From Shipping To Shopping: Rationing To Economic Austerity

By: Andrew_McKillop

MODELS AND PRECEDENTS
When World War II started in September 1939 the UK's first rationed commodity was unsurprisingly petroleum. By January 1940 food was added to the list: bacon, butter and sugar were firstly rationed, followed by meat, tea, coffee, jam, biscuits, breakfast cereals, cheese, eggs, lard, milk, canned fruits and dried fruits. This, also unsurprisingly, produced a black market within the first 12 months.

Why food after oil? Taking food outside the market economy by rationing, ensuring egalitarian access to food by all persons is for the simplest of all reasons: famines cause revolt. Governments fall.

An interesting detail was that all UK wartime controlled foods were rationed by weight, except meat which was rationed by price. This enabled black market financial operations using meat as the underlying asset, but conversely the domestically grown fruits like apples and pears were subjected by the sellers of these fruits to their own egalitarian restrictions, for example banning customers from buying more than one apple each. Also, up to 10 million Britons, over 20% of the population at the time either continually cultivated, or intermittently grew their own vegetables in equitably allocated, zero rent land parcels in urban and suburban areas. This State enabled socially cooperative self-help activity had the slogan: Dig for victory.

The Nazi war strategy was starkly simple: in 1939 roughly 70% by value of all food consumed in UK was imported. By using its U-boat submarines to sink ships carrying either military equipment or food to the UK - food soon becoming more important than weapons as the war continued - Britain could be brought to its knees, its political system overthrown, destroying its will to fight. The early 1940 food focus UK rationing system, which was tightened each year until 1943, was due to the UK having only six weeks of food stocks left by midyear 1940. During the 1914-18 war with a lower, less urbanized population and far fewer German submarine attacks on shipping, the UK had only been forced to start rationing at the end of 1917, maintaining this rationing on some food items until 1920. Food and fuel rationing was also planned by British governments from 1925, due to increasing labour strikes and the coming 1926 General Strike - but this strike was only full-scale for a total of 9 days and nationwide rationing was not introduced.

THE INTERNAL ENEMY
Rationing is a non-market distribution system which, in "mature economic" democracies, is thought of as a historical wartime expedient under siege conditions, although as noted above for the UK (and other liberal democracies in Europe) during the 1920s, it was also held in reserve for times of struggle between organized labour and organized capital.

The essence of post-1980 neoliberal ideology and its so-called New Economy is that a liberalized financial sector will efficiently ration and regulate capital flows using "free market mechanisms" and will make better use of capital than either the State-controlled or State-dominated sectors of the economy. Wherever and whenever this fails, as in the 1920s in Europe, and worldwide since 2008, the default solution and cause is "benign neglect", simply ignoring the black or "grey" markets that mushroom.  The economy quickly segments into formal and informal components.

When the informal or 'black' component concerns a growing part of the fiscal and monetary superstructure of the economy, the declining wealth skim taken by the State from the physical or non-financial, non-monetary economic sphere, the "real economy" which is often contracting in these circumstances, tends to cause spiral growth of the noxious results of "benign neglect". The process has "high gain positive feedback", it becomes one-way only.

The noxious results feature pure-play profitmaking by the financial sector and its nearly inevitable counterpart of State cronyism, corruption and refusal to govern. Any national economy with a large black or grey financial market segment, notably driven and intensified by the evasion of corporate taxes, becomes hard to quantify or measure. Only the formal economy is measured, and only estimates are used for the black informal economy. These estimates are often deliberately too low.

Under the Twin Doctrine of Keynesianism plus neoliberalism however, this black economy is given new white sheets and specifically and deliberately concerns the entire financial and monetary sector. The Central Bank and State protect the pseudo-private or nominally private financial sector's vast rakeoff of national wealth, using dysfunctional and flimsy regulations, and occasional show trials such as the recent LIBOR rigging scandal, but only for "media windowdressing". The economic damage continues, as the media bleats the "surprising news" of national economic contraction, de-industrialization, rising unemployment, corporate decline and insolvency, and supposedly surprising "ongoing difficulties" for private banks.

At the same time, the sales of luxury goods, cars, yachts, watches and Hermes handbags are at all time highs. In the same way that the State will at most only "moderately criticize" the pure play financial sector and its crony banks depending on State handouts, the media will avoid any overt criticism of the rich and super rich who "Shop Until You Drop" and conspicuously display their useless surplus wealth. These are "iconic symbols" of wealth and success, supposedly able to reassure the struggling masses that they still have a chance. For these so-called masses, the soup kitchen line-outs grow each day, and suicide become the primary cause of death for the Lost Generation of 15-25 year olds, today, in most "liberal free market" economies. There is of course No Alternative!

CRONY CAPITALISM
This is a spontaneous mutation of capitalism under well-known and well described economic, political and historical conditions. It features the State-aided explosive growth of the capital rent economy and is intrinsically parasitic, non-productive, socially divisive and a direct cause of war. Previous examples notably included the period of about 1600-1650 in Europe, and 1875-1895 in Europe and the US.

The mutational pathways for the process can however by different, even very different from one period or phase of capitalism in crisis, to another crisis phase. The post-1918 crisis period, which continued until 1929 and then mutated into the Great Depression was notably used by "the Keynesians" to promote their alternate new pathway. This directly resulted in the present period of crony capitalism, most certainly the most intense and destructive ever known.

The start date for the "ideological conversion" enabling the Keynesian pathway can be precisely dated: on August 15, 1971 after taking the United States off the gold standard Nixon said to the press: "I am now a Keynesian in economics", linked by journalists and commentators with the influence of Milton Friedman on Nixon. Friedman's "temporary conversion" to Keynesianism was dated by the media to the December 31, 1965 edition of 'Time' magazine in which Friedman is quoted as saying that with managed economic growth in the "liberal economies" after 1945, their sovereign debt constantly shrank as a percentage of GNP.

The "Keynesian model" or project was that the State and its Central Bank should manage market forces whenever the market turns down. The economy would therefore, miraculously, enter into "permanent growth". Everything would expand: State tax revenues, credit, profits, investments, GDP, employment. Whenever the one or the other of these iconic emblems of the Growth State turned down, the State and its Central Bank would force the economy back into growth using "market means", that is managed market means. The difference between this and the so-called "Soviet model" was almost zero.

The Soviet model collapsed; the managed market model collapsed, or is collapsing.

In its collapse, however, the "swan song" of capitalism is the creation or massive outgrowth of the pure play capital rent economy. Its existence is a simple telltale indicator that all is wrong - not that some pick and choose parts of the system are dysfunctional, badly organized or "not properly managed".

Keynesianism we should note. was a strictly postwar phenomenon introduced with the later liberal counterpart of rationing - austerity - in the liberal economies. Under both rationing and austerity, we could argue, the economy is sufficiently managed and manageable for Keynesian "solutions" to work. After a certain period of "permanent growth" - called the Trente Glorieuses by economist Jean Fourastie and dated at about 1948 to 1975 - these solutions however become openly counterproductive, and themselves facilitate the mutation of capitalism into its capital rent deathwish format. Rather than too much of a good thing leading to a bad thing, we can be sure that only a combination of good luck and very special economic and historical circumstances slowed the inevitable mutation of a bad thing into something much worse.

NO MODEL FOR WHAT COMES NEXT?
One constant playact of media-approved economists is the claim that we have "unique conditions" today - not just special or lucky conditions, that is. At the largest macroeconomic scale we have an unsustainably overgrown and overblown financial sector extracting tribute from, and bearing down on a stagnant or contracting real economy, in the liberal economy countries. These are also facing a large number of other economic, demographic, social, environmental and political challenges all of which are well known and some of which are very serious.

The dysfunctionality or "under-performance" of the late stage distorted New Economy is shown by very simple indicators like sovereign debt to GNP ratios, the decline of manufacturing, permanent trade deficits, year on year contraction of the economy in most European countries, and many others. True to the Keynesian dream, growth is the only official way out of this crisis mix. If for some reason or reasons which we can enumerate without difficulty it is either impossible or very difficult to "grow our way out of crisis", the allowable and effective solutions will not include growth.

Real solutions will obviously include either rationing or austerity - noting that austerity is already on the official menu in a large and growing number of liberal economies, and runs well with the simple menus on offer in their growing numbers of soup kitchens. Austerity in the late stage liberal economy is of course newspeak for further and greater social injustice and the incitation to popular revolt. For the elites austerity helps "paper over the cracks", in fact fissures, in the Liberal Edifice and avoids all talk of socially acceptable rationing on an organized, egalitarian and transparent basis.

Officially approved rationing in the late stage "managed liberal economy" includes forced currency devaluation, capital controls and transaction-specific taxes in a now accelerating 1930s-style international currency war. These beget trade wars, and can beget military wars.

Further backtracking is needed - to historical cases of rationing operated on a non-market basis, able to heavily limit potentials for capital rentiers to parasitically extract tribute from the lives of ordinary citizens not obsessed with greed and conspicuous consumption. This is another version of the "guided or managed economy", ranging from the UK economy in 1939-45 to North Korea today.

This is a "war footing" or wartime solution: the present War of Capital is waged by the crony capitalist State and capital rentiers, against everybody else on the well-known 1%/99% basis: 99% of all new wealth is reserved for the crony capitalists. Change is therefore almost certain to come through conflict, when a sufficient number of critical stages in the economic breakdown process have been breached. Forecasting when this happens is difficult, but the sooner the economically parasitic capital rent system is disabled or heavily reduced, the sooner there can be hope of economic progress.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

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