The post-war social contract was extremely good news for the vast bulk of the population, but it was not good news for wealthy market fundamentalists. The popularity of the post-war social contract meant that, in a democracy, it would be hard to get rid of it. And this set a fundamental challenge for the market fundamentalists. In a strategic masterstroke – or perhaps fortuitous evolution – they created ‘the Hydra’, a powerful political force for achieving their aims without ever needing to declare them.

The 99% (actually probably more like 99.99%) of the population who want to preserve the post-war contract need to recognise the Hydra, and unite to destroy it. We can learn a lot from Hercules.

Good News for The 99%

During the Second World War, the National Government of Great Britain commissioned Sir William Beveridge to produce a report on the reconstruction of Britain after the war ended. His report aimed to create a better, fairer, more prosperous society, and to reward the nation for the shared sacrifices during the war.

Specifically, Beveridge aimed to free Britain from what he called Five Giants: Want [poverty], Disease, Ignorance, Squalor and Idleness [unemployment]. The report was published in November 1942, and was overwhelmingly popular with the public.

Clement Attlee’s post-war government implemented Beveridge’s report through a series of Acts of Parliament (the National Insurance Act 1946, the National Assistance Act 1948, and the National Health Service Act 1946) which founded the modern British Welfare State. And in so doing created a new social contract.

For most people, this social contract was a dramatic improvement on what had gone before – as the Conservative Prime Minister Harold Macmillan said in 1957, “you’ve never had it so good.” And he was right.

The post-war settlement was also extremely successful economically: it led to the Golden Age of Capitalism, the period from 1945-1980 during which the economy grew at unprecedented rates, and the benefits of growth were shared widely by the population as a whole.

Bad News for Market Fundamentalists

But not everyone was happy. Some of the wealthy, the market fundamentalists, saw this new social contract as a profound injustice. The problem was the progressive taxation needed to fund the NHS and the Welfare State. The most talented members of society, the market fundamentalists believe, were being forced, against their will, to subsidise the losers and the left-behind. As William Rees-Mogg put it in his book, The Sovereign Individual,

“The terms of progressive income taxation, which emerged in every democratic welfare state during the course of the 20th century, are dramatically unlike pricing provisions that would be preferred by customers [wealthy taxpayers].… Government in many respects appears to be run for the benefit of employees [the mass of the population – see quotes below].”

If this problem could be overcome, the social contract could be dissolved, and progressive taxation removed. The poor would then have to depend on charity from the wealthy – that charity would of course be at much lower levels than the punitive taxation that the rich had been forced to endure; and the recipients would need to work much harder to persuade the donors that they deserved it. In Rees-Mogg’s words,

“Still another likely spur to sterner morality will be the end of entitlements and income redistribution. When the hope of aid for those falling behind is based primarily upon appeals to private individuals and charitable bodies, it will be more important than it has been in the 20th century that the recipients of charity appear to be morally deserving to those voluntarily dispensing the charity.”

Democracy as a hurdle to be overcome

But the fundamental issue they faced in dismantling the new social contract was its overwhelming popularity. In a democracy, it is hard to remove something which most of the population favours. As Rees-Mogg put it,

“Mass democracy leads to control of government by its “employees.”

But wait. You may be saying that in most jurisdictions there are many more voters than there are persons on the government payroll. How could it be possible for employees to dominate under such conditions? The welfare state emerged to answer exactly this quandary. Since there were not otherwise enough employees to create a working majority, increasing numbers of voters were effectively put on the payroll to receive transfer payments of all kinds. In effect the recipients of transfer payments and subsidies became student employees of government who were able to dispense with the bother of reporting every day to work.”

Clearly, the market fundamentalists needed political power to achieve their objectives; equally clearly, if these objectives were made clear, they would gain no political support in a democracy. What could they do?

Creating the Hydra

The answer was to create ‘The Hydra.’ In Greek mythology, the Hydra was a many-headed serpent whose venom, and even whose breath, was deadly. This Hydra is a useful metaphor for the solution the market fundamentalists found to their quandary.

The body of the Hydra represents the philosophy of market fundamentalism. This was to remain hidden, masked behind a carefully woven tapestry of economic myths. Most powerful of all of these myths is the myth of unaffordability. According to this myth, government finances are in such a state that spending must be reduced. Austerity is, they claim, a regrettable but unavoidable necessity. It is not a policy choice, so there is no point questioning it. As they often say, “there is no alternative.

And from austerity, spring the many heads of the Hydra: mass impoverishment, underfunding of the NHS, under-resourcing of the police force, inability to address the climate emergency, underfunding of schools and local government, rising rates of homelessness, rising rates of stress and mental illness and even support for no-deal Brexit from some of those who will suffer most if it happens.

Each of these heads is potentially deadly, and attracts attention and resources from those who care about such things. Individually, each is large enough to occupy multiple think tanks, charities and campaign groups. In combination, they are enough to prevent people examining the myths and seeing behind them the body of the Hydra.

And the most brilliant thing of all from the point of view of a market fundamentalist is that, the more the population struggle financially, the more plausible people find it when politicians say that government to needs to rein in its spending. For the market fundamentalists, the more the policy of austerity fails, the more it succeeds.

So for our current civilisation to survive, we need to find a way to kill the Hydra. And perhaps Greek mythology can come to our aid here.

As you probably remember, the hero Hercules was set a number of tasks – the labours of Hercules. And the second of these labours was to kill the Hydra.

Initially, Hercules thought the task was not difficult: he was quickly able to lop off several of the Hydra’s heads. But then to his horror, from each stump another two heads grew. Hercules realised that he was about to be overwhelmed and withdrew.

He called on his nephew Iolaus to help him. They returned together and, as Hercules cut off each head, his nephew cauterised the wounds to prevent the new heads from growing back. In this way, Hercules and Iolaus were finally able to kill the Hydra.

So, for those of us trying to battle the heads, there may be two lessons to learn:

  1. We cannot do it alone
  2. We cannot do it just by looking at the heads – we need to tackle the body of the Hydra.

If Hercules could learn to kill his Hydra, so can we. And instead of a future of mass impoverishment, we can create a world were everyone is far better-off than today.