The system is rigged in favour of the owners of capital, says Guy Standing
Black swans are rare. The image is used to describe social or economic events that are unpredictable with potentially devastating effects. The trouble is that the global economic system has generated many more of them, because it has morphed into what I have described as rentier capitalism. Contrary to government claims, it is an unfree market system, rigged in favour of the owners of property – physical, financial and “intellectual” – such that those who rely on labour for income are steadily losing out.
As described in my new updated book, The Corruption Of Capitalism, this has made the world economy increasingly fragile and unstable, so that more shocks plunge it into crisis. It has spread into nature. Covid is already this century’s sixth pandemic. Black swans are no longer rare. Worse, not only are societies less robust, they are also less resilient, that is, less able to cope with and recover from shocks.
Rise of debt
The key figure in this horror is finance. Banks used to be for facilitating transactions and investment. Now finance exists as a zone of frenetic short-term speculation, and dominates economic life. In the UK, the value of financial assets has risen to over 1,000 per cent of GDP. Finance wants as many people as possible in debt, because it makes much of its profits that way.
One consequence has been that the modal household has become a speculative venture, buying property to make capital gains. Literally, the idle rich make most of their money while they sleep. But the growing precariat – those having bits-and-pieces lives without an occupational narrative – are constantly on the edge of unsustainable debt. One accident, one illness, one unlucky bad decision, and they fear becoming the proverbial “bag lady”, out on the streets looking for a local food bank.
Payday for property owners
The horror is made worse by the fact that property owners have never had it so good. Government reacts to economic crises by pouring money into the financial markets, and they fuel the property market, so that the salariat as well as the elite and plutocracy are cushioned, while the precariat lose whatever control they have of their time and rationality.
It has been made more unfair by a “job furlough” scheme that gives white-collar employees five times as much as to those in the precariat. It allows middle-class fraud. It gives support on condition that the beneficiary does no work, meaning that those who could “work at home” could pretend not to do so while being paid 80 per cent of their salary. Surveys show that one in three recipients have been fraudulent.
While rentier capitalism must be dismantled, we must come to terms with the reality that for the foreseeable future black swans will swarm and we are in for a prolonged era of insecurity characterised by uncertainty. This is unlike ordinary risk and insecurity. With uncertainty, you cannot predict when an adverse event will occur, and you cannot predict the consequences or the ability to cope with and recover from it. There are “unknown unknowns”.
Living with uncertainty is stressful and leads to people losing control over their time. More and more are surviving through “unbounded rationality”, not knowing which decisions are most likely to be sensible. Our income distribution system has broken down, while our welfare system is dysfunctional. When designed after 1945, it offered ex post compensation for an adverse event, such as unemployment or an illness. But it fails dismally to do so today. It is a punitive disgrace concocted by people and interests who know they will not need it, because they are affluent property owners, counting their capital gains. And the elite among them indulge in financial shenanigans as revealed with David Cameron and his merry fellows going through revolving doors between politics and finance.
The era of pandemics will trundle on until rentier capitalism is dismantled. We are in a low-level trap of dysfunctionality, steeped in shabbiness. By the time you read this little article, there will be the rumblings of zombie firms going bankrupt as the fiscal props are removed. The normal turnover of small and medium-sized companies was halted in 2020, but this merely made the market economy even more rigged. Watch foreign private equity pick up the pieces. Already over 3,400 firms have fallen into its hands.
The necessity of a basic income
Meanwhile, the morbidity that will be less noticed than the deaths from Covid will be sobering. What we need above all is a strategy to give everybody ex ante protection against uncertainty and black swan events. We cannot tackle the ecological, social and economic crisis unless everybody in society has a robustness – near immunity to shocks – and a resilience to handle them. This is why sooner or later even a blinkered prejudiced bunch of self-serving rentiers will come round to seeing the necessity of a basic income as an anchor of a new distribution system. Without that, do not blame those who will take to the streets at the rottenness of it all. With it, there will be hope.
Guy Standing is a Professorial Research Associate at SOAS University of London and a founding member and honorary co-president of the Basic Income Earth Network (BIEN), a non-governmental organisation that promotes a basic income for all.
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