Lean and Mean: How obsessive cost-cutting destroyed job security

Lean and Mean: How obsessive cost-cutting destroyed job security

John Hully

I’m afraid to tell you there’s no money left.” (Liam Byrne)

For there to be austerity, there must be no money. But for a state with its own central bank and its own sovereign currency to have no money, there must be a complete misunderstanding – or misrepresentation – of what money is and how it is created.

The definitive reference point for this fiction – the last two words used unreflectively by lobbyists, journalists, and politicians – is Margaret Thatcher’s declaration: “There is no such thing as public money. There is only taxpayers’ money.”  In Thatcher’s macro-economic model, individuals first earn money from which the state then borrows or takes through taxation to provide public spending. This image of the scrounger filching your earnings and leeching from your savings to spend on what it cannot afford was brilliantly constructed to justify and enable the shrinking of the state. Governments since Thatcher have thus cast themselves in the role of Prudence: guardians of the taxpayers’ money, determined to cut taxes and cut spending.

Beneficiaries of state expenditure such as civil servants, public employees, and recipients of social security have been cast by implication as scroungers; and public roles (in government, health, education, welfare, environment, transport) recast as costs, and never investment. In contrast private sector providers in receipt of state subsidies have been cast as “wealth creators”, and those providing what were previously public services as fellow guardians of “taxpayers’ money”, creating “real” jobs while cutting costs to “the taxpayer”. In the words of Chancellor George Osborne,

“[Our policy is] an economy where the state does not take almost half of all our national income, crowding out private endeavour.”

With the state reduced to a system for taking from the earner and giving to the non-productive, recipients of social security can be transformed into victims of the state, dependent on other individuals’ money: and the moral imperative becomes saving them by removing the state and their benefits, and forcing them into paid labour. Taxation is itself reduced to the immoral act of seizing one person’s property to subsidize another’s dependency, and a moral justification for tax avoidance or evasion – or even ending taxation – constructed.

This subversion of reality and morality is catalyzed via the third of Wacquant’s institutional logics of neoliberalismin his  book, Punishing the Poor: “the cultural trope of individual responsibility… a vocabulary of motive [for] the proclamation of sharply reduced accountability [for the state] in matters social and economic”; and implemented in part by use of the second, “devolution, retraction, and re-composition of the welfare state … to submit reticent individuals to the discipline of desocialised wage labour via variants of workfare”.

The first institutional logic of a neoliberal state is to re-regulate to promote “the market” as the optimal device for organizing human activities. Re-regulate, because there is deregulation of finance and corporate behaviour but increased regulation of the poor, the unemployed, Trades Unions, and indeed the “ordinary” citizen; with the creation of (privately run) penal sanctions that overlap with the workfare to the point where “penalfare” is more apposite.

The desocialisation of labour, and the severance of social relationship between employer and employed, manager and employee, has been forced by the use of “command and control” management: arbitrary targets, performance related pay, performance review, and piece work. The neoliberal state has actively intervened to constrain Trades Unions; and to permit employers to remove benefits (including final salary scheme pension plans), security of tenure, and guaranteed hours: all under the guise of a general utilitarian benefit to the economy. Every deregulation – most recently, zero hours contracts – related to flexible employment has been sold to us as of benefit to us as individuals.

In the late 1940s a handful of businesses set up in the US Midwest to supply temporary workers. Their services were consciously branded as non-threatening to the (unionized) full-time (and overwhelmingly male) worker. Temp work was advertised through thousands of images of middle class women. “The typical Kelly Girl doesn’t want full-time work.”

That was 1958. The temp agencies expanded rapidly, and by 1971 the Kelly Girl had invented “The Never-Never Girl”: “Never takes a vacation or holiday. Never asks for a raise. Never costs you a dime for slack time. (When the workload drops, you drop her.) Never has a cold, slipped disc or loose tooth. (Not on your time anyway!) Never costs you for unemployment taxes and Social Security payments. (None of the paperwork, either!) Never costs you for fringe benefits. (They add up to 30% of every payroll dollar.) Never fails to please. (If your Kelly Girl employee doesn’t work out, you don’t pay.)”

As the neoliberal state continues on its mission to cut government spending, it has entered into a positive feedback loop with business on a mission to cut costs. The neoliberal state deregulates and cut taxes, and fails to collect taxes: all of which cut the costs of doing business. The neoliberal state ceases supervision of business, while increasing supervision of being poor or ordinary: all of which cut the costs of doing business. The neoliberal state reassigns its penal apparatus to imprison the poor, but leave the white collar criminal untouched: all which liberates business. The neoliberal state can privatize public services, creating almost unlimited opportunity for rentiers.

Together, the neoliberal state, its finance sector, and its corporations progress through what Professor William Black calls the “three Ds”: deregulation, de-supervision, and de-facto decriminalization.

In the most generous version, CEOs become victims of a “neoliberal paradox”: intense market competition makes it impossible to generate ever-increasing returns. They cut costs. Corporations (such as Enron) become “serial acquirers”, then, finally, “management simply cooked the books.”

In the less generous version, the “neoliberal paradox” is not the cause, but “the dumbest idea in the world”, maximizing shareholder value is the driver of cost-cutting:

when the shareholder-value mantra becomes the main focus for companies executives usually concentrate on avoiding taxes for the sake of higher profits and don’t think twice about permanently axing workers.

In the most realistic version, we have undergone a dramatic regression in understanding, and need to be taught that corporations are inherently criminogenic:  that “How to Rob a Bank”  is by controlled fraud.

Misinformed or mendacious, in a world dominated by what Black calls, theoclassical economics, the Thatcher narrative of “taxpayers’ money” is canonical. It’s also a complete fiction, as a recent article issued by the Bank of England about the role of money shows.  (Almost all) money is created out of nothing by commercial banks creating loans. A central bank with a sovereign currency can create money (as the Bank of England had to do when commercial banks stopped lending in the most recent financial crash). It is why the Bank of England was created over 300 years ago. As Borges writes, “A fictitious past occupies in our memories the place of another, a past of which we know nothing with certainty – not even that it is false.

The truth is difficult to find, as the dominant and pervasive theoclassical economics neglects money and the monetary system, preferring to treat money as neutral ether in which economic transactions are done. But the truth is startling and important:

Money and monetary systems… are social constructs, and can and must be managed, mobilised and deployed to serve the wider interests of society and the ecosystem … We know it can be done, because in our recent history, after the 1929 financial crash, society succeeded in wrenching control of the monetary system back from a reckless and greedy wealthy elite.”

Our money and our money system are being abused to create control fraud; to allow rent-seeking to crowd out the real business of investment, risk-taking, and adding social value; to construct corporations which do nothing but eat of the fruit of the magic money tree, the very tree that David Cameron said does not exist.

Under the onslaught of neoliberalism it is necessary to identify a prerequisite, a necessary response, to stem that onslaught and initiate its retreat. That prerequisite is the understanding that money and monetary systems are constructed by society. The response is to restore money and monetary systems into society’s democratic control. From there, regulation and supervision of finance and markets can be re-imposed. Social value, dignity, and security can then be restored to employment.

 

John Hully is an IT Service Manager with a special interest in Governance. He helps develop policy for the National Health Action Party, and is currently creating a syllabus from the new Primary Computing Curriculum. He blogs at The Putney Debates.

6 Comment responses

  1. Avatar
    May 07, 2014

    Yep! Consume more than we create and debase the currency obsessively and we’ll soon all be living in the kind of socialist “security” they enjoy in, for example, Venezuela.

    Reply

    • Avatar
      May 07, 2014

      Iain, that’s the nonsense .

      Reply

    • Avatar
      May 07, 2014

      Iain,

      The US govt has created $29 Trillion to date to bail out Wall Street; the UK govt has created over £300 Billion just to buy a third of the UK national debt, which it could write off with a keystroke.

      Neither state has “debased the currency”. If either state did not back the money which private banks created, then there would be no trust, banks could not create money and the economy would have no money. The economy and the state would then collapse together.

      Both UK and the US have a sovereign currency and a central bank, and debts in their national currencies.

      The decision is not whether the state should create money, or regulate the creation of money by private banks, but whether money should be created for public good or speculation and rent-seeking.

      If too much money is in circulation, it can be siphoned off through taxation.

      Reply

      • Avatar
        May 09, 2014

        The question is precisely whether the government should create money or interfere with the banks. As I pointed out in El Pais in June 2012, the 2008 crisis was prompted by the state exempting banks from normal commercial discipline and the answer is not more interference but less. As early as the crash of 1857, it was noted that government safety nets encourage excessive risk-taking and I’m delighted to say that a recent edition of the Economist concurs http://www.economist.com//news/essays/21600451-finance-not-merely-prone-crises-it-shaped-them-five-historical-crises-show-how-aspects-today-s-fina?fsrc=nlw%7Chig%7C4-10-2014%7C8283453% 7C97956952%7CUK . I knew they’d get there in the end! Similarly, the Keynesian nonsense of inflating the next bubble as soon as the current one bursts is strongly contraindicated. Gordon “Gormless” Brown did not “save the world” (after “abolishing boom and bust”) by plunging our grandchildren into debt.
        You may concur with Ronnie Regan: “I never worry about the deficit, it’s big enough to look after itself,” but extracting money through taxation is not so simple as you may suppose. I’m old enough to remember loony-left (if you’ll excuse the tautology) Chancellor Dennis “squeeze the rich till the pips squeak” Healey being shown that his top marginal rate was yielding no net revenue. He persisted with it on the grounds that it was “socially just.” Healey hated people like Jackie Stewart and was determined to drive them out of the country: probably the only aspect of his policy that could be counted a success. Again, however attractive you might find the prospect personally, few of the rest of us would like to see these days return.
        Argentina wrote off its debt “with a keystroke” in 2002 and has been excluded from normal commerce ever since. Where Venezuela goes today, I suspect it’s bound to follow.

        Reply

        • Avatar
          May 11, 2014

          The choice you offer is nugatory. Private banks are licensed to create sovereign currency on behalf the govt, which ultimately backs that IOU. And rightly so: the business of banks should be to assess risk and make loans to persons and business.

          Given vast underemployment in UK and US, both governments could and should be printing money to stimulate the economy. It would have required much less than the trillions printed to give failed banks (and other financial institutions) the illusion of stability.

          In licensing banks to create money, the government has a democratic and a fiduciary responsibility to regulate those banks in order to manage the risks they present to themselves as businesses, to the state, and to the public.

          Deregulation and de-supervision have inevitably led to de-criminalisation, as Professor Black demonstrates. To call for less regulation is irresponsible.

          The ‘grandchildren in debt’ argument is also spurious: it assumes a sovereign nation has no future economy and will default.

          The UK is not Argentina, and would not peg the £ to the dollar. It should be remembered that it was not socialism which led Argentina to default, but a military dictatorship and a savage Hayekian experiment.

          The defeatism with regard to collecting taxes is easily adopted by those who wish not to pay them. I argue taxation should be moved from earnings to property; but capital controls may well be required.

          As for those who whine they have been ‘driven from the country’ to avoid paying tax, I have no sympathy. They could hand their passport and citizenship in at the exit.

          Reply

  2. Avatar
    May 15, 2014

    John,
    Your argumnt is spot on and I would go further in recommending asset nationalistion for those leaving the country because they have decided its up to them to allocate tax rates, meanwhile forgetting the cost paid by others (historic public provision) for their success.

    Paul

    Reply

Leave a comment