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Market and capitalism go hand in hand

Bit of a shock to the system when I read a press release from the Trades Union Congress this morning that attacks “the embrace of market capitalism by successive governments”.

But before you get too excited, the TUC is not actually suggesting that we should replace capitalism – just the “market” bit of it, as if you could do one without the other.

The radical language from Congress House is in connection with a new report about the decline over the last 30 years in the level of wages paid to millions of low and middle income earners.

Britain’s Livelihood Crisis by Stewart Lansley is a well-researched pamphlet about the development and consequences of corporate-driven globalisation. He shows that wages have been falling sharply as a share of the national wealth since the mid-70s. The share of national output accruing to wage-earners fell from a peak of nearly 65% in the mid-1970s to as little as 53% by 2008.

“Moreover, this collapse in the wage share has been borne most heavily by the middle and lower paid, leading to a sharp rise in earnings inequality. Some unskilled and semi-skilled jobs now pay little more in real terms – and in some cases less – than they did in the late 1970s,” he writes.

A rich minority have been taking an ever larger slice of the UK's dwindling earnings cake. The top 10% have seen their pay increase almost twice as fast as median incomes, and nearly four times faster than the lowest 10%. The real wages (adjusted for inflation) of medical practitioners (+153%), judges, barristers and solicitors (+114%) have more than doubled since 1978, while those of bakers (-1%), forklift truck drivers (-5%), packers and bottlers (-3%) actually fell.

The growth of poorly paid work is illustrated by the proportion of workers whose wages are at least a third less than the median (currently £11.09 an hour). This figure has almost doubled in the last three decades from 12% in 1977 to 22% in 2009.

What Lansley calls the “experiment in market capitalism”, promoted by Thatcher and then New Labour, promised that all citizens would be better off through an expanded economic cake. But it brought slower economic growth, renewed instability and three deep-seated domestic recessions. He warns:

The livelihood crisis and economic instability are now locked together – via soaring inequality – in a dangerous economic vicious spiral. This is because the rising concentration of wealth, driven by the collapsing wage and rising profit share, has not only led to the declining opportunities that underlie the livelihood crisis, but has also contributed to economic fragility. As relative wages fell and purchasing power sank, personal debt soared: as the newly inflated fortunes were turned into giant speculative bets, asset prices boomed. Hence the twin triggers of the credit crisis set in motion by the market experiment.

The analysis may be sound but the suggested remedies are totally inadequate. We have not lived through an “experiment” but a new phase of corporate-driven capitalism that emerged out of the wreckage of the collapse of the post-war system of regulation in 1971. This was not a policy decision but the response to a profound crisis that followed the end of the Bretton Woods system.

Capitalism broke free of these bonds because the drive for profit required the export of capital, the lowering of wages at home, the creation of new markets and a financial system that matched the globalisation drive. TUC general secretary Brendan Barber wants an end to the “discredited model of market capitalism” and for a “prioritising of a fairer distribution of new wealth and jobs”.

That is simply not going to happen under this or any other government you might want to elect. Because not only do we have market capitalism, we also have a market state in which the political system is inextricably linked to big business and finance in thousands of ways.

The so-called experiment requires the termination of the capitalist system itself – both the economic and political sides of that debased coin. The system is unsustainable, driving millions into poverty and isn’t working. Reform is simply out of the question.

Paul Feldman
Communications editor
6 June 2011

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