The Marxists are back PART 2

From the October issue of Master Investor Magazine

In the UK, ordinary folk who never previously resented the fat cats of the City were aghast to learn that their Government had used public funds to keep the banks afloat so that the very people who had messed up could continue to receive their gigantic bonuses. If poor old Fred the Shred Goodwin was demonised, he still walked away with a seven figure pension. Very few senior bankers were fired. And none executed. Once again, no economist will offer a single clearcut reason as to why or how this financial earthquake, which precipitated four years of recession, could have happened. Howard Davies (then Chairman of the FSA and recently appointed Chairman of RBS) wrote an excellent book in which he identified nearly 40 critical factors.

They range from inadequate prudential regulation (and he was a regulator!) to short-selling, off-balance sheet vehicles, accounting irregularities, the greedy bonus culture, hedge funds (a plague of locusts) and the shadow banking system, inept liquidity risk management and flawed risk models. His conclusion: all of the above came together in a combustible mixture. Could it happen again, in Davies’ view? Quite possibly. It is difficult to assess the Credit Crunch without at some point reflecting that there was something very wrong with the system that permitted it to happen. The regulators eventually responded, in Europe but not America, by re-engineering bank capital adequacy regulations (Basel III). But the Left seized on this crisis as evidence of capitalism’s inherent contradictions.

Third: the resulting sovereign debt crisis in Europe. This arose because European governments were forced to rack up debt to exorbitant levels in the downturn, and because many had to refinance their moribund banking sectors.

When the financial collapse engulfed les Anglo-Saxons (as the French call Britain and America collectively) in 2008, José Manuel Barroso, President of the European Commission, sniffed that this crisis had nothing to do with Europe. Yet, within 18 months, a swathe of Southern European governments (plus Ireland) had hit the financial buffers. The first Greek bailout of May 2010 was a prelude to the protracted saga of how an overly indebted country could continue to function as a member of the Eurozone, which (as discussed elsewhere) has still not fully played out.

Fourth, as a consequence, the extensive welfare systems of the European social model came under huge strain. Right-of-centre politicians like George Osborne understood the need to bring under control the elaborate and often misdirected system of transfer payments which in many countries like the UK now account for more than one third of the national budget. This has given rise to activists who describe themselves as anti-austerity. One can see that they have a case in Greece, where government expenditure has been drastically reduced – libraries, museums and doctors’ surgeries closed. It’s more difficult to understand their case in the UK, where spending has risen in real terms every year since the crisis. Here, austerity means that previously inexorable increases in the welfare budget (Housing Benefit being a case in point) have only recently been checked. Pension spending has continued to rise in real terms, as has spending on the NHS.

In Scotland, Ms Sturgeon has shaped the SNP into a party that aspires not just to the independence of an ancient nation, but as the resistor of a wicked regime of austerity imposed from cruel, distant London. The facts that Scotland receives a more generous level of funding per capita than other parts of the UK or that major spending decisions are now taken in Edinburgh are ignored in this narrative. The Scottish Parliament has had the power to raise the basic rate of income tax by a penny since its inception; yet the SNP government has chosen not to use it, for fear of losing votes.

The fifth reason is the rise of environmentalism as a political movement. In the old days, conservationists, as they were called, were of the right. Landowners and aristos campaigned for red squirrels. The Duke of Edinburgh became the President of the WWF (World Wide Fund for Nature) in 1981. But, with the rising consciousness (Marxist term) of man-made global warming – climate change – the green movement began to align with the reds. Caroline Lucas, Britain’s only Green MP, has described her self as an old fashioned socialist.

The point is that the Green/Environmentalist critique of capitalism has breathed new life into the Marxist cause. They claim that capitalism, by always maximising profit (surplus value) by its very nature denudes the environment. Eminent left-wing writers like George Monbiot have constructed a new critique of the capitalist system from the Green Left, weaving environmental protection with themes of sustainable development, human rights, social inclusion and welfare policy, all under the general banner of equality.

Monbiot, by the way, like Mr Corbyn, was an arch-critic of the Iraq War and has even launched a pressure group which campaigns to put Tony Blair on trial as a war criminal. Everything connects.

In popularising the man-made global climate crisis, the Green-Reds have managed to expose just how stupid the Right can be, especially in America, where climate change deniers sit alongside racial segregationists and those who denigrate Darwinian evolution. On this side of the Pond we have some respectable climate change deniers, such as Lord Lawson. But the overwhelming consensus of the scientific establishment is that man-made carbon emissions are causing a rapid rise in mean global temperatures. Though no one agrees by how much temperatures might rise over a given time horizon.

On the academic front, Thomas Piketty’s Capital in the Twenty-First Century, published in 2013, shows persuasively how the rich have been getting richer at a much more rapid pace than median earners over the last 150 years (with a short interruption during the post-war baby boom years). This, says Piketty, is because the return on invested capital (r) has a tendency within capitalism to be higher than the rate of growth of the economy as a whole (g). This may seem rather dry to non-economists. But it is a very powerful argument in favour of wealth taxes as backed by Marxists; whereas bourgeois politicians just tinker with taxes on income.

Collectively, these five factors have breathed new life into the Marxist narrative, especially amongst disaffected young people, many of whom have college debts to repay and restricted job opportunities.

Yet it has taken time for all this to translate into electoral success for the Left. Indeed the initial impact of the Credit Crunch and European Sovereign debt crisis was to favour right-of-centre parties (Gordon Brown lost in the UK in 2010, and JLR Zapatero in Spain in 2011). Syriza in Greece and Podemos in Spain have only lately flourished in the arid soil of desperation that millions of lower middle class and working class Europeans feel, with only the prospect of joblessness and austerity ahead.

Hitherto, across Europe and America, middle class supporters of the status quo have exhibited a higher propensity to vote. But what if the one third of the electorate who refused to exercise their right to vote in the UK in May 2015 were stirred into action? This is Mr Corbyn’s dream, and, to some extent, the manner of his own victory in the Labour leadership contest proves that it is possible. If the goby guru, Mr Russell Brand, with his nine million followers on Twitter, could persuade the disaffected to register their votes, rather than propagating apathy, who knows how many millions of votes that could deliver?

Whatever you think of his views, it would be a mistake to underestimate Mr Corbyn. He has two rare qualities in modern politics: integrity and coherence. Right-of-centre Labourites might defect but, after the tsunami of support that brought him to the top, they will not be able to topple Mr Corbyn as Labour leader between now and 2020. Labour Party membership is surging (just as SNP membership surged after Ms Sturgeon took over).

All Mr Corbyn needs to get to Number Ten in 2020 is another economic crisis. This would further erode the credibility of the capitalist system, and of course consign Mr Osborne’s spreadsheets to the shredder.

What would a Corbyn government be like? Expect swinging tax increases on anybody earning above £40k, mansion taxes, stealth taxes on second homes, a massive hike in corporation taxes and, oh yes, a new wealth tax beyond even Mr Piketty’s dreams of avarice. Banks and railways will be nationalised. Private schools will be closed, their assets sequestered. The pound will plummet, the stock market will crash; gilt yields will soar. The national debt will rocket, at least until such time as national economic statistics are supressed as being socially obnoxious. The UK Border Force, together with the armed forces, will be disbanded.

You will try to buy a one-way ticket out, but not to the USA, since after Mr Corbyn flogs our fleet of Trident submarines to the Russians on the cheap our American friends will close their borders to British passport holders. The MI website will be closed down. The national grid will falter; but just before the lights go out your bank accounts will be frozen.

There is yet time to prepare. What we must collectively do to secure the young is to articulate what is the non-Marxist response to financial crises, climate change and the rest. History is driven by ideas. Hereon in, only the intellectually fittest shall survive.

Should we capitalist dinosaurs be scared of the New Marxist asteroid? Absolutely. And scared is exactly where they want us. Round One to the Corbynistas.

You can read Victor’s full article in the October issue of the Master Investor Magazine