The Birth Of The New Welfare State

george

 

Although not often headline news and analysis, one of the main purposes of quantitive easing was supposed to be to provide national economies with the space to undertake comprehensive economic and social “Restructuring “.

 

The Bank of International Settlements, the International Monetary Fund and a whole host of governmental and quasi-governmental international bodies, have repeatedly insisted that national governments do more to implement ‘restructuring.’ They have constantly complained that national governments have failed to undertake restructuring at a sufficient pace.

 

But despite being vocally interested in the pace of restructuring, these bodies have generally been quite reticent in spelling out what restructuring actually consists of. Nevertheless I suppose that you and I could hazard a pretty good guess at what is meant.

 

Privatisation, running down and removing public services, deregulating employment conditions, opening economies to mass migration, all form the core of restructuring. If this is indeed what restructuring is, it could well be argued that no nation is further along this road than Britain.

 

Britain and the City of London can rightly be considered to be at the very epicentre of Financialisation and the Credit Crunch that followed. Britain undoubtedly suffered some of the most profound economic and political shocks as a consequence of the Credit Crunch.

 

And Britain has been at the forefront of implementing ‘austerity’ as a response to the Credit Crunch. Indeed, Britain remains virtually alone in the developed world in adhering rigidly to the rhetoric and the logic of austerity when economists and politicians in so many other nations have abandoned it as a temporary response to the immediate aftermath of the collapse.

 

This was the context in which we saw so the unveiling of the latest in a series of austerity budgets by Chancellor of the Exchequer George Osborne yesterday, Friday the 16th 2016.

 

Since cutbacks in government provision of welfare for disadvantaged groups in society (including basic disability payments), have become increasingly stringent there has been something of a push back in the media and society generally.

 

But this media furore over headline disability cuts has tended to obscure the real significance of the budget, which is that further major elements of restructuring are being introduced into the British economy.

 

Unsurprisingly perhaps, most people don’t realise the significance of restructuring, and media outlets don’t find it ‘sexy’ in comparison with the headline welfare cuts. But the truth is, the measures that have been introduced are indications of a profound change in the way that society in Britain is being organised. Much more significant than any relative monetary change to the nations accounts, no matter how large or small it might be.

 

The two most striking examples of restructuring in the latest budget have taken place in the realm of money and education.

 

Money Saving and Interest

 

Ever since  the implementation of Quantitive Easing, the policy of zero interest rates has meant that it is effectively impossible for ordinary savers to receive interest payments on the deposits they make in the banking system.

 

For over seven years now, savers have been told that the government issued money that they hold no longer warrants interest on deposit. It has been estimated conservatively that this has cost around £160 billion to the savers of Britain.  Fortunately for the Monetarists in charge of the bank of England, the savers of England seem to be prepared to suffer this loss with relatively little complaint.

 

However, it is clear that this state of affairs could not continue indefinitely. The relatively old and wealthy voters who constitute the backbone of Conservative support in England have traditionally relied on interest on savings and investments as the source of income.

 

Zero interest rate policy has meant that these savers have had to forego interest in the traditional sense or else put their savings and investment in far riskier endeavours such as the stock market. This has been the cause of some increasing disquiet.

 

In response to this problem, a previous Conservative administration decided to offer what was effectively a government backed savings investment scheme that guaranteed ‘quasi-interest’ in the form of direct government ‘top-up’ payments and tax relief on savings. This was called an ISA scheme.

 

In addition to this, the government also allowed retirement savers to withdraw all their savings from state sponsored retirement schemes at a certain point and to do with them what they wish.  In other words the policy was: ‘Since we can no longer guarantee interest payments we can at least leave you to be free as you do to do as you wish with your own money and get what you can out of it.’

 

Seen in isolation these two measures could just be short-term political fixes for the problem of older generation savers who could no longer get an adequate return on their savings.

 

But in this most recent budget, Chancellor George Osborne has expanded and developed this scheme in such a way as to indicate that it and schemes like it, are going to become an integral part of the way that money is ‘saved’ in Britain.

 

The new scheme is aimed at ‘young people’ of ages 18 to 40.  And more importantly it is being marketed as a lifetime saver scheme. A lifetime alternative saver scheme? This implies that there is not going to be any significant interest paid on deposits in the lifetime of the young people who live in Britain today!

 

It is worth taking a moment to consider the significance of the implications of this statement.

 

This scheme is meant to provide a savings route for young people to enable them to buy a house or pay towards their retirement. And it is based upon the idea that these young people will not be able to achieve an adequate rate of interest return from any of the traditional sources in economy – for the space of their entire working lifetime !!

 

So it is absolutely clear that for at least the next 40 years or so, the Chancellor of the Exchequer sees no possibility that government issued money will be able to generate sufficient level of interest to pay for housing or retirement for a significant section of the population.

 

I have previously explained the significance of the 2- 2 ½ % interest rate that has become a de facto predicted norm in the Anglo Saxon economies. It is half the general average, indicating that from now on, government issued money will service only half the available economy. Privately issued Democratised money will service the other half.

 

Given that real terms inflation will continue to run at 2% or over, 2 – 2 ½ % government issued money interest rates are effectively a bust. So the government will have to directly step in and provide an alternative savings route.

 

But the key point to understand is that the extra donated into the savings pot of individuals IS NOT INTEREST. Interest on Government Issued Money is an idea whose time is gone. This scheme is clearly a means to transition to something else.
Education

 

The significance of the Government saving scheme will gradually become apparent over the coming years. The significance of changes to the way that education is provided is as clear as a bell today.

 

Announced government policy focuses on two major changes:

 

1.Forcing schools become autonomous ‘academies’

  1. Taking parents off school governing boards

 

Before I examine these changes in more detail I first want to refer to what I wrote in Crackernomics as part of ‘2023’; a set of predictions dealing with some of the most important developments in the coming decade:

 

‘Title: 2023: CONTROL AND FUNCTION: Open timetables and Permeable

schools.’

 

Core or control education universally provided by the state will increasingly

centre on enforcing social control. Control education, whose purpose is to

‘socialise’ children in openly political ways will be the core of a 3 day school

week.

 

Parents who can afford it will have the option of paying directly or indirectly

for more elective days; increasingly these will be on different campuses from

control based education.

 

An increasing number of key skills will be designated as elective: put in

straightforward terms, ‘A’ level equivalence (pre college/university education-AP) will be effectively privatised.

High school holding pens described as technical clubs and vocational organisations run by charities and local government will begin to appear for those people who cannot afford supplemental education. They will be a place to warehouse children whose parents have to work radically longer hours.

 

To offset opposition and build a new social constituency to defend the changes,

governments will start offering educational discounts on elective education

(probably based on reduced interest rate loans) for: Military service reservists.

Volunteers for public events such as the Olympics. Key sections of workers in

health care, (mainly because will no longer have adequate occupational pensions

or working conditions).

 

SPECIAL FORECAST

 

These territorial paramilitaries will be the backbone of the emerging social order.

 

To summarise I am predicting that the social function of education is to be radically altered to fit the newly emerging requirements of society .

 

Social Control and Social Function

 

For most of the last century public education was designed and implemented to produce workers who could interact with a mass production society. It was broadly agreed across the political spectrum that the social good of the pupils and the social good of society was the same.

 

Mass production education was agreed to be the social function of education. Pupils receive the benefits of basic literacy and numeracy etc which was held to be an advance over what they had before. This basic technical education would benefit society generally through increased productivity and would therefore be paid for out of taxation

 

Since pupils now had literacy and numeracy they could also more effectively be indoctrinated in the forms of ideology and propaganda that would be required to control a new growing urban population.

 

But now the idea that broad swathes of the population will be provided with a technical education that they will never be able to apply because of lack of suitable jobs is simply not credible.

 

The market, driven by technical innovation, requires an ever decreasing number of ever increasingly more specialised technicians surrounded and serviced by an ever growing cohort of generalised menial workers.

 

In this environment, the social function of education is being redefined to conscript the technical cohort and control the menial cohort. In other words, to prevent the menial cohort becoming independently economically and politically active for as long as possible. This takes the form of an extended education that teaches next to nothing. And when this cohort does become economically and politically active to make sure that it can pose no threat to the new order.

 

So the ‘education’ element is being separated out from the ‘indoctrination’ element.

 

Since education can only benefit a relatively small technical cohort (because of reduced employment opportunities), it will be rationed. How will it be rationed? The same way everything else is; through the price mechanism; it will be privatised.

 

But the indoctrination component still benefits society as a whole (which is to say it benefits the elite in society). Especially now that the menial cohort can never expect to have access to high paying technical jobs. If they can’t have a life they can have propaganda instead. So that will be paid for out of taxation.

 

But there is a further wrinkle that will have to be negotiated… No matter how dumbed down the menial cohort is, some of them may figure out what is going on…

 

And that is where education will increasingly function as an overt way to distribute social wealth.

I made the statement that:

 

‘…territorial paramilitaries will be the backbone of the emerging social order.’

 

And that will indeed be the case. It would be a mistake to imagine that the ‘welfare state’ will be completely dismantled in the coming years. It is far too valuable a tool of control for that. But it will be redefined and reconstituted to create a social constituency whose purpose will be to enforce social control throughout society.

From this perspective we can now understand the long term significance of the policy of making schools into academies and removing parents from govenorship roles.

By making schools directly answerable to the central state as academies they are transformed into a collective resource that can be integrated into the model I describe above. Individual schools and groups of schools can be designated as warehouse or education schools as part of a nationwide system. Since there will no longer be any  local control, the chances of effective political resistance at a  local level are minimised.

The same is obviously true for the removal of parent input. Any resistance from parents who begin to see what is being done is effectively short circuited.

The New Welfare State is a subject I will return to in the near future….

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