Johnson’s bonanza for private capital

The Tories are increasing spending, but the money is going to the rich. Adam Blanden argues that this represents the acceleration of Britain’s transformation into a ‘speculator state’.

Westferry printworks
The Westferry printworks development site waved through by Robert Jenrick. Photo: Diamond Geezer via flickr

Boris Johnson has announced plans to get Britain ‘booming’ again after coronavirus has ravaged an already weak UK economy. Chancellor Rishi Sunak’s much touted Summer Statement offered up paltry sums for green infrastructure and youth employment. Much of the new spending was on the kind of business subsidies that have typified the government’s response to the coronavirus crisis. The Tories are intervening more in the economy, but in whose class interests? What specific relations are emerging between the state and the economy? 

There is plenty of evidence to suggest that a ‘speculator state’ is emerging in the UK: one in which ‘depoliticised’ office holders operate in close  – and often crooked – alignment with rentier and financial capital in the leveraging of public assets for private profit. This state has been emerging since the financial crisis of 2008 and the virtually limitless support provided through the ‘independent’ Bank of England to the financial sector. The coronavirus crisis has seen the state reactivate and intensify these forms of support while expanding the blatant cronyism of its procurement and outsourcing processes.  

Labour is right to worry about the Tories’ spending plans. Big promises on NHS investment helped the Conservatives to victory in the 2019 general election. Johnson has promised that ‘We are absolutely not going back to the austerity of 10 years ago.’ Commentators on the left are right to argue that state intervention is on the rise and Corbynite anti-austerity fails to adequately describe this new breed of Tory government. But the Conservatives are not boosting public spending in a way that increases workers’ power or even benefits socially-useful institutions. Instead that money is being routed through a nexus of state-corporate relations that encourages cronyism and the extension of private capital into the areas of social reproduction once provided by the public sector.  

Who benefits?

All capitalist states intervene in the economy. Capitalism is a system in which the economy and the state are (formally) differentiated: public office holders do not usually exercise direct control over the means of production. Instead the state plays a strategic role in organising and reproducing the conditions of economic activity. What is at issue, then, is not whether the state intervenes, but the specific type of interventions the state undertakes. Whose interests are served by specific relations that emerge between the state and the economy?

Brett Christophers describes the British economy as a case of ‘rentier capitalism’ (see also here) in which large companies exercise ownership or control over scarce resources and extract monopoly profits through the granting of access to them. Christophers argues that monopoly rents are extracted not only through land ownership, but through monopoly ownership and control of property, financial assets, natural resources, privatised public infrastructure, and public procurement contracts. When, for example, the government hands out lucrative contracts to outsourcing giants like Serco, the latter is benefitting from monopoly access to public wealth and services.

What kind of relations emerge in such a system between the state and the private sector? One way in which the state can support a parasitic private sector is through subsidies. Business subsidies have been a mainstay of the neoliberal era, during which private sector growth has lagged behind its postwar highs. State subsidies can take many forms, but all involve the extraction by private companies of forms of monetary, fiscal and political support from the state. Subsidies can be of strategic value when they help to support vital sectors, but in recent years subsidies have tended to maintain the monopoly power of large firms rather than meet strategic goals for innovation. 

The government’s coronavirus policy response has also often taken the form of subsidies. Following on from years of low interest rates, the Bank of England has once again embarked on an extensive round of asset purchases (including short term corporate debt) that not only pumps liquidity into the financial sector, but also stabilises prices and makes borrowing cheaper. This has been coupled with state-guaranteed loans to smaller companies and no-strings-attached bailouts. Even the popular (and necessary) furlough scheme subsidises employment and preserves the relation between capital and labour in its pre-Covid form. It has so far limited a collapse in employment that would be disruptive to the private sector, but doesn’t impose any structural changes on it, or alter the balance between capital and labour in the way a real Universal Basic Income might. Moreover, much of the furlough money has been handed over to rentier capital in the form of rent payments and payments to the providers of privatised public services.

Another common feature of rentier capitalism is the role of public procurement. Cases of cronyism in the granting of state contracts have proliferated in recent years. The coronavirus response has been no different. £1 billion in government contracts has been doled out under a coronavirus fast-track scheme that loosens government accountability. Serco, the controversial outsourcing giant, was in charge of the bungled launch of the government’s test and trace system. Although these contracts reflect the tendency of the state to centralise political power and outsource service provision under neoliberalism, new fields of social reproduction are being opened up to the private sector in the midst of the crisis. Serco, for example, has been put in charge of running emergency contact centres for the vulnerable. The consultancy firm Deloitte was contracted (amid a veil of secrecy and reputedly close ties between it and the Cabinet Office) to supply PPE to the NHS with predictably ‘useless’ results. Concerns have also been raised about how the personal data of those using the NHS test and trace app may be used by third parties such as the US data-mining firm Palantir. These new public-private connections suggest a willingness to extend the commodification of social reproduction. 

Under Johnson cronyism is a common feature of political life. Rather than a quirk of Johnson’s personality, this cronyism can be seen as arising from our model of capitalism and the way it is governed. Depoliticisation and the concentration of power in elite public offices have allowed for the cultivation of highly personalised relations political office holders and bearers of financial and rentier capital. A lack of effective public scrutiny over the elite of offices of state and other ‘depoliticsed’ public bodies like the Bank of England has granted these office holders a high degree of personalised autonomy. This trend is visible in the case of the Housing Secretary Robert Jenrick, who has been under pressure to resign following a scandal over the Westferry development in London’s Tower Hamlets. Jenrick appears to have been wooed by the billionaire developer and media mogul Richard Desmond while seeking approval for the £1 billion development on the Isle of Dogs. The scheme was approved just in time to avoid a £45 million infrastructure levy while also watering down social housing provision on the familiar basis of claims about the threatened ‘viability’ of the project. The scandal may reach as high as Johnson himself. Desmond was one of a select few figures in the world of private property development who had Johnson’s ear when he was Mayor. It is a perfect example of the kind of cronyism that arises from a concentration of power in the state, a lack of democratic accountability in ‘depoliticised’ state institutions, and the growth of close relations between rentier property developers and politicians. 

More of the same?

The state’s involvement in the economy is growing in quantitative terms, but it is also changing in qualitative terms. Neoliberalism sought to constrain how the state managed the economy by setting quantitative monetary targets (for example, ‘depoliticised’ central banks were supposed to target inflation by setting interest rates and thus controlling the amount of cash in the economy). Rules-based regimes that mandated quantitative targets were supposed to depersonalise and depoliticise economic governance. After the 2008 crash, this pretence fell away and governments and central banks focused on incentivising corporate borrowing and profitability in order to drive GDP and employment growth. Low wages, low productivity and ballooning corporate debt were the result. The state also continued to subsidise on the basis of corporate lobbying rather than long-term strategy. The Johnson government represents the full realisation of this process: it now provides support to every level of rentier, financial and corporate power in the economy through highly personalised, cronyist channels.

It has now become obvious – even to those not on the left – that capitalism is in a parlous state. Many blame private monopolies and rentiers. Few mainstream commentators care to note, however, that the depoliticization of economic governance that was once championed in the neoliberal era helped insulate policymakers and public office holders from democracy. The rational technocrats of the Bank of England – who have taken every action imaginable to support financial market liquidity over the last twelve years – are the opposite side of the coin of the irrational asset hoarders and property speculators that so many now decry.  

In the wake of coronavirus, the state is inviting capital deeper into the public sector. Rishi Sunak’s plan to invest £1.25 billion in tech start ups is an early indication of where the emphasis is likely to fall. Data, medical and tech innovations are likely to be subsidised by the public, invited into the provision of public services, and granted both profits and forms of control over the subsequent output. Rather than a reversion to a more interventionist welfare state, then, this looks like an intensification of private activity and control over key areas of social reproduction that were once decommodified: public health and social care, domestic and international ‘security’, and social welfare. The government has repeatedly welcomed entrepreneurial capital  – often patronised by government ministers themselves – into the so-called voluntary sector as part of the ‘national effort’ to fight the virus. Unlike the earlier period of neoliberalism, then, the speculator’s state may even be comfortable with rising spending on public services – as long as it can be routed through channels that are profitable to rentier capital. 

Talking about rentiers

The notion of rentier capitalism can be unhelpful if it is used in the wrong way. Mainstream commentators often arbitrarily separate ‘bad’, unproductive rentiers from ‘good’, productive capitalists. The concept of rent needs to be embedded in our understanding of the history of capitalism. The rent that was derived by landlords from a growing capitalist agricultural sector became a vital part of the capitalist economy. It was increasingly bound up with the commercial credit system that funded the expansion of production and catered to a growing mass consumer market. Both rent and interest bearing capital need to be understood as part of a broader economic system centred on production and the increasing exploitation of wage labour for profit. Boom time for rentiers is not a sign that capitalism ‘isn’t working’, but a sign that it is working very well for the superrich in a context where organised labour has been mortally wounded.

In today’s world of marked uncertainty (and the heightened risk of long term investment), it has increasingly fallen to the state not so much to stabilise volatility by socialising investment (as Keynes once advocated), but to boost financial market activity and provide investment opportunities for rentier capital. In modern financial systems, state debt forms the backbone of leveraged lending through its use as collateral by financial firms in repo transactions. The latter allow financial firms to borrow cash against their assets in order to engage in more profitable asset purchases. The Bank of England intervenes in repo markets to support liquidity when the value of assets falls and margin calls by asset holders threaten to undermine the basis of growing lending. Thus, there is an interdependence between the state, the markets and the central bank. All depend on a supply of liquid assets in the form of Treasury debt, which the Bank of England stands ready to purchase in times of stress. By purchasing state debt and other assets in this way, the Bank ensures a ready supply of cash and supports asset prices and keeps the costs of borrowing (i.e. interest rates) low. Central government, meanwhile, creates the conditions for new forms of investment – increasingly in the realm of social reproduction (that is, in healthcare, social care and welfare provision through outsourcing and procurement as well as through investment in tech start-ups). The state thus attempts to sustain rising future profit expectations by deepening and intensifying speculative investment opportunities. 

The coronavirus crisis offers the opportunity for the state to intensify this model by further opening up public services to private profit. Johnson is likely to do all this, just as he did as Mayor of London, through a highly personalised form of state cronyism and a never-ending parade of cultural spectacles – think the London 2012 Olympics, but as a permanent feature of the landscape of a fragmenting British isles. In the ‘speculator’s state’ decisions about how public services are provided are made not on the basis of need but on how they can be transformed into revenue streams and subsidised where necessary through public funds. 

Socialists should be clear about what this is and who it benefits: profits for Johnson’s favoured business ‘partners’ at the expense of the working class. The question is not whether the state intervenes, but who it intervenes for. The crisis has, however, highlighted the vital importance of key workers – from NHS workers to bus drivers to bin collectors – and there is a renewed awareness of the need for strong public services in its wake. Socialists have an advantage here: many of them are key workers or have been involved in the efforts of the voluntary sector to meet the popular needs that the state is neglecting. The work of socialists in the coming period should be in workplaces, communities and trade unions – to show that Johnson’s private capital bonanza is not how real needs are met.  


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