The World Has Been Turned Upside Down: The End of the Era of Robber Baron Capitalism

Gerry Hassan

Scottish Review, January 24th 2018

The world has been turned upside down in the last few weeks. Ten years after the banking crash showed that the economic assumptions which shaped most of our lives were bogus, along has come the collapse of Carillion, the biggest outsourcing company in the UK.

The taking of the public out of public services has been a long war of attrition which has been waged by all the mainstream Westminster parties. It hasn’t improved public services or benefitted the public. Instead, the winners from it have been the companies who have won such contracts, their directors and shareholders, who have made millions of pounds from the public purse.

The Public Private Initiative (PFI) and Public-Private Partnership (PPP) was born of John Major’s government, but came of age under Tony Blair and Gordon Brown: being seen as a way to engage in significant public investment while keeping it off of the government’s books. Of the 720 PFI-PPP schemes more than 75% of them were signed off under New Labour’s period in office. They liked the supposed efficiency the private sector aided, but in reality, were driven by undertaking public spending off the balance books and the dogma of thinking ‘private good, public bad’.

Most of us know that public sector monopolies can provide poor services insensitive to the needs and interests of the public. But the tales of PFI-PPP were of a new order of providing services which weren’t about the public, but creating a guaranteed income stream and scam to the vested interests of crony capitalism. Thus, PFI-PPP schemes involved grotesque inefficiencies and inflexibilities which were paid for by the public purse.

Tales are legion of schools and hospitals being charged fortunes for basic items. The TES (formerly The Times Educational Supplement), hardly a left-wing publication, itemised some of the abuses last year such as a PFI school in Bristol where a new window blind cost £8,154 and a new tap £2,211.

Yet despite the legacy of PFI-PPP senior New Labour figures still cling to the wreckage. Andrew Adonis last week refused to condemn such practices saying of his period in office: ‘Obviously we assumed that the private sector was better’. John McTernan, Tony Blair’s former Chief of Staff, dismissed a National Audit Office report last week which said PFI-PPP had cripplingly higher costs than the public sector, calling its findings ‘nonsense’.

Neither Blair nor Brown have expressed any regret. Tony Blair saw the arrangement as a way of funding more schools and hospitals without raising taxes or taking on public debt. Blair as Prime Minister once complained to a conference of private equity financiers: ‘Try getting change in… public services’, and has continued in this vein since he left office.

Gordon Brown writing in his autobiography late last year made the case for public-private partnerships as if nothing had changed since the days of New Labour. He wrote that PPPs ‘were a way of mobilising private funds for public purpose and offered a better route to building our infrastructure than the old ways of financing.’

He observed that the old public-private debate about ownership was ‘sterile and self-defeating’, while the only reference he made to rising concerns was that he conceded that such schemes had ‘teething problems’ which he believed had been corrected. Brown concluded that ‘at their best, PPPs married the long-term thinking and ethos of the public sector with the managerial skills of the private.’ As if it were still as simple and straightforward as that.

PFIs and PPPs have to be seen in the context of a great corporate takeover of large parts of the public sector – predominantly, but not exclusively in England. This isn’t popular with the public, nor has it led to better public services: think of the example of Virgin Trains and Stagecoach and their running of the East Coast train line. Perhaps even worse, has been the contracting out of huge swathes of the NHS in England to private providers, which is slowly and cumulatively undermining the idea of a co-ordinated publically owned health service. And in Scotland, PFI-PPP has left a legacy of £30 billion of past deals and crippling debt payments, before the SNP Government put a stop to them (but not to other forms of tendering and contracting out).

All of this is connected to the huge rise in inequality we have witnessed in the UK and elsewhere. An Oxfam report this week found that of the wealth produced in 2017 a staggering 82% of it had been appropriated and seized by the most wealthy one percent. Scotland’s ten richest families and individuals were estimated to have a combined wealth of £14.7 billion: the richest being the Grant-Gordon whisky family worth a reputed £2.37 billion.

This increasing concentration of wealth at the most narrow elite at the top increasingly defines and distorts every aspect of UK society. The self-interest of this tiny group of people increasingly shapes how success, status and wealth are judged, distorting the top end of the London housing market, and increasingly that of other cities such as Birmingham, Manchester and Edinburgh.

It isn’t surprising that there has after decades of the super-rich and their apologists getting away with it that a counter-critique has begun to gather force. This has begun to worry the forces of reaction and privilege, with the right-wing think-tank the Institute of Economic Affairs issuing a special report in response to Oxfam’s findings. Their reasoning is that the free market revolution has led to an unprecedented increase in wealth and that this is more important than any desire to level out through the politics of redistribution.

This rising discontent will define much of our world and politics over the next few decades. Globalisation and deregulation promised us more choice and greater wealth for all, but has instead brought us a spiv capitalism, the horrors of Grenfell Tower and private semi-monopolies such as Carillion.

All of this has ramifications for how our politicians and political debate deal with these challenges, including here in Scotland. There has long been a prevalent feeling that we have escaped the worst excesses of freewheeling, buccaneer capitalism, but our income and wealth inequality isn’t that different from the rest of the UK. And we haven’t been immune to the insidious practices of contracting out and outsourcing what were once publically owned services.

This has consequences for the debate around independence with the SNP’s Growth Commission which is awaiting imminent publication grounded in the attitudes of the old order: that tax competition and lower Scottish business rates versus the rest of the UK can power drive the economy and deliver higher economic growth.

We have to answer the big questions of who we run the economy for, and bring the new vested interests: merchant banking, corporate lawyers and accountants, and outsourcers, to account. This new insider class are increasingly and brazenly not interested in the rest of us and our well-being and prosperity: in the 1970s £10 in every £100 in UK company profits went to shareholders, whereas now it is between £60-70: a brutal form of extraction capitalism.

Right-wing apologists such as the ‘Daily Telegraph’ and ‘Spectator’ still talk blithely of ‘the UK jobs miracle’, oblivious to the longest squeeze in living standards since the Napoleonic Wars, or the generational gridlock, which has left affluent baby boomers stacking assets, and twentysomethings and thirtysomethings are excluded from the housing market and laden with debt.

We are now at the end of one age: that of free market crony capitalism, and the beginning of a new one, posing as stark choices as those we witnessed in the 1970s. We face huge choices about how we tax and hold accountable wealth, democratise business and finance capital and make it work for us, rather than us work for them, and address the changing world of work and think through bold ideas such as a universal basic income. These are big questions: which need to be addressed in Scotland, the UK and internationally, but it is clear that the orthodoxies and half-truths which have shaped most of our adult lives has come to an end.

This isn’t the end of capitalism, but it is the end of the robber baron capitalism we have come to know and detest. Aditya Chakrabortty in The Guardian has called this the age of the zombie capitalism, where despite everything Britain is still dominated by ‘zombie ideas, zombie politicians, zombie institutions, stripped of credibility and authority.’ It is time to call time on this system, its apologists and those who financially gain from it, and make a different kind of economy and society.