, its author was a Polish
economist. Even economics students may not have heard of
Michał Kalecki – but it's the discipline that got small,
rather than his legacy. In his time, Kalecki was recognised as
having anticipated some of Keynes's most important ideas,
years before the Master published his General Theory, and he
exerted a big influence on such legendary Cambridge thinkers
as Joan Robinson and Nicky Kaldor.
His article, Political
Aspects of Full Employment, explains with an almost eery
prescience why the coalition is attacking our wages, our
working terms and conditions and our welfare state.
 Economist
Michał Kalecki.
The tone is exhilaratingly brisk. "A solid majority of
economists" agree on how to solve a slump, Kalecki says. The
government borrows more and invests the cash either in
building schools and hospitals or in providing benefits and
tax cuts; this boosts demand and generates employment. Ta-da!
Two pages in, and he has both fixed the problem of recessions
and despatched most of the arguments against public borrowing
that we have heard with such tedious frequency in the past
five years.
What if savers become wary of lending to the state? Then,
Kalecki says, the Treasury pays higher interest rates – and,
since most of its lenders are British (just like now), the
money will still flow back into the economy. But he notes that
Churchill's war coalition has run "astronomical budget
deficits", while "the rate of interest has shown no rise since
the beginning of 1940". What if it becomes too costly to keep
on top of the national debt? Then ministers should raise more
funds, not by taxing ordinary pay or spending, which would
slow the economy, but with a levy on idle wealth.
That proposal, by the way, is tossed out in a mere footnote on
the second page; and, reader, if you can't love a man who
comes up with a novel way of soaking the rich in one short
italicised paragraph, then I fear we're never going to be
friends.
Having rattled through the urgent problems, Kalecki points out
that a booming economy and healthy profits would be good for
the "leaders of industry", but that they will never support
such government intervention. And in a sentence that sums up
post-crash Britain, he identifies one of the principal sources
of resistance as "so-called 'economic experts' closely
connected with banking and finance" along with "big business".
The opposition posed by this coalition of bosses and
financiers is motivated by three factors. First, they want as
little government interference in the economy as possible;
second, they don't want the state expanding into new areas and
so doing them out of business. But the thing that really keeps
the capitalists awake at nights is the boost to workers'
confidence that will be provided by a heathy jobs market. They
will demand more pay, better working conditions, perhaps even
a say in how their companies are run. Fully employed,
well-paid Britons will have more cash to buy things, so a
healthy economy supported by the government is better for
corporate profits than a sick one. "But 'discipline in the
factories' and 'political stability' are more appreciated by
the business leaders than profits". Rather an insecure and
cowed workforce than a confident and boisterous one.
But it's Kalecki's "political business cycle" that sums up the
world we're in now. Rather than opting for public investment
and a healthy recovery, Britain is stuck in a slump that austerity and
a blind trust in private-sector vigour is only deepening. But
the parallels don't stop there. Last week, the day after MPs
voted through a bill for real-terms cuts year upon year in
benefits for the jobless and the low-paid, newspapers led on
government briefings that the butchering of the welfare state
would not stop there. Next, the FT reported, winter fuel
allowance would be for the chop.
Meanwhile, living standards for those in work are also under
attack: through wages that are falling further and further
behind inflation and government schemes to sacrifice workplace
rights in return for share options. For those slow on the
uptake, there is always William Hague, telling Britons to "work
harder".
The rhetoric is also echoed in our media. Last Friday, the
Guardian's librarians went through all the British tabloids
and broadsheets since 2007. Up to 2010, they found that Fleet
Street was quite restrained in its use of the term
"scrounger": a mere 46 mentions (when discussing benefits or
welfare) for all of 2007. In 2010, though, that shot up to 219
mentions, and last year 240 mentions. As for shirkers v
strivers, the false opposition du jour, newspapers did not use
the phrase at all until 2010. Last year, the total was 10. In
the first two weeks of 2013, the press had already racked up
30 mentions.
Whether from politicians or the press, these justifications
for austerity are getting more strident even while evidence of
austerity's failure is stacking up. It may be that Britain
goes into a third recession this year; it is certainly not
going to enjoy a recovery. And what was always evident in the
coalition's spending plans issued back in 2010 – that our
welfare state and public realm were going to get shredded – is
slowly but surely materialising.
This assault on an entire social contract, says
Malcolm Sawyer, a leading expert on Kalecki, is what his
subject warned about. "The argument for dealing with budget
deficits has provided cover for attacking wages and benefits."
And austerity is just code for the transfer of wealth and
power into ever fewer hands.
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