Sunday, April 24, 2011

Gordon Brown & PFI: neoliberal economic alchemy

The UK is in an economic mess. This became pretty much indisputable after the government borrowed £900 billion (91% of GDP) in order to rescue the insolvent financial sector and the Bank of England started printing new money and holding interest rates at artificially low levels in order to keep the reckless speculator classes from the natural consequences of their own stupid gambling.

Gordon Brown is responsible for a lot of the mess, but not in the simplified way right-wing nut-jobs like to claim. Their contemptible contributions go along the lines of "Gordon Brown's left-wing big state policies have created this debt" when anyone can see that his adherence to orthodox neoliberal pseudo-economic (ie very right-wing) policies such as the deregulation of the banks, turning a blind eye to tax-dodging, refusing to regulate the buy-to-let slumlord sector and the introduction of extortionate PFI deals are some of the major factors in the economic meltdown.

To cram through all of those insane "off balance" PFI deals that were designed to funnel vast quantities of public money into private enterprises, whilst shifting the ownership of state infrastructure into private control - Gordon Brown either had some serious vested interests, or he was the most economically illiterate man ever to serve as chancellor (a title quickly snatched from him by Gideon Osborne).

In simple, Gordon Brown's PFI schemes are privatisations but with massive state subsidies. Instead of simply selling stuff off on the cheap to fund tax cuts for the rich like Thatcher's Tories did in the 1980s, these scams are actually designed to pay the private sector many times the value of the assets over the course of decades.The government bulldozes the old school/hospital/city hall, arranges for private interests to build a new one, then pays them many multiples of the construction cost over the course of decades. Future generations of taxpayers are shafted by these absurdly one-sided and inflexible deals and the private interests are left to cash in even further by restructuring the loans they took out to build the projects (once the risky construction phase is over and the subsidies are rolling in, they can get the rates on their loans slashed dramatically).

After the financial sector imploded in 2007-08 what happened to Brown's self imposed 40% "golden rule" of economics that incentivised all of this dodgy off balance sheet borrowing in the first place?

He ditched it as soon as his rich banker mates started squealing that they had pissed away all their money on bad bets. Then he meekly paid off all these debts to keep the whole shambolic and corrupt banking system afloat, without even bothering to nail them down with tough lending conditions or nationalising them if they wouldn't/couldn't comply. 

Instead of doing something sensible like using all of the money he wasted on the bankers' bailout to support British industry directly, we still have the same parasitic economic minority that caused the economic crash through their reckless speculation soaking billions out of the real economy in massive bonuses and convoluted tax schemes, and all it seems to cost them these days is a few million in political donations to the nasty party.

If the oodles of bailout cash had been diverted directly to British industry, universities and research facilities instead of pouring it into a black hole of bankers' debts, the nation could already be seeing good returns on the investment in terms of economic growth & employment.

The fact that our supposedly "socialist" party was up to its elbows in neoliberal economic alchemy schemes like PFI shows how pervasive the crony capitalist greed has become. Add to that the fact that New Labour also started other neoliberal processes such as NHS privatisation by stealth, Royal Mail privatisation, corporate outsourcing of the welfare state, the digital economy bill and the commodification of higher education. The New Labour adherence to neoliberal economic orthodoxy gave the Tories far more destructive power than they would have had if they had been forced to begin their crazy neoliberal agenda again from scratch after 13 years of genuinely left-wing governance.
 
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