There is a quote, often attributed to Albert Einstein – though whether he actually said it is disputed – that “the definition of insanity is doing the same thing over and over and expecting different results”.

This article argues that, by that definition, the UK has been increasingly insane since at least 2010 – and that we are overdue for a return to sanity.

Doing the Same Thing Over and Over

There is a dominant narrative among the British far-right – which includes the majority of our media as well as most members of our ruling party – that says that the route to success for Britain is through rolling-back the frontiers of the state:

1. Lower taxes;
2. Reduced public spending;
3. Less regulation;
4. More privatisation.

The claimed benefits for these ideas were as summarised in this table:

This was the premise of Thatcher’s government, partially interrupted by Major’s and Blair’s governments; and again the goal of Cameron’s and May’s governments, modified by Johnson’s innovation of the Plunderstate, which had a different attitude to tax:

“tax-funded spending is fine, as long as we can direct it to whom we want and as long as the tax burden does not fall on the wealthiest.”

So while one might hope to see redistribution from the richest to the poorest, Johnson’s model accelerated the enrichment of the very wealthy at the expense of the middle-class who pay the increased taxes and without benefiting the poor.

When Johnson was ousted, all the contenders to replace him agreed that the UK was now struggling badly on many fronts but somehow concluded that the future would require a renewed commitment to these four principles, though they differed sharply on how fast to move.

Doing it Again and Expecting Different Results

Liz Truss was the most committed to doubling-down on these ideas and she was accordingly selected by party members to be the next Leader. Her Budget was, predictably, a disaster and she was swiftly replaced by Sunak, who shared the same ideological background, but was prepared to move more slowly.

Incredibly, though, even after Truss’s abject failure, there was no suggestion by any of the leadership contenders of looking at the UK’s performance in recent decades, noting that it has been in decline since the 1970s, and questioning whether the overall strategy was right.

Real wages, as we pointed out last week, have grown more slowly in the last 13 years than in any 13-year period for the last century (ie not at all).

And despite what most of the media tell us, for unemployment the picture is equally stark.

This clinging on to a belief in the ‘magic of markets’ on the part of the far-right is a mirror image of the far-left view that “Communism hasn’t failed; it has never been tried.” It may be touching in its naivety, but it is hugely damaging to the UK.

And as a result, even after 13 years of watching the state retreating from its responsibilities, we continue to see and hear messages like these from far-right journalists and politicians:

Sunak has repeatedly said that he “cannot solve every problem” – indeed it is not clear which problem he believes he can solve.

And Javid who – incredibly – was Health Secretary believes that:

“Government shouldn’t own all risks and responsibilities in life. We, as citizens, have to take some responsibility for our health too. We shouldn’t always go first to the state – what kind of society would that be? Health and Social Care: it begins at home. It should be family first; then the community; then the state.”

“Family first, then the community, then the state” might be sound advice if your lawnmower has broken; it makes less sense if you have just had a heart attack or been diagnosed with brain cancer.

The consequences for the UK population of clinging to these ideas have been dire: as John Burn-Murdoch pointed out in the Financial Times,

“Real wages in the UK are below where they were 18 years ago. Life expectancy has stagnated, with Britain arcing away below most other developed countries, and avoidable mortality — premature deaths that should not occur with timely and effective healthcare — rising to the highest level among its peers, other than the US whose opioid crisis renders it peerless.”

Those at the bottom end of the income distribution have been finding life tough for decades, but today even those who in previous generations would have been rather comfortably-off and for whom buying a house would have been an expectation rather than a distant dream – people like teachers and academics and even doctors and accountants – are beginning to feel the pinch. On current trends, the middle class is at risk of disappearing. This process of mass impoverishment is described at length in the book, 99%.

So what should we do?

Return to Sanity

A rational government would look to see what works.

Looking backwards, the historical view is clear: the post-war Golden Age of Capitalism (1945-1980), when government was more active, did work very well for most people in the UK. Since then, things have not been working for you unless you are very rich.

And looking across geographies also lends no support to the notion that “governments are at their best when they do least.” If we look at economic results, we see that on the contrary, the governments which do least tend to be those with very unsuccessful economies.

Slightly more subjectively, but very importantly, when we look at the happiness of the population, we see the following.

And this is not surprising since similar analyses show that larger states correlate with:

• Higher life expectancy;
• Lower poverty rates; and
• Greater social mobility.

It is clear to everybody that the UK is struggling badly on a range of issues. Right now the cost-of-living crisis, the NHS crisis and the climate emergency all require serious action by a responsible government. And none of those things can happen within the constraints that market fundamentalism imposes.

It is time for a return to sanity.

Taking five relatively straightforward steps will put us back onto a path of rational policy-making in the interests of UK citizens:

These five steps are described fully in 99% and outlined briefly below.

Step 1: Democratic Reset

Of  course, we need to see policy change. But even more fundamentally we need a democratic reset. We don’t have a written constitution in this country – and recent events have shown clearly how precarious our rights are in the absence of such a protection. It is not illegal for a government in this country to pass legislation that it knows will harm the interests of 99% of the population. And we are now living through a government that is happy to take advantage of that freedom. Here are the key elements of that democratic reset.

Step 2: Fact-based Policy

And we need fact-based policy. There is a spectrum of truth from absolute truth to unfounded falsehood. And far too much recent policy has been based on the right-hand end of that spectrum.

Since 2010, policy has been guided by the myth of unaffordability – that was the reason for austerity. When Theresa May wanted as her final act to commit the UK to carbon neutrality by 2050, Philip Hammond didn’t try to deny the science, but he claimed that it would cost £1 trillion, and it was taken for granted that this meant that we couldn’t afford to do it. Why not? Because of the ‘state of government finances.’ But Government Debt:GDP is today roughly at its 300-year average, below where it was before the Industrial Revolution took off, and below where it was before the Golden Age of Capitalism. It is simply a myth that we couldn’t afford to protect the health of the economy and our environment. And in the US, they don’t even accept the science.

Without facts, there can be no sanity.

Step 3: Policy for Solidarity and Abundance

On the basis of this constitutional reform and a commitment to look at the facts, we can then expect government to formulate policy that will tackle and reverse mass impoverishment. Policy formulation is complex, but there are only fundamentally four types of policy.

Each policy either grows the pie or it doesn’t; and it either shares the benefits of that growth fairly or it doesn’t. That gives us these four types of policy:

1. Captured growth policies;
2. Shared growth policies;
3. Vulture policies; and
4. Balancing policies.

The chart below helps understand both how we got into our current mess, and how we can get out.

We got into this mess because we have had far too many captured growth policies and vulture policies, and far too few shared growth policies and balancing policies.

And we can get out if we focus as much as possible on shared growth policies. and recognise that where we choose to adopt captured growth policies, they need to be balanced.

First, the shared growth policies. Why not spend £100 billion over the next few years insulating every house in the country? Why not spend a few £ billion on R&D for battery technology or infrastructure for electric vehicles? Why not build a million eco-friendly social housing units? And why not fund the NHS properly?

And for the balancing policies, why not pay a ‘green dividend’ to the poorest, funded by taxes on fossil fuels? How about immediately ensuring a true living wage? Why not stop the roll-out of universal credit and replace it with something fit-for-purpose, and why not return to a taxation system that at least stops inequality growing?

Step 4: Investing in the Future

The fourth step is to invest wisely in the future. That is the Type II policies. We haven’t been wise, because of the narrative of unaffordability which has prevented all kinds of sensible investments. The chart shows the case of flood defences. And of course other environmental investments would fall into this category, too. It is no more prudent for the Government to say that it cannot afford these things than it would be for me to ‘save’ money by not fixing a leaking roof in my house.

Step 5: Clean-up Capitalism

And the fifth step is to clean up capitalism. At the moment, the immensely powerful force that is the profit motive is too often fighting against solving the problems we are most concerned about. But it need not be.

In Appendix IX to the book 99% (you can download the Appendices free from the website), there is the story of a fictitious but quite realistic business, Alpha plc. The story as it is normally told goes like this:

In 1997, Robin Quickly was a young man with a dream. Working with two friends from rented premises in an out-of-town business park, using second-hand IT equipment funded by a loan from his parents and a small government grant, he founded a company which was destined to change the way Britons buy their clothes. In its first year of operation, the then unknown Alpha company had a turnover of just over £300,000 and made a small loss.

Today, Alpha plc is recognised as one of the UK’s most dynamic and successful companies. In little over 20 years, it has grown from nothing to a turnover of £1.5 billion and is still growing at over 10% per annum. Customers love Alpha. Because of its innovative business model, its costs are approximately 5% lower than those of bricks-and-mortar competitors – and it has passed this cost saving on to customers. Its service levels are consistently high. And Alpha was one of the pioneers in using algorithms to drive product selection. It has swept its competition aside.

And the reported profit of Alpha looks very healthy.

But underneath the surface, the picture is very different. Alpha externalises many of its costs. It gets us to pay for its pollution, for its underpayment of staff and its failure to pay its taxes.

Because it externalises its costs, it can outcompete more ethical businesses. Because it externalises its costs, it becomes an engine for mass impoverishment. And because it externalises its costs, it gets rewarded for destroying the environment.

But if it could no longer externalise all these costs, it would cease to have an advantage over more ethical businesses. It would not have grown. It would not have contributed to mass impoverishment or environmental destruction.

In a world without externalisation, ethical businesses would outcompete unethical ones and the profit motive would become a force for good.

Conclusion

Whether you are most concerned about the cost-of-living crisis, the NHS crisis , the housing crisis or the environmental crisis, those five steps are all-important.

Once we have taken those steps, we can start to see progress towards a just, prosperous, democratic society in which everybody has the chance of a decent life. A society with secure, fairly-paid jobs so that ordinary people have a reasonable expectation of being able to afford to buy themselves a flat or house. A society where people can count on being able to bring up children without fear of poverty. A society where access to healthcare is a right not a luxury. A society where the government accepts that it has responsibilities for the population as a whole and that collective action is often the only way to solve important problems (for example tackling the climate emergency or funding basic research with no immediate commercial application).

A society, above all, where each new generation has a reasonable expectation of a better life than its predecessors.

If you think you might like to help, take a look at The 99% Organisation and join us.