When Obama accidentally saved neoliberalism

obama1.jpg

You remember him (Photo credit)

It has been almost a decade since the most spectacular economic crisis of the last half century – the Global Financial Crisis (GFC). In approximately a fortnight, it will be exactly nine years since the collapse of the major American bank Lehmann Brothers (which constituted the most dramatic event of the crisis) put into perspective the extent to which the entire global financial system was at risk of collapsing. What is particularly striking about this historical event is that it could have constituted the beginning of a new era of political dominance for the Left but, due to the political miscalculations made in the immediate following months by leaders such as Barack Obama, it can in retrospect be seen as the beginning point for the rise of the populist Right, culminating in Donald Trump’s 2016 election victory.

The GFC demonstrated in dramatic fashion the extent to which the global banking system (including the credit rating agencies) was incapable of governing itself. The event seemed to my eyes (as, at that time, a first year uni student) to also present an opportunity for a new political era. The GFC provided solid empirical evidence that the doctrines of neoliberalism and free-market economics constituted an inherently flawed framework for administering economies in a globalised world. This was, after all, not a crisis caused by an unpredictable external event like a war, but rather was fundamentally inherent to the system itself.

lehmann brothers.jpg

The Lehman Brothers bankruptcy was the largest in US history (photo credit)

The free-market advocates appeared to have been defeated and voters would consequently be won over by the inherent value of social democratic parties (who prioritised the importance of intervention and regulation of economic markets). My confidence in this outcome was reinforced by the knowledge that, by the end of 2008, the Democrats controlled the US Congress, Senate and the Presidency. It felt like the beginning of a new era.

If future-me was to tell uni-student me that, only two years later, the Republicans would recapture a majority in the Congress and that, in a further eight years, they would control the Congress, Senate AND be led by a President Donald Trump, I would have assumed future-me had become insane. Considering the way that the Global Financial Crisis had played out  – how could this outcome have occurred?

In retrospect, it’s clear that much of the responsibility for the resurgence of neoliberalism and the emergence of right wing populism across the Western world lies at the feet of Barack Obama. Indeed, it’s striking how little criticism the former US President attracts from the Left for his strategic errors and political misjudgement in the immediate aftermath of the crisis.

Obama, at the direction of his (heavily Wall Street connected) Treasury Secretary Timothy Geithner, implemented two key responses. The first was a program where the Government purchased the ‘toxic’ worthless loans (ie. the mortgages that couldn’t be paid) from the banks. The second was to implement an $800 billion stimulus program to make up for the huge loss in economic demand (and jobs) caused by the banking crisis.

To be fair, these actions did much to prevent the ensuing recession from becoming a depression (although some economists had argued that the stimulus package was far too small to adequately stabilise the economy). However, the true shortcoming of this approach was that it only addressed the technical aspects of the crisis. This economic focus was, of course, necessary, but it was not sufficient. The political issues presented by the GFC relate to the question of how to pursue justice for the taxpayers that had bailed out the banks and for the people who had lost their jobs. These political issues were not properly dealt with by the Obama Administration and the consequences have reverberated ever since.

There was a fundamental need on Obama’s part to articulate a political narrative of the crisis that illustrated the moral failings of the banking industry and compelled the financial sector to demonstrate meaningful contrition. This was a period in history where the financial class had not only required being bailed out by the taxpayers due to a failure to adequately do their jobs, but the broader public were the ones being punished for it through job losses and wage stagnation. The capacity for this crisis to tear divisions through different sections of American society (as with much of the rest of Western society) was almost inevitable. Accordingly, it was not a time for the language of compromise, stability and unity (which was Obama’s preferred political vernacular) but a time where fingers needed to be pointed and justice had to be seen to be delivered.

Obama’s failure to demand justice is personified in a memorable quote he delivered to a room full of banking CEOs in the months following the crisis: “My administration” he told them, “is the only thing between you and pitchforks.” An obvious question, both at the time and with the benefit of hindsight was; why stand between them? This is not to advocate for actual violence or the sacrifice of economic recovery for the sake of political scalps, but rather to point out that, despite the huge damage the GFC unleashed on millions of lives, no one has ever faced criminal charges. The Obama Administration’s willingness to act as a shield for the banks allowed the public to develop the impression that the state and the banks were one in the same.

obama

A great orator without a great narrative (photo credit)

Obama could have demanded that the bankers resign or at the least pledge to rescind any future bonuses for a number of years. He could have requested the Department of Justice investigate members of the banking industry for criminal culpability (even if no laws had been technically broken, the message sent to the public would have been clear). These actions should have been communicated through journalists, but also delivered in major public addresses to hallrooms packed with the crowds of grass-root supporters he had amassed in the 2008 election.

It is almost certain that large sections of the Democrat Party (let alone the Republicans) would have been moved to criticise his response as populist and unhelpful and it is similarly likely journalists would have criticised his actions for causing division in his political party. As we have seen from Trump and Bernie Sanders in taking on their respective political parties in 2016 however, this would have been a savvy political move. The public would have been able to see Obama as distinct from both the political and financial establishment that they were so justifiably suspicious of.

An immediate consequence of addressing the policy-side of the banking collapse without balancing it with a demand for justice was that other figures took the opportunity to nominate villains and point the finger. Most famously, CNBC reporter Rick Santelli delivered a fiery TV interview from the floor of the Chicago Mercantile Exchange blaming poor people who took on mortgages that they couldn’t afford on the one hand, and the Federal Government for “rewarding their bad behaviour” on the other hand.

Santelli’s neoliberal framing of the issue might seem spurious, but it fit with the prevailing narratives about free markets that had informed US politics up to that point and, in the absence of a moralistic counter-narrative from the Obama Administration, it was the only real narrative on offer. The Santelli interview is now seen a major step towards the emergence of the populist right Tea Party Movement which directly led to the Republicans retaking Congress in the 2010 midterm elections.

CNBC.jpg

There’s basically no images of Rick Santelli labelled for re-use, so here’s an image of the CNBC instead (photo by Kevin Action)

It is certainly possible that no amount of advocacy from Obama could have prevented this outcome in a country wedded to certain notions of free enterprise, but, based on the comments of a President who apparently saw his role as standing between the banking executives and the “pitchforks” of the public, it is also clear that he never really tried. As the writer David Bromwich observed of Obama early in his presidency, he tended to adopt a technocratic position of assuming that his actions would justify themselves: “He expected a gratitude he did not get. His choice of tactics could never have been easy to explain in a climate where so many bankers survived and so many ordinary people lost their homes and jobs.”

From this point on, the Left had lost the capacity to frame the debate and we have seen the following ten years characterised by austerity and the rapid growth of the far Right and nativist politics. It is only recently, through such figures as Jeremy Corbyn, Bernie Sanders and Jean Luc Melenchon that we are seeing the revival of Left political movements advocating for a larger role for government in society. Indeed, it is notable that these individuals couch their arguments in highly moralistic language that identifies specific culprits for the prolonged recession and subsequent wage stagnation that have characterised the last ten years.

To point out Obama’s political errors in the aftermath of the GFC is not to discount the fact that he was a savvy and talented politician. One cannot help but think however, that his brand of soaring rhetoric and progressive technocratism would have made him the perfect candidate in a 1996 or 2000 election when economic growth was consistently high and advocacy for a major program such as healthcare reform would have been consequently easier to make. Indeed, one can only imagine how valuable Obama’s relatively measured decision-making processes might have been in the immediate aftermath of September 11.

On this ninth anniversary of the GFC however, as the prospect of at least four years of a Trump Administration remains and populist movements across the globe show no sign of declining, we can see that Obama was not the right person for the times in which he found himself. While, in retirement, Obama is still largely feted by the Left and retains a ‘cool guy’ persona (which other figure on the Left could receive such a warm reception while kite-surfing with Richard Branson?) it is likely that history will see him as one of the primary factors in why the Left failed to capitalise on the event that posed the greatest threat to the primacy of neoliberalism in a generation.

Advertisements

The Gig Economy is WorkChoices by Stealth

The rapid growth of the gig economy in the past five years through businesses such as Uber and Deliveroo has raised fundamental questions about the nature of economic justice and working conditions in the 21st century. To frame these questions and contextualise the challenges, there is value in looking at them through the lens of one of the most infamous industrial relations fight in Australia in my lifetime –  the WorkChoices debate.

WorkChoices’ was the package of industrial relations reforms controversially introduced by the Howard Government in 2005. Two of the most important components of the package were the replacement of collective bargaining agreements with one-on-one individual employment agreements and the modification of the minimum legal standard that had to met for such agreements (such as in regards to penalty rates and minimum annual leave).

WorkChoices reflected the philosophical views of many on the Right. To them, collective bargaining reduced the ability of workers to negotiate agreements that were ‘flexible’ and suited their individual needs. It also reflected a conviction that labour unions stifle economic growth and reduced the potential productivity of individual workers.

The outcry from the Australian Left was immediate and emphatic. The resistance to the changes stemmed from a sense that the bargaining power of any individual worker was greater when negotiating was done collectively (ie. set by negotiation between major businesses and the labour unions responsible for the sector). Conversely, the power balance is tipped in favour of the employer if negotiation is done individually – particularly regarding workers in low-skilled jobs – because businesses could devote more resources to negotiate and, particularly in a tight labour market, offer a take-it-or-leave-it deal to prospective workers.

The opposition to WorkChioces was expressed through huge public rallies across Australia and when the Howard Government was defeated in the 2007 election, there was consensus across the political spectrum that WorkChoices had been a significant factor, leading to its ultimate demise a year later.

309866553_a5762c2c10_z

The Australian Council of Trade Unions campaign ‘Your Rights at Work’ was hugely influential in the fight against the WorkChoices legislation (flickr)

Now let’s fast forward roughly a decade to the introduction of ‘gig economy’ businesses to Australia.

The gig economy has emerged from the idea that each piece of work (say, a taxi ride or food delivery) is an individual ‘gig’ which can be doled out on an individual basis to to ‘self-employed’ individuals. The growth of the leading gig economy businesses (Uber/Deliveroo/etc) has been spectacular. One in four Australians are now regular Uber rides and Deliveroo has been expanding significantly year on year.

While there are technical differences between being a low-skilled self-employed worker in the gig economy and being a low-skilled worker on a WorkChoices-style individual workplace agreement, the two modes of employment are, on a practical level, strikingly similar.

Take for example the idea that these agreements give greater flexibility to workers. This had been a major benefit to WorkChoices for the Business Council of Australia, who had previously praised WorkChoices for giving employees the flexibility to trade off or vary conditions in a way that may suit them. Similarly, gig economy businesses promote the flexibility they give their ‘employees’ (for want of better word) as a major drawcard. The ‘join us’ sections of the Deliveroo and Uber websites promote how you are “free to work to your own avaibility” and “set your own schedule” respectively. Furthermore, the business model operates on the basis that the workers are – at the outset -’cashing in’ benefits such as sick pay and annual leave for a higher upfront pay. Deliveroo, for example, notes that you can “earn up to £120 a day and Uber promotes how you can “make money on your own terms”.

These purported benefits of flexibility for the employees break down upon closer examination however. One Deliveroo rider explained the catch in conversation with The Guardian: “you can work anytime you want. But the reality is you have to do the evening shifts to make enough money to survive.” For Uber drivers, the catch that comes with the higher pay is that the driver must foot the the cost of providing one’s own vehicle, paying for the private hire insurance and accounting for the vehicle’s depreciation costs. When the hidden costs are taken into account, the actual rate per hour often drops far below the minimum wage.

34496853100_e00554d35c_z

Deliveroo workers must supply their own vehicle, phone and foot the associated costs of any accidents or theft they experience (Flickr)


A common trend is that the workers earned more in the first few years of the gig economy business starting (“a year ago there were fewer drivers and a lot more work on the road… now it is much slower”). This trend is not accidental but rather the logical consequence of a business model that, in order to provide the high level of responsiveness that their customers value, necessarily flood the market with a high quantity of worker supply to guarantee an immediate response to any individual customer demand.

The concerns of being self-employed in the gig economy are, therefore, fundamentally similar to the concerns of individual workplace agreements; the sense of trying to negotiate with a powerful company without a union or under the guarantees of a government-enforced safety net. The gig economy is, in effect, WorkChoices by stealth.

The idea that an individual worker has significant bargaining power may apply where there are a limited number of skilled private contractors offering high end goods and services (such as consultancy services or plumbing) but it is unrealistic to presume that low-skilled workers have the same capacity for negotiation. Even the term ‘WorkChoices’ dovetails neatly with the premise on which the likes of Uber and Deliveroo base their appeal.

It has been therefore surprising that, considering the passionately critical response to Howard’s Workchoices in 2005, the response by Left has been relatively positive. While the gig economy in Australia has hardly been free of criticism, the overall reaction has been in no way comparable to the reaction to WorkChoices.

The clearest indication of this is the ease with which state and territory Labor Governments – which were at the forefront of the opposition to WorkChoices – are leading the way in terms of deregulating taxi industries.

There has also been a relative lack of solidarity from the broader labour movement towards these sectors when they do protest. This has been perhaps most acutely displayed recently in London where Deliveroo and UberEats workers have faced a targeted wave of theft and acid attacks by groups stealing their mopeds – thus depriving them of the means of earning an income (and for which Deliveroo has no legal obligation to compensate them for). These attacks have occurred in a highly progressive area (within Jeremy Corbyn’s seat of North Islington) and come at a time when the limitations of the gig economy have great media prominence (following a recent UK Government review on the gig economy). Hundreds of delivery drivers descended on Parliament Square to call for a crackdown on acid attacks and motorcycle theft. If there was ever a time for the Left to protest in solidarity at the injustice of their predicament, this was it. Instead, the protest was limited to the workers themselves (thus ensuring the protest was limited to a few hundred when it could have numbered in the thousands) and the opportunity to make the issue a watershed moment for the treatment of gig economy workers (or at least to demand that Deliveroo compensate those workers who need to purchase new vehicles) was missed.

33539966531_5b2630191a_z

Parliament Square, London (flickr)

This is not to deny that the gig economy has been free of controversy or criticism – the founder of Uber Travis Kalanick has, after all, recently resigned after months of public outrage and the #deleteuber hashtag attracts dozens of mentions every day on Twitter. These concerns however, have related largely to issues of sexist corporate culture, sexual assaults by Uber drivers and anger over inappropriate use of surge pricing. When it comes to concerns about exploitation and worker conditions, it is largely only those directly affected (such as the taxi drivers, or the gig economy workers) that take to the streets, with limited backing from the broader labour movement (with the honourable exception of British Shadow Chancellor John McDonnell and Shadow Business Secretary Rebecca Long-Bailey).

When such a visceral example of injustice forces itself into the media and fails to attract significant support outside of the sector, it raises the question of what *would* provoke greater outrage and bring people to the streets and why the issue of worker exploitation in the gig economy does not motivate people in the same way that WorkChoices did.

The political context is undoubtedly a factor. It’s easier for the Left to know where to stand when a Conservative or Liberal Government is introducing industrial relation laws. Furthermore, the unprecedented nature of mobile app-facilitated economic activity also means there is no existing Right/Left political dynamic in which to situate the new gig economy – especially when it’s made up of predominately young ‘disruptive’ entrepreneurs.

However, in an era where greater attention is paid to the ethical standards of the supply chains that bring goods and services to the consumer, it is odd that the concern seems to ebb away at the point at which the link in the chain is a gig economy worker.

This does not mean that we can put the genie back in the bottle and go back to the pre-mobile app era of business and nor does it mean that old taxi services constituted some virtuous standard of ethical business. Yet a concern about economic justice and the legacy of the fight against WorkChoices should imply a need to advocate for better worker standards in the gig economy. After all, why should we boycott businesses that no longer pay penalty rates but be delighted about the introduction of UberEats to Canberra?

The Left’s broad ambivalence to the gig economy can surely only be temporary, as it is only a matter of time before it expands and swallows up the jobs and industries of tertiary-educated knowledge workers bringing the supposed benefits of flexibility very close to home. Yet the broad acceptance of the current terms of the gig economy will undermine any effort to fight back in the future.

Progressives accordingly find themselves at a crossroads – either the current terms of the gig economy are fought with the same ferocity with which WorkChoices was fought, or we acknowledge our implicit acceptance is allowing the implementation of WorkChoices by stealth.

barricades.jpg

To the barricades, comrades! (google)

 

Postscript:

It seems rather relevant to this essay to mention that, on the day I wrote it, I also caught an Uber. I have drawn my personal red line at the point of not personally getting an Uber account but I am also choosing to not make an issue of my friends and family utilising it to get us to our preferred destination quickly and cheaply. While I am entirely sympathetic to any critique that this action renders me an insufferable hypocrite, I consider that there’s an inherent and unavoidable tension between acknowledging and trying to change the injustices of society while also having to live in society. The elements within the Left (described by the writer Guy Rundle as the ‘social market’ strain which operate on the basis of “letting the market run things, regulate it to a degree, and supplement what it cannot do”) that seek to address the injustices through improved individual consumer decisions can only achieve so much (but that’s a whole other blogpost).

My concerns about the limitations of the social market approach restrain me from advocating that readers ‘boycott Uber’. Instead, I advocate that we demand the State – through the existing framework of the labour movement and existing left-of-centre parties – to see addressing the economic injustices of the gig economy as a top priority industrial relations political issue (just like they did with WorkChoices) and force it to address the issues that all sectors of the economy will soon be confronted with.

Screen Shot 2017-07-21 at 8.33.09 pm

Fake news and ‘post-truth’

Following the unexpected victories of the Leave campaign in the Brexit referendum and Donald Trump in the US election, media commentators have been scrambling for an explanation. The search for an explanation stems from both the unexpectedness of the results and the fact that it took place despite the overwhelming majority of major media publications recommending against it.

A prevailing explanation across many parts of the media and political spectrum is that the results were largely driven by the phenomena of ‘fake news’. Some major examples include one of the central claims of the Brexit Leave Campaign – that 350 million is sent to the European Union every week (which, as The Guardian has written, does not stand up to the facts. The New York Times has written about “Fake News Sausage Factories” based in Eastern European countries churning out deliberately fake pro-Trump news stories with the purpose of influencing the US election.

I do not seek to dispute the veracity of the investigative journalism in the above articles or deny that there are partisans who are self-consciously propagating factually incorrect stories. What I am interested in however is the notion that ‘post-truth’ is a relatively new concept and the implicit assumption of many articles decrying fake news – and, indeed, of most mainstream media publications – that, had those fake stories not existed and people were instead exposed to ‘real news’, they would not have voted either for Brexit or for Trump.

To appreciate why this is a poor prism through which to understand the changes that have taken place in the media landscape over the last few years, it is worth asking not why people find ‘fake news’ believable, but rather why the value of ‘objective facts’ – and, by extension, fact-checking – has plummeted in public discourse.

The focus on fake news perhaps reached its zenith with the Oxford English Dictionary announcing ‘post-truth’ as its 2016 Word of the Year – which it defines as “circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief.”

However, the real question is why Oxford English Dictionary might have waited until 2016 to declare it the word of the year, when the process of ‘objective facts’ being subsumed into ‘emotion and personal belief’ has been gathering momentum for decades.

Take, for example, the phenomena of human-induced climate change. This is a process which has been established to a high degree of certainty since the early 1990s. It has been the overwhelming consensus of national scientific organisations and reflected in each of the United Nations International Panel on Climate Change reports. The scientific nature of the issue was also expressed in economic terms in the landmark 2006 Stern Review, which found that “the benefits of strong and early action far outweigh the economic costs of not acting.” If there is any public policy issue that has significant expert consensus (and would therefore meet the articulated standard of ‘objective fact’), it is Anthropogenic Climate Change.

Despite this, significant sections of the media and political class have never truly accepted its veracity. From right-leaning media organisations who reject it outright to organisations such as the ABC and BBC who have in effect downplayed the issue through the promotion of ‘false balance’ in its reporting.

Climate change ‘critiques’ sometimes take the form of disproportionate coverage of a tiny minority of scientist ‘climate skeptics’ (usually from outside the field of climate science). More often however, climate science is rejected on the basis that the scientists are biased by their desire to implement communism or, more typically, through a vague religious devotion to environmentalism or groupthink. While this line of attack appears in all the usual suspect right wing media outlets, it is perhaps noteworthy that it also came from Bret Stephens from the New York Times – a reporter and newspaper which sees itself as a vanguard against the ‘war on truth’ just earlier this year, in his article warning against “overweening scientism” in the climate change debate.

Screen Shot 2017-07-14 at 9.57.41 am

The NY Times’ insufferably sanctimonious advertisment – photo credit

Given the extent to which major media publications across the political spectrum have promoted the idea that public science institutions (originally established to provide objective policy guidance on issues requiring scientific-expertise) are either incompetent or motivated by political bias, it should not come as a shock that populist political leaders extend that critique to other institutions with ease.

That task has undoubtedly been made easier by the fact that many prestigious economic institutions have allowed themselves to be drawn into politics. The US Federal Reserve, through its former chairman Alan Greenspan promoted a vision of economic management that had significant consequences in terms of defining the policy options of governments (through, for example, a deference to market-based solutions to public policy issues). Following the Global Financial Crisis (GFC), he was forced to admit that he had put too much faith in the self-correcting power of free markets. The International Monetary Fund (IMF) was at the forefront of the post-GFC push to implement austerity policies in countries such as Greece to boost “market confidence.” In 2013, the IMF admitted these policies had not worked and instead resulted in a “deeper than expected” recession.

In an era where scientific institutions have been discredited for political ends and economic institutions, through their political ends, have discredited themselves, is it any surprise that significant sections of the public identify with the now-famous observation that “people have had enough of experts”?

The dilution and politicisation of objectivity explains why ‘fake news’ as a phenomena is not going anywhere and why many of the proposed antidotes are likely to fail. The interest in Facebook fake news filters or greater proliferation of ‘fact-check’ articles, for example, assumes that there is an organisation or set of statistics that somehow floats above the political partisan debate – but the media have, over the past few decades, methodically dismantled any such possibility.

In light of the above, it seems that the only difference between the ‘fake news’ of the past few years and the fake news of the past few decades is that traditional media organizations have lost their gatekeeper status and monopoly on its dissemination. The major media publications may not like the fact that Trump denies ‘objective facts’ but he is only taking advantage of a phenomena that they have created.

Screen Shot 2017-07-14 at 10.05.29 am

Many thanks to the BBC for debunking this fake news story before something serious happened. photo credit