Saturday, January 18, 2014
A Cautionary Tale of Black Gold Fever
A week ago it was announced that Norway's North Sea oil fund had amassed enough that every Norse had become (symbolically) a millionaire. That's a million Krone or about $118,000 per head - but still. Anyway you cut it, that's a nice piece of change for the Norwegian people.
Norway shared a lot of that North Sea oil with another country, Great Britain. This naturally invites comparisons about how rich the Norwegians are and how rich the Brits have become from their North Sea windfalls. After all, much of the money that poured into London's coffers had to pass straight through then prime minister Margaret Thatcher's fiscally conservative fingers.
Britain had its share of North Sea oil, described by one PM as "God's gift" to the economy. We pumped hundreds of billions out of the water off the coast of Scotland. Only unlike the Norwegians, we've got almost nothing to show for it. Our oil cash was magicked into tax cuts for the well-off, then micturated against the walls of a thousand pricey car dealerships and estate agents.
All this was kick-started by Margaret Thatcher, the woman who David Cameron claims saved the country. The party she led still touts itself as the bunch you can trust with the nation's money. But that isn't the evidence from the North Sea. That debacle shows the Conservatives as being as profligate as sailors on shore leave.
Britain got nothing from the North Sea until the mid-70s – then the pounds started gushing. At their mid-80s peak, oil and gas revenues were worth more than 3% of national income. According to the chief economist at PricewaterhouseCoopers, John Hawksworth, had all this money been set aside and invested in ultra-safe assets it would have been worth £450bn by 2008. He admits that is a very conservative estimate: Sukhdev Johal, professor of accounting at Queen Mary University of London, thinks the total might well have been £850bn by now. That doesn't take you up to Norwegian levels of prosperity – they've more oil and far fewer people to divvy it up among – but it's still around £13,000 for everyone in Britain.
...When the North Sea was providing maximum income, Thatcher's chancellor, Nigel Lawson slashed income and other direct taxes, especially for the rich. The top rate of tax came down from 60p in the pound to just 40p by 1988. He also reduced the basic rate of income tax; but the poor wouldn't have seen much of those pounds in their pockets, as, thanks to the Tories, they were paying more VAT.
What did Thatcher's grateful children do with their tax cuts? "They used the higher disposable income to bid up house prices," suggests Hawskworth. For a few years, the UK enjoyed a once-in-a-lifetime windfall; and it was pocketed by the rich. The revolution begun by Thatcher and Reagan is often seen as being about competition and extending markets. But that's to focus on the process and overlook the motivation or the result. As the historian of neoliberalism Philip Mirowski argues, what the past 30 years have been about is using the powers of the state to divert more resources to the wealthy. You see that with privatisation: the handing over of our assets at knock-down prices to corporations and supposed "investors", who then skim off the profits. The transformation of the North Sea billions into tax cuts for the wealthy is the same process but at its most squalid.
Now you might think this is an ideal point at which to explore what Canada's Conservative reprobates did with our nation's petro-wealth but, c'mon, how many times can you flog that dead horse? Same, same, eh?