Wednesday 12 October 2011

End of a Faustian Bargain

A guest post by Guy Standing, a Professor of Economic Security at the University of Bath, and author of The Precariat – The New Dangerous Class (Bloomsbury).

Now that the party conference season is over, Labour must reach out to the class-in-the-making that successive governments have done so much to construct, the precariat. It consists of a vast and growing number of people without occupational identities, in chronic insecurity, in and out of jobs, anxious, alienated, anomic and increasingly very angry.

The Fabian Society should be a forum for identifying the frustrations and aspirations of the emerging precariat, and not be befuddled by public relations talk of a ‘squeezed middle’ or some lingering image of the proletariat.

The precariat is not an underclass, and commentators do a disservice by presenting the problem in that way. The precariat was wanted by the global market system, and is not peripheral, consisting of drug addicts, petty criminals, dysfunctional families and so on. If the establishment succeeds in presenting the problem as a bunch of social misfits, ‘feral’ or otherwise, it will get away with a concoction of charitable pity for the ‘deserving poor’ combined with workfare and prisonfare for those labelled as ‘mindless’ and ‘undeserving’. Only if the challenge is recognised as generic to a large and growing stratum of society will progressive policies stand a chance.

We are witnessing the end game of a Faustian bargain made by the Conservatives and New Labour in their long periods in office. Workfare and prisonfare were the long-term price.

The Faustian bargain was simple. When globalisation was accepted, centre-right and centre-left parties, not just in Britain but across Europe, North America and Japan, accepted a certain logic. Liberalising meant that labour supply to the global market economies trebled, with more than a billion new workers prepared to work for a fiftieth of what workers in the rich countries had come to accept. Convergence was bound to mean declines in wages and enterprise benefits in the latter and for productive jobs to shift to where labour costs were lowest.

With labour costs put back into international trade and investment, mainstream parties opted for a policy euphemistically called ‘labour market flexibility’. This meant making the lower end of labour markets, and increasingly up into the middle, more insecure in many respects. No government did more to achieve this than New Labour, which set out to make the British labour market more flexible than the rest of Europe, in order to boost ‘jobs’ and draw investment from elsewhere. The great early Fabians, Tawney, Shaw and the Webbs, would have been shocked and scornful.

But as governments pursued flexibility, there was a prospect of sharp falls in wages and a whittling away at elements of hard-won social income. A rapid decline in living standards was politically and socially unsustainable. So, a Faustian bargain took shape. While the precariat grew and had its social income chipped away, tax credits and cheap credit bolstered living standards in the short-term, allowing an orgy of consumption and rising indebtedness. It was a reckless postponement of adjustment at a time when more redistributive measures could have been taken.

With a flexible labour market, social insurance was unsustainable. So, a wholesale shift to means-testing and behaviour-testing took place, premised on the polemic that scarce public resources had to be targeted on the deserving poor. This flaunted Richard Titmus’ famous aphorism: Benefits that are only for the poor are invariably poor benefits.

As the Faustian bargain played itself out, poverty traps and what I have called precarity traps spread, reflecting the fact that more complex tests for entitlement created a long dreary process for the poor and precarious as they sought to obtain benefits. New Labour failed to overcome these trends with its tax credits; it was like Canute trying to hold back the waves of downward pressure in the labour market. Real poverty traps and precarity traps worsened under its watch. In the end, there was no positive incentive for many in the precariat to take available jobs.

The Faustian bargain imploded in 2008, since when austerity measures have further stripped away elements of social income, as well as chipping away at ‘the commons’, and making millions of people more fearful of falling into the precariat. The precarity trap has been intensifying, epitomised by recent reports of claimants being sent to food charities while they wait for their benefit claims to be considered. If you were a claimant and if you managed, after weeks of trying, to obtain entitlement to a modest benefit, would you rush to take a minimum wage temporary job, where you would be facing what is an effective rate of tax of 80% in lost benefits and the prospect of being out of a job within weeks and thus have to start trying to obtain benefits all over again?

While poverty traps and precarity traps grew, the predictable legacy of the Faustian bargain was a trend to workfare and prisonfare, driving more people to take insecure low-paying, career-less jobs because there is no positive incentive to take them. Now, government threatens more people with benefit cuts, spells of graffiti cleaning and criminalisation. They chip away at entitlements – the ‘disabled’ (pseudo-tested by Atos and declared ‘fit to work’), working mothers (shamelessly called non-working, and therefore implicitly ‘idle’), youths (idle by definition, of course), oldagers (pensions postponed and declining), migrants, and so on. Inequalities continue to mount.

The Faustian bargain is dead. But our politicians refuse to acknowledge their folly. They must wake up to the reality that continuing with its model is socially dangerous, inequitable and a recipe for social discord on a scale much greater than we saw in August. They must seek another road, one that makes the reduction of inequalities and insecurities the central guideline to their politics. So far, none of the flood of coloured books and factional tracts has tried to do so. Illiberalism will not do.

The left must relearn two lessons. Great progressive movements emerge from identifying the insecurities, anger and aspirations of the emerging mass class. And the forward march occurs only through the collective action of that class. Noisily, in the squares of dozens of European and other cities, a movement is taking shape. All of us who believe in the great values that underpinned the Fabian Society should be taking part.

To hear Guy Standing talk more in-depth about his work, you can catch him presenting The Precariat at the following venues in the UK over the coming months:

October 12: London School of Economics, 1245-1400
October 19: University of Leeds, 1600-1800
October 20: University of Bristol, 1500-1700
October 21-24: University of Cardiff, 1500-1700
October 25: University of Greenwich, 1700-1900
October 26: University of Brighton, 1230-1400
October 27: St.Anne’s College, Oxford, 1230-1400
November 1: Child Poverty Action Group conference, London, 0930-1400
November 21: Scottish Parliament, Edinburgh, 1100
November 21: University of Glasgow, 1530
November 22: Glasgow, Centre for Population Health, at 1630
November 23-24: University of Cambridge
November 29: Royal Holloway College, University of London.
November 30: Cambridge Fabian Society, Dinner talk
January 16: Bath, Royal Literary and Scientific Institution
January 17: Trades Union Congress, London, at 1230.
January 19: Manchester, Manchester Industrial Relations Association
February 15: University of Southampton, ‘Marshall Lecture’
March 3: Bath Literary Festival
March 7: Hertford University – evening debate.

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