What if NaMo was India’s PM in 1947?

By Girish Menon

Pervez Hoodbhoy, one of few famed Pakistan scientists, asked whether India could have launched Chandrayaan2 if Modi was India’s Prime Minister in 1947? I thought this was an extremely important question in an era when all things Nehruvian and Indirayian are being rubbished without any concern for facts.

Meghnad Desai, an economist of renown, in his latest piece in the Indian Express provides a stark example. Desai tries to create the impression that it was the private sector that was responsible for India’s lead in the space programme. Desai states that despite Nehru’s inclinations towards the public sector he listened to Sarabhai, who came from an industrialist family and had a market orientation, and this resulted in the successful space programme.

What Desai ignores is that ISRO has always been a public sector organisation. It was not started by the Sarabhai family and subsequently nationalised by a socialist Nehru or Indira.

A recent edition of the Guardian (How the state runs business in China) talked about how members of China’s Communist Party are involved in the management of all large companies operating in China. This includes western multinationals as well. And China is poised to be the world’s largest economy with its firms ready to compete with global corporates. Free market ideologues deliberately ignore such facts.

In India’s case, the spokespersons of the ruling corporatocracy fail to admit that the industrialists post independence viz. Tatas and Birlas did not have the capital nor the knowhow to launch the industrial revolution and it was left to Nehru to use tax payer money to launch the education and scientific revolution whose benefits India is now reaping.

The case I am making is that there are good public sector organisations as well as bad ones. The bad ones could be shut down due to their continuous reliance on government subsidies. But as the so far botched privatisation of Air-India has shown, India’s private sector enthusiasts have not shown any enthusiasm to take over and turn around such firms. Instead, they would like instant money spinners or public sector firms which can be cannibalised for instant profit.

Even in the case of bad public sector firms, if a systematic analysis of their sickness is carried out many will reveal that their problems often are not within the firm but lie outside with their political masters. In Air-India’s case the decisions by Praful Patel to favour Jet Airways and to destroy the public sector firm have led to its current state.

On the other hand, it is worthwhile to study the case of Jet Airways the private sector darling of free market India. It is now bankrupt despite all the favours given to it including flying rights and free aviation fuel.

There are so many instances of India’s preferred industrialists being given favourable loans, government lands and other subsidies and yet not contributing to reducing the burgeoning unemployment question. All of this is swept under the carpet as the current administration prepares to make a distress sale of the public sector.

India’s private sector has not provided global leadership in any area. While we await to see what Anil Ambani’s defence company will do, Indians must rejoice Chandrayaan2 while not forgetting that it is a public sector firm that is a world leader in rockets and satellite technology.

How Britain fell out of love with the free market

Andy Beckett in The Guardian


Twelve years ago, shortly after winning his third consecutive general election, Tony Blair gave the Labour party a brief lecture on economics. “There is no mystery about what works,” he said, crisply, speaking from a podium printed with the slogan “Securing Britain’s Future” at the party conference in Brighton. “An open, liberal economy prepared constantly to change to remain competitive.”

Blair rounded on critics of modern capitalism: “I hear people say we have to stop and debate globalisation. You might as well debate whether autumn should follow summer. They’re not debating it in China and India.” He went on: “The temptation is … to think we protect a workforce by regulation, a company by government subsidy, an industry by tariffs. It doesn’t work today.” Britain should not “cling on to the European social model of the past”. 

Most of his conference speech was vigorously applauded. But the passage on economics was received with solemn looks and silence. There was no heckling, as there had been when previous Labour leaders and chancellors delivered what they saw as home truths about the economy. Instead, there was a sense of resignation in the hall: an acceptance by a party of the left that the right had won the economic argument.

In the early years of the 21st century, the inevitability of an ever more competitive, deregulated, internationally orientated market economy, to which both government and society were subordinate – a doctrine often called neoliberalism – was accepted right across the mainstream of British politics: from the Thatcherites who still dominated the Conservative party; to the increasingly pro-business Liberal Democrats, who would soon form a coalition government with the Tories; to the Scottish National party, whose then leader Alex Salmond praised Ireland and Iceland for their low corporate taxes; to the Blair cabinet itself, where, I was told by a senior Labour figure in 2001, “You won’t find a single member with anything critical to say about capitalism.” It was assumed by the main parties that most voters felt the same way.

Margaret Thatcher’s government had overcome fierce opposition to install a free-market economy in Britain. But under Blair, seemingly more consensual and less dogmatic, the extending of markets into ever more areas of everyday life was presented as unavoidable, or simply practical: “what works”. The British housing market was thriving, with home ownership reaching an all-time high in 2003. There had not been a recession since 1991, a blissfully long time for the previously fitful British economy. Compared to the sometimes tatty, depopulating country of the 70s and 80s, much of Britain in the early 2000s looked successful – a society of regenerating city centres and steadily rising wages.

The free-market ascendancy was acknowledged even by some of its strongest critics. In 2000, the Marxist historian Perry Anderson declared: “The only starting-point for a realistic left today is a lucid registration of historical defeat … Neo-liberalism as a set of principles rules undivided across the globe: the most successful ideology in world history.” In 2007, Naomi Klein wrote in her book The Shock Doctrine that capitalism was “conquering its final frontiers”.

In 2017, that aura of invulnerability has evaporated. Disenchantment with the economic status quo has been potently expressed in elections across the world, from France to the US. But in no democracy has the political shift against the free market been as stark as in Britain.

Since Thatcher’s election in 1979, Conservative and Labour governments have privatised and deregulated, reduced taxes for business and indulged its excesses, opened up the economy to foreign capital and commercialised the national psyche, until Britain became one of the world’s most thoroughly neoliberal societies. And yet, at last year’s EU referendum, the votes of those “left behind” by all this played an unexpectedly pivotal role. Then, at this year’s general election, both the Conservatives and Labour campaigned – or appeared to campaign – against the economic system that they themselves had created.

The Conservative manifesto attacked “aggressive asset-stripping” of British companies by foreign buyers; “perverse pricing” by privatised rail companies; “exploitative” markets in energy, property, insurance and telecommunications; and “the remuneration of some corporate leaders … [which] has risen far faster than some corporate performance”.

Theresa May launching the 2017 Conservative election manifesto. Photograph: Danny Lawson/PA

“We reject the cult of selfish individualism,” the manifesto declared, in language seemingly calculated to insult Thatcherites. “We do not believe in untrammelled free markets.” Instead, the Conservatives now believed that “regulation [was] necessary for the proper ordering of any economy”. They would “enhance workers’ rights and protections”, and create an “economy that works for everyone”. The obvious implication was that the free market had created the opposite.

The Labour manifesto opened with almost exactly the same words: “Creating an economy that works for all”. Like the Tories, Labour attacked executive pay and promised to strengthen workers’ rights. Like the Tories, they offered an “industrial strategy” through which government – long depicted by free-marketeers as largely irrelevant or actively harmful – would help modernise the economy. And like the Tories, Labour said companies should no longer be run primarily for their shareholders, as free-market doctrine has insisted since the early 80s, but also for the benefit of their employees, customers and the public as a whole.

While the Conservatives offered mostly rhetoric, Labour offered policies – nationalisation, restored trade union rights, restrictions on the City of London – which would undo much of British neoliberalism. It is these policies that, on 8 June, helped Labour achieve its largest vote since Blair’s landslide in 1997, and now leaves the party possibly on the verge of power. John McDonnell, who lists one of his recreational activities in Who’s Who as “generally fermenting the overthrow of capitalism”, could soon be chancellor.

Amid all the current political turmoil in Britain and the wider world, the shift against free markets has yet to register fully with much of the media or many voters. But the most ardent neoliberals have noticed. “Free marketeers have been gobsmacked,” says Mark Littlewood, director of the Institute of Economic Affairs, which has supplied British politicians with pro-capitalist arguments for 62 years. “Things we thought of as like the laws of gravity are now up for grabs.”

The end of the free-market monopoly in British politics is part of an even bigger change. After almost a quarter of a century when it was widely agreed that the fundamentals of the economy were too important to be meddled with by politicians, or be subject to democratic scrutiny, the contest to shape that economy has restarted.

One clue as to why Britain fell out of love with the free market is in the tone now adopted by its defenders. Gone is the capitalist triumphalism of the Thatcher and Blair eras. Instead, there are apologies. “Markets can be brutal,” concedes the Conservative MP James Cleverly, leader of the Free Enterprise Group, a Commons pressure group with three dozen members (all Tories) that was founded in 2010. “The benefits of free markets have not spread themselves between the generations as equally as many of us would like,” he says. “Part of the reason Corbyn got so much support in the election, for policies which I regard as economically illiterate, is that many people don’t value the impact my kind of economic values have had on their lives. The big wins we had with market reforms in Britain were back in the 80s.”

These days, many free marketeers are highly critical of how British capitalism operates. “The City is incorrectly incentivised,” says the Tory peer Nigel Vinson, who has been a leading player in Britain’s free-market thinktanks since the formative days of Thatcherism in the mid-70s. “We have sold far too many companies to foreign owners. A lot of corporate takeovers are personal megalomania, not corporate efficiency. There are abuses of market power, such as [the zero-hours employer] Sports Direct. Meanwhile you see [the advertising executive] Martin Sorrell taking home £70m in 2015. That sets a rotten example.”

Littlewood lists other dysfunctions: “Wage stagnation, poor GDP growth, crony capitalism in the contracting-out of public services, endless gaming of the system by corporations, a general ennui about the prevailing economic system … ” Finally, he cites the event that did more than any other to discredit free-market capitalism in Britain: “the 2008 crash”, the banking crisis caused by the deregulation and hubris of the financial markets.

The day the credit crunch began, 10 years on: 'the world changed'



That crisis and what followed – recession, prolonged weak growth, ballooning public and private debt, and seemingly endless austerity – has already destroyed or severely damaged the governments of Gordon Brown, David Cameron and Theresa May. It has necessitated contortions that suggest an economic system on life support: bank bailouts, unprecedentedly low interest rates, and quantitative easing – ie the Bank of England simply printing money and pumping it into the economy.

“The architecture of neoliberalism has had huge holes blown in it,” says Will Davies, reader in political economy at Goldsmiths, University of London. He argues that free-market capitalism has suffered a two-stage collapse: “First, in 2008, it was revealed as financially unviable. Then, in 2016 and 2017, it went into political crisis.” One symptom of the latter, he says, has been a rupture between big business and the main British political parties.

But this is not the first time that the economic failings and social costs of neoliberalism have led people to forecast its demise. Repeatedly in the past three decades, critiques and alternatives have been conceived and promoted, refined and combined by innovative thinkers and politicians of both main parties – and then frustrated and largely forgotten, until the re-emergence of many of their themes and advocates under May and Corbyn.

In the meantime, the free market has survived, and worked its way into more aspects of Britons’ daily lives, becoming in many ways progressively more efficient and thorough in its commodification of our activities, our homes, our minds. In fact, it might be this inhuman efficiency, and its social consequences, that has provoked the current political revolt against modern capitalism.

Is this revolt just another episode in a long resistance to neoliberalism, or is it a breakthrough? And if so, do Labour or the Conservatives have another viable economic model, which might make capitalism less dominant in our lives?

The first chance to change the economic order that Thatcher and John Major’s governments had imposed on Britain came 22 years ago. In January 1995, a few months after Blair was overwhelmingly elected Labour leader, the then Guardian economics editor Will Huttonpublished a panoramic book about the British economy, The State We’re In. Hutton had spent years exploring the economic ideas and social consequences of Thatcherism, and had decided that both were disastrous. He was a follower of John Maynard Keynes, the early-20th-century economist whose vision of a milder, state-regulated capitalism had shaped the postwar Britain that Thatcherism largely erased. Hutton was also close to the Labour party: two rising young Blairites, Yvette Cooper and David Miliband, gave him comments on the book’s manuscript.

The State We’re In depicted British economic life after a decade-and-a-half of Conservative free-market reforms as “meaner, harder, and more corrupting”. It also saw the economy as a failure in business terms: short-termist, low in productivity, over-reliant on the City of London and old technology, prone to boom and bust. Britain was falling behind other capitalist countries. “The individualist, laissez-faire values which imbue the economic and political elite,” wrote Hutton, “have been found wanting.” His solution was to import the best practices of other economies, particularly Germany, which he admired for its more patient, more socially inclusive economic approach. He called his vision “stakeholder” capitalism.

The book had a cautious initial print run of 3,500. But its timing was good: Britain was emerging sluggishly from a long recession, and was tired of Tory government. The State We’re In sold 250,000 copies, making it one of the bestselling economics books in Britain since the second world war. Among its readers were much of the New Labour government-in-waiting: Gordon Brown, Ed Balls, John Prescott, Robin Cook and Tony Blair himself.

“Tony was not a man of settled opinions, nor someone who knew a lot about economics,” says Hutton, “but David Miliband persuaded him to read it. This may be apocryphal, but apparently there is a picture of Blair reading it on holiday.” During 1995 and 1996, Blair’s speeches began to refer to the limitations of the free market, and to the desirability of a “stakeholder” economy, “run for the many, not for the few” – an almost exact prefiguring of the title of the 2017 Labour manifesto.

But then these themes were abruptly dropped. According to Hutton, as the 1997 election neared, Blair was told by his more nervous advisors that any talk of reforming British capitalism would be presented by the Conservatives as a return to the economic interventionism of the troubled Labour governments of the 70s. For decades, they had been crudely but effectively caricatured by the Tories, and much of the media, as bullyingly leftwing and disastrous. Meanwhile Brown, who as shadow chancellor had spent years trying to win over the City, decided Hutton’s book was too hostile to bankers; and Prescott, a Labour traditionalist, decided it was not anti-capitalist enough. “I was frozen out,” Hutton says.

  Gordon Brown as chancellor in 1997. Photograph: Kevin Lamarque/Reuters

In the late-90s, the economy started growing more consistently, as part of a technology-driven boom across the western world, and Hutton’s view of Britain began to seem too pessimistic. On winning power in 1997, Labour left most of the structure and practices of Thatcherite capitalism in place, and rather than question its rationale, they used swelling tax revenues to soften its social effects, for example through tax credits to subsidise low wages.

Outside Britain, the free market had more doubters. In 1997, the World Bank, previously an uncritical advocate of its state-shrinking orthodoxies, published a report conceding that “an effective state is the cornerstone of successful economies”. In South America, the failures of market-driven economic policies began to move electorates dramatically leftward. And in 1999, an even wider mass movement formed around the world against the environmental and social damage done by globalisation, as the spread of free-market capitalism was euphemistically called by its advocates. Enormous protests took place, from Genoa to Seattle. Smaller, but still vibrant, anti-capitalist demonstrations began to occur regularly in London.

But still most British politicians did not take them very seriously, regarding the movement as backward-looking and naively utopian. In a brief book published in 2001, the Financial Times journalist John Lloyd, a former communist who had become a New Labour associate, described the activists’ annual summit at Porto Alegre in Brazil as “a ragbag of declamation, hot air and vapidity”. The contempt was mutual: most of the protestors showed no interest in forming alliances with centre-left politicians in order to slightly civilise capitalism. “It’s not our job to suggest alternatives!” one prominent activist told me in 2000.

By the mid-00s, the protests were tailing off. Rather than listen to the anti-capitalists, the Blair government and its centre-left counterparts regulated their sometimes violent demonstrations with ever more riot police – while regulating the more powerful anarchic forces of finance capitalism less and less. The British public, meanwhile, seemed to have largely accepted the reign of the free market: during the mid-00s, the annual British Social Attitudes survey found that dissatisfaction with its impact on society and the workplace, while still substantial, had dipped to the lowest levels ever recorded.

With the economy still growing, year after year, the mass benefits of unfettered capitalism – ever wider property ownership, low inflation, cheaper consumer goods, and “no more boom and bust”, as Brown put it – appeared secure. “For most people under 20,” wrote the cultural critic Mark Fisher in his 2009 book Capitalist Realism, “the lack of alternatives to capitalism is no longer even an issue. Capitalism seamlessly occupies the horizons of the thinkable.”

And yet, even during these boom years there were signs that the free-market economy might be brittle. In 2001, the rail infrastructure company Railtrack – which had been one of the Conservatives’ most high-profile privatisations seven years earlier – went into administration after the Hatfield train crash and a botched modernisation of the west coast mainline. In 2002 the company was effectively nationalised by the Blair government – a policy approach supposedly discredited and abandoned in the 70s – and became Network Rail.

Meanwhile, the short-term British business culture identified by Will Hutton persisted. Investment by companies fell almost continuously between the late-90s and the late-00s. With trade unions weak, many employers became meaner. “Around 2003, wages for most Britons started to flatline,” says Will Davies. This was usually a sign of a recession rather than a boom, and had not happened since the early 80s. In order to keep shopping, people borrowed: outstanding private debt, already high by international standards in 2003, at about twice the national GDP, began rising, faster and faster, towards a peak of more than two-and-a-half times GDP in 2008.

“Much of the apparently benign [economic] growth … did not in fact represent a sustainable expansion,” wrote the economists Michael Jacobs and Mariana Mazzucato in their introduction to the 2016 book Rethinking Capitalism. “Rather, it reflected an unprecedented increase in household and corporate debt … lax lending practices … [and] an asset price bubble, which would inevitably burst.” Large elements of the neoliberal British economy were going to prove unsustainable.

In Dagenham, on the eastern edge of London, the local Labour MP Jon Cruddas noticed pressures building. The area has some of the cheapest housing in London – worn but sought-after 1930s semis – but “around 2002, 2003”, Cruddas says, “the economic status quo stopped working: wages, property prices, competition for public services … People were not living the lives they had been promised by the politicians.” In 2007, he stood for the Labour deputy leadership.

Cruddas was (and is) on the left of the party, but had a reputation for free thinking and building unexpected alliances. After working in Downing Street in the 90s, and helping introduce the minimum wage – one of Blair and Brown’s few alterations to the economic status quo – Cruddas had become frustrated by their refusal to confront corporate power. He based his deputy leadership bid around attacks on “free-market dogma”, and warnings about “the material insecurities” and proliferation of low-skilled jobs in his and other working-class constituencies. Once famous for highly unionised car manufacturing, Dagenham was becoming a patchwork of derelict former factory sites and casualised, low-paid work in retail. Standing against five other less radical, better-known candidates, Cruddas won the election’s first round. But subsequent rounds of voting narrowly eliminated him from the contest.

Regardless, the tempo of the revolt against free-market Britain picked up. The following year, the activist and thinker Maurice Glasman, whom Cruddas knew well, began to conceive of a movement he called Blue Labour. Glasman had worked for years with people who felt bullied by the modern economy, through the community organisation London Citizens. “I was just channelling what I was hearing,” he says. “People would say to me, ‘I’ve got to work two jobs to survive,’ or ‘I’ve had to move to London to find a job, but my mum is in Derby and she’s dying.’”

A social conservative, Glasman saw capitalism as “a criminal, dominating thing” that fractured families and communities. Glasman is an intense, compelling talker, and as with Will Hutton a decade earlier, his ideas intrigued senior New Labour figures, many of whom were becoming more interested in the importance of community themselves. But when he properly laid out his critique of capitalism, he remembers, “their faces would go a bit blank. Then they would say: ‘You don’t understand. It’s the goose that lays the golden egg.’”

Along with close allies such as Ed Balls, Brown saw the deregulated City of London as a source of tax revenue to fund more generous state spending. During his premiership from 2007 to 2010, despite the City’s major part in causing the 2008 financial crisis, Labour could never quite bring itself to turn against the free-market capitalism it had inherited and furthered.

Instead, improbably, the denunciation came from the right. Phillip Blond was a conservative philosopher and theologian with a declamatory, slightly old-fashioned persona and prose style who had lectured for years at a small Church of England higher-education college based in Cumbria and Lancashire. In 2008, he began publishing newspaper articles attacking the Thatcherites and New Labour as co-conspirators. “The lesson of the last 30 years,” he told Guardian readers in May of that year, “is that neither the state nor the market is able to alleviate poverty or deliver opportunity for all.” Cleverly branded as Red Toryism, Blond’s ideas caught the attention of David Cameron. He was then still a relatively new Tory leader, and was energetically and shamelessly looking to differentiate his approach from Thatcherism.

In January 2009, Blond wrote much of a speech that Cameron delivered to the annual summit of the global business elite at Davos. “This is what too many people see when they look at capitalism today,” declared the Tory leader, who had until recently been an enthusiastic free-marketeer himself. “Markets without morality … wealth without fairness … recklessness and greed … lives [that] feel like little more than flotsam in some vast international sea of business.”

 

David Cameron at the World Economic Forum in Davos in 2009. Photograph: Pierre Verdy/AFP/Getty

Cameron’s solution was almost laughably vague and ambitious: the creation, by unspecified means, of a new “capitalism with a conscience”. But he and Blond caught a mood. Thanks to the financial crisis, during 2008 and 2009 Britain suffered its worst recession since the calamitous first years of Thatcher’s market experiment in the early 80s.

In 2010, as Brown’s government ended and Cameron’s began, Westminster was suddenly crowded with competing critiques of the free market. As well as Red Toryism and Blue Labour, there was “fake capitalism”, an idea promoted by the Conservative MP Jesse Norman. It said that, in Britain, corporations lived too easily off earnings from privatised state functions. There was also a run of acclaimed books about the costs and flaws of neoliberalism: The Spirit Level: Why More Equal Societies Almost Always Do Better, by Richard Wilkinson and Kate Pickett in 2009, 23 Things They Don’t Tell You About Capitalism by Ha-Joon Chang in 2010, and The New Few: Or a Very British Oligarchy, published in 2012 by Ferdinand Mount, who in the 80s had been one of Thatcher’s senior advisors. And over the winter of 2011-12, there was Occupy London, a raucous anti-capitalist encampment outside St Paul’s Cathedral. During its first weeks, Occupy London received strikingly plentiful and respectful media coverage.

The culmination of all these revolts, some hoped, would be the party leadership of the one senior New Labour figure who had never been fully converted to the free market, Ed Miliband. “When Ed and I worked for Gordon at the Treasury,” says the Labour peer Stewart Wood, who became a Miliband advisor, “we used to sneak off for a drink at the end of the day, and say to each other, ‘Why isn’t the government doing anything to challenge the market?’”

Miliband unexpectedly won the Labour leadership in 2010, after campaigning against “brutish US-style capitalism” and for a more controlled, egalitarian British economy. As leader, he consulted Hutton and Glasman, whom he made a Labour peer. He appointed Cruddas to lead a review of all Labour’s policies. And he made high-profile speeches attacking corporate “asset-strippers” and “predators”, the treatment of customers by the privatised utilities, and the worsening living standards of “the squeezed middle”. He condemned neoliberalism in more concrete terms than Cameron’s generalities at Davos.

Cruddas was energised: “We were beginning to change lanes as a party.” Even some of the small residue of older Labour MP’s who had never accepted any aspect of Blairism were intrigued. John McDonnell told me: “In some of his criticisms of the market, Ed Miliband was ahead of his time.”

But Miliband’s judicious, qualified critique of capitalism had to compete for political space with other, more primal forces unleashed or strengthened by the financial crisis: resentment of immigrants and the European Union; resentment of MPs after the expenses scandal, and of elites in general; and above all, Cameron’s appealingly simplistic austerity policies.

Even though the cuts in state spending made the daily experience of neoliberalism worse for many Britons – by weakening the initiatives introduced by New Labour to soften it – the rhetoric used to justify austerity helped make the general discourse about the economy more cautious, not more adventurous. Rather than talking about the bankers, and how to reduce their power, people increasingly talked about scroungers. The economic views of many voters initially moved rightwards, not leftwards.

With his modest communication skills, Miliband faced a huge task in advocating a different kind of economy. The few reforms he proposed were either too abstract and technical-sounding (“predistribution”, or creating a capitalism that requires less redistribution of income by government), or too short-term (a temporary price cap on energy bills) to form a coherent picture.

Like Blue Labour and the Red Tories, he wanted to remove the worst excesses of the free market while leaving the rest of it intact. The ambivalence of the Labour mainstream towards capitalism, an ambivalence as old as the party itself, “played out inside him,” says Cruddas. Last month, Miliband told the Guardian with a characteristically opaque mix of self-confidence and self-criticism: “I think what Jeremy [Corbyn’s success] teaches me is that when I had instincts that we needed to break with the past, and we needed more radicalism, I was right.”

In 2015, whatever Miliband’s true intentions, the many remaining neoliberals in the Labour hierarchy, such as then shadow chancellor Ed Balls, had other economic priorities. So, increasingly, did Glasman, who became controversially preoccupied by the idea that a reformed British capitalism would involve drastically less immigration. At that year’s general election, after an internal struggle that Cruddas and Miliband lost, Labour presented a manifesto that emphasised cutting the national deficit in language little different from that used by the Tories. The manifesto only criticised the deregulated capitalism that had effectively created that deficit in the first place in coded terms: “We will build an economy that works for working people,” it promised blandly. Even though more and more politicians and commentators agreed that free-market Britain was working less and less well, the anti-capitalist moment seemed to have gone.

But even rigid, insular Westminster politics has to bend to economic realities in the end. In 2017, after two more years of thin growth and austerity, with British wages in their longest slump since the Napoleonic wars, and home ownership at a 30-year low, neoliberalism is no longer producing enough winners to be an utterly dominant set of political ideas. An opportunity has been created – bigger than any before – for the anti-capitalist counter-revolution that has been stopping and starting since the mid-90s.

Phillip Blond senses it. “I go into No 10 [Downing Street] a lot,” he says. “They really do get it about the failures of the market.” Glasman has been to No 10 in recent months too. “There is a stirring among genuine Conservatives,” he says. “A realisation that capitalism is against place and home.”

Cruddas quite liked the 2017 Conservative manifesto: “Some of it was very well written. I thought: ‘Spot on. Confront the market. Make government more interventionist.’ It was an attempt to acknowledge that the world is now challenging the old Thatcher certainties.” But he liked the Labour manifesto a lot more. “It has set up the possibility of … a different kind of economy. There are more continuities between the manifesto and Ed’s than people assume, but under Ed we had to smuggle our anti-free-market stuff in. It wasn’t spoken to properly. Corbyn and McDonnell are more explicit. Some of the people and energy from the anti-globalisation movement of the 2000s have fed into [the pro-Corbyn movement] Momentum. And some of the concerns of those activists are being reconciled with the economic concerns of people here, in Dagenham. Everything’s in play. It’s fantastic.”

In early July, not long after Labour’s far better than expected election performance, I went to a party rally in Parliament Square. During the 90s and 00s, I had been there repeatedly for slightly sparse anti-capitalist demonstrations, which felt, at best, defiant. But now the atmosphere was expectant. “We are winning, and the battle is now on our terms,” said one of the warm-up speakers, to a mass of young and much older faces – the potent Corbyn electoral coalition made flesh. McDonnell made a short, fierce speech attacking “the bankers and profiteers” and “neoliberal trickle-down economics”. He ended with a promise: “Another world is in sight!”

 

Labour shadow chancellor John McDonnell. Photograph: Jack Taylor/Getty Images

Afterwards, I asked him why it had taken so long. The financial crisis began exactly 10 years ago this month. “When a crash occurs, people are in survival mode,” he said. “It’s when growth returns that people get angry.” What did he think of the Conservatives’ apparent break with the free market? “The Tories are opportunists.” Then he talked fluently for several minutes about Labour’s plans to “learn from Germany” about how to create a more high-tech, more long-term economy. It sounded like a passage from The State We’re In. With his neat silver hair, and wearing a striped shirt with a bright summer jumper slung over his shoulders, McDonnell even looked like an off-duty German industrialist.

But wasn’t he meant to be interested in replacing capitalism rather than reforming it? He gave a big, knowing smile. “It’s a staged transformation of our economic system.” Then he continued less gnomically: “Public ownership. A fairer distribution of wealth than in Germany. A society that is radically more equal … ”

Even economic thinkers close to McDonnell wonder if a Corbyn government could effect such a transformation. Paul Mason, author of Postcapitalism, says: “They have a big task with a small team. We face problems – climate change, information technology destroying jobs, a market economy that in many sectors is not capable any more of generating value – that were not faced by Keynes,” the last economist to shift British capitalism to the left, more than 70 years ago.

Mazzucato is probably McDonnell’s favourite contemporary economist. In her much-cited 2013 book The Entrepreneurial State, she argued convincingly – as the Labour manifesto did – that through state-funded research and other investment, government acts as an essential accelerator of capitalism rather than a drag on it, as free-marketeers usually claim. Last year, she gave the first lecture in an ongoing series of Labour events intended by McDonnell to set out a “New Economics”. According to the website LabourList, “McDonnell sat [in] rapt attention throughout.”

In a hot meeting room at University College London, where she is director of a new institute for innovation, the Italian-American Mazzucato told me that the 2017 Labour manifesto was “a turning point” in British economic policy, “full of good stuff, a new energy”. She advises McDonnell. Yet she also advises the Conservative business secretary, Greg Clark, and the SNP. She thinks Labour could do better: “I say to them, ‘You sound defensive. You sound like you know what’s wrong with the economy, rather than what could happen.’” She says Labour needs to explain its economic policies more compellingly: “When you do bold things, if you don’t have the language to describe them, you’re going to be in trouble.”

The Conservative reformers of British capitalism have the opposite problem. So far, their rhetoric dwarfs their solutions. “Their promises to put workers on company boards, to stop high executive pay, haven’t really gone anywhere,” says Tim Bale, a leading historian of the party. Many observers, on both the left and the right, interpreted the 2017 Tory manifesto’s anti-market talk as solely a ploy to attract Labour voters – a ploy that failed so badly that it led to the resignation of one of its devisers, Theresa May’s joint chief of staff Nick Timothy.

Blond insists that many senior Tories besides Timothy oppose neoliberalism. Before Thatcher, there was a recurring Conservative impulse to soften capitalism during hard times – from the future prime minister Harold Macmillan’s influential 1938 book The Middle Way to Edward Heath’s centrist government in the 70s. But that impulse has weakened. “Most Tory MPs are Thatcher’s children,” says Bale. “Most Tory thinktanks are still in a free-market phase.” So is the Tory press: “I could more easily imagine an asteroid hitting the earth,” says Mason, “than the Sun and the Mail coming out for state intervention.”

Many Tory activists and voters have also become free-market diehards. During the election, when the usually revered editor of the website ConservativeHome, Paul Goodman, told readers “to get over Thatcher” and embrace the Tory manifesto, because “the world has moved on”, the response was prickly. One post accused May of being “a Labour sympathiser”. Another pointed out that Heath’s policies failed.

Moreover, the current government might respond to Brexit – an even bigger economic shock than Heath suffered in the turbulent 70s – by becoming more neoliberal, not less, having freed British business from the EU’s limited restrictions on capitalism. Tory economic policy has swerved suddenly rightwards before. Faced with the aftermath of the financial crisis, Cameron and his chancellor, George Osborne, quickly dropped Red Toryism and instead told Britons to toughen up for “the global race” – their phrase for an ever-more competitive capitalism. Osborne had never lost his faith in the free market. “Cameron turned out to be just a standard Thatcherite,” Blond now says.

As Cameron, the son of a wealthy stockbroker, knew well, Britain is still home to plenty of neoliberalism’s beneficiaries: hedge funders, homeowners with the right kind of property, disproportionately rewarded “top talent” from footballers to management consultants, and companies built on cheap labour and loose regulation. They will not give up their supremacy easily, and after Brexit, a Tory government – or a Labour one – might be desperate for economic growth from any source.

As an idea, the free market retains a simple power. “Neoliberalism was sold as capitalism perfected,” says Mason. That has made its diminishing returns politically explosive, but it has also made a reformed capitalism hard to sell. “The idea that markets work well in very limited circumstances, that economic life is about compromise, imperfectability – that’s not an argument you can present easily in a tabloid or a political advertisement,” says Abby Innes, assistant professor of political sociology at the London School of Economics.

Critics of neoliberal Britain have long dressed their texts and speeches with rosy images of other countries’ kinder economies. “Following the successful example of Germany and the Nordic countries,” says the 2017 Labour manifesto, “we will establish a National Investment Bank … that unlike giant City of London firms, will be dedicated to supporting inclusive growth.” In today’s spivvy Britain, how grown-up and enlightened that sounds. But on reflection, the idea that Britain should become more like Germany – its profoundly different capitalism the product of a different geography, culture and history – feels both very ambitious and yet also underwhelming. Can’t we come up with our own economic vision?

Globalisation: the rise and fall of an idea that swept the world



Somehow, it would have to reconcile the intensely competitive, commercialised daily existence of many Britons with the fact that the economic system that created that individualistic world no longer works very well. But perhaps the children of Thatcher’s children have an answer. Many of them are already living with this tension: working ambitiously but often for nothing; sharing living space and possessions as well as racing to buy them; jostling with each other for the smallest economic opportunities, but also marching together for Corbyn.

The emerging outline of a new economic order is often present, not much noticed, amid the final stirrings of the old. In the 70s, the City traders and sharkish entrepreneurs of the Thatcher era to come were often already at work, even as trade unions and Keynesians still held court in Downing Street.

If Brexit proves a disaster, or another crisis soon hits our largely unreformed financial system, as an increasing number of commentators predict, the political space for alternatives to neoliberalism may open further. But Glasman predicts that working out exactly what comes after modern British capitalism will be “the job of the rest of our lives”. He is 56 years old.

More freeloaders than free market. How Britain bails out the business chiefs

 

‘In an age of untrammelled greed, company executives are rewarded for cannibalising their businesses and bilking their staff.’ Illustration by Andrzej Krauze

 Aditya Chakrabortty in The Guardian


On Wednesday, two very different men will have to explain themselves. Both appear in London, to a room full of authority figures – but their finances and their status place them at opposite ends of our power structure. Yet put them together and a picture emerges of the skewedness of today’s Britain.

For the Rev Paul Nicolson, the venue will be a magistrate’s court in London. His “crime” is refusing to pay his council tax, in protest against David Cameron’s effective scrapping of council tax benefit, part of his swingeing cuts to social security. In order to pay for a financial crisis they didn’t cause, millions of families already on low incomes are sinking deeper into poverty. In order to pay bills they can’t afford, neighbours of the retired vicar are going without food. The 84-year-old faces jail this week, for the sake of £2,831.

Meanwhile, a chauffeur will drive Philip Green to parliament, where he’ll be quizzed by MPs over his part in the collapse of BHS. A business nearly as old as the Queen will die within a few weeks, leaving 11,000 workers out of a job and 22,000 members of its pension scheme facing a poorer retirement.

There the similarities peter out. Nicolson was summoned to court; Green wasn’t going to bother showing up at Westminster. When the multibillionaire was invited by Frank Field to make up BHS’s £600m pension black hole, he demanded the MP resign as chair of the work and pensions select committee.

But then, Green is used to cherry-picking which rules he plays by. Take this example: he buys Arcadia, the company that owns Topshop, then arranges for it to give his wife a dividend of £1.2bn. Since Tina Green is, conveniently, a resident of Monaco, the tax savings on that one payment alone are worth an estimated £300m. That would fund the building of 10 large secondary schools – or two-thirds of the annual cut to council tax benefits.

Just as Green underinvests in society, so he underinvests in his companies. The man to whom he sold BHS last year, Dominic Chappell, told MPs last week that “for the past 10 or 12 years there had been little or no inward investment in the stores”. A staple of the high street had been run down.

Then again, what incentive has he had to do otherwise? Green bought BHS with just £20m of family money and borrowed the rest. Within four years, he had pulled £400m of dividends out of the firm – 20 times his initial outlay.

He used the same tactic to buy Arcadia – stumping up £9.2m in equity and taking out £1.2bn three years later. This isn’t retailing as you might think of it, it’s balance-sheet shazam – the kind of financial engineering that posed as real business in Britain’s bubble years. And it’s enabled Green to turn major retailers into what Robert Peston, in Who Runs Britain?, calls “giant gushers of cash”.

But in today’s Britain, the poor are forced to pay the unaffordable, while the tax-avoider is honoured for his contribution to society. Green was knighted by Tony Blair, while David Cameron appointed him a government adviser.

Just as Green pretends to be a cheeky chappy even though he went to boarding school, so any charlatan in pinstripes can claim to be a businessperson – and be handsomely rewarded. The barons who run our rail services tout themselves as “investors”, but for every quid they put into their trains, they take out £2.47. That level of underinvestment ensures commuters are never sure of getting in on time and having a seat – but shareholders and managers can make a fortune.

From Margaret Thatcher through Tony Blair to David Cameron, successive prime ministers have preached the virtues of free enterprise. We’ve ended up with an economy comprised of what parliament’s public accounts committee calls “quasi-monopolies” – from water to banks to electricity to public outsourcing – and big businesses being treated as money-sponges to be wrung dry by their owners and managers.

In the 1970s, £10 of every £100 in corporate profits was paid to shareholders. Now between £60 and £70 of every £100 is handed out. Workers, companies and the economy are thus starved of investment and growth opportunities so that, as Andy Haldane at the Bank of England warns, firms are “eating themselves”.

In an age of untrammelled greed, company executives are rewarded for cannibalising their businesses and bilking their staff. The typical FTSE-100 boss is now on a total pay of around £5m, the High Pay Centre calculates, even while the average employee is still earning less in real terms than in 2008.

This is less about the free market than freeloading. The banks collapse and are bailed out. The Sports Direct billionaire Mike Ashley walks away from a collapsed business, giving hundreds of workers 15-minutes notice of redundancy – and handing taxpayers the £700,000 bill to clean up the mess. Tax-avoider Amazon receives tens of millions of public money to build warehouses, and even has a road in Swansea built for it. Richard Branson takes £28m to open a call centre in Wales.

The public pay for apprenticeships, so that companies get readymade workers. We shell out for upgrading the railways. Most of all, we top up poverty pay. Official figures show that 37% of working-age households in this country now take more from the public purse than they pay in. Not because they’re lazy or unemployed – employment has never been so high – but because their bosses can rely on the rest of us to pay their way.

Survival of the fittest? This is a deformed capitalism, barely worthy of the name – and it won’t improve by slinging a few rotten tomatoes in parliament. We need a working capitalism, where the public no longer give away their protections and subsidies for free – but instead make businesses take their responsibilities seriously.

If rail operators rely on taxpayer billions, they should train staff and pay them a living wage. Why shouldn’t big supermarkets that need public planning permission and licensing to trade be required to stock some locally sourced goods? And why shouldn’t local and central government, which allocate billions in procurement and tendering, foster a diversity of business models – from not-for-profit to mutually owned.

Some of you may think such measures impossible, others may see them as baby steps. They should be the first heaves on the pendulum, turning our economy away from the interests of the wealthy to the rest of us.

Last week Nicolson promised: “I shall start paying my tax again when they stop taxing benefits.” Good for him. The rest of us taxpayers should do the opposite: asking businesspeople what they’ll do to deserve our corporate welfare. That question should not just be put to Green and Ashley, but to those who run all our major corporations. Otherwise, we’re merely chasing out a few big names and hanging up a sign over Britain that reads: “Under new owners, business as usual.”

An Economist's Guide to Debating Bhakts

A cheat-sheet for an intellectual argument with the Right. Warning—it's not pithy or witty enough for social media

SHAILESH CHITNIS in Outlook India

 

June 2004, deep in the heart of George Bush's presidency, the Onion, a satirical magazine, ran a story on how America's liberals were suffering from outrage fatigue. The article explained that liberals were overwhelmed with stories of abuses of civil liberties, unchecked military aggression and policies that ran roughshod over the environment. Most liberals were just exhausted from protesting and had decided to take a break. They couldn't sustain their anger anymore. 

Like any good satire, it was funny because it was close to the truth.

India's liberals probably feel the same today. From the mundane to the sublime, every facet of our society is now a cultural battleground. Each week is a new fight, from the meat we eat to the size of our nationalism. The prevalence of social media has only served to amplify differences and harden opinions. If you can't say it in a witty sentence that neatly fits in a Tweet or a Facebook post, it's probably not worth saying.

I've frequently thought of engaging with people who are ardent BJP supporters. But the thought of defending against charges of being a Congress agent or a closet Pakistan supporter (the horror!) makes me keep my opinions to myself.

But what if there was a genuine discussion? What if you were able to get more than 140 characters across? Here's an attempt at imagining an intellectual argument to four assertions frequently trotted out by the right.

(BS = Bhakt says)

[BS]: India needs a strong, authoritarian leader to develop faster. Look at what Singapore and China has achieved.

The idea that a benevolent autocrat can transform a chaotic country into a disciplined economic engine is very seductive. Unfortunately it has no basis in fact. Data shows that autocracy is a gamble, the country could be governed by a Lee Kuan Yew or a Mugabe.

The economist William Easterly has shown that the chances for the latter scenario are much higher. He measured countries that had experienced big growth success and failure over a forty year period. Easterly found that the probability of sustained high growth under an autocracy are only 10 per cent, it's more likely that the country implodes or experiences sluggish growth. Democracy doesn't yield spectacular gains either, but it does limit the chances of total failures. Human fallibility assures that more centralised societies will have more volatile performances.

Given our history with leaders who experienced total power, we are better-off taking our chances in an imperfect democracy than a perfect autocracy.

[BS]: The minorities (i.e. Muslims) have been coddled for too long

This is an easy claim to refute. Successive government and independent agencies have found that the socio-economic indicators of Muslims are the lowest among all groups, only marginally better than SC/STs. The poverty rate among urban Muslims is 38 per cent compared to national average of 23 per cent. Only 24 per cent of Muslims complete high school, against a national average of 43 per cent.

It's not just human development indicators. A recent study found that even though Muslims constitute 13 per cent of the population, only 2.6 per
cent are senior executives at BSE 500 companies. And in the last 2 years, Muslims got only 2 per cent of the priority loans from public sector banks. What the statistics mask is that the dismal state of Muslims in India isn't a recent phenomenon. It reflects a steady decline since the country's independence relative to all other groups.

In light of these numbers, it's entirely fair to ask why aren't the country's Muslims angrier?

[BS]: Why can't they just respect the wishes of the majority?

This argument rests on the utilitarian idea of the greatest good for the greatest number of people. If a certain policy brings happiness to 80 per cent of the population, but leaves the rest 20 per cent worse-off, surely the society as a whole is better off. But this view isn't compatible with protecting everyone's rights.

The philosopher John Rawls proposed a fairer way to decide on justice and rights. He suggested that before deciding any rules, members of a society stand behind a veil of ignorance. Behind this veil no one knows their class, gender, race, wealth, religion or any other detail that gives them a hint of their place in society. The laws that this group decides will, by its very nature, be just and equal. Since no one knows their position in society once the veil is lifted, they'd want to make sure they were protected.

Rawls' veil is a thought experiment of course, but it does seek to illustrate the fallacy of using majority to determine rights.

[BS]: Reform takes time; it'll take time to see the results

On this issue, the Bhakt has a point. The pass-through benefits from structural reforms take time. India's growth rate surged in the 80s, with the loosening of a few regulations. But the big reforms of the 90s didn't lead to a corresponding burst of growth in that decade.

The economist, Arvind Virmani, has found a J-shaped growth curve. Following structural reforms, growth initially falls and then begins to rise. In the 90s, the removal of import restrictions and currency volatility were a shock to the protected industries, resulting in lower productivity. As firms learned to cope and then benefit from the new technologies, output improved dramatically from the 2000s.

But as we complete two years of the Modi government, we have yet to witness any meaningful reforms — no GST bill, no significant disinvestment of PSUs and no major labour market reforms. We aren't at the bottom of any J-curve, nor should we expect a growth spurt a few years later.

[You ask] While on the economy, it's a good idea to pose the paradox of BJPs economic ideology. Narendra Modi is a self-professed free-marketer, who believes in less government. Free markets are open; open to capital, open to ideas. And yet, the RSS continues to espouse the glories of Swadeshi economics that seeks Indian solutions to Indian problems. How can Mr. Modi reconcile such opposing views?
Now observe how the BJP defenders try to square their love of the "Gujarat model" with their fealty to the RSS.

If you have made it this far without being called sickular, AAP-tard or any such pejorative, stop and congratulate your Bhakt. You are speaking with a right-wing supporter who is respectful and is confident in their views. A rare species. May their tribe grow.

Next, pinch yourself to interrupt your musings. A discussion like this can only happen in your imagination.

Britain's free market economy isn't working

Larry Elliott in The Guardian

Last week should have been a good one for George Osborne. The first day of April marked the day when the ”national living wage” came into force. The idea was championed by the chancellor in his 2015 summer budget when he said it was time to “give Britain a pay rise”.

Unfortunately for the chancellor, the 50p an hour increase in the pay floor for workers over 25 was completely overshadowed by the existential threat to the steel industry posed by Tata’s decision to sell its UK plants.

Instead of being acclaimed by a grateful nation, Osborne found his handling of the economy under fire. The fact that official figures showed that Britain has the highest current account deficit since modern records began in 1948 did not help.

At one level, all seems well with the economy. Growth was revised up for the fourth quarter of 2015 to 0.6% and is running at an annual rate of just over 2% – close to its long-term average and higher than in Germany, France or Italy.

Two of three key sectors of the economy are struggling, though. Industrial production and construction have yet to recover the ground lost in the recession of 2008-09, leaving the economy dependent on services, which accounts for three-quarters of national output.

Digging beneath the surface glitter shows just how unbalanced and unsustainable the economy has become.

Growth is far too biased towards consumer spending. Borrowing is going up and imports are being sucked in. An enormous current account deficit and a collapse in the household saving ratio are usually consistent with the economy in the last stages of a wild boom rather than one trundling along at 2%.

A little extra digging provides the explanation, with some alarming structural flaws quickly emerging.

Here are two pieces of evidence. The first, relevant to the debate about the future of the steel industry, comes from an investigation by the left of centre thinktank,the IPPR, into the state of Britain’s foundation industries.

Foundation industries supply the basic goods – such as metal and chemicals – used by other industries. They have been having a tough time of it across the developed world, but the decline has been especially pronounced in the UK. Since 2000, the share of GDP accounted for by foundation industries has fallen by 21% across the rich nations that belong to the Organisation for Economic Cooperation and Development but by 43% in Britain. At the end of the 1990s, imports accounted for 40% of UK demand for basic metals; import penetration is now at 90%. Clearly, this trend will become even more marked if the Tata steel plants close.

The second piece of evidence comes from a joint piece of research from the innovation foundation Nesta and the National Institute for Economic and Social Research being published on Monday. This found that productivity weaknesses are common across the sectors of the UK economy, but particularly marked among newly formed companies. Fledgling firms tend to be less efficient on average, but the report said that in the years since the recession performance had been unusually poor among startups.

Since the economy emerged from recession, the growth of highly productive companies has been curbed and there has also been a slowdown in the number of under-performing businesses contracting in size. This helps explain why Britain has an 18% productivity gap with the other members of the G7 group of industrial nations.

According to the economic orthodoxy that has prevailed for the past four decades, none of this should be happening. The theory was that a good, solid dose of market forces would clear out the dead wood from the manufacturing sector; financial deregulation would ensure that funding was provided to young, thrusting startup firms; and free trade would ensure that British industry remained on its toes. Industrial policy would no longer be about “picking winners” but involve an open door to inward investment and low corporate taxes.

This approach has proved a complete dud. Successive UK governments have allowed good companies to go to the wall for the sake of their free market principles. They have squandered the once-in-a-lifetime opportunity provided by North Sea oil to modernise and re-equip the manufacturing sector. They have sat back and watched as the economy has stumbled from one housing-driven boom-bust to another. They have now arrived at the stage where house price inflation is running at 10% a year; the current account deficit in the latest quarter was 7% a year; and manufacturing is in recession.

The UK has been here before, although this time the numbers are scarier. Traditionally, what happens next is a sharp fall in the value of the pound, which helps rebalance the economy by making exports cheaper and imports dearer.Consumer spending takes a hit because goods cost more in the shops while manufacturers get a boost because their products are more competitive on world markets.

Such a depreciation would almost certainly be triggered by a decision to leave the EU in the referendum on 23 June. The assumption is that this would be a bad thing; in truth, a cheaper currency would be one of the benefits of Brexit.

But only in the right circumstances. There is more to rebalancing the economy and solving the UK’s deep-seated problems than simply devaluing the pound. If it was as easy as that, Britain would be a world beater by now. Getting the right level for the pound is a necessary but not sufficient factor in putting the economy right.

There is no shortage of ideas. Help for steel would be provided if procurement rules were tightened up so that contractors had to show they were sourcing sustainably, with the test being the impact on the environment and on local communities. The IPPR has a range of ideas for boosting foundation industries, including building stronger supply chains with advanced manufacturing and using the regional growth fund to provide more patient finance.

Nesta said its research shows the need for better targeted support for new companies rather than blanket measures such as cuts in business rates.

A new paper for the Fabian Society by the former Labour MP and leadership contender Bryan Gould believes there should be a twin-tracked approach: a 30% depreciation of the currency accompanied by a focus on credit creation for investment. This, he argues, could happen either through the existing banking system under the direction of the Bank of England or, if necessary, through a national investment bank. Gould says this is not about “picking winners” but about setting the parameters for possible good investment opportunities.

What links all these ideas is the belief that Britain needs a proper long-term industrial strategy. The prerequisite for that is an admission that the current model – low investment and competing on cost rather than quality – has failed, is failing and will continue to fail.

Business giants walk off with our billions. No more something for nothing

The state has the powers to make business serve us better. A north London borough is leading the way

•  
• • Aditya Chakrabortty
  • The Guardian, Tuesday 9 December 2014

Illustration by Matt Kenyon

A few weeks ago, I had the disconcerting experience of sitting in a smart room full of clever people who sincerely held a silly idea. We had been gathered together by a big charity to discuss its research on inequality, and talk naturally turned to Britain’s free-market economy. Some praised the free market, others longed to reform it: all agreed it was central to the UK being one of the most unequal economies in the rich world.

The famous political philosopher worried whether the free market was eroding our ethics; the gentle wonk from a rightwing thinktank thought that tempering it would turn a dynamic economy into an arthritic one. The British people now saw themselves as free-marketeers, argued the strategist from a giant consultancy; try telling that to the Occupy protesters in Parliament Square, retorted the environmentalist at his elbow.

Economists, politicians, academics: all well read and well meaning. But what was this free market they each took for granted? It had nothing to do with the tap water in our glasses – that came from the local monopoly, Thames Water. Nor did it apply to the trains that delivered some of my fellow diners – many rail services face no direct competition.

And what about the lights and heating? Nearly three decades on from the start of liberalisation, 90% of the gas and electricity piped into our homes is still controlled by an oligopoly of six huge suppliers who contend for our custom by trying to bamboozle us with their tariffs.

Few conceits are more cherished by our political classes than the notion that this is a free-market economy. To the right it is what makes Britain great. For the left it is what they are up against. And for the rich it is what justifies their huge pay packets: after all, they have earned it.

When asked for his view of western civilisation, Gandhi said he thought it would be a very good idea. I feel much the same way about the free market: I’m genuinely curious to see what such a mythical beast looks like. But that term, however widely accepted and advertised, has little to do with today’s Britain. The economy most of us experience – everything from who collects our bins, to how we commute to work, to that new school attended by the kids – is often not a free market at all. Instead, it’s a bog of privately run monopolies; of public projects and services outsourced to businesses for years, even decades, at a time; and massive taxpayer subsidies handed to the corporate sector with fewer questions asked than of disabled people wondering where their living allowance has gone.

Grasp that, and the question of how to tame corporate power becomes easier to answer. If corporations rely on the public for a sizeable chunk of their revenues and power, then we should start asking what they are doing for us in return. Do businesses deserve the privileges given them by society?

You almost never hear this question from any politician. What you get instead is the kind of cant served up by David Cameron at last year’s Conservative conference: “It’s not the government that creates jobs. It’s businesses that get wages in people’s pockets, food on their tables, hope for their families and success for our country.”

Really? Cameron can’t be looking at the same economy as the rest of us. In Britain businesses take £85bn a year from the public in grants, subsidies, insurance schemes, preferential credit and government services. That’s the corporate welfare bill as totted up by Kevin Farnsworth, senior lecturer in social policy at the University of York, and he admits it’s on the conservative side. Add on the various subsidies for too-big-to-fail banks and you’re well in excess of a hundred billion. Nor does he include the most fundamental privilege society affords the investors in a business such as Tesco: that of limited liability, which means they only stand to lose the value of their shares, and no more. We could argue for limited liability, but let’s not pretend it’s anything less than a substantial underwriting of shareholder enterprises.

If it is business that gives, and government that takes, then how does Cameron account for privatisation and outsourcing? Take the farce that is the rail industry, where taxpayers stump up billions for the infrastructure and the upgrades, while tycoons such as Richard Branson and Brian Souter put in hardly any investment, and always have the option in hard times of walking away. That is what GNER did with the East coast mainline that the public had to step in and save – and which the government has justawarded to Branson and Souter.

The same wacky logic of low risk, low investment applies in outsourcing. G4S can’t provide the security for the Olympics, Serco can’t lay on the staff for an out-of-hours GP service in Cornwall – but never mind, both still get to bid and win more public sector work. Under this coalition the money spent on outsourcing has doubled to £88bn,creating a whole string of what Margaret Hodge at the public accounts committee calls “quasi-monopolies”.

The fashionable thing to say is that in a globalised economy states can’t keep up with businesses. That is to get the relationship the wrong way round. The reality is that states often give businesses their revenues and so their power. More than that: markets are created by states, who provide the infrastructure, the transports and the rule of law.

So let’s start asking businesses what they’ve done for us recently. If the state is going to subsidise the rail industry (and we will, until it’s eventually renationalised), ministers should insist not just on an intermittently punctual train service and a token contribution to the Treasury, but also better pay and conditions for staff, decent training, and a commitment to sourcing equipment in Britain.

This is what the Centre for Research in Socio-Cultural Change terms “social licensing” in its latest book, The End of the Experiment. The academics’ suggestions have been followed by one council in north London, Enfield. Officers and researchers sat down and worked out how much money its 300,000 residents sent the way of big businesses: 11 Tesco stores, for instance, provided the PLC with around £8m of its annual profit. And what did the area get back? Not very much, but the highlight included a community toilet scheme and some charitable giving from the supermarket’s corporate social responsibility department.

And so the council has started asking big businesses, such as utility firms, what they had done for Enfield recently. They’ve begun hassling banks to lend more to local businesses, the likes of British Gas to give more of their local work to local contractors with local staff – or run the risk of being named and shamed in the local press. It may sound small, but imagine if the same approach were taken by Holyrood or Cardiff – or by Westminster.