Europe is slowly spinning out of control. The Centrifugal forces of failing economics and politics are causing populism on the peripheral edges of the bloc. The push for power in Hungary and Poland is also coming to life in Austria and the Czech Republic, which in turn provides oxygen to the ever shrill voices of the secessionist movements that have seen Brexit, the Catalonia crisis and Italy’s Lombardy and Veneto regions calling for independence. They are all connected.
These are the escalating symptoms of political and economic fragility. The concentration of this failure has manifested itself as rising inequality and social injustice. Rights and suffrage go hand in hand and the solidarity of those less fortunate is finally being seen.
Proper analysis of macroeconomics – that is the performance, structure, behaviour and decision-making of an economy as a whole will lead the impartial mind to conclude that average incomes have not just stagnated but declined when factoring in “real” inflation over the last four decades. Whilst citizens see economies recovering from the 2008 bank-driven financial collapse, their own economic experience is now turning into a crisis of daily life. If not for them, then for members of their family, usually the generation below.
Increases in employment have not arrested the fall in living standards for the many whilst corporations see ever-greater levels of capital wealth, enriching their small management teams. This drives an inevitable cycle of lower consumption, that itself pushes down wages and so on.
The employment landscape has also changed considerably over the last four decades. The middle classes have been affected by the rise of high-skill and low-skill work, leaving many no option but to resort to the latter. This large demographic has been “hollowed out”, as so many economists often report today.
Deceptive economic reporting by government masks what is really going on. We might have the lowest unemployment in Britain for forty-four years, but we also have one third of all children living in poverty.1 How can this dichotomy of life in the sixth richest nation on Earth exist?
In 1997, General Motors, Ford, Exxon, Walmart and AT&T were the largest corporations in the USA. Ten years later, not much had changed – it was Walmart, Exxon, General Motors, Ford and General Electric. Another decade on and a seismic shift had already occurred. Apple, Google, Microsoft, Facebook and Amazon are the top dogs with the biggest market capitalisation. Only Exxon Mobil now makes it to the top 10.
General Motors was the largest motor manufacturer in the world from 1931 to 2007. At its peak in the late 1980’s General Motors employed 350,000 workers not including tens of thousands more in the supply chain. In 2016, GM produced 10 million cars with just 200,000 workers.2
Facebook, a company founded in 2004 that employed just 15,000 people ousted GM from the top five US corporations a few years back. And whilst Facebook continues to grow exponentially, its global workforce has barely grown and now sits at just 17,016 (December 2016).
These crest fallen corporate manufacturing behemoths that build and sell things, to this day still employ nearly three times as many workers as the so-called frontier firms, now known as tech giants. The diffusion of wealth is therefore being concentrated into the hands of so few that you can count them on one hand.
This is evidenced by productivity verses wages. Since the beginning of the 1980’s productivity in the US, and many other western economies for that matter, has increased by almost 250 percent.3 In real terms, wages have fallen a very long way behind. From that you can deduct that political influences, those macroeconomic decisions over the economy, have been such that the workforce has not kept up with those productivity gains in any tangible way. Inequality was an unreported output.
In this backdrop, western politicians and economists then forced to “trickle down economic” theory down the throats of its citizens. It hinged on two assumptions: all members of society would benefit from growth, and growth is most likely to come from those with the resources and skills to increase productive output.
As we have since learned, that was the lie of political charlatan’s who were bankrolled by the very corporations who in turn funded shadowy, obscure think tanks and a subservient media to promote nothing more than the economic mirage of excessive neoliberalism.
The “hollowing” out of the middle classes has led to millions entering what Britain politely terms as the “JAM’s” or Just About Managing.4 Academics like to refer to these hardworking but poor households as the “precariat” – a social class formed by people suffering from a condition of “existence without predictability or security, which affects both material and psychological welfare”. Nearly 40 percent of all British citizens live in a world dominated by austerity that, by no fault of their own, end up stuck in JAM.
Whilst corporations continue to suck the wealth and well being of nations, the state inevitably picks up the tab for this new and rapidly rising social class who can barely feed their families. Half of all households in Britain are now dependent on state benefits to make ends meet. The shredding of the social contract is leading directly to those centrifugal forces referred to earlier. It is this that is tearing apart the stability of Western democracies.
Economically, this injustice can be demonstrated no better than Amazon’s CEO Jeff Bezos. He is reportedly the world’s richest man, worth a staggering $90 billion. His personal wealth exceeds the annual GDP of two thirds of the world’s economies. To reach such stratospheric wealth his workforce permanently suffers brutally exploitative contracts and low wages the world over. A committee of British MP’s recently concluded that Amazon workers were routinely forced to sign “unintelligible contracts designed to stop them asserting their rights”.
Europe’s real problem is not really immigration, the economy or the threat of the fourth industrial revolution. It is the loss of dignity, the loss of rights and the total loss of social justice as a result of the cynical exploitation of the working and middle classes by those who should know better, by those in power. Blowback is both inevitable and now visibly evident.
When parents cannot feed their children, when families submerge under a sea of un-payable debt, when communities decay, this loss leads to unambiguous frustration and anger. When there is nowhere to go, no choice – anything but the status quo will do. Hence, we see the rise of populism, isolationism and extremism.
Call it what you like, but it’s not the economy on its own that causes these reactionary responses. The economic ideology deployed since the 1980’s is a tool of the selfish and greedy and it has ended up cutting the umbilical chord between the state and its people. Those at the helm have become so corrupted by power and money they still fail to see what ails, fails and ultimately nails everyone else.
History tells us, when the social contract is severed, the state is in deep trouble. If Trump fails to make good on his promise to make America great again, what’s next? If the Conservative party fail to make a good Brexit deal, or indeed, any deal for Britain and the economy sinks into recession, what then?
The American philosopher Richard Rorty gave lectures at University College, London and Trinity College, Cambridge about his controversial 1989 book “Contingency, Irony and Solidarity”. In it Rorty predicted with a high degree of precision that:
“Members of labour unions, and un-organised unskilled workers, will sooner or later realise that their government is not even trying to prevent wages from sinking or to prevent jobs from being exported. Around the same time, they will realise that suburban white-collar workers – themselves desperately afraid of being downsized – are not going to let themselves be taxed to provide social benefits for anyone else.
At that point, something will crack. The non-suburban electorate will decide that the system has failed and start looking around for a strongman to vote for – someone willing to assure them that once he is elected, the smug bureaucrats, tricky lawyers, overpaid bond salesmen and post modernist professors will no longer be calling the shots…
All the resentment which badly educated Americans feel about having their manners dictated to them by college graduates will find an outlet”.
Nearly thirty years later, we have Trump promising to drain the swamp, in a nation fully divided and what many consider to be, on the brink of civil unrest along with its alt-everything’s.
Did Rorty have such foresight as to predict exactly the trajectory of economic theory or did he simply look back in history to see the future?
Bill Clinton’s 1991 election campaign advantageously used the then-prevailing recession in the United States as one of the campaign’s means to successfully unseat George H. W. Bush with the slogan “It’s the economy, stupid.”
Today, taxing what is left of the dwindling middle classes to pay for an austerity they never caused whilst ostentatious billionaires parade across endless front pages of the glossies and financial pages will only accelerate the predictability of Rorty’s thoughts.
At this juncture, politicians still have a choice. Pitching workers purely against productivity gains in an age of new technologies will only increase the precarious nature of life already blighting society and community alike. The tax burden has to revert back to corporate capital. Corporations need to understand their place in society. Society has to be included in economic models that return dignity, rights and justice – because it’s no longer about the economy, stupid!
Featured Image: General Motors’ workers assemble a Cadillac ATS on the assembly line at the General Motors Lansing Grand River Assembly Plant. © Bill Pugliano – Getty Images
About the Author
Graham Vanbergen’s business career culminated in a Board position in one of Britain’s largest property portfolio’s owned by one of the world’s largest financial institutions of its type. Today, he writes for a number of renowned news and political outlets, is the contributing editor of TruePublica.org.uk and Director of NewsPublica.com.
1. (1) BBC – UK Unemployment at 44 year low: http://www.bbc.com/news/business-40947087
2. Fortune 500 – 50 year database: http://archive.fortune.com/magazines/fortune/fortune500_archive/full/1995/
3. The productivity pay gap: http://www.epi.org/productivity-pay-gap/
4. YouGov. Just About Managing: https://yougov.co.uk/news/2016/11/30/who-are-jams-37-britons-say-they-are-just-about-ma/