Why is unemployment not an election issue?

On Wednesday I was sitting staring into space, wondering what I was going to write about this week. The press were preoccupied with mounting debt, and the creeps at Strathclyde Passenger Transport circumnavigating the globe at our expense.  Then my phone rang.  It was a BBC producer wondering if I would come and talk about why unemployment was no longer an issue. Now, that’s a very interesting question.

  Hardly anyone seems to think that unemployment, currently running at 2.5 million in Britain, is going to be a key issue for the general election.   An issue, yes, but hardly a dominant one.  Yet back in 1979, the last time a refreshed Tory opposition challenged  an incumbent Labour government after an economic crisis, unemployment was THE number one issue.  “Labour Isn’t Working” said that Saatchi and Saaatchi Tory ad, possibly the most  infamous election poster of all time.  Unemployment then was only 1.4 million.  

    True, the unemployment figures were calculated rather differently in 1979, but that doesn’t alter the point.  The return of mass unemployment has not been the burning issue it was in the past.   In 1979, 53% of voters believed unemployment to be most serious issue facing the country against only 30% today, according to Ipsos Mori.   Yet unemployment really is back in a big way.  The slight decline in the UK figures last week ( they continued to rise in Scotland of course) by no means indicates that joblessness has peaked.  There has been a huge increase in underemployment, with over 7.6 million on part time working.  Economic “inactivity” is also up - the numbers who have given up looking for a job, like students, long term sick etc. has risen to 8.8 million.   Hundreds of thousands of workers have accepted big reductions in pay in order to hang onto their jobs.  One in five young people is unemployed.  And the Chartered Institute of Personnel  and Development warns that a new shakeout of employment is almost inevitable later this year because of the sluggish economic recovery. 

   So, why is unemployment not an issue?  Make no mistake,  a lot of people are really suffering. Ask yourself: could you live on £64 a week jobseekers allowance?  Britain has some of the lowest benefit rates in Europe. In Ireland, unemployment benefit is nearly three times what it is here.  Many British workers have exhausted their savings and are hitting rock bottom, as the dramatic rise in the claimant count indicates.   The pain is partly mitigated by he various government schemes which have frozen mortgage payments and credit card debt.  But these subsidies can’t last indefinitely, and when they unwind, we could be facing a huge social problem. 

  But where’s the public outrage?   Where were the ministers squirming on Newsnight?   In 1991 when the Tory Chancellor, Norman Lamont said that unemployment was “a price worth paying” for economic recovery he was rounded on by the media.  Now no one bothers to compute the price of joblessness. It’s as if we don’t think that governments have any responsibility any more - even though Gordon Brown said, some years ago, that “full employment” was the government’s goal.  

    In the 1970s and 80s, joblessness was regarded as THE great social evil.  The prospect of just one million unemployed was enough to make Ted Heath, the Tory PM, radically change his economic policy in 1971.  The Labour PM, James Callaghan, came to grief over it in 79.   Under Margaret Thatcher’s monetarist policies in the 1980s, unemployment soared and so did social unrest, culminating in the miners strike in 1984/5. Now it’s back, and we all seem to be just accepting it as inevitable.  Even the response to the Corus ending steel-making in Redcar after 150 years has been muted, though a ballot on industrial action has been called. 

   So, what’s changed? Well, for one thing the nature of employment has.  Instead of being in large workforces in manufacturing industry, workers today are largely employed in small companies of under 50 often in poorly organised service occupations.  The great strikes and factory occupations in the 70’s and 80’s, like Upper Clyde Shipbuilders and the British Leyland Bathgate, were mobilised like military campaigns.  The foot soldiers were workers who all knew each other, lived in the same streets, had similar status and a great sense of class solidarity.  Now they are dispersed across all manner of occupations, as security guards, supermarket shelf-stacker, or in call centres.  They also have mortgages, which most didn’t in the 1970s, and big debts which put a dampener on industrial militancy.  And whisper it, but the influx of several million poorly unionised immigrant workers, willing to accept poor conditions and low pay, has sapped the strength of British  labour  Instead of union militancy, we have apathy and incapacity benefit.  As a result, trades unions are not the political force they were in the 70s and 80s. The last attempted strike action was the farcical BA non-event at Christmas.  Before that, it was power station workers downing tools in favour of “British jobs for British workers”. 

   The other big difference is that the public sector unions have not yet been mobilised in this economic crisis.  The recession has hit in the main the private sector.  Employment by the state has actually risen by around 100,000 since 2008, during the deepest recession in eighty years, and wages in the public sector have continued to rise, even as non-state workers are taking pay cuts.    In the past, public sector workers - nurses, teachers, fire-fighters - had a deep sense of grievance at their poor pay and were leaders in industrial unrest.  Nowadays they are a relatively privileged class earning higher wages and with better pensions than their private sector equivalents. 

   However, this might all be about to change.  If and when the next government tries to tackle Britain’s unsustainable public deficit, sacking hundreds of thousands of public sector jobs, then unemployment and industrial militancy are likely to stage a dramatic comeback.  There have already been threats of strikes from public sector unions at the mere suggestion of a pay freeze - but much more than that will be required to balance the government books.  This may explain why Labour, which tends to do rather badly in times of industrial distress, has held off cutting public spending until after the election is safe and gone.

    So politicians may be fooling themselves if they think unemployment is no longer an issue. There is a lag in social awareness.  It has taken some time for people to remember what it actually means in terms of ruined lives and social dislocation.  If we think society is broken now, just wait until next year and the year after that.  When people lose hope they become desperate - and the clock is ticking.  

  

Forget the BNP - the financial fascists are in the City of London

The BNP leader Nick Griffin was predictably awful on Question Time . He exposed himself as a tongue-tied demagogue whose repellent views on the holocaust, race and homosexuality are thinly concealed beneath a New Labourish veneer of respectability. What did come as a surprise was how dreadful the rest of the panel was. 


Baroness Warsi, the Tory communities spokeswoman, Chris Huhne, the Liberal Democrat MP and the Justice Secretary Jack Straw spent much of the programme trying out do each other on how tough they would be on immigration, thus doing Griffin's job for him. As did the deputy director of the British Museum, Bonnie Greer, who claimed that we were all Africans because that's where the British came from after the last ice age. Presumably, the European and British collections of the British Museum will be reclassified accordingly. At times I wasn't sure who was more barking, the fascist or his detractors. Fortunately, the audience and David Dimbleby saved the day. 


The BBC's decision to allow Griffin to appear on Question Time was vindicated, and not just because the BNP is, whether we like it or not, a legitimate political party with elected members and a million votes, but because it forced Griffin out of his comfort zone. The BNP leader is a plausible, even fluent performer in conventional news interviews where he's only required to craft a soundbite or two. But when he was exposed to debate, and a live audience, he turned into a guilty schoolboy trying to disguise the fact that he'd been bullying kids with special needs. Really, we have nothing to fear from these people except fear itself.


But what really annoyed me about this particular edition of Question Time was that it ignored the most important issues of the week - the postal strike and the Governor of the Bank of England's devastating commentary on the banking bail out. The Royal Mail has taken leave of its senses and seems determined to commit hara kiri before Peter Mandelson privatises it. Everyone attacked the BNP for quoting Winston Churchill, but it was governor Mervyn King who adapted Churchill's rhetoric to most devastating effect last week. 


“Never in the field of financial endeavour” King told a gathering in Edinburgh, “has so much money been owed by so few to so many. And, one might add, without any real reform.” The £1trillion banking bail out was, he went on, “the greatest moral hazard in history” adding: "It is hard to see how the existence of institutions that are 'too important to fail' is consistent with their being in the private sector." In other words, the behemoth banks need to be broken up or taken into public ownership, just as this column has been arguing all year. I'm not used to finding myself on the same side as the guv'nor, but these are not normal times. 


It was an unprecedented intervention by a figure who is generally regarded a spokesman for the City of London. King condemned the government and the regulators, not just for handing taxpayers money to people who don't deserve it, not just for racking up the biggest public debt outside wartime, but for endangering the future financial welfare of the country by allowing a banking oligarchy to take over the economy. It was like the chairman of the Equalities Commission accusing the government of being racist. 


Now, I'd all but stopped writing about the banking crisis because people seem to have lost interest in it. There's a mood around that the worst is overand that the economy is back on track again, which as King points out is very far from the truth. We are still mired in recession - the longest since records began in 1955 - and the Bank of England is still electronically printing billions of money to try to prevent another financial cardiac arrest. Meanwhile the government is borrowing  13% of GDP with no clear idea of how it is going to pay this money back. 

But it's business as usual in the City where banks are preparing to award themselves a staggering £6bn in bonuses this year, 50% more than in 2008.  Yet, had it not been for the £1 trillion in public money devoted to rescuing them from their own folly, most of these banks would have ceased to exist.  This is not far short of legalised theft. It is not only just the bigglest bail out in history but the biggest bank raid in history by a caste of financiers who clearly believe that they are no longer accountable to anyone but themselves.  The billions the banks are blowing on bonuses are only there because of direct and indirect subsidies from the tax payer. This is most obviously the case in semi-nationalised banks like RBS. But even banks like Barclays, which didn't take cash from the government, have been beneficiaries of the biggest bail out in history. Without the government's asset relief programme, Barclays would be bust, because all the big banks would be bust. 


I'm at a loss to understand why the public has been so quiescent on all this. Why were there no demonstrations outside the Royal Bank in Gogarburn or Lloyds in London? We've developed a very strange set of political priorities, getting worked up about one of the petty criminals of the political world, like Nick Griffin, when the real villains are getting away with grand larceny.  One of the main reasons the government hasn't been tougher with the banking kleptocracy is that public opinion does not appear to demand it. Meanwhile, the banks have been lobbying assiduously behind the scenes, persuading government ministers that if they only allow them to go back to their old ways they'll fill the hole in public finances and start lending to first time buyers. 


I suppose the answer is that bollocking the BNP is easy and makes us feel good – they're fascists, after all. The workings of the financial system are opaque and difficult to understand. It's never quite clear what we want banks to do: lend more to home buyers or less; make credit easier or more difficult. We want the government to spend to save the economy, but we don't want it to leave our children in penury paying off the debt. So we've indulged in self-righteous bear baiting while the real predators pick our pockets. Well, we get the economy we deserve, I suppose.

The banality of bankers

Hannah Arendt used to talk about the “banality of evil”; last week we saw the banality of bankers. There they sat, the Sir this and Lord thats, uttering po-faced clichés and over-rehearsed apologies to ratty MPs in Westminster. The Sun called them “scumbag millionaires” but they were really a bit of an anticlimax, and far to dull to make proper villains. Goodwin and co were revealed to be just like the countless interchangeable suits who sit around thousands of corporate boards and shuffle paper around a million offices every day; uninspiring bureaucrats whose vision extends no further than the latest management fad.

They’re the people you remember from school - the ones who got their homework in on time but lacked any kind of inspiration or independence of thought. The ones who joined the right societies at university, studied subjects of mind-numbing tedium, and then polished up their CVs for the graduate milk round. They were supposed to be the safe pairs of hands these accountants and actuaries, with their mousy wives living in their characterless suburban houses. Secure and boring. But somehow they grey men managed to blow up the world.

How did it happen? When did it happen? Without a shot being fired, these people not only took over the commanding heights of the economy, they infiltrated the heart of government, sitting on countless quangos and inquiries, advising ministers and civil servants, creating a society in their own image. How did we let them do it? And where did these boring bean-counters and shiny-bottoms get the wherewithal to engineer the greatest financial crisis in history?

Well, it all goes back to the 1980s when the ruminant number crunchers became infected with the virus of greed and turned into voracious financial predators. It was the great financial boom ignited by Margaret Thatcher’s privatisation policies that transformed plodding corporate clones into to reckless gamblers and risk-takers. With deregulated financial markets, the suits discovered that they suddenly had access to the ‘dumb’ wealth of society which had been sitting passively in pension funds, insurance funds, government departments. Deregulation encouraged financial ‘innovation’ and the creation of ‘products’ like dodgy endowment mortgages or “personal” pensions that delivered little apart from commissions.

But it was the sale of public utilities that offered the suits their opportunity to cash in on a grand scale. The sale of state assets in rail, airports, communications gas and electricity yielded billions in commissions and fees that flooded into the offices of the grey men turning them into privatisation tycoons. Look at how well they’d done, selling the country back its own property and calling it popular capitalism. They set up remuneration committees staffed by their friends which awarded higher and higher salaries to themselves under the guise of incentive schemes. The bonus culture was born.

The lords of financial misrule weren’t actually making anything - building companies or creating new markets - but they began to regard themselves as financial engineers, masters of the universe, able to create wealth apparently out of nothing. Ten they started on the property market - a massive pyramid scheme, so huge and complex that it took over twenty years to construct and will take almost as long for society to pay off.

A pyramid scheme, like Bernie Madoff’s Ponzi scheme, is a way of inflating asset prices by creating an artificial scarcity fuelled by buying mania. Like the South Sea Bubble, inflated asset prices only last for as long as ever larger numbers of people can be persuaded to invest in them. The global real estate boom was the greatest asset bubble in history, as house prices in countries like Britain tripled with in a decade. This created trillions worth of paper wealth which was managed and manipulated by the bloated financial services industry which had now begun to crowd out other productive forms of economic activity.

It’s an open secret that the bankers realised that the boom couldn’t last forever, but they did everything they could to prolong it. Banks like Northern Rock and HBOS started selling 125% mortgages and the infamous sub-prime loans to people who could never repay. Then there was ‘securitization’. Instead of just holding on to mortgages for the duration of the loan, the banks started selling packages of mortgage in bonds to other investors and used the proceeds to lend ever more mortgages. They invented sophisticated derivatives like collateralised debt obligations and credit default swaps which used complexity to disguise risk.They started lending on every greater ratios of their core capital, “leveraging” loans by thirty or forty to one. Their command of the language of the balance sheet prevented the rest of us from fully understanding what they were doing. Just take a look at an RBS balance sheet - they’re openly available on the web - and try to work out whether or not it is solvent.

Most of the dodgy mortgage-backed bonds were bought by savers in Asian countries, who are now feeling extremely sore. Back home in Britain people stopped saving altogether as the suits found ever more ingenious ways of ensnaring them in debt - like credit cards, with 25% interest rates. Then there were student loans: an entire generation of graduates landed with £20,000 debts. Governments were persuaded to take out PFI schemes - which are a bit like endowment mortgages for public projects like hospitals and schools. Our children will be paying the cost of these and other financial innovations for decades.

As I say, the bankers knew perfectly well that a real estate asset bubble couldn’t last forever. But they believed that if they got big enough, fast enough, they would be too big to fail when the music stopped. This was why the former HBOS executive, Sir James Crosby, launched his dash for growth, which even the Financial Services Authority realised was reckless insanity. When Lloyds ‘rescued’ HBOS by taking it over last year, they too hoped that the resulting bank behemoth would be too big to fail - that the bigger the losses the more likely the government would always step in with public money.

This was why the Lloyds boss, Sir Eric Daniels, largely dispensed with due diligence before the HBOS take-over- he didn’t want to know how bad the HBOS books really were. And in a sense, he was right; they were all right. As we saw last week, the government has had no choice but to step in to save the bankers from the consequences of their own irresponsibility. After the privatisation of gains comes the socialisation of the losses. It’s been the crime of the century, perhaps of the millennium, and the colourless culprits are getting clean away.