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Economic system must be run to help the majority – not a few

By Western Morning News  |  Posted: January 25, 2013

The all-powerful markets have the power to dictate policies to governments

The all-powerful markets have the power to dictate policies to governments

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In an edited version of a speech for Plymouth University’s Beyond Capitalism series, Mark Serwotka, general secretary of the Public & Commercial Services Union, looks at austerity.

When economics is mentioned on the news, it is either talked about like the weather – a series of events that appear largely beyond our control and predicted by "forecasters" – or it is the incomprehensible trivia of whether the FTSE is up ten or the Dow Jones down 20.

Then there is a seemingly mythical element. In any fairytale you need a monster. In this case it is "the markets". But what are "the markets"? Who comprises them and why are they so powerful? I didn't vote for them and I doubt you did either – yet they apparently have the power to dictate policies to governments.

Closely aligned to the markets is "the confidence fairy". Apparently, if you keep the confidence fairy happy then the markets will stay asleep in their cave rather than marauding through jobs, public services, benefits and pensions – or hiking your tuition fees.

Capitalism as a system is fundamentally based around private property – the right to hold it, accumulate it, and to do with it as you see fit.

"Protecting property from the majority" is not quite how advocates of free market capitalism sell the concept. But as the US comedian George Carlin commented: "They call it the American Dream because you have to be asleep to believe it."

Democracy is therefore an anti-capitalist concept. Tony Benn argues democracy transferred power from the wallet to the ballot. What people could not afford to buy for themselves they could vote for at the ballot box: free education, the NHS, council housing, the welfare state. It's no coincidence that in an economic crisis – ie, when capital is threatened – it is these democratic gains that are sacrificed through cuts and privatisation to the non-profitable and profitable parts respectively.

Although in recent decades Karl Marx has been a derided figure, he argued that capitalism would inevitably sow the seeds of its own destruction, but many economic observers now think he is, finally, being proved correct.

The crash acutely affected the UK because it was, and is, the global centre of our generation's high-profit new market: the finance sector.

The growth of the finance sector has been a disaster for the UK. It has meant that British capital – our wealth – has been used to speculate on commodities and derivatives markets – with high returns for a tiny few – instead of investing in renewable energy, high-speed rail or much-needed council housing.

While the finance sector itself was a source of economic instability, it also sucked investment from other sectors that could have provided more stable growth.

What was it then that enabled the finance sector to grow so rapidly, to become the dominant sector in the UK economy, to be lauded by all major political parties, and then to crash the UK economy so spectacularly.

Firstly, deregulation. The government created markets for the finance sector by removing previous restrictions: from the familiar currency speculation, to a morass of futures markets, derivatives markets and the invention of ever more complex terms: collateralised debt obligations, special purpose vehicles, credit default swaps.

Secondly, it redistributed wealth ... to the rich. Through slashing corporation tax and the higher rate of income tax it allowed the super-rich to grab an even larger share of the national wealth.

The third element was privatisation. Entire industries – from the railways and telecoms to gas, electricity and water were taken out of collective public ownership. This transferred power over them from the ballot to the wallets of a few.

Many countries have recovered from the recession by boosting their exports. Despite devaluing the pound to make our exports cheaper to importing countries, there has been no export-led recovery. This is because no government has an industrial policy to support industries. In this free-market environment, those with capital are channelling it to where it can get the highest and quickest returns: the finance sector.

If we are to move beyond the failures of today's capitalism then we need to restart and extend the democratic revolution that constrained its power in the last century.

That means extending public or common ownership into areas of the economy that are "too big to fail". The great privatisation experiment has been a huge failure, from the NHS to the railways and, perhaps especially, the banks.

There's a simple test: if our society cannot function without it, then it should be publicly controlled – at a minimum that requires tough regulation, but more often it should mean publicly owned.

We need to invest where it is socially useful for the many, not profitable for a few. That means investing to create jobs, meet human needs and improve our living standards. I want to set out three reasons why my union believes the banks should be publicly owned.

Firstly, a bank underpinned by the state could lend at lower rates and offer savers higher rates.

Secondly, there is no end of investment opportunities from housing to redressing under-investment in renewable energy.

Thirdly, we can stamp out the gratuitous greed and institutional abuse we have seen in the finance sector.

The question is one of democracy: it is the wages, pensions and mortgages of millions of people that create the wealth banks have squandered. It's time the millions controlled their billions. Just as a century and more ago the Chartists, Suffragettes and trade unions argued for a political system open to all, today, to put it in the terms of the Occupy movement, we need an economic system run in the interest of the 99% not the 1%.

Sir Mark Moody Stuart will deliver the next Beyond Capitalism lecture on April 18. See http://www.plymouth.ac.uk/pages/view.asp?page=38717

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