UK

‘It Can’t Happen Here’ could happen here

DECEMBER 7, 2924

Guy Standing suggests a bleak political outcome will result from Labour pursuing its current economic strategy.

In 1935, Sinclair Lewis wrote a book entitled It Can’t Happen Here, warning that fascism in Europe could easily happen in the United States. His central character is a right-wing multi-millionaire, Buzz Windrip, who stands for President, whose speeches are uncanny precursors of Donald Trump’s. So is the story, although the shooting of Windrip has a nastier outcome.

Today, we need a British equivalent to Lewis’ book, because all the signs are there to suggest that unless a progressive transformational politics is launched now, in a few years’ time the extreme right could take control.

In most analyses of Trump’s victory, the focus has been on demographics – whites versus minorities, women versus men, young versus old, etc. There has been very little on class, although Bernie Sanders accused the Democrats of abandoning the working class. We will come to his perspective shortly.

Before doing so, we should reflect on some ancient wisdom. Plato was among the first to assert that democracy could only thrive if there was only modest inequality and widespread public education based on morality and respect for truth. Neither condition exists today.

We are living in a globalising economic system best described as rentier capitalism, in which an institutional architecture has been constructed such that more and more income flows to the owners of physical, financial and so-called intellectual property.

Wealth has grown relative to income, and wealth inequality vastly exceeds income inequality, while the labour share of income has fallen globally. In the process, the paradox is that the ideological domination by free market economics has created the most unfree market system ever imagined, as elaborated elsewhere.

Two implications help to explain the crisis leading to the re-election of a man as President who in any real democracy should have never been considered. First, rentier capitalism has generated a new global class structure, in which the top three classes in income terms are recipients of rental income – a plutocracy, an elite serving their interests and a shrinking salariat in secure employment benefiting from various forms of property.

Below them is the old proletariat, long the core support for US Democrats, Labour in Britain and social democrats generally. That has shrunk sharply, with many falling into the new mass class, the precariat, defined in three dimensions – insecure, unstable labour, volatile earnings without non-wage benefits or guaranteed state benefits and exploited by debt, and, most importantly, distinctive relations to the state, in that they are the first mass class in history that is systematically losing acquired rights of citizenship, les droits acquis. They are, and feel like, supplicants. This is stigmatising, humiliating and induces the four As – Anxiety, Alienation, Anomie and Anger.

In 2011, I wrote a book, The Precariat: The New Dangerous Class, which has been translated into 25 languages and led me to make hundreds of presentations around the world. A Financial Times reviewer said I was predicting that the growth of the precariat would lead to fascism. This was wrong. The argument was that unless governments addressed the needs, insecurities and aspirations of the precariat, there would be a drift to fascism. On page 1, it is claimed that we would see the emergence of a “political monster”. In 2016, numerous people emailed to say the monster had arrived.

The precariat has continued to grow, but consists of three factions in what is still a class-in-the-making, not yet a sufficiently united class-for-itself with a common vision. The first faction is the Atavists, those falling out of old working-class communities, with little formal education. They feel they have lost Yesterday, and tend to support Trump and his look-alikes elsewhere. They are predominantly men. The term ‘left behind’ is not right. They have been pushed down. They tend to be anti-feminist, racist and anti-liberal.

The second faction is the Nostalgics, the millions who feel they have no home anywhere, a Present. These are the migrants along with minorities including many people with disabilities. In general, they do not support populist far-right politicians, but some are drawn to appeals to traditional conservative views, through the weaponizing of religion, a favourite tactic of Trump and his type.

The third faction is the Progressives. These are mainly the young educated who were promised a Future and a Career if they went to college. They come out realising they bought a lottery ticket and that they do not have future income security. They are aghast at the neo-fascism of the Trumps. But they see little in what the orthodox ‘left’ is offering. So, they are inclined to disengage from politics, not voting at all. This is especially likely when they see Biden et al supporting genocidal slaughter in Palestine.   

Now we come back to Bernie Sanders’ reaction to the Democrats defeat. After he accused them of abandoning working-class people, the Democratic Party chair said this was BS (bullshit) and that Biden had been the most pro-working class president, pointing out that he had saved union pensions, joined a picket line and created millions of high-wage jobs.

Both were stuck in the past. Biden had looked after the proletariat, but ignored the precariat. Labour and social democrats in Europe have been doing the same. The precariat are not in trade unions with access to pensions, paid holidays and access to social rights. They are wallowing in chronic insecurity, denied access to universal benefits and entitlements. The Democrats have neglected them for three decades, beginning with Clinton’s welfare reform of 1996, when he pronounced “the end of welfare as we know it”. This shifted social policy decisively to means-testing and behaviour-testing, backed by punitive sanctions. New Labour and social democrats of the Third Way persuasion in Europe took the same route. In the UK, it culminated in the odious Universal Credit. 

While Democrats were alienating the precariat, a space opened for libertarian populists. Ironically, because Trump is a serial liar, able to promise anything he thinks will appeal to emotions, he and populist copyists can sell a vision of a better future when in fact the plutocracy he represents and on which he depends for financial support will deliver libertarian policies that are contrary to the material interests of the precariat.

Symbolically, not only was he funded by the world’s richest man, Elon Musk, who reportedly donated $175 million to the campaign, but on the day after Trump’s victory, the nine richest American plutocrats gained an extra $64 billion. There were also unseemly celebrations on Wall Street, with traders wearing Trump T-shirts. As one said, “Every capitalist in America is celebrating.” Meanwhile, there were reports that millions would be losing medical insurance.    

This leads back to the analogy with Britain. In an injudicious Mais Lecture earlier this year, Rachel Reeves, in preparing to become Chancellor, claimed that Labour would emulate Bidenomics, which she named “securonomics”, or “modern supply-side economics”.

In her initial budget in October she certainly began that. If Labour continues with it, one can predict political failure and socio-economic conditions conducive to US-style plutocratic populism, in which someone like Nigel Farage will have a realistic chance of winning power.

Progressives should remember that Labour only received the support of 19% of the electorate in July, in what were the most propitious circumstances imaginable, faced by an exhausted, chaotic Conservative Party, pilloried by Farage’s Reform Party. Starmer’s Labour obtained fewer votes than Corbyn in 2019. They won a landslide only because of a woefully undemocratic electoral system. But with that system, they only have to lose a couple of percentage points of voter support to become a political rump. Without electoral reform towards proportional representation, Labour could just prepare the ground for Faragism.

Another lesson for Britain is that the space for a plutocratic populism is gained by a combination of a visionless centre-left party and the erasure of a civilised centre-right party. Trump achieved the latter by openly attacking the old Republican establishment. In Britain, we have a visionless Labour government and crushed civilised Conservatism, as the Tories lurch to the right to wrestle with Trump’s close friend, Nigel Farage.

In that context, Bidenomics with a British face could alienate enough of the precariat to sleepwalk to defeat. The measures Labour has already introduced are seriously regressive – refusing benefits for children with two younger siblings, cutting winter fuel allowance for people hovering above poverty, raising national insurance (passed onto workers by lower wages and expanding the precariat), cutting the real value of benefits for people with disabilities, and raising university tuition fees, which will hit students from low-income families.

A key idea behind securonomics is that public spending will shift from current to capital investment that will, in the government’s estimation, boost economic growth in the longer term. It brings to mind Keynes’ famous aphorism – “in the long run we are all dead”. But Reeves said in the Mais Lecture that Labour would adhere to a fiscal rule with a “target to ensure that expenditure on welfare is contained within a predetermined cap”. This is a clear signal that benefits that would give security to the precariat and others are set to fall.   

Labour is relying on attracting foreign financial capital to achieve growth, and in that regard organised a lavish Business Summit within months of coming into office. Moreover, in her dealings with finance, Reeves promptly blinked.

Before the election, Labour had said it would tax private equity profits – so-called ‘carry’ – at the same rate as income tax. Those in private equity are among the plutocrats and elite, making phenomenal money. In her budget, Reeves reneged on her commitment, and their lofty incomes will be taxed at 32% compared with 45% that other high-income earners are supposed to pay. There were lavish parties held in the City to celebrate.

This is a further regressive twist, and looks particularly nasty in the context of saying the government cannot pay benefits for all children living in poverty. Probably equally regressive is the proposed industrial strategy based on copying Biden, which promises even more subsidies for capital, reducing their risk exposure in the hope that this will boost GDP growth. If those subsidies go mainly to foreign capital, there will be massive leakages abroad, mainly to financial firms in the USA.

Reeves’ adoption of Biden’s industrial policy, based on supply-side economics, will not boost GDP growth by much. It did not in the USA. Even the IMF has recognised that structural inequalities of wealth and income are the main impediments to economic growth. But there is nothing on any plan to reduce inequalities in the Mais Lecture. Instead, Labour is to rely on supply-side reforms that will probably increase inequalities, while having little effect on investment and growth, because they will induce international tax competition.

However, the biggest flaw of all is the almost religious faith placed in growth. Labour believes higher GDP growth will lead to rising living standards all round. But under rentier capitalism, income gushes upwards, little trickles down. One revealing study found that with increased GDP growth, only the top two percentiles – that is, top 20% — gain more than the rate of growth. Lower down the spectrum many do not gain at all; growth increases inequality.

A further flaw in the misnamed securonomics is that there is no demand-side vision. Where is the increased demand coming from? The precariat’s income will remain depressed and uncertain, with Universal Credit making life more cruelly so. There is nothing to suggest private debt will fall, which is crushing demand and increasing stress, mental illness, deaths of despair and anomic violence. And real wages will continue their decades-long stagnation.

In short, if growth happens, made unlikely by Trump’s protectionist tariffs, it will not make the precariat more secure or reduce the inequality that breeds resentment, rising morbidity and mental ill health. On top of that, our education system has moved closer to the US system, in which the pursuit of ‘human capital’ has crowded out ethical education and respect for truth.

Unless Labour changes course, giving priority to providing basic security and a vision of a Future for the precariat, what has happened in the USA will happen here.               

Guy Standing is Professorial Research Fellow, SOAS University of London and a Council member of the Progressive Economy Forum. He is author of various books, including The Precariat: The New Dangerous Class and The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay.

Image: Rachel Reeves and Keir Starmer. Source: UK Parliament. Creator: JESSICA TAYLOR  Author: © UK Parliament / Maria Unger, licensed under the Creative Commons Attribution 3.0 Unported license.