The debt deal will hurt the poorest Americans, convinced by Fox and the Tea Party to act against their own welfare

Debt deal: anger and deceit has led the US into a billionaires' coup

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• • George Monbiot
  • guardian.co.uk, Monday 1 August 2011 21.29 BST
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Illustration by Daniel Pudles
There are two ways of cutting a deficit: raising taxes or reducing spending. Raising taxes means taking money from the rich. Cutting spending means taking money from the poor. Not in all cases of course: some taxation is regressive; some state spending takes money from ordinary citizens and gives it to banks, arms companies, oil barons and farmers. But in most cases the state transfers wealth from rich to poor, while tax cuts shift it from poor to rich. So the rich, in a nominal democracy, have a struggle on their hands. Somehow they must persuade the other 99% to vote against their own interests: to shrink the state, supporting spending cuts rather than tax rises. In the US they appear to be succeeding. Partly as a result of the Bush tax cuts of 2001, 2003 and 2005 (shamefully extended by Barack Obama), taxation of the wealthy, in Obama's words, "is at its lowest level in half a century". The consequence of such regressive policies is a level of inequality unknown in other developed nations. As the Nobel laureate Joseph Stiglitz points out, in the past 10 years the income of the top 1% has risen by 18%, while that of blue-collar male workers has fallen by 12%. The deal being thrashed out in Congress as this article goes to press seeks only to cut state spending. As the former Republican senator Alan Simpson says: "The little guy is going to be cremated." That means more economic decline, which means a bigger deficit. It's insane. But how did it happen? The immediate reason is that Republican members of Congress supported by the Tea Party movement won't budge. But this explains nothing. The Tea Party movement mostly consists of people who have been harmed by tax cuts for the rich and spending cuts for the poor and middle. Why would they mobilise against their own welfare? You can understand what is happening in Washington only if you remember what everyone seems to have forgotten: how this movement began. On Sunday the Observer claimed that "the Tea Party rose out of anger over the scale of federal spending, and in particular in bailing out the banks". This is what its members claim. It's nonsense. The movement started with Rick Santelli's call on CNBC for a tea party of city traders to dump securities in Lake Michigan, in protest at Obama's plan to "subsidise the losers". In other words, it was a demand for a financiers' mobilisation against the bailout of their victims: people losing their homes. On the same day, a group called Americans for Prosperity (AFP) set up a Tea Party Facebook page and started organising Tea Party events. The movement, whose programme is still lavishly supported by AFP, took off from there. So who or what is Americans for Prosperity? It was founded and is funded by Charles and David Koch. They run what they call "the biggest company you've never heard of", and between them they are worth $43bn. Koch Industries is a massive oil, gas, minerals, timber and chemicals company. In the past 15 years the brothers have poured at least $85m into lobby groups arguing for lower taxes for the rich and weaker regulations for industry. The groups and politicians the Kochs fund also lobby to destroy collective bargaining, to stop laws reducing carbon emissions, to stymie healthcare reform and to hobble attempts to control the banks. During the 2010 election cycle, AFP spent $45m supporting its favoured candidates. But the Kochs' greatest political triumph is the creation of the Tea Party movement. Taki Oldham's film (Astro)Turf Wars shows Tea Party organisers reporting back to David Koch at their 2009 Defending the Dream summit, explaining the events and protests they've started with AFP help. "Five years ago," he tells them, "my brother Charles and I provided the funds to start Americans for Prosperity. It's beyond my wildest dreams how AFP has grown into this enormous organisation." AFP mobilised the anger of people who found their conditions of life declining, and channelled it into a campaign to make them worse. Tea Party campaigners take to the streets to demand less tax for billionaires and worse health, education and social insurance for themselves. Are they stupid? No. They have been misled by another instrument of corporate power: the media. The movement has been relentlessly promoted by Fox News, which belongs to a more familiar billionaire. Like the Kochs, Rupert Murdoch aims to misrepresent the democratic choices we face, in order to persuade us to vote against our own interests and in favour of his. What's taking place in Congress right now is a kind of political coup. A handful of billionaires have shoved a spanner into the legislative process. Through the candidates they have bought and the movement that supports them, they are now breaking and reshaping the system to serve their interests. We knew this once, but now we've forgotten. What hope do we have of resisting a force we won't even see? • A fully referenced version of this article can be found on George Monbiot's website. On Twitter: @GeorgeMonbiot

• guardian.co.uk © Guardian News and Media Limited 2011

Call the fat cats’ bluff and tax their preposterous pay fairly

September 2, 2007
Simon Jenkins

Prison officers last week went on strike over a pay rise of 2.5%, phased. The heads of Britain’s 100 biggest companies have had 37%, unphased, as presumably are its recipients. The bosses won 28% more last year, 16% the year before and 13% and 23% in the two preceding years, yielding an average pay of £2.8m a head or 20 times the rise in price inflation. Under Labour, these company directors have stretched their remuneration to almost 100 times average earnings, a gap unprecedented since the rise of modern taxation.

Is this a good or bad thing? Any pay package is, like beauty, in the eye of the beholder. But for an entire class of workers to receive sequential increases of 37%, 28% and 16% suggests a serious leakage of cash from businesses into the pockets of those at the top. Nor is there any noticeable relationship of pay to company size or success. Last week Eric Nicoli left as boss of EMI after eight years in which the company faltered and its share price fell by 40%. Yet he received £800,000 a year in salary and was given a leaving present of £2.8m.

Cash bonuses mostly in financial services are beyond the imaginings of wage slaves. Bob Diamond, who works at (but does not even run) the floundering Barclays Bank, took a bonus of £10.4m this year. Sir Fred Goodwin of the Royal Bank of Scotland took £2.7m. Last month’s Guardian/Office for National Statistics survey reported that bonuses overall increased 30% in 2007 to £14 billion, double last year’s rise. Readers may be tempted to ask how people contrive to dispose of such sensational winnings each year.

The apologists have been in full cry. A simple response is to play the comparisons game. These companies are the size of small states and their leaders have a right to tax their workers and shareholders accordingly. So implies Peter Newhouse, the survey’s author, and a consultant with Reward Technology Forum. He says we should publicise rewards as “an important message to able and aspirational young people”. The CBI adds that companies must pay “the going rate” or competitive talent will float offshore and something called UK plc will suffer. Britain now depends for a third of its income on financial services, so do not kill the geese that lay the golden eggs.

Nor is that all. As this money swills through the pockets of bonus recipients, say the apologists, it “trickles down”, finding an outlet not just in blue-chip properties but in cars, restaurants, holidays, nannies, clothes, hunting stables and Cotswold interiors, most with a high labour content. The incomes of the very rich allegedly redistribute to the poor faster through personal expenditure than through taxation. This is plausible given how much of the latter goes on white collar salaries, fees and subsidies.

But all this is special pleading. In allowing himself to be bluffed by the super-rich, that they will emigrate if he properly taxes their earnings, Gordon Brown falls for the Mandy Rice-Davies retort: they would say that, wouldn’t they. As for dangling £2m bonuses before the young, it is like Margaret Thatcher telling young women to find themselves rich husbands. Other proffered comparisons, such as between executives and Elton John and David Beckham, ignore the fact that such celebrities operate in a truly open market, do not determine their own incomes and, unlike City firms, receive no public money.

Anyone who has served on a corporate remuneration committee knows how it operates. It puts pay decisions out to consultants who, like the nonexecutives, the headhunters and senior management as a whole, have a vested interest in inflated incomes. Everyone scratches everyone’s back.

Discussion is not concerned with market forces but public relations. How will an outrageous bonus look to the press? Can shareholders and investors be fooled?

Apart from such rare company doctors as Stuart Rose of Marks & Spencer, who can add value out of proportion to their price, Britain is experiencing the same breakdown in top pay restraint that JK Galbraith noted in America. Corporate remuneration, he remarked, was nothing to do with the marketplace but was a heart-warming gift from executives and their friends to each other, a gift that had grown so large as to “verge on larceny”.

I suspect that wildly extravagant short-term “incentives” are as likely to distort performance as boost it, as is the case with Whitehall public service targets. As for the idea that a 37% pay rise will trickle down to help the poor, this might pass muster as an economics essay but it will get short shrift in the canteen where 2.5% is the norm. Why does trickle-down not apply to them?

The claim that executives with families well installed in London and country houses will suddenly vanish to Monaco or the Cayman Islands if not paid millions more each year (or if fully taxed on those millions) is absurd. It ignores the role of location, lifestyle and other nonpecuniary perks in a modern executive’s career package.

Being well regarded for running a successful company should be more satisfying than a reputation for greed, as BP’s Lord Browne and the privatisation “fat cats” of the 1980s found to their anguish. London’s financial preeminence is based primarily on its lax market regulation and its agreeable living conditions for those not reliant on public services. Businesses will leave Britain not when executives are properly taxed but when they start losing money.

I prefer to kick all this out of court. The rich, like the poor, are always with us. There is no morality in economics. The exponential rise in corporate pay is a hangover from the 1986 Big Bang phase of Thatcherite capitalism. If it had anything to do with free competition, there would have been a rush of talent into this market sector and a consequent fall in pay. That has not happened.

Two forces are influencing top people’s pay. The first is structural. The fortunes recently made in the City are largely due to a shift from lumbering corporate suppliers of financial services, such as banks and brokers, to fast-moving individuals and partnerships. I see no harm in this. More worrying is the new cartels, like those that the Big Bang supposedly smashed. Just four accountancy firms control large-scale audit and have spilt over into public/private finance. Half of management consultancy, again involving a small group of firms, relies on work from government. The rise in statutory regulation under Labour has sent legal and other professional bonuses soaring. As Adam Smith said, people of the same trade never meet “even in merriment” but to conspire to raise prices. This is government’s doing.

The other force is political. The widening of the pay gap, which has not occurred in continental Europe, followed the disempowering of organised labour by Margaret Thatcher and Tony Blair, vigorously supported by Brown at the Treasury. This has released corporate Britain from any sense of self-restraint. Indulging tax loopholes for the rich while ordering workers to shoulder the fight against inflation may help Brown sound macho in the City, but it is high-risk politics.

A real sense of unfairness greeted the revelation that a number of the richest participants in economic success were, de facto, being subsidised by the rest through private equity tax evasion and/or nondomicilary status. The same anger was unleashed by the disclosure that a shift in the economy from manufacturing to financial services had led to a shift in profits to offshore tax havens.

Any lobbyist can cobble together special pleading for such antics, but they will not wash for millions of hardworking, tax-paying Britons. Low taxes for all are good, but tax breaks for a privileged few are wrong. The rising tide of wealth should float every boat, not just executive yachts.

As most people see their incomes slide ever further behind those about whom they read in the papers, they will be more inclined to cry halt. Democracy may not be the force it was, but it can deliver politicians an occasional kick, as can industrial relations. The prison officers may yet prove a straw in a wind that sweeps up others in its tail.

The days of statutory pay restraint are mercifully past, replaced in Britain by the most fluid labour market in Europe. But government vigilance is needed to retain that fluidity, and a regard for fairness to back it up.

Capital and labour will never coexist in a climate of equality, but some respect for equity must underpin the nation’s social contract. Otherwise we shall be back to the bitter divisions of the 1970s, where nobody wants to go.

Don't be fooled by Bush's defection: his cures are another form of denial

The president's avowed conversion on climate change is illusory. He is just drumming up new business for his chums

George Monbiot
Tuesday January 30, 2007
The Guardian

George Bush proposes to deal with climate change by means of smoke and mirrors. So what's new? Only that it is no longer just a metaphor. After six years of obfuscation and denial, the US now insists that we find ways to block some of the sunlight reaching the earth. This means launching either mirrors or clouds of small particles into the atmosphere.
The demand appears in a recent US memo to the Intergovernmental Panel on Climate Change. It describes "modifying solar radiance" as "important insurance" against the threat of climate change. A more accurate description might be important insurance against the need to cut emissions.
Every scheme that could give us a chance of preventing runaway climate change should be considered on its merits. But the proposals for building a global parasol don't have very many. A group of nuclear weapons scientists at the Lawrence Livermore laboratory in California, apparently bored of experimenting with only one kind of mass death, have proposed launching into the atmosphere a million tonnes of tiny aluminium balloons, filled with hydrogen, every year. One unfortunate side-effect would be to eliminate the ozone layer.
Another proposal, from a scientist at the National Centre for Atmospheric Research, in Boulder, Colorado, suggests spraying billions of tonnes of sea-water into the air. Regrettably, the production of small salt particles, while generating obscuring mists, could cause droughts in the countries downwind. Another scheme would inject sulphate particles into the stratosphere. It is perhaps less dangerous than the others, but still carries a risk of causing changes in rainfall patterns. As for flipping a giant mirror into orbit, the necessary technologies are probably a century away. All these fixes appear more expensive than cutting the amount of energy we consume. None reduces the concentration of carbon dioxide in the atmosphere, which threatens to acidify the oceans, with grave consequences for the food chain.
The demand that money and research be diverted into these quixotic solutions is another indication that Bush's avowed conversion to the cause of cutting emissions is illusory. He is simply drumming up new business for his chums. In his state of the union address last week, he spoke of "the serious challenge of global climate change" and announced that he was raising the government's mandatory target for alternative transport fuels fivefold. This is wonderful news for the grain barons of the red states, who will grow the maize and rapeseed that will be turned into biofuel. It's a catastrophe for everyone else.
An analysis published last year by the Sarasin Bank found that until a new generation of vegetable fuels, made from straw or wood, is developed, "the present limit for the environmentally and socially responsible use of biofuels [is] roughly 5% of current petrol and diesel consumption in the EU and US". Bush now proposes to raise the proportion to 24% by 2017. Already, though the rich world has replaced just a fraction of 1% of its transport fuels, the UN Food and Agriculture Organisation reports that using crops to feed cars has raised world food prices, with serious consequences for the poor. Biofuels fall into the same category as atmospheric smoke and mirrors - a means of avoiding difficult decisions.
But at least, or so we are told, the argument over whether or not manmade climate change is happening is now over. On Friday the Intergovernmental Panel on Climate Change publishes the first installment of its vast report, which collates the findings of the world's climate scientists. Though conservative in its assumptions, it shows that if you persist in believing that there is no cause for concern, you must have buried your head till only your toes are showing. If even Bush now grudgingly acknowledges that there's a problem, surely we've seen the last of the cranks and charlatans who had managed to grab so much attention with their claims that global warming wasn't happening?
Some chance. A company called Wag TV is currently completing a 90-minute documentary for Channel 4 called The Great Global Warming Swindle. Manmade climate change, the channel tells us, is "a lie ... the biggest scam of modern times. The truth is that global warming is a multibillion-dollar worldwide industry: created by fanatically anti-industrial environmentalists; supported by scientists peddling scare stories to chase funding; and propped up by complicit politicians and the media ... The fact is that CO2 has no proven link to global temperatures ... solar activity is far more likely to be the culprit."
So it's the same old conspiracy theory we've been hearing from the denial industry for 10 years, and it carries as much scientific weight as the contention that the twin towers were brought down by missiles. The programme's thesis revolves around the deniers' favourite canard: that the "hockey-stick graph" showing rising global temperatures is based on a statistical mistake made in a paper by the scientists Michael Mann, Raymond Bradley and Malcolm Hughes. What it will not be showing is that their results have been repeated several times by other scientists using different statistical methods; that the paper claiming to have exposed the mistake has been comprehensively debunked; and that the lines of evidence used by Mann, Bradley and Hughes are just a few among hundreds demonstrating that 20th-century temperatures were anomalous.
The decision to commission this programme seems even odder when you discover who is making it. In 1997 the director, Martin Durkin, produced a similar series for Channel 4 called Against Nature, which also maintained that global warming was a scam dreamed up by environmentalists. It was riddled with hilarious scientific howlers. More damagingly, the only way in which Durkin could sustain his thesis was to deceive the people he interviewed and edit their answers to change their meaning. After complaints by his interviewees, the Independent Television Commission found that "the views of the four complainants, as made clear to the interviewer, had been distorted by selective editing" and that they had been "misled as to the content and purpose of the programmes when they agreed to take part". Channel 4 was obliged to broadcast one of the most humiliating primetime apologies it has made. Are institutional memories really so short?
So the whole weary business of pointing out that the evidence against man-made climate change is sparse and unable to withstand critical scrutiny, while the evidence in favour is overwhelming and repeatedly confirmed, must begin all over again. How often must scientists remind the media that a handful of cherry-picked studies does not amount to the refutation of an entire discipline?
But with Bush's defection, the band of quacks making these claims is diminishing fast. Now the oil and coal companies that support such people have changed their target. Instead of trying to persuade us that man-made global warming is a myth, they are seeking to divert us into doing everything except the one thing that has to happen: reducing our consumption of fuel. It is another species of denial.
George Bush's purpose - to insulate these companies from the need to cut production - is unchanged. He has simply found a new way of framing the argument.

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