THE BLOG

Trump, Brexit, The London Riots, And Alternative Economic Futures

17/11/2016 15:58

2016 should be remembered as the year when the reality of capitalism hit home (once again). Many things will be written about the rise of Trump and parallels with Brexit. Most of them will compare the effects of immigration, class divides, and broken political promises on these startling anti-establishment votes. Here I want to suggest though that there are deeper, underlying causes - rooted in processes of neoliberalisation - that both explain events in the US and the UK and point to a disturbing conclusion: that the London riots of 2011 are perhaps the most illustrative example of where Trump and Brexit will lead us. I will also contend that 2016 should be a moment for sober self-examination for the social sciences in higher education.

I contend that the disturbing explanation for events in 2016 has to do with the seemingly inescapable realities of global capitalism and neoliberalisation. In the 1990s, the alter-globalisation and anti-globalisation movements sprang from and came to characterise a so-called "cultural turn" in globalization. Globalization developed a conscience, as western consumers were repeatedly faced with the fact that their cheap products - from coffee and bananas to Nike trainers - came at a cost to the livelihood and health of workers in the global south. Ethical capitalism was born. The fair trade movement and corporate social responsibility were thus attempts to pull a veil over the commodification of every day life and the insatiable search for profit. In reality, little changed. Profit continued to triumph over values and ethics. The so-called coercive forces of competition continued to be the driving force behind corporations from banks to clothing manufacturers. And when cost efficiency and shareholder value are the guiding light, misconduct and poor ethics will simply find new outlets.

During the 2000s, rising property prices in Anglo-America were the main driver of the illusion that class divides had disappeared and that everyone could engage in what Marx called the 'project of prosperity'. With the financial crisis and, in particular, the political management of the crisis, that veil of a classless society was once again removed. For, I argue, it was the political management of the crisis in the UK and the US that has fuelled the rise of Trump and Brexit. What followed has been euphemistically called "privatisation of the profits and socialisation of the losses", and rightly so. Make no mistake, despite the flurry of regulatory activity on both sides of the Atlantic and the niceties of Obama-care, there is a disturbing pattern to the statecraft which has followed the financial crisis.

It is here that I believe the parallels with the London riots are most informative. As with most race riots it is easy to focus on the initial or ongoing moments of police brutality that gave rise to what followed. In a think-piece in the summer of 2011 however, Naomi Klein contended that the roots of the riots lay in the financial crisis. Not only was there an underclass that had consistently been overlooked and marginalized, but this underclass had learned lessons from the management of the financial crisis, she argued. During the financial crisis this underclass - who had for a generation felt the heavy hand of the rule of law - saw daylight robbery by the financial elite and protection being offered by the political classes. Left with no legal or democratic means by which to vent their slow-burning frustration, this underclass took to the streets - smashing and burning everything in their sights.

Return to the financial crisis and examine the political efforts on both sides of the Atlantic and three stark conclusions become clear. The first is that despite the ruling parties ostensibly being from opposite ends of the political spectrum, both the Obama administration and the Tory party have presided over some of the most severe budget cuts in recorded history. Already deprived communities have suffered even further from cuts to public services and social spending. The austerity mantra has been almost unquestioned across most major political parties. The second conclusion is that, despite the flurry of post-crisis regulatory activity - in part designed to "appear" to be solving the crisis problem - most of the underlying assumptions behind market regulation remain unaltered. These assumptions and goals - of market equilibrium and risk management - are deeply rooted in orthodox economics and mainstream finance theory. Take some of the most "fundamental" changes to bank capital requirements for example, and you find that though ratios have been raised to supposedly safer levels, banks can still operate with 97% debt financing - a staggeringly high leverage ratio that would not be acceptable in any other industry. And the third feature of the response is that, despite catchy slogans, experiences after the crisis reveal we are not 'all in it together'. In fact, in a cruel twist of fate, a number of studies are now revealing that the main beneficiaries of the low interest rate environment and Quantitative Easing measures have been high net worth individuals and asset holders, as opposed to the businesses the measures were designed to aid.

One of the most telling scenes in a recent film therefore came at the end of The Big Short. The point the narrator - Ryan Gosling - made was that rather than focusing attention on the true architects of the financial collapse, scapegoats had been made of immigrants and ethnic communities in particular. And the axe once again fell on the weakest and most vulnerable members of society. It should be emphasized again and again though that this is a political decision. It is not simply that the banking and financial services communities in the US and UK are untouchables. This is too simplistic an analysis. But it is clear that a political calculation is made in these instances that raising revenue from - for example - combating tax evasion by the largest corporations, is much more complicated and sensitive than targeting poorer, working class single mothers and benefit recipients.

So, to return to the starting question, what do Trump and the London riots have in common? The London riots were provoked by an overwhelming sense of frustration. And when Trump and Brexit supporters realise that they are facing more broken promises and further cuts, further riots will of course ensue. Many, many reasons could be cited as to why neither Trump nor Brexit will solve what many anti-establishment voters see as the fundamental problems in the US and UK, namely immigration and inequality. For our purposes here though, only two are required: one is that countless studies have shown that neither the US nor the UK economies could function without high levels of cheap, immigrant labour. The choice is bleak - underpay immigrants or underpay your domestic workers; or shrink the economy. Either way, cuts in living standards are unavoidable to deal with these supposed problems. And secondly, it is worth recalling that neither the Brexit leaders nor Trump himself are opponents of liberalism. This may appear too obvious to warrant attention. But on this point, a range of other studies have shown that contrary to the assumptions of trickle-down economics, liberalism itself is the driving motor of rising inequality. Indeed, this critique formed the basis of Marx's twenty-fifth chapter of Das Kapital. Market liberalism, so he argued, will not lead to greater equality, though the wages of the poor may rise. Instead, what matters is the relative divide between higher income and lower income individuals - he contested - and here the gap between the rich and the poor will only widen. It is still astonishing to me when I come across Economics, Business School, and Management undergraduates who have never been asked to engage substantively with this line of critique (more on this below). Put simply, neither Donald Trump nor Brexit will solve some of the problems voters are angry about. And so, having voted against the establishment but seen little to no change, these voters will be left with little recourse but more violent forms of protest; which in turn will be accompanied by even more aggressive forms of policing. This is what the London riots signified. The outlook does not look good.

Once again then, we should be asking questions about alternative economic futures. Such questions rapidly narrowed following the global financial crisis, into the debate between "cut now" (austerity) versus "spend now and cut soon" (the so-called Keynesian alternative). Many academic disciplines, particularly in the social sciences, underwent a period of introspection following the financial crisis. My sense, looking at my Facebook newsfeed this past week, is that Trump and Brexit are provoking a similar period of introspection. It is with some joy then that I have noticed not just commentaries lamenting the fact that - inter alia - much of the political science toolkit used by university academics provides little means of explaining Trump and Brexit, but also a series of more challenging commentaries confronting the "value-free" claims of certain strands of social science.

To explain the point I will focus on my particular field of interest, Political Economy. For those unfamiliar with the history, in a strange turn of events early in the twentieth century classical Political Economy - comprising philosophy, social policy, economics, and politics in a overtly value-laden manner - became divided into what is now orthodox Economics and International Relations. Orthodox Economics, as we now know, sought to establish itself as value free, and as a technical and objective scientific discipline. We also now know, as Keynes himself had suggested and more recently behavioural economists and critical Keynesian insiders have opined, that the scientific claims surrounding orthodox Economics are, at best, very dubious. But what is even stranger and more concerning is that many of the other social sciences, including my own discipline of Political Economy, established a dominant orthodoxy that also sought to model itself on the kind of value free status that Economics aspired to.

All of this may sound very abstract and you may be wondering why exactly are any of this matters. To put it in context, as the world changed, inequality increased, and crises became more and more regular and devastating, the dominant orthodoxy in many of these academic disciplines effectively ignored questions of justice, ethics, and morality, in favour of simply "describing" - in oftentimes colourless, depoliticized terms, the social world they saw. From the perspective of many critical observers, it was as though the bourgeois perspectives of many of these academics blinded them to the blatantly obvious questions of social injustice. More worryingly, and returning to our point about alternative economic futures, these same academics schooled the next generation of university undergraduates in similarly value-less worldviews. On both sides of the Atlantic then, the social sciences at large and Political Economy in particular missed a trick. Rather than imitating everything that was wrong with orthodox Economics, these other academic disciplines ought to have been a source for fruitful critique.

Of course, this is to place a little too much blame on the individuals themselves. Anyone familiar with Anglo-American university systems will be aware that there are strong, coercive pressures enforcing conformity of approach and these so-called "scientific standards". Academic retention and promotion depend on publishing in the right journals, which is a powerful mechanism for vetting and marginalizing critical approaches. Likewise, research funding also tends to prioritise certain types of approaches and questions. And these pressures on academic life have only increased following the global financial crisis. Take for example the Post-Crash Economics Society in Manchester. This was one of the first Economics societies in the UK to demand a radical reform to the syllabus to include more heterodox approaches and a history of economic thought. But here too they have struggled. The Department recently refused to renew the contract of the leading academic. Without this kind of funded opportunity, it is difficult to see where visions of alternative economic futures can come from. And, to re-emphasise, this is precisely what is needed - grander visions of alternative economic landscapes, not simply a reversion to the cut-now, cut-later debate.

In closing, one potential answer is that the social sciences - and Political Economy - instead resort to forms of critical education. Critique of the orthodoxy is surely not enough. But it is a start. By gathering together a collection of like-minded individuals, there is perhaps some hope of challenging the value-free aspirations of so much of the orthodoxy. Economics should continue to be one target of this critique. But so should other mainstream approaches in the social sciences which effectively turn a blind eye to forms of social inequality and unrest. If nothing else, Brexit and Trump should be a warning to these value-free approaches, that we risk overlooking the most important changes in the political and social world in 2016 to our peril. In this regard, the Political Economy institute at Goldsmiths University in London is perhaps a promising template. Combining the teaching of Economics with disciplines like Philosophy, Politics, and Social Policy, their undergraduate programmes better resemble the kinds of Political Economy which preceded the neoclassical period of the 20th century. Combining this with high profile talks from leading critical academics and activists, this could be used as a blueprint for other UK and US universities.

In sum, Brexit and Trump will - I contend - not lead to a greater rebalancing of social relations and less inequality. Neoliberalisation will continue and an increasingly disillusioned electorate will shift from expression via traditional democratic means to more violent forms of protest. And so the search for alternative economic futures needs to step up a gear. Value-free social sciences should indeed be sober and undergo a serious period of self-examination following the events of 2016.

Comments

CONVERSATIONS