Saturday, October 12, 2019

 

The Strange Case of the Imploding British Elite



The British elite has split in two. The two parts are now viciously fighting each other and regardless of who wins the current battle it is unlikely there will be a return to the old cohesive, all-powerful ruling elite.

How and why has this happened?

Elites are groups, tribes or classes who rule. Their two main functions are to control the non-elite and gather income and wealth for themselves. These basic objectives usually override any possible divisions and conflicts. Elite solidarity is normally solid and impressive.

European elites were frightened by the French and Russian Revolutions in which traditional rulers were executed or otherwise eliminated but new elites were then formed and fear served to create a stronger internal solidarity. The main problem was not from internal uprisings but that elites frequently went to extended and costly international war with each other, usually over wealth, including territory, and resources.

In mid-20th century European elites attempted to solve the problems of war and fear by creating an international organisation now known as the European Union. Through this they have cooperated regionally long enough to rule the non-elites of 28 nations using the arrangements provided by the treaties which form the European Union. Treaties are agreements which create obligations for the signing government and for all successive governments. Given the thousand-year history of European national elites using their local power over the populations to enable wars the cooperation and peace since 1957 may seem remarkable.

The anti-war aspect of this arrangement may not seem so pure and overriding if it is understood also that elites have always secured their wealth and income from things international – international trade, migration, finance and, of course, international theft of resources and goods from peoples other than their own. A regional organisation which guarantees this source of wealth from its members other and, by using collective power, perhaps from the rest of the world would be a highly desirable product compared with the previous conflictual situation.

 EU treaties then appear for elites as their dearest wish come true. It committed future governments of originally six and then swelling to 28 to ensure unrestricted imports and exports, provide cheaper labour through migration and allow 28 different possibilities for securing a surplus from investment. It established a raft of conservative policies relating to privatization, budget restrictions, and directives serving the needs of corporations. To compensate for a certain loss of global spread the EU treaties also delivered restraints on any political movements which attempted to interfere with the elites beloved free enterprise or introduce serious state regulation. All the elite nightmares of the past were thus banished - no more fear of nationalisation by socialists or protection of employment or health by banning or taxing at the border.

The EU was God’s gift to elites dependent on extra-national activities of the traditional type.
So, if the EU delivers so much to national elites why has the British ruling elite split so violently with part of it wishing, it seems, to give up all the advantages and leave the EU and the other part happy to stay within the EU?

The answer to this question requires a brief look over the past decades at the changes in the way the British ruling elite has captured its wealth.

By tradition many  European elites have secured a substantial part of their wealth through international trade in goods often beginning with tea, sugar, wood, ivory and such similar goods extracted from colonies. This was certainly the British case and once the local manufacturing base had been established exports of the goods from British factories became dominant. Whether the transfer of goods was forced as in the case of Empire or slightly more voluntary as in trading exchanges it was, and still is, always the higher income elites who benefitted the most.

This situation prevailed for about 400 years up to the mid-20th century. Although there were occasional disputes about whether the state should serve the interest of investors or traders these differences were not sufficient to create combative factions. Solidarity prevailed in both the management of the empire and the control of the lower orders.

Then things began to change. In the first half of the 20th century manufacturing goods was still an important if not the most important source of wealth for the British elite. But from 1960 onwards manufacturing declined and the so-called “service” economy grew. Major services include health, all sorts of management, transport, education, all public services and, the most important, financial services which includes banks, fund management, stockbrokers and attached lawyers and consultants. In the United Kingdom services grew from 53 percent of national income in 1960 to 75 percent today in 2019. 

In the last decades financial services expanded three times between 1965 and 2006.For the first time in the history of the British elite most wealth was to be made in the financial sector. Some of the elite in manufacturing sold their holdings to foreign elites and joined the banks and hedge funds.
For the first time then the governing elite split into those who were dependent on, or where hopeful for, large amounts of wealth from banking, property development and other financial services and those who still clung to the “merchant” ethos of manufacturing, exporting and importing. In a certain way this was a dispute between the corporations and the banks about the future sources of income and wealth.

With this background the strange case of a totally split British elite emerged into the daylight and the precipitating issue was whether the EU could continue to deliver the benefits for both sides.

For the financial services section the EU institutions not only brought competition for the British financial services sector (sometimes known as “The City of London”) from other financial centres it made the expression of financial power more difficult as regulations to protect the Euro affected the Pound. In addition, it made cooperation with other financially-oriented elites in the world more difficult. Logically, then, it would be better to secure global freedom and exit the EU. The merchants and manufacturers did not agree. During the membership of the EU wealth and income had been effectively distributed towards the top, supplies of cheaper labour were available from Europe, most socialist and social democrat political parties had been destroyed and alliances with other corporations, particularly those from USA, had been facilitated. Further, the elite had been able to control the non-elite to the extent that international investors continued to be confident of UK political stability.

The administrative centre of the ruling elite — the Conservative Party—then split into the supporters of financial services and City of London versus the rest.

So it is that as Brexit prime minister designate Johnson could say “f…k, business” because business is not finance. So it is that the principle negotiator for Brexit in 2019 finished his stint in Brussels and then took a job in the USA – not in Google, or General Motors or Pfizer but in the bank and global leader in financial services, Goldman Sachs. Not surprising then that the major funders of the Brexit wing of the Conservative party have been hedge funds which are at the core of financial services. One study showed that of the 40 donations for Johnson's bid to be prime minister 30 were from hedge funds and City of London connected investors. 

The leaving EU part of the elite are the samurai for financial services and will take their chances on being able to continue conservative social and economic policies at home without the EU. The trading/manufacturing part of the elite are for remaining in the EU closeted goods market and continuing to receive external help in maintaining conservative policies.

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Statements and Opinions in this Blogpost can be supported with analysis, documents and statistics which are themselves based on evidence.
To check specific statements on:
1) ‘Brexit Negotiator goes to Goldman Sachs’  

2) ‘Financial services support of Brexit’ 
site claims to be using data from British Electoral Commission, Parliamentary register of members’ financial interests and Financial Conduct Authority.






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