If I were to suggest that we do not have an energy crisis, you would no doubt wonder exactly what type of mushrooms I’d put in my risotto. Nevertheless, please bear with me for a moment while I explain. While it is certainly true that the UK (and Europe) is currently experiencing eye-watering rises in the price of gas, electricity, petrol, and diesel, this is not – at least not yet – the energy crisis that I have been writing about on this blog for close to a decade. What we are currently experiencing is the final economic crisis of the neoliberal system… expensive energy is merely the rocky nemesis upon which the neoliberal ship is being torn apart.
The result of the immediate crisis is that we see people grasping for easy but wrong explanations for why things have gone so bad apparently so rapidly. “Putin’s energy shortages” seems to be the preferred explanation for the establishment media. “Brexit,” is the inevitable scapegoat for the 10 percent or so who insist on blaming everything on Britain’s decision to leave the European Union. The cry of “greedy energy company bosses!” grows ever louder as the impact upon the poorest becomes more evident. But these are merely symptoms and misdiagnoses of the collapse of the current economic and social system.
To understand this, we need to go back half a century to the crisis of the 1970s, the breakdown of the post-war consensus and the ensuing battle of ideologies. The crisis itself stems from the combination of the failure of the 1944 Bretton Woods monetary system, which created a massive dollar shortage across the western economies, together with the end of the US position as the world’s swing producer of oil. The landmark events being the German and French decision in 1969 and 1970 to settle balance of payments accounts in gold rather than dollars – a process that created inflation in the USA. The August 1971 decision to take the dollar off the gold standard – thereby exporting the inflation back to Europe. The 1970 peak of US oil production. The October 1973 OPEC oil embargo – which forced the price of oil up, thereby increasing the price of everything made from or transported with oil.
The two – erroneous – contesting ideologies of the period were developed in response to the failure of gold-backed currencies in the aftermath of the First World War. Neither had any understanding of the key role of energy in the economy. Nor did they have much understanding of how currency is created in a fiat system. The incumbent “Keynesian” ideology had held that the way to maintain economic growth and full-employment was for governments to act as investors and consumers of last resort – printing and investing or spending new currency into the economy in order to increase consumer demand and to improve the productivity of the industrial base. This approach appeared to have considerable success in the aftermath of the Second World War, where the massive dollar printing in the Marshall Aid program helped usher in a spectacular period of economic growth. As historian Paul Kennedy explains:
“The accumulated world industrial output between 1953 and 1973 was comparable in volume to that of the entire century and a half which separated 1953 from 1800. The recovery of war-damaged economies, the development of new technologies, the continued shift from agriculture to industry, the harnessing of national resources within ‘planned economies,’ and the spread of industrialization to the Third World all helped to effect this dramatic change. In an even more emphatic way, and for much the same reasons, the volume of world trade also grew spectacularly after 1945…”
When the same trick was attempted in the early 1970s though, the result was the combination of inflation and unemployment which is now referred to as “stagflation.” The mythology which emerged to undermine the post-war consensus was that too much government spending and intervention had created over-powerful trade unions which had driven up wages far above what employers and investors could afford. In response, businesses had no choice but to raise prices. The result was a wage-price spiral. And since government was ever present with newly printed currency, neither side had any incentive for pay or price restraint.
The alternative ideology that politicians and central bankers looked to for a response, came from a group of Europeans who had fled persecution in the 1930s. They had witnessed first-hand the detrimental impact of excessive money-printing, and the political extremism which followed it. And the perspective they developed was staunchly anti-government and pro-balanced budgets. Insofar as governments were to have a role in the economy at all, it should be limited to setting the rules within which a free market could thrive. This, of course, fitted in well with a new generation of conservative politicians who no longer viewed unemployment as the primary economic problem facing them. Indeed, a growing number had already accepted that mass unemployment was likely the easiest means of restoring corporate profitability and bringing prices under control.
The fact that it – sort of – succeeded gave credence to the most pernicious myth to emerge out of the crisis of the 1970s – that a recession actually caused by an oil shock – the Iranian revolution and the enduing war with Iraq – came to be attributed to the steely determination of Saint Paul Volcker and the all-seeing and all-powerful Federal Reserve Bank. And just as the recession had very little to do with central bank policy – except for making matters worse than they need have been – the recovery in the mid-1980s was primarily the result of opening up new, non-OPEC, oil fields in Alaska, the North Sea and the Gulf of Mexico rather than the technical expertise of economists and central bankers.
The myth produced two results which conservatives of the day embraced. The first was that government was generally portrayed as an anti-democratic force which needed to be restrained and rolled-back… forgetting that elected government is the only means by which democracy can exist. This provided an ideological cover for selling off public assets – including key critical infrastructure – to the highest bidder. The second, and more insidious consequence was that technocracy – rule by “experts” – emerged as the preferred form of government. Beginning with the central banks themselves, government began a process of cutting public servants and replacing them with technocrats seconded from the private sector. Famously, for example, Britain got rid of its government-employed tax experts in favour of using secondees from the “big four” accountancy firms. Having written Britain’s tax laws, these secondees would then go back to their firms, where they would help their wealthy clients avoid the tax laws they had written.
Managers got in on the act too. In the post-war years, managers were often people who had worked their way up within a company. As a result, they had considerable understanding of the processes they were managing. This changed in the 1980s with the development of business schools to replace the older management studies departments within the top-tier universities. The conceit here was that management was a technical speciality in its own right, separate from the processes being managed. And so, the same individual could move seamlessly from the management of, say, a television company to the post office or from a telecommunications company to running a government health testing program.
The system was further cemented into place by the development of extra-national bodies designed to keep national governments in check. This was most obvious in the European Union, where the technocratic Commission holds the power and where the fig leaf Parliament can neither propose nor amend legislation. European state aid rules were used to punish any government which sought to borrow or print currency in order to support a domestic industry… no matter how critical that industry might be. Less obviously, similar measures were included in trade deals such as NAFTA, TPP and TTIP in order to give transnational corporations greater power than the nation states which signed up to them. Special international courts, for example, regularly order states to compensate corporations which claim to have suffered losses due to government policy (a point, by the way, to consider when thinking about windfall taxes on transnational energy companies).
Cleverest of all though, was the co-option of the political left in support of this process of democratic disempowerment via the adoption of what has come to be known as “stakeholder capitalism.” In the UK in the early 1990s, the political left dropped its anti-EU stance after the EU technocracy adopted minimum labour rights as part of the creation of a single market. The technocracy was being mercenary. Their concern was that the countries of southern and eastern Europe be prevented from using lower wages and worse conditions to undermine the more developed north-western European economies. The practical result though, was that European courts regularly overruled Britain’s Tory governments on issues concerning workers’ rights. And this, in turn, was music to the ears of a new generation of neoliberal Labour leaders who could replace trade unions and workplace conflict with the calming balm of EU directives to secure most of the rights demanded by workers.
Notice, however, that for all of the supposed benefits of the European Social Chapter, it did nothing to reverse the de-industrialisation and impoverishment of Britain’s former industrial regions. Indeed, while London prospered through close ties – and with the channel tunnel, easier transport links – with Brussels, ex-industrial, rundown seaside and small-town Britain sank into ever greater decline:
It was surely this, rather than Russian bots or lies on the side of buses, which explains why Britain (or more correctly, England and Wales) voted to leave the European Union in June 2016. And, indeed, why this decision was confirmed in the general election in December 2019. To the disappointment of those millions of voters though, Brexit without bringing the technocracy under democratic control – and especially in Tory hands – will continue to favour the technocrats in the global corporations at the expense of ordinary people.
It is the technocracy which continues to benefit the most from stakeholder capitalism, because it allows them to escape accountability. And the main reason today’s fake left fails to call them out on this is that they have learned to mouth the (politically) correct platitudes while continuing to fleece everyone. What, for example, are we to make of corporations which make a big play of opposing eighteenth century slavery while benefitting from near slavery working conditions in the developing world? How seriously should we take claims to women’s rights of corporations whose third world female employees are forced to give birth in factory toilets?
It is here that the left would do well to ask of the technocracy the five questions set out by the late Tony Benn:
- What power have you got?
- Where did you get it from?
- In whose interests do you use it?
- To whom are you accountable?
- How do we get rid of you?
An honest technocrat – assuming one could be found – might answer:
- The power to ignore, contest and overturn the policies made by elected government
- We used our claim of technical expertise to steal it from the people
- We use it to further the interests of the technocracy and the ruling elites
- Ourselves, and
- You can’t!
Prior to the adoption of neoliberal stakeholder capitalism in the 1990s – which, in the absence of moral hazard, is not really capitalism at all – managers had just one standard against which they were measured… returning profits to shareholders. Insofar as there were social issues to be addressed, this was the task of democratically elected governments who could be kicked out by their voters. Sure, political parties were influenced by lobbyists – usually investors donating to conservative parties and trade unions donating to social democratic ones. But CEOs and the corporate power they wielded, were generally excluded from the day-to-day political discourse.
The neoliberal claim that a corporation is no longer solely accountable to shareholders but also to a host of “stakeholders,” including the corporation’s employees, various minority groups and to the biosphere itself may well appear to fit the demands of the contemporary left, but its primary result is to allow CEOs to escape scrutiny… a manager who is accountable to everyone is accountable to no one. This is why, for example, the observation that companies that “get woke go broke,” does not seem to damage the careers of the CEOs who take such a cavalier approach to the investors’ capital they are entrusted with.
Most often though, corporate claims to lead on environmental, social and governance (ESG) issues are little more than a cover for the further enrichment and empowerment of the technocracy itself. As former pharmaceutical company CEO Vivek Ramaswamy writes:
“All great magicians master the art of distraction—flashing lights, smoke, beautiful women on stage. Today’s captains of industry do it by promoting progressive social values. Their tactics are far more dangerous for America than those of the older robber barons: their do-good smoke screen expands not only their market power but their power over every other facet of our lives…
“Consider Fearless Girl, a statue of a young girl that suddenly appeared one day in New York City to stare down the iconic statue of the Wall Street bull. It was apparently a challenge for Wall Street to promote gender diversity: the placard at Fearless Girl’s feet said, ‘Know the power of women in leadership. SHE makes a difference.’ Feminists cheered. The trick? ‘SHE’ referred not only to Fearless Girl but to the Nasdaq-listed exchange-traded fund (ETF) that her commissioners, State Street Global Advisors, wanted people to buy. State Street was battling a lawsuit from female employees saying it paid them less than their male peers in the firm. Fearless Girl was a line item in an advertising budget. But it’s not enough to spend money on a PR trick. No capitalist would applaud yet. You have to bring the money back. For its final act, its Prestige, State Street is suing the statue’s creator, Kristen Visbal, saying that by making three unauthorized reproductions of Fearless Girl Visbal damaged State Street’s global campaign in support of female leadership and gender diversity. A master class on the trick itself. Some feminists still adore Fearless Girl. I doubt many of them know about her ETF or the fees State Street charges on it. She now stands guard across from the New York Stock Exchange. Yes, SHE makes a difference—to the bottom line.
In response to the growing environmental crisis, the faux-green corporations and the technocrats who serve them, have promoted only those “solutions” that benefit themselves. Nowhere in the tomes printed by bodies like the World Economic Forum is there a demand that the corporations scale back their wealth-accumulating activities in order to save the planet. Nor are our technocratic overlords about to give up their private jets or their prime steak dinners. Instead, it is the little people who are now told that we cannot have warm showers anymore but must wipe ourselves down with (presumably increasingly smelly) flannels, that we must give up meat in favour of bugs, and that we must give up our warm houses in favour of (presumably covid and monkey pox superspreading) public warm spaces.
The one glint of light in this otherwise depressing process is that, in the wake of the covid response and the sanctions imposed on Russia, much of the self-serving authoritarian grift has been exposed. In the UK, we have discovered this summer that the same revolving door process which corrupted the tax system has also corrupted the privatised energy, water, and railway monopolies. Revolving-door employment for technocrats moving between industry, regulator and government amounts to nothing less than a conspiracy against the people, in which the technocracy has enriched itself while failing to deliver on any of the promises made to the people when these monopolies were sold off. In each case, the technocrats merely borrowed in order to pay themselves even as essential future proofing was neglected. And so, we have water companies in one of the wettest places on Earth unable to prevent widespread drought or, indeed, to meet the basic requirement of preventing raw shit from spilling into the rivers and seas. In the same vein, overcompensated energy bosses and over-promoted ministers claim that nobody could have foreseen our current energy security issues, despite masses of warnings from academics and engineers who understood full well that the technocracy was attempting to break the laws of physics. In 2004, the BBC even aired a docudrama raising the causes of the crisis which is playing out today. Meanwhile, the hubris of neoliberal politicians is coming back to haunt them. As Henry Hill at UnHerd reported this week:
“As decades of infrastructure under-investment come home to roost in the United Kingdom a new light is being thrown on the Liberal Democrats.
“You might have seen this video of Nick Clegg, then leader of the party, dismissing nuclear power in 2010 because it wouldn’t come on-stream ‘until 2021, 2022’.
“Then there is Layla Moran, the MP for Oxford West and Abingdon, who has the distinction of having been a proud and very vocal campaigner against a new reservoir in a part of England where villages are starting to run out of running water…
“‘Making sure the taps work’ ranks even lower than ‘making the trains run on time’ or ‘catching burglars’ in Maslow’s hierarchy of citizens’ expectations which the Government is increasingly failing to meet. No volume of tax cuts is going to sell the public on a Government presiding over a country which simply doesn’t work.”
And that’s the point, the crises of our age – the pandemic and the responses to it, the Russian invasion of Ukraine and the responses to it, and now a growing economic disaster which is likely to be worse than the crash in 2008, have not caused the system to fail, they have merely served to expose a system which was corrupt and rotten from the very start. The technocracy – from Paul Volcker on – never did have some special esoteric expertise… they were just good at blagging us into believing that if we handed them the wealth of nations they could make life better (but only for themselves, was the bit they didn’t say out loud).
And the purpose of the system? Well, as Anthony Stafford Beer, a management theorist of an earlier age, explained:
“The purpose of a system is what it does. There is after all, no point in claiming that the purpose of a system is to do what it constantly fails to do.”
If you and I are forced to go hungry and cold this winter it is not because we have an energy crisis, it is simply that the neoliberal system – which includes such utilities as energy, water, and the fair distribution of wealth – is doing what it was set up to achieve… the enrichment of the technocratic few at huge and enduring cost to the people.
As you made it to the end…
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