Friday, 25 January 2013


I have just finished reading John Lanchester’s novel Capital. Lanchester is also the author of one of the best non-technical account of the financial crisis, Whoops, which I draw on in my book and list in the suggested reading. But he is first and foremost a novelist and his debut novel, The Debt to Pleasure, is one of my favourite books. That is a subtle, delicate meditation on art, cookery and murder; but Capital is more like an essay in sociology. It tells the story of the inhabitants of a London street and the people who work there during the period of the financial crash. The street reflects a common story in London, with property prices having risen to dizzying levels during the neo-liberal era, so that its inhabitants range from the elderly poor, relics of an earlier era, to City bankers and Premier league footballers. Amongst them work a Polish builder, a Hungarian nanny, a Zimbawean asylum-seeker parking attendant and a Pakistani family of shopkeepers, reflecting the globalised nature of a city like (and perhaps in particular) London. I suppose that listed in this way the characters sound a little clich├ęd, and there’s some truth in that, but Lanchester’s narrative is sufficiently skilled to make most of them, at least, feel like real people rather than cardboard cutouts.

This is a big, sprawling novel and it brings to mind some others with similar ambitions. It is a bit less raucous than Tom Wolfe’s The Bonfire of the Vanities, a book which still captures brilliantly the social effects of the New Capitalism. It could perhaps be compared to Sebastian Faulks’ A Week in December, although I found it better written. But more than anything else it reminded me of an almost forgotten novel, Norman Collins’ London Belongs to Me (1945). Collins’ book is based on the various occupants of a single house rather than a street, but it shares with Capital a sense of a wide variety of people at a time of transition, namely the period immediately preceding the Second World War.

Like all novels, Capital is open to a variety of interpretations and some obvious ones concern the nature of wealth and inequality. But for me the key motif is that of chance. It is chance that makes those who own the street’s houses into millionaires, chance that determines the outcome of an asylum hearing, an arrest for suspected terrorism, a football injury, the success of an arranged marriage or a date with a stranger, the loss of a job, the growth of a tumour. The inhabitants of the street are brought together by chance, and their lives are also affected by chance.

Much current political discourse stresses not chance but worth. Thus we are invited to think that the unemployed, the poor, asylum seekers and so on suffer by reason of some personal or moral taint: they are lazy, scrounging or bogus. On the other hand, the secure and rich are depicted as being virtuous, prudent and worthy. In the The Bonfire of the Vanities there is a nice line about how when bond traders started to make massive amounts of money in the 1970s they attributed it to the belated recognition of collective talent rather than to an outbreak of dumb luck. That our various fates turn on a knife-edge of luck – where and when we were born, the flukes of our genes and so on – is less appealing. And of course this is all of a piece with neo-liberalism with its emphasis on individual effort and its refusal to consider the social context and formation of individuals. But it is also something with a psychological appeal: if only we can believe that our lives reflect our virtues then we can insure ourselves psychologically against the vagaries of chance. I’m not a bad person, so nothing bad can happen to me.  It’s a kind of secularised version of the idea, analysed in Max Weber’s seminal book The Protestant Work Ethic and the Spirit of Capitalism, that wealth is a sign of being pre-destined for heaven. Appealing as it may be, it is nonsense: life’s chances are distributed, sometimes randomly, often politically, but not morally.

A friend of mine once said to me that The Bonfire of the Vanities was not a great novel but it was a good book. I think the same is true of Capital. It's probably not great literature, but, like a much older realist novel, it discloses something about 'the way we live now'.

Wednesday, 9 January 2013

Impoverished by outsourcing

Under the cover of the budget deficits which are mainly the result of the financial crisis, the welfare state in many European countries is being rolled back. In the UK, the latest manifestation of this is today’s announcement that much of the work of the probation service is to be outsourced to private providers. These will, it is said, be ‘paid by results’ implying that they will only be paid if re-offending does not occur. This move combines two now familiar claims made by neo-liberal policymakers but is also indicative of the way that neo-liberalism is now transforming into something quite different.

The familiar claims are, first, that private provision is more effective then public provision, with competition driving standards up and prices down and thus offering taxpayers better value for money. The other is something well-known in management theory, namely that motivation comes from economic reward in the way famously envisaged by Taylor.

It’s not hard to predict what the results will be, because it is exactly the same policy that has been applied to workfare to work programmes. Here, the private provider is to be paid according to how many unemployed people are placed in jobs. In fact, the evidence shows that the leading provider in this area, A4E, is less successful at placing people than would be the case if no such scheme existed. Yet they continue to be paid. Moreover, the payment by results system, which is presented as simple common sense, has precisely the kinds of dysfunctions that are well-known in management theory. It incentivises the providers to focus on the easiest cases and to write off those with more complex needs.

The deficiencies of such schemes do not end there. Typically, such outsourcing involves recruiting staff who used to work for the public sector to work for the private contractor but on worse terms and conditions, whilst the contractors themselves are normally global companies who do all they can to reduce their UK tax liability.

However, the idea that what is happening here represents anything like the competitive free market envisaged by neo-liberal theory is quite laughable. What we have is a handful of companies to whom contract after contract is awarded by the UK and other governments despite a track record of persistent failure. Examples include the well-documented case of Capita (discussed on p.87 of the book but see also here) or the high-profile case of G4S which failed to provide the necessary security for the 2012 Olympics and had to be bailed out by the oh-so-incompetent public sector.

What is emerging, then, is not neo-liberalism as normally understood but what might be called neo-mercantilism. Under mercantilism, an economic doctrine of the 15th-17th centuries, companies were licensed by the State to trade, thus stifling competition and encouraging corruption. Ironically, it was Adam Smith, the unwitting poster boy of neo-liberals, who was one of its sternest critics. Now, we see something similar emerging, with the global outsourcing firms being handed licences to milk what were hitherto public monopolies, with guaranteed revenue streams from the taxpayer. We also see something of the corruption, too, with politicians and senior civil servants who bestow these contracts moving seamlessly on retirement onto the boards of the companies who benefit. The overall effect is quintuply impoverishing: poorer public services, higher costs, diminished employment conditions, an erosion of the tax base, and a corruption of politics.