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The Economy

I agree with the final comments of the hon. Member for Aldershot (Mr. Howarth)—[Interruption.] I refer to his comments on the need to rebuild Britain’s manufacturing base. I had better clarify that, because I am after a job in the future. I want to avoid what I consider to be pretty senseless tit for tat. I want to avoid aiming for the easy target presented by the individual bankers who have caused outrage in society. I want to deal with some of the fundamental questions. I think that we should be discussing and arguing about those, and hopefully the public will be listening. It is my contention—here I pick up a point made by my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher)—that the past 30 years have been dominated by a neo-liberal consensus which has unfortunately been accepted by new Labour and, much to our detriment, willingly embraced by the Conservatives. I am not so sure about the Liberal Democrats. Let me define neo-liberalism. The theory is that the market should determine individual actions, that we should support privatisation and deregulation and trade and financial liberalisation, that we should shrink the roles of the state and of trade unions because they interfere with the workings of the market, and that, on an international level, the International Monetary Fund and the World Bank should carry out the structural adjustment programmes that introduce such ideas into the societies of developing countries. How do these incredibly sophisticated ideas work out in our everyday lives? I think it is tremendously important that at an individual level, we are defined as consumers rather than citizens. The high priest of neo-liberalism, Ronald Reagan, said when he was elected that government is the problem, not the solution. Those involved in the neo-liberal revolution of the mid-to-late 1970s promised that an economic panacea could be delivered that would mean growing wealth for everyone, but that was far from the case. Neo-liberalism has not delivered gains of that kind for people; in fact, I would argue that throughout the world it has delivered growing insecurity. Over the past three decades there has been a widening of inequality between rich and poor nations, and—just as important from our point of view—a growing inequality within the populations of the advanced economies. Another less well-known fact is that those three decades of neo-liberalism have led to no improvement in the living standards of large sections of humanity, and in many areas incomes have fallen. As for the international dimension, Real World Economic Outlook, which was published by the New Economics Foundation in 2003 and used the IMF’s own figures in assessing the world economy, described what had really happened over the past three decades. World GDP per head was static between 1980 and 2002. In some crucial years—at roughly the time of the collapse of the Soviet Union, between 1988 and 2002—world GDP per head actually fell. Between 1980 and 2002, real average GDP per head in the countries outside the IMF’s group of so-called advanced countries, comprising four fifths of the world’s population, fell from $1,400 to $1,100 per year. What has been the impact in the home of neo-liberalism, the United States? The figures for median earnings of working males in the United States are interesting. The median earnings in 2005 were slightly less than in 1980. The New York Times has been mentioned, and its report of 29 March 2007 is also interesting:""The top 1 per cent."" of the US population""received 21.8 per cent. of all reported income in 2005…more than doubling their share of income in 1980."" That approaches levels of wealth distribution last seen in the 1920s. Warren Buffett, one of the richest men in the world, stated in 2006:""There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning."" He was absolutely correct. What has been the impact of these neo-liberal ideas over the past three generations? What have they done to our society in Britain? A recent article in The Guardian dealing with inequality in Britain makes worrying reading. Using 1974 as a baseline, it said that inequality had increased by 40 per cent. by 2006. The Guardian explains that the increase""was the sharpest in the developed world"," and suggested it was partly the result of the political architecture that we labour under. Child poverty figures are particularly important, as they show how the economic system works out for the most vulnerable. We now have 3.9 million children living in poverty in the UK, after housing costs are taken into account. The UK has one of the worst rates of child poverty in the industrialised world. This is the result of three decades of this economic system working through. I could go on and highlight the figure for child poverty in the east end of Glasgow, which is, I think, about 98 per cent., or even state that four out of 10 kids in London are brought up in poverty, even though the richest square mile of the country is located in the city.