The pandemic has punctuated a long period of economic stagnation by plunging the UK – and the world – into a deep economic crisis. After the financial crisis, the illusion of rising growth and productivity generated by the bubbles in finance and real estate was shattered and the deep-rooted political economic problems that had been stored up for the previous thirty years suddenly became very obvious.
Investment – both public and private – was chronically low, productivity and wage growth had both stagnated, and inequality – wealth, income and regional – was rising. In the gap between stagnant income and rising asset prices (including house prices) lay a mountain of debt. Risky corporate debt in the US and the UK had ballooned in the post-crisis period, and before the pandemic hit at least 8 million families in the UK were struggling with problem debt.
In short, our economic model was profoundly broken before Covid-19. Three new books – Competition is Killing Us by Michelle Meagher, The Asset Economy by Lisa Adkins, Melinda Cooper and Martijn Konings, and Unions Renewed by Alice Martin and Annie Quick – cut to the core of why our economy works so badly for the majority of people.
Competition is Killing Us, written by a former corporate lawyer who became disillusioned with facilitating huge mergers between large businesses, documents the massive increase in market concentration that has taken place across many industries in recent years. Meagher identifies the drivers of these trends, including the neoliberal turn in competition law that has discouraged competition authorities from intervening in big mergers – such as the mega-merger between Monsanto and Bayer approved by US and EU competition authorities a few years ago.
Rising market power is rarely seen as a problem by economists who only focus on whether monopolies decide to raise prices, but it is associated with a number of negative political and economic trends – including higher inequality, lower levels of investment and innovation, and political capture. Big businesses are, Meagher argues, increasingly able to dominate not just the market but also our politics, leading to regulatory capture, tax avoidance and all sorts of examples of outright corruption.
The other side of the coin to rising corporate power is the hobbling of the labour movement that has taken place over the last forty years. Ever since the 1980s, governments in the US, the UK and many other rich countries have seen it as a central aim of macroeconomic policy to reduce the power of their domestic labour movements. The anti-union laws in the UK and policies like ‘right to work’ across many US states have made it much harder for workers to organise to demand higher wages, safe conditions and adequate benefits.
At the same time, the financialisation of corporations, Martin and Quick argue, has made it harder for workers to bargain directly with those who profit from their labour as shareholders can be anyone from high-frequency traders to private equity firms. With huge, financialised monopolies able to exert massive power over labour market outcomes, and workers facing all sorts of barriers to collective bargaining that could be used to resist this power, the balance of power between capital and labour has shifted fundamentally.
The Asset Economy identifies another trend behind rising inequality in advanced capitalist economies: the growing importance of asset ownership in the determination of class identity, and the increasing policy focus on maintaining and increasing asset prices. The privatisation of the social housing stock and peoples’ pensions, combined with financial deregulation, fundamentally restructured the nature of many economies – particularly those in the US and the UK, where these trends proceeded especially quickly.
Those who were able to afford to purchase these assets, often at a discount or with access to subsidised mortgages, benefitted from substantial capital gains over the following decades when asset prices rose sharply. In contrast, those who were left out and forced to rely on the housing, pensions and social security that remained in the public sector saw their living standards diverge from those of the wealthy.
After the financial crisis, these trends deepened as central banks focused on cutting interest rates and pumping money into asset markets through quantitative easing. With wages stagnant and house prices rising, young people began to struggle to acquire assets in the same way as their parents, even as older homeowners found it much easier to access credit to purchase buy-to-let homes. Today, the widening divide between those who own assets and those who don’t has become a fundamental driver of our politics.
Each of these problems are only likely to get worse in the coming years. Many small businesses will fail as the government’s dismal response to a direct public health emergency leaves us in a deep recession. Big businesses, on the other hand, are either thriving due to increased demand (such as Amazon) or receiving cheap credit from the state (such as EasyJet). Ultimately, those big businesses could use the pandemic to buy up failing small businesses and increase their market power even further.
With a renewed lockdown coming into force across England this week, unemployment is likely to increase sharply – and organising the unemployed has always been fraught with difficulty. Those who remain in employment are likely to be more concerned about keeping their jobs than they are about joining a union to fight for better pay and conditions.
House prices, which one might have expected to fall in the context of a pandemic that has seen many people opt to move out of the cities, have remained largely stable – at least in part due to the decision of the Bank of England to step up quantitative easing once again. Private renters – particularly young people – are, however, facing a crisis with the end of the evictions ban.
Each of the books reviewed here provides interesting policy prescriptions for fighting these trends – from reforming competition law, to altering the tax system, to reducing working time. What has become abundantly clear during the pandemic, however, is that none of these victories will be achieved without a movement to champion them.
The fundamental problem in our economy today – analysed from different perspectives by each of the books mentioned here – is an imbalance of power between workers and bosses. Only a united left that is able to link up the Labour Party, the labour movement, the tenants’ movement, the anti-racist, feminist, environmentalist and anti-imperialist movements, and all those fighting for a better world, will be able to correct this imbalance.