The Gravest Development of Our Time

27/07/2011 14:27 BST | Updated 26/09/2011 10:12 BST

The financial crisis that broke in 2008 is far from over. It is moving through different phases with different policy initiatives - all of them (printing dollars, European bailouts) involving state-sized sums of money.

This much is reported in the general media. What is not pointed out is the way in which governments are changing the narrative about what is happening. The ruling coalition in the Kingdom is well on top of this game and a cowed, dim-witted British media is fully on board with them, feeding us with a barely digested Cameron/City-of-London take on the continuing crisis.

David Malone has just written a remarkable piece on the way the Conservative-lead coalition, together with a compliant opposition and media, is manufacturing the dominant narrative on the crisis.

"The official narrative today is that the plan of recovery is working .... The new story is that the debts we have now are nothing to do with the banks and their temporary difficulties. They are due to a deeper incontinence in public spending.

"The dissident narrative I advance says ... The measures taken to 'deal' with the 'crisis' have in fact created ... a new and very much more reliable system for ensuring that the super rich stay that way. The new system horrifies me because it has put finance above democracy, markets over governments, and sets up an untouchable aristocracy within the [financial] markets who are not allowed to lose and who can therefore take what they want, when they want, from whomever they want and the law will not touch them."

Perhaps the most chilling phrase here is "finance over democracy". Do we really now live in a society where the banks and the City of London have more power than the elected government?

Listening to current political debate in the Kingdom reveals a big underlying assumption about the way power operates in society. People talk as if power works according to the following simple formula. It originates in the people, who for these purposes are the electorate. The people elect the government and the government can control and fashion the country and all within it - individuals, businesses and organizations - as it wishes . Thus, via the democratic process, the people run the country.

This is the received political scenario, but also most people are aware that there are other constituencies that operate in society that have no democratic mandate but that nevertheless have considerable power. In the past the great bogey was trade union power and during the Thatcher years the government attempted to attack and diminish that power.

Thatcher also began the attack on another perceived enemy - that of professional power which she identified with "vested interests". This attack on what is often referred to as the "Civil Society" or the "meritocracy" continued unabated under Blair and Brown and today shows no let up. The attack always takes the same form which is to replace "merit" as a qualification for doing a job with some kind of quasi-competitive arrangement. This is what we have seen in the NHS, the BBC, schools and so on.

There is a further constituency that the Neoliberal Conservative/Labour consensus has identified as an adversary that they wish to hold in check - the civil service. The British civil service in the nineteenth century was recognized as one of the finest in the world and it still retained a good reputation for the first part of the last century. But, thanks to the actions of successive governments, it is not what it used to be.

We need, at this point, to stress the way in which this agenda of undermining the civil society and undermining the civil service is always justified by its proponents. The attack is presented as a promotion of "more democracy". The loss of power and status of these other constituencies means more power for the government and under the simplistic idea that that government represents the people, and only the people, it means that power is returned to the people and "democracy", and away from "vested interests". This is the narrative that the post-Thatcherite consensus would have us accept.

This scenario can be understood seen as having as its players various different "-ocracies". On the one hand we have the unelected constituencies of power in the meritocracy (civil society) and the bureaucracy (civil service) and the elected power of the democracy.

The problem is (and here we return to the theme at the beginning of this piece) there is another "-ocracy" that is now a far, far bigger player than any of the other three. It is one that wags the tail of the elected "democracy" and watches on with approval as the democratic leaders do its dirty work in clearing away the thorn in its side represented by the professionals in the civil society and civil service. It is the "plutocracy" of Big Finance, banks, hedge funds and the superrich.

The way in which the plutocracy has grown from strength to strength is the big socio-economic story of the last decade but its seeds were planted back in the early 1980s when the neoliberal philosophy was adopted on both sides of the Atlantic. Neoliberals claim to be for free markets and free enterprise but in reality they are the enemy of both. The liberalism they embrace is above all liberation for the banks and the big financial players whereby regulation was begun to be dismantled and controls on international movements lifted.

The banks used this new freedom largely to one purpose. the issuance of vast amounts of money into the international monetary system. It is to state the obvious that you cannot own mega amounts of money and assets unless that money exists in the first place. The creation of immense cliffs of money is what the Neoliberal politics has resulted in and with it a new global class of superrich and the banks that they effectively control.

It is into this new situation that the old constituencies of power: democracy, the civil society and the civil service, find themselves thrown. The leverage that the last two have on the situation is limited to say the least. Democracy, in the form of our democratically elected representatives, certainly has the power to reverse the runaway accumulation of power by the new plutocracy but they do nothing. In fact they encourage its development and support it. When the coalition says we have to have austerity to enable us to borrow on the bond market this is what they are doing.

What we have now is an enfeebled civil society and enfeebled civil service and a democratic system corrupted by its closeness with finance and the City of London. It is this compact between democracy and plutocracy that is at the heart of our problems. The meritocracy and the bureaucracy which in the natural way of things protect us against the malfunctioning and excesses of the other power constituencies are not doing their job.

They cannot because their power has been undermined by democratic leaders who are then letting the power of money and capital dominate everything.