Monthly Archives: April 2020

A Brief History of Folly: the NHS, Integrated Care, and How to Challenge the Changes

John Carlisle, Chair, YSHA

25 March 2020 (revised 13 May 2020)

The NHS was an Integrated Care institution, until the politicians began to meddle with it. Norman Fowler started the rot when he set aside the Area Health Authorities (AHAs) in 1982, after being Health Secretary for less than a year. The AHAs had been running for eight years and were on the verge of integrating with local government to balance regional demand and supply. The management system was key. Local management teams integrated the hospitals, family medical clinics and community health centres; and decisions were made by consensus.

Fowler’s intervention was a major disruptor, opening the way for the top down, ‘efficiency’-driven fragmented encumbrance that Hunt and Stevens have left us with today.

What was Norman Fowler’s qualification for this key role? Just like Michael Gove’s for education – journalism! How much did he know about how large service organisations work best? Did he visit the Marriott or Taj hotels, famous for their service, or John Lewis, or even another successful health service? No, his opinion was sufficient. He clearly had never heard of Continuous Improvement, a policy used by the finest companies in the world, e.g. Toyota. Toyota has never reorganised in fifty years; but it obliterated General Motors in less than 10 years, with a little help from Honda and Nissan – not on price, but customer satisfaction.

Here we have the nub of the problem: Ministers are put in charge of vital services like the NHS, Transport, Justice, and Probation (the last three all fell under the egregious Chris Grayling) with no understanding of them as systems. Instead they arm themselves with neoliberal ideology, and with command-and-control management style. The extent of their ignorance is only matched by the degree of cognitive dissonance, which means they refuse to acknowledge any evidence that shows their policies are not working.

This is where activists have gone wrong. In the case of the NHS they have presented moving examples of very sick patients in corridors, nurses at the end of their tether, grieving families etc. This approach is not effective in challenging a money-driven government. The empathy in the political world, especially of the Conservatives, seems negatively correlated with the seniority and significance of the post, e.g. Theresa May and Priti Patel at the Home Office, Chris Grayling at Justice and Probation, Jeremy Hunt in health. In summary, those with the thickest skins get the posts requiring the greatest humanity.

What we need to do is point out clearly their failures as ‘executives’ in their jobs and the subsequent waste and increased costs. We need to relate these consequences to their flawed organisational model, i.e. targets, cost-cutting, outsourcing, privatisation, and, most subtly malignant of all, excessive governance and compliance. The YSHA will be directing its efforts to replacing the Tory public sector disaster with a State economy based on Bevan’s In Place of Fear (1952). This will resurrect the model of excellent service the NHS provided before the destructive tampering. It will then be applicable in all public services as they are brought back into the public domain, working hand in hand with a new green economic strategy.

We must be prepared to change everything!

The Economics of a Social Democracy

John Carlisle, Chair, YSHA

24 April 2020

In Place of Fear, a book of reflections by Aneurin Bevan (published 1952), has often been overlooked for what it really is, i.e. a handbook for running a socialist nation. Most people seem to assume mistakenly that the title refers just to the NHS, whereas the chapter A Free Health Service is just 24 pages in a 203-page book. The rest of the book is a deeply insightful analysis of the post-WWII world and a prescription for Britain’s recovery by instituting socialist practices in the UK.

Bevan’s grasp of the economics of a socialist country was profound. He accepted the reality of a mixed economy, stating that that is what the people in the West would prefer, but nevertheless was clear that the conflicting social forces were poverty, property and democracy: “Among them no rest is possible”. The balancing of these is a dilemma that remains today. The management philosopher Charles Hampden-Turner says dilemmas can only be managed, never resolved. This, Bevan writes, is the responsibility of the legislature, by efficacious state action and judicious collective policies.

In possibly the most important chapters on macroeconomics (chapters 2 and 4) Bevan shows his scorn for British businessmen in times of crisis. He compares them unfavourably with those in the USA: “In Britain the businessman is mobilised. In the States he mobilises.” If the Labour government had not nationalised some key industries then the continuing insufficient investment would have damaged even more an already unproductive industrial sector, e.g. railways and steel. Labour revived them and invested in the infrastructure needed, and production began to rise steeply. For instance, in 1952 steel production had risen by 50% and oil production by 16 million tons more than in 1939. In 1950 Britain stood third out of the Western Europeans in industrial production and first in agricultural production, and had doubled her exports.

All this went on while Britain was broke. The USA had suddenly terminated the Lend-Lease agreement in 1945 that the country had relied on to keep its military and its empire afloat. Keynes had to negotiate a $4billion loan from the USA, but there were conditions: US loans became conditional upon progress towards sterling becoming fully convertible into US dollars, thereby aiding US trade. The $2.7 billion Marshall Plan contribution again largely went to propping up its “world power” role in 1948, and to the housing programme, as opposed to renewing the public infrastructure. The global player funding was a mistake, as Keynes pointed out.  In July 1949 the pound fell from $4.03 to the dollar to $2.80. This, and paying for the Korean War, incurred public spending cuts, including in the NHS, e.g. charging for prescriptions, dental services and spectacles. Nevertheless, the NHS and National Insurance continued to be implemented, as did the social housing programme.

This all took place largely under a Keynesian economic thinking, where demand was the driver, not money supply. This was part of the Post-War Consensus, which accepted some degree of nationalisation, promoted strong trade unions, regulation, high graduated taxes and a generous welfare state. What Bevan was unaware of when his book was first published was that the economic system under which this happened underpinned the socialist thinking that informed the Post-War Consensus.  In other words there was no major political argument against the principles that were a given in the Beveridge Report. Hence, the succeeding Conservative government kept the housing programme going, supported the NHS and did not quibble over institutions like British Rail. What a different world.

The Post-War Consensus was an unconscious paradigm. When I first arrived in Britain from Africa in 1965 people complained about, but accepted, high taxes, moderate wages for managers and workers, the dole, the trade unions’ role and comprehensive schooling, not least because of low unemployment.

If Socialists wish to get back to that world then we need to unpack the economic thinking that is creating the conditions for inequality and low productivity today (and not just in the Conservative Party), and identify and implement those conditions that must prevail to deliver a fairer, more just society. It is very important that we do not make this a discussion between the Left and the Right. This always obscures the debate.

Universal Basic Income (UBI) is a term now familiar to most people thanks to the COVID-19 pandemic; but it is only the tip of an iceberg that is the New Economics, the system that is required today. After all, the Tory party mooted it as part of a strategy to mollify critics of pay inequality. So, what are some of the economic axioms that Socialists need to promote to support Universal Basic Income into reality?

Modern Monetary Theory (MMT) has as one its foundations is the notion that the government is not a currency user, but a currency issuer. It creates money to finance public spending. The austerity regime conceptualised the government as a currency user, financing its spending by taxation, by borrowing (debt issuance) or ‘printing money’. This modus operandi creates constraints to public spending, e.g. spending can’t happen because it requires more taxation, borrowing which may lead to increased interest rates, possible inflation, etc. All of these beliefs have been debunked by the current crisis, where governments have, miraculously, found trillions to fund the losses in commerce and industry and wages.

However, to quote the authority on this topic, Professor Michael Hudson:

After being attacked by monetarists and others for many decades, MMT and the idea that running government budget deficit is stabilizing instead of destabilizing are suddenly gaining applause from the parts of the political spectrum that long opposed MMT: the banking and financial sector, especially the Republicans. But what is applauded is in many ways something quite different than the leading MMT advocates have long supported.

Modern Monetary Theory (MMT) was developed to explain the logic of running government budget deficits to increase demand in the economy’s consumption and capital investment sectors so as to maintain full employment. But the enormous U.S. federal budget deficits from the Obama bank bailout after the 2008 crash through the Trump tax cuts and Coronavirus financial bailout have not pumped money into the economy to finance new direct investment, employment, rising wages and living standards. Instead, government money creation and Quantitative Easing have been directed to the finance, insurance and real estate (FIRE) sectors. The result is a travesty of MMT, not its original aim.

By subsidizing the financial sector and its debt overhead, this policy is deflationary instead of supporting the “real” economy. The effect has been to empower the banking sector, whose product is credit and debt creation that has taken an unproductive and indeed extractive form.

This can clearly be seen by dividing the private sector into two parts: The “real” economy of production and consumption is wrapped in a financial web of debt and rent extraction – real estate rent, monopoly rent and financial debt creation. Recognizing this breakdown is essential to distinguish between positive government deficit spending that helps maintain employment and rising living standards, as compared to “captured” government spending to subsidize the FIRE sector’s extraction and debt deflation leading to chronic austerity.

Naked Capitalism: The Use and Abuse of MMT, Hudson, M. et al April 2020.

The Socialist drive is to ensure that this does not happen as the pandemic eases. Never has “know thy enemy” been more important. The Yorkshire SHA has taken on the task of awakening not just the Left, but every concerned citizen and politician to these dangers from unreformed neoliberal politics. A good starting point is a careful study of chapters 6, 7 and 8 of In Place of Fear: The Transition to Socialism, Social Tensions, and World Leadership. The time to start is now.