A triumph of failed ideas European models of capitalism in ... - Journal

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Reinforcing neoliberalism: crisis and austerity in the UK.................................................................................................................................................................Figure 1 UK public sector net debt, percentage of GDP, 1975–2016807060504030201001975-761977-781979-801981-821983-841985-861987-881989-901991-921993-941995-961997-981999-002001-022003-042005-062007-082009-102011-122013-142015-16Note: forecast data from 2011-12.Source: Office for National Statistics data, OBR Fiscal supplementary tables (March 2011).The instability of the UK model initially centred on the financialeconomy. September 2007 witnessed a run on the retail deposits of theNorthern Rock bank. This was followed by an unprecedented £850billion government bailout of the industry, 2 increasing numbers ofhouse repossessions and rising unemployment. There followed a shortlivedbacklash against bank executives, including a highly publicisedgrilling by politicians of hedge fund managers 3 and widespreadcriticism of ‘fatcat’ bonuses in the City. However, the UK model’sneoliberal roots reasserted themselves in the policy response to publicdemands for stronger banking regulation. A widely anticipatedgovernment review, Project Merlin, in fact concluded by supporting thestatus quo; it argued against a re-regulation of the banking industry andrejected a tax on banks or on bonuses. Instead, the four largest Britishbanks were requested merely to ensure that their 2010 bonus pool was2. This figure includes the £76 billion purchase of shares in Royal Bank of Scotland andthe Lloyds Banking Group, £200 billion of liquidity support to indemnify the Bank ofEngland against losses incurred, up to £250 billion guarantee of wholesale borrowingby banks to strengthen liquidity, £40 billion of loans to Bradford & Bingley and theFinancial Services Compensation Scheme, and £280 billion insurance cover for bankassets (The Independent, 04/12/09).3. At a House of Commons Treasury Select committee, several senior hedge fundmanagers were questioned by Members of Parliament. One MP, John Thurso (LiberalDemocrat) is reported as telling them their public image was that of ‘an opaque bunchof spivs gambling with public money’ (The Financial Times, 27/01/09).A triumph of failed ideas – European models of capitalism in the crisis 43
Damian Grimshaw and Jill Rubery.................................................................................................................................................................lower than for 2009 (and only for their UK workforce), to agree lendingtargets to business (with more set aside for SMEs, also agreed bySantander bank), to link lending targets to bonus payments and topublish the pay of top earners. These have been subsequentlymonitored but no significant change in speculative behaviour or highpay culture has occurred. 4 Moreover, lending to business in 2010–11was below target, despite additional liquidity provided through thegovernment policy of quantitative easing (QE).The redistribution of national product in the form of the bankingbailout and quantitative easing policy has occurred against a backdropof a turnaround in government spending policy and a reversal ofapproach towards demand management. Up to 2010, governmentdisplayed a partial commitment to demand management, referred to as‘coarse tuning’ (Clift and Tomlinson 2006) or ‘constrained discretion’(Thain 2010). Interventions during 2008 through to early 2010 in sixkey policy areas are likely to have prevented further job losses throughassisting business survival:(i) financial interventions (especially QE and the credit guaranteescheme);(ii) a temporary reduction in VAT (from 17.5 to 15.0 per cent through2009);(iii) the bringing forward of capital spending (£3 billion from the2010–11 budget);(iv) financial help for businesses (including relaxed tax rules for lossmakingfirms, 5 government backed loans such as the EnterpriseFinance Guarantee for small firms and a £750 million StrategicInvestment Fund set up in April 2009);4. Evidence includes: bank bonuses decreased by 8 per cent in 2010–11 but basic payincreased by 7 per cent, compared to an average 2 per cent for the UK workforce (TheGuardian, 26/04/11); continued use of multi-million ‘golden hellos’ and salaries tobanking board executives and non-board executives (High Pay Commission 2011: 31–32); and an ongoing shareholder backlash over massive bonus payments (for example,at Barclays: http://moneyfacts.co.uk/news/in-the-papers/?id=204794).5. Around 60,000 companies had deferred more than £1 billion by February 2009(Williams 2009: 11).44 A triumph of failed ideas – European models of capitalism in the crisis
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Page 6: Table of contentsSteffen LehndorffI
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The Austrian model and the financia
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Hungary’s full-blown malaiseAndr
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Italy: Chronicle of a crisis foreto
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List of contributors...............
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EuropeanTrade Union InstituteBd du
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