Paying for the market

Britain sees itself in the forefront of trade liberalisation and Tony Blair is preaching its benefits to the rest of Europe. Can it bring economic improvement for all, asks Caroline Dumonteil, or does it just produce social polarisation?

Britain's free-market orientation has a long history. Trading on a world market produced the empire and helped shape the social structure, with the dominant role of financial institutions. But major changes followed the introduction of deregulation and trade liberalisation in 1979. On one hand, the transnational sector of the economy flourished. Capital was free to move overseas and UK Foreign Direct Investment (FDI) rose from around $51 million from 1973-1980 to $202 million in the decade following 1981. British companies showed a marked preference for investing abroad rather than in the UK. In 1994, of the top 100 global firms, while the US, Japan, Germany and France had 30-40% of employment abroad, the figure for the UK was 77%.

On the other hand, the country more or less abandoned manufacturing and opted for a service economy, mainly in financial services. After the stockmarket underwent the big bang, well over a third of UK stock was in FDI, in contrast to Germany, France and the US with around a mere 7%. Britain now has the highest level of stockmarket capitalisation and lies in third position behind the US and Japan in its share of high performing businesses. All this stands in marked contrast to the performance of domestic firms. The programme of privatisations produced an endless stream of grossly undervalued state assets sold off to groups of insiders who then sold them on for large profits, often to overseas firms.

The political climate engendered a never-ending series of financial problems and scandals as business interests were given priority over the general good, and the word "market" became ubiquitous. Research funding disappeared for anything that was not "near-market", pseudo-markets were created in public services such as health and education, civil service functions were market-tested and areas of work were syphoned off into agencies and run as businesses, and local authorities sacked and rehired employees on lower pay. Yet real markets were left to run unchecked by commercial or competition law, producing powerful oligopolies.

Examples of how ordinary people have paid the price for these policies are numerous:

Using the argument that foreign direct investment creates employment, the Government introduced numerous policies to create a "flexible" workforce. This has produced striking differences between Britain and other European countries. Since the 1980s, while working hours decreased in countries like Belgium, France and Ireland, they increased in the UK. Britain now has the longest working hours and shortest holidays in Europe -- for both men and women. In hourly wage rates, the UK comes fourth from the bottom, above Spain, Greece and Portugal, yet these countries have a high percentage of their economy in small-scale agriculture whereas the UK has the largest number of farms in the largest category and boasts of their efficiency.

There has been a major shift to insecure forms of employment -- temporary work, self-employment, agency work, homeworking, and working unsocial hours. Despite these efforts and the many anomalies in the calculation of unemployment figures, overall unemployment rates are not much below EU average and there are many EU countries with lower rates. While British firms chose not to invest in the UK, it was a favoured location for firms from other countries. This pattern is now changing and firms in the UK and other countries now show a preference for investment in France. Companies find the benefits of low wages are outweighed by the costs of poor education and infrastructure.

The skills of the UK workforce have fallen behind those in other countries. 16% of men and 21% of women of working age have no qualifications. The OECD level of literacy considered the minimum for coping with modern life and work is not achieved by about 50% of men and women in the UK. In France, nearly all 3 and 4-year old children attend nursery school, compared to under 60% in the UK. And while over 60% have the equivalent of one A-Level in France, less than 25% have one or more A-Levels in the UK.

It is now well-established that these policies have produced a sharp rise in income inequality. This has accelerated since Thatcher. Recent figures given by the General Household Survey show that the poorest households spend £94 a week while the richest spend £677. The proportion of people living in poverty rose more here than in other EU countries and more than doubled during the 1980s. Britain now has 12 out of Europe's 50 million poor, the largest number of those earning less than the European decency threshold, and receiving some form of benefit: one in six compared to one in twenty in Germany. Yet the UK hands out a lower percentage of GDP in social protection (again coming just above Ireland, Portugal and Greece), and apparently plans to give still less. While 18 million people in the UK own shares, nine million, or 10% of all consumers, have no bank accounts and three million have to borrow from loan sharks.

Many of the poor are pensioners -- three-quarters of them have only the state pension to live on, three million don't qualify for state pensions and there are 1.5 million women pensioners on income support. While there are pensioners who receive lower incomes elsewhere in Europe, the UK has higher mortality rates in the older age groups, and the highest winter death rates. There are eight million people in Britain who can't afford to keep warm in winter. After many years of blocking reports on the matter, the links between poverty and ill-health have finally been admitted.

Rather than conclude that poverty should be reduced, efforts seem to be going into preventing it from having these effects, mostly by forcing people into low-paid work, from which they are now being enjoined to be "thrifty" and save up for their old age. As the rich have got richer, the idea of taxing them has been made more unthinkable. The idea of redistributing shared wealth to those in need in accordance with humanitarian values has been undermined by portraying anyone receiving "something for nothing" as culpable. Frank Field says we shouldn't reward people for being inactive or deceitful. Thus the bare survival money to feed and clothe yourself and your children is seen as a "reward".

Children are one of the most vulnerable groups. Britain has the worst maternity care in Europe. As hospitals are free to subject women in maternity units to pressures to use commercial babyfoods, the UK has one of the lowest breastfeeding rates in Europe. Despite having a National Health Service, of the 19 countries with the lowest infant mortality rates, the UK came 18th. The numbers of poor children have increased dramatically, as the proportion of families without a full-time worker increased from 18% in 1979 to 31% in 1993, and 20% have no-one working.

Many children in the UK work, (one-third of Europe's working children can be found here), some for as little as 33p per hour, and some for as many as 29 hours per week. Higher numbers of children get killed on the roads here, despite very low traffic accident rates. The UK has the highest rates of teenage pregnancies in Europe. Over the last seven or eight years, prosecutions for child prostitution have increased and actually doubled in 1996.

Britain has one of the largest prison populations in the developed world, currently 65,000, and numbers continue to rise, including the numbers of women, most of whom have children. Most of this is for drugs, and heroin use is closely associated with areas of high deprivation. Women are also held in jail for non-payment of small sums, such as the recently cited case of a woman with a small child who was jailed for non-payment of a £14 taxi fare, and who was too poor to raise £400 bail. Child jails are planned and children can now be jailed from the age of ten for up to a year under detention and training orders.

This mere recital of factual information does not reveal the quality of social relations under a marketised regime. People in work increasingly have to spend time competing with each other for money rather than doing their work, engendering suspicion and dislike rather than co-operation. Anyone negotiating the system of social protection will be well aware of the moralistic nature of the system which tells you that one's misfortunes are due to personal failure.

The policy area covered by some notion of the common good is minute in comparison with other countries. The example of farmers burying their dead animals (as the rendered products are no longer saleable) illustrates this point. The collapse of the cattle market does not lead the Government to conclude that dead animals should be removed as a matter of public hygiene.

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