https://consciousnessofsheep.co.uk/2024/07/23/the-return-of-the-cargo-cult/

In its modern form, cargo cult behaviour involves doing something unrelated to the thing you want to happen, in the hope that it will mysteriously happen anyway. Think, for example, of the children’s game where so long as you avoid stepping on the cracks in the pavement, it will not rain. Cargo cult thinking though, is not limited to children’s games but is often deployed by adults… particularly when they lack agency over the desired outcome… how many young men down the years have turned up on dates armed with chocolates in the hope that this will result in a romantic tumble in the bedroom later on? And how many young women have turned to perfume to achieve the same end?

This kind of behaviour would be amusing but for the fact that in a neoliberal system, government itself has become a cargo cult. Consider, for example, what happened in the UK in the late-1990s. Parts of the economy – notably the City of London – had recovered from the depression of the 1980s, but swathes of the country – particularly in the north and west – were still lagging behind. The proposed “solution,” as ever, was growth. But nobody in government had the first idea what growth actually was, still less how to make it happen. Nevertheless, since governments do not get elected by holding their hands up and saying, “don’t ask us, we haven’t got a clue,” some overarching electoral pledge had to be made. And so, Blair’s iteration of the Labour Party offered a cargo cult solution – “education, education, education.”

The proposition was simple enough. The emerging “Asian Tiger” economies of the period excelled in hi-tech industries which depended upon a highly educated workforce. Britain, in contrast, was believed to have failed to invest in education and so, would not be able to operate those hi-tech industries even if it could attract them. The solution, then, was surely to massively increase the number of youngsters going to university and obtaining graduate and post-graduate education. In short, if we created enough graduates, graduate-level jobs would surely appear.

It would be wrong to say that the policy failed, since Britain’s top-tier universities have developed partnerships with some of the world’s leading hi-tech corporations. At the same time, the suburbs immediately adjacent to the top-tier universities contain the last pockets of prosperity within the UK. Rather, the problem is that the same result might have been achieved (with a lot less angst) by taking a qualitative rather than quantitative approach to education. That is, had Britain produced a much smaller number of graduates specialised in those leading-edge subject areas required by global hi-tech corporations, we would have achieved the same outcome without the need to create the downward wage pressure from an army of indebted – and increasingly angry – graduates who can’t find real graduate-level employment, and who might have fared better going through technical education or an apprenticeship.

Key to the failure was neoliberalism’s fetishising of the private sector. Rather than being run by the government, universities were to operate commercially, mostly in partnership with corporations. But instead of focussing on the educational needs of the private sector in the future, the result was that both universities and the corporations they partnered with sought immediate profits – with debt-loaded students becoming mere cash cows.

While the system continued beyond the Blair years, faced with years of Tory austerity the universities increasingly abandoned British students in favour of fleecing fee-paying foreign ones. But the model began to fracture as all but the top-tier universities faced rising costs and shrinking numbers. By some estimates, half of all UK universities run at a loss, with government regularly having to step in and bail them out. Nevertheless, there is no mood among the political class to abandon the failed neoliberal approach in favour of one operated directly by government in the long-term interest of the wider economy.

Indeed, not only has the incoming Labour government not abandoned the cargo cult approach to government, in last week’s King’s Speech, we see it expanded to areas like energy, housing and transport. Take housing for example. In the distant past, governments – particularly at a local level – actually employed skilled tradespeople and held stocks of building materials to enable them to build actual houses. It goes without saying that by the end of Thatcher’s period in government, little of this had survived. And far from rebuilding the state’s capacity to construct things, the Blair governments dispensed with what little remained… relying instead upon private corporations to do the building work – one reason why the UK has a massive housing and homelessness crisis.

The Labour pledge in 2024 is to build 300,000 new houses a year between now and 2029 (which, given that the population is growing at more than 600,000 people per year, is insufficient anyway). But Labour is not planning to employ a single bricklayer or to buy a single trowel. Which is where the cargo cult behaviour comes in. What Labour has correctly observed is that the reason for both housing shortages and unaffordable house prices is the shortage of land. That is, the housing developers are more than capable of keeping the cost of building houses to a minimum, but without the land to build them on, shortage forces prices up. And so, Labour is going to legislate to make land available – the equivalent of the child avoiding stepping on the cracks in the pavement – while some mythical “private finance” appears to pay for it all.

In the current climate, however, housebuilding targets are to private finance what garlic is to a vampire. With the economy dipping in and out of recession, and a global slowdown in bank lending, investment in new housing development began petering out several years ago – with only those projects already underway continuing. This is simply because property developers do not have wads of cash of their own gathering dust in a safe somewhere and waiting for new land to become available. Rather, they borrow the funding for the project from a bank, and then repay it with the income from the sale of the houses at the end. But in the post-covid economy, with mortgage rates around six percent, banks have simply stopped lending.

According to business rescue specialists Begbies Traynor:

“Serious concerns remain over the state of the Construction, Real Estate and Support Services sectors which represent over 40% of the companies in ‘critical’ financial distress.”

In addition to the 6,043 construction firms in critical distress (expected to enter insolvency within 12 months) a further 89,824 were in significant distress. This makes construction the most at risk sector of the economy. Moreover, the associated Real Estate and Property Services sector is the third most at risk, with 5,575 firms in critical distress and 65,919 in significant distress. This is a particular problem in the social housing sector, as James Riding at Inside Housing explains:

“New build projects are already being delayed and cancelled across the country due to ‘significant financial pressures and uncertainty’, housing providers warned…

“Rental income is 15% lower in real terms than in 2015, while each social home will require up to £50,000 over the next 30 years in maintenance and retrofit costs.

“Reflecting these financial pressures, housing association starts of new homes in England were 30% down last year compared to 2022-23, with ‘further falls expected this year.’”

The bottom line is that if government wants to come anywhere near its housing target, it is going to need to provide direct funding, because the fabled private financiers have left town, leaving construction and property management companies with a giant debt mountain on their balance sheets. But, as Dagenham Liz Truss discovered two years ago, unbacked commitments of this kind tend to cause international finance to experience a dose of the vapours leading to the cost of government borrowing going through the roof (and jeopardising pension and insurance funds along the way). Which is why incoming Chancellor (and Grand High Witch lookalike) Rachel Reeves has already played the “there’s no money” card.

We can expect something similar from Ed Miliband’s new Great British Energy, which aims to achieve the impossible (unless, perhaps, we can persuade China to build and operate them for us) task of building out a massive fleet of wind farms in an effort to make the UK energy independent. As with housing, Miliband is not about to employ anyone, still less build and equip the necessary factories and supply chains (which no longer exist in Europe following the loss of the cheap Russian gas which used to power the factories). And so, it will fall to the magical private finance fairies to wave their wands and conjure into existence the funds to even begin the project. But as with housing, wind farm operators have been burned in recent capacity auctions because they are unable to deliver at a low enough price for the wider economy. The cargo cult behaviour, then, is government changing planning laws to make more land (and offshore zones) available to private windfarm developers, but with no means of encouraging or forcing them to build.

Even the plan for the railways – which at least creates a single, publicly-owned, national management body – will recreate many of the existing problems if it continues to involve the private sector in the fragmented delivery of everything from tickets to tracks and to trains. And yet, the neoliberal mindset demands this of an already highly fragmented railway system in which trains, tracks, stations, and ticketing are owned or operated by separate private companies. So that a continued reliance on private finance with only the top-level management in public hands, risks continuing the same problems which have beset the railway system for decades.

During the Blair years, when the UK still enjoyed the receipts from oil and gas exports from the North Sea along with the trickle-down income from a City of London providing financial alchemy to a global economy unknowingly speeding toward its 2008 nemesis, this cargo cultism was affordable, even if it represented a gross misallocation of the UK’s remaining capital. In 2024, a UK economy still reeling from the impact of the 2008 crash, compounded by Brexit, lockdowns, and self-destructive sanctions is already falling apart, with the electorate demanding an alternative to the failed neoliberalism of the previous half-century. This time around, not only is more cargo cultism unaffordable, but its inevitable failure will drive exasperated voters into the arms of the national populist parties of left and right.

It is time for the political class to wake up and understand that some critical infrastructure and public services are simply too important to leave to corporate financial institutions concerned solely with today’s bottom line. And rather than handing out lavish contracts (mostly absent of even basic penalty clauses) to these vultures, it is time to revive the Department of Public Works; employ the necessary workforce (and offer much needed apprenticeships); purchase the tools and materials and cut out all of the lenocrats. Because it they don’t, I fear the path they are on leads to gallows or guillotines on Parliament Green.