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UK - Time for Change?

UK - Time for Change?There have been many great 'isms' that have battled to shape the world: feudalism; imperialism; Catholicism; secularism; liberalism; socialism; conservatism, capitalism; Nazism; communism; Zionism; Buddhism; modernism; Maoism; fundamentalism and more. These cultures wax and wane. They attract believers because they appear to offer a way we can define - and thus make sense of - our lives.

But they mostly also share a different commonality; that of control effected through a belief or value system that holds its constituents either by physical threat, or more subtly by information management and thought control.

People might say the top two 'isms' of modern times are socialism and capitalism. These opposing ideologies represent the magnetic poles of western thought. They also illustrate alternate control systems; socialism and communism appealing to man's better nature - by expecting the sharing of common resources - but eventually almost always turning to repression and threat to effect the control, whilst capitalism uses the opposite approach of seduction by personal avarice which is given (almost) free rein within an (almost) invisible web of control.

In recent years, the power of communism and socialism has waned. Capitalism has triumphed as the most favoured control system, (at least in the west). This is because of another 'ism' - probably the greatest 'ism' of all.....

Consumerism

Consumerism is the holy grail of capitalism. Its foundation is the theory that consumption produces personal happiness via the acquisition of goods and services, irrespective of need.

And it is that "irrespective of need" that is the important part of this definition.

Consumerism is a condition in which rich and poor alike attempt to impress others and seek personal advantage. It has nothing to do with physical need, but everything to do with emotional needs. It has replaced 'the survival of the fittest' as our reason d'etre as individuals.

Initial work by Sigmund Freud identified subconscious drives within each of us. This was followed by his nephew Edward Bernaise and legions of advertising gurus since, to make us what Thorstein Veblen coined the "conspicuous consumption" society; able to engage in 'conspicuous leisure.'

We are what we can afford - and with unending credit there is no limit to affordability.

I spend, therefore I am.

Nowhere is this more clear than in "retail therapy" - which is now the accepted way for many people assuage the feelings of inadequacy that have been subliminally implanted in their subconscious by advertising shysters and politicians.

Capitalist governments - and especially those in the USA - use consumerism to produce the illusion of personal progress and the pursuit of happiness, as the engine that fuels their economic activity, their national wealth, and their power. Consumerism is the invisible binding that ties the citizen to control by the state, and never was bondage so happily and willingly accepted.

As Huxley foretold (in his 1932 visionary book "Brave New World") the future would see the mass production of humans to order. Passive obedience, material consumption and mindless (drug assisted) promiscuity would become virtues promoted by the state. They would become modern "bread and circuses" used to subdue and satiate the populace.

We have all of Huxley's predictions with us today except the mass production of humans to order. But even that is in train, as more and more the family is disintegrated and children are seen as being in need of 'protection' by the state and its agencies.

If you think this claim absurd, stop for a moment and ask yourself how comfortable you would feel today putting a plaster on an unknown little girl's grazed knee, and why such emphasis is given to people and incidents that 'threaten' children, and how after (awful) cases like Victoria Climbie, wholesale reorganisations of social services have spawned whole local government departments dedicated to children's welfare. We are moving toward a state where many parents are no longer thought fit to make decisions affecting their children. Family Courts - where even the reporting of proceedings is prohibited - determine which parent or agency will bring up children deemed 'at risk' by the state. Only last year, Spain agreed new birth certificates where the expression "father" is replaced with "Progenitor A," and "mother" replaced with "Progenitor B."

When the scales lift, you will see these as incremental steps that are moving toward the licensing of childbearing and the state production of children. How prophetic Huxley was - and how even more impressive his prophecies given that they were made 75 years ago.

Whilst this is a digression from the main financial theme of this article, it does serve to illustrate the first of two great risks attached to capitalism based on material consumption. That of our seeing the Emperor is naked. Our realisation that the whole system is a tissue of lies and a delusion in which we are constrained and milked - just as an ant strokes and milks an aphid for its sweet honeydew - is a great danger for those in control.

Over time we have been milked of more than half the money we earn by Government's direct and indirect indirect taxes and their duties, licenses and, more recently, fixed penalty schemes. And we have been milked of more than the other half by advertisers, manufacturers, retailers and financiers. The UK personal debt we owe as consumers is £1.4 trillion (£1,400,000,000,000 or four million Rolls Royce Phantoms, or 182 years of food for the world's starving children).

The second risk is the waste that consumption produces.

Persuading people to buy things they don't need in order to maintain national economic activity is wasteful of primary resources and energy throughout the planet. Consumption inevitably brings what Veblen described as "conspicuous waste" in its wake. It must. The process absolutely depends on renewal and replacement before exhaustion. Its foundation is 'built in obsolescence' and it is why items are no longer repaired, but discarded and renewed. Dealing with those discards and the associated waste is now causing trouble.

When you realise that 60% of the UK and 65% of the USA's economy is now based entirely on consumption, you begin to see how fragile those economies really are (and why the drive to reduce 'waste' is so important. Ultimately, if noting is done, the good consumers will be choked by their own consumption).

But waste is a minor issue compared with the risk of letting people understand what is really going on financially, which is why so much effort and money has been poured into the troubled banking system recently.

Paradoxically, the troubles in the banking system actually stem from the capitalist philosophy and its use of consumerism.

We hear arguments that the crash was caused by the excesses of the free market; and the bankers that lent imprudently (which they did); and the regulatory system which was defective; and because the banker's misjudgements were concealed and fed through into the whole banking system.

It is indeed a curious state of affairs that loans were deliberately made to people who could not afford to repay them, then those loans were sliced, diced and repackaged together with loans made to more reliable payers, as investment opportunities producing unbelievably high rates of interest that were sold on to what should have been experienced bankers without them having the faintest idea of the ultimate risk they were taking on, and having no way of evaluating it.

Like a giant pyramid-selling scam, once the pack began to shake, and those involved saw that the Credit Emperor really was naked, the result was close to panic, and the cards tumbled. Banks stopped lending to each other (and to anyone else), because they believed the loans they made might not be repaid. No-one knew which (if any) banks had enough assets to cover the combined liabilities of their loans and their so called 'investments'

This was bad enough, but those banks like Northern Rock who mainly sourced their funds for mortgage lending from other banks rather than savers, suddenly had no money available to borrow, and when word got out, worried investors wanted to withdraw their money, prompting a 'run' on Northern Rock that showed no sign of easing until be bank was bankrupt (nice term that if you think about it - a bank, ruptured, and its contents flowing out).

Now this would have caused real trouble, because other banks would have followed into bankruptcy as the panic spread and the house of cards fell. It is now clear that major banks like Natwest/Royal Bank of Scotland/Halifax et al were also literally on the verge of a run and possible bankruptcy. Furthermore, Britain itself could have been the country (as Iceland threatened to become) that shook the foundations of the international financial house of cards on which the world's banking system is itself based.

For a time we watched in disbelief as financial institutions we knew as household names were reduced to what Gillian Tett of the Financial Times eloquently described as "not capitalism as we know it, but panic-stricken survival capitalism"

So it's no surprise that the Government had to intervene. We've no doubt they cared not one jot about an individual bank. It was the risk to the whole financial system that precipitated their intervention. This is also why they will almost certainly not intervene in commercial company failures unless such failure were to threaten national security or something similar.

So why did the system fail?

Well most people seem to trace the origin to the City's 1986 'Big Bang' and the increased competition for money when the American Investment banks wanted a slice of the UK's financial market. We think it was earlier, but either way, the cause was more intense financial competition which, ironically, is the fundamental basis of the capitalist philosophy that caused the problem in the first place.

It's even more curious that according to Government, the solution is to be more of the same - the banks will be required to use the squillions of taxpayers money they were given by government to fund and encourage us to borrow more (or at least to start borrowing again) and be good consumers and get spending, so the fingers of business and government can start to milk us again, and the whole short-term, credit driven, free market cycle can re-start a new homage to the great God of 'Growth'.

Most people, and even the political right, seem to agree that more regulation is needed. They are calling for the free market to be better regulated.

But if that happens, how can it be considered a free market? What is state control if it is not the imposition of regulation by the state and its agents to control the actions of the 'free' market? How can a market be free when it is shackled by regulation?

The answer to this conundrum also signals the future of our society.

We can hear sceptics saying "this is too far fetched." If you are amongst them, think on this. Do you believe it is possible to "mis-sell" something? (We know Government says it is, because they passed the law, and 'punished' those who "mis-sold" pensions for example).

We argue "mis-selling" is, and should be, impossible.

The fundamental tenet of the mis-selling philosophy is that the buyer is not responsible for his purchases, and the seller must take steps to understand all the needs of the buyer in order to sell him what he needs. If he is in error, he is guilty of mis-selling.

What tosh. There is fraud and there is mis-representation - both of which were (and are) adequately covered by our laws before the offence of "mis-selling" entered the lexicon. Subject to accurate information, it is up to the buyer to take responsibility for his own actions. But this pernicious system of consumerism that was being, and might again start to be, woven around us completely reverses this eternal truth and starts from the presumption that people should not be responsible for themselves and their actions; that is the role of business or the state. It fosters irresponsibility, the "me-centric" culture, selfishness, and the illegitimate "entitlement" and "rights" mentality that is, step by step, destroying both our sense of community and our wider society.

Other people are seeing this light. In a series of extraordinary and mostly unreported speeches during late 2008, Sir Martin Sorrell, founder and Chief Executive of WPP, (the world's second largest advertising and media buying group), has been heralding the imminent demise of the consumer society in its current form. Other advertising companies are joining his call.

If consumerism - the holy grail of capitalism - has been mortally wounded, it follows that capitalism as a system, and governance that presumes it can employ capitalistic perpetual growth to satiate the populous is, itself, under threat.

As the Church of England has already seen, there now exists an opportunity for people to call time on the forces that would return them to passive, obedient, consumers.

The issue here is personal responsibility, and the choice is simple - if hard.

We can decide to live in a society where it is the state's responsibility to save us from the consequences of our own actions, or we can learn the hard lessons from the last year and rebuild our society with personal responsibility at its core.

It is a hard choice because either way the path will not be easy. The disaster we have watched unfold will bring a lot more trouble next year (and for many years to come). Large numbers of people will lose their jobs and some will lose their homes. Businesses large and small will fail, and Government will start to print money it doesn't have in order to spend it - quite possibly in the housing market - and move the economy back into life.

Because of this 'quantative easing' of the money supply - as Government is euphemistically calling their scheme (in other circumstances it would be called 'forgery') - toward the end of 2009, inflation will take off and the RPI, the real measure of inflation, will rocket. That means savers in the UK will see the real value of their money fall, both as a result of the dilution of the overall money supply caused by government printing more money, and secondly by the inflated prices they have to pay.

As time moves on, the danger of polarisation will arise between those that have, and those that have not, and in some places these conditions will create a fertile ground for civil disturbance. It is possible the present government will ultimately be blamed for the situation, and will lose public support. As history shows, these conditions (deprivation, unemployment, poor prospects and weak government) engender support for political extremism, and we could see a resurgence of the far right.

As we said at the start, when the Emperor is seen as naked; when the house of cards tumbles, when people see the deception for what it has been, the reins of control will cease to work.

What will emerge is uncertain.

One thing we can be sure of; capitalism and the UK will never be the same again once this is all over.

With that, and the time of year in mind, we wish our readers a healthy and secure new year.

30 December 2008 


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