He outlined his ideas in the book, Beyond the Profits System, published last year. Red Pepper talked to him about why capitalism is ‘hopelessly outmoded’, why another financial crisis is imminent, how the left just doesn’t get it, and what lies beyond…

You write in Beyond the Profits System that the explanation of the financial crisis by government, business representatives and academics is ‘uniformly superficial’, that it’s not just down to reckless banks. What’s a non-superficial explanation?

It’s down to a fundamental fault in the design of the economic system, whereby corporations – including banks – are mandated by company law to maximise profits in a competitive market place. Where, as in recent decades, this has been compounded by extreme deregulation and official guarantees against loss – moral hazard – you have what amounts to a positive incitement to greed and recklessness, all too easily tipping over into fraud. Indeed in such an environment it would be virtually impossible, especially in the financial sector, not to succumb to pressures to behave badly, as you’d stand to lose not only your bonus but your job.

The fruits of profit maximisation in the form of accumulated profits, surplus value in Marx-speak, have to be perpetually reinvested at a profit. This age-old bane of capitalism – the basis of the inescapable business cycle – is now compounded by technological change such that decreasing amounts of capital – per unit of output – can be absorbed by needed new investment in fixed capital. Hence, as detailed in all my books, productive investment is perceived as less and less profitable than financial speculation – famously described by Lord Adair Turner as ‘socially useless’.

In summary, it’s a system which, having been designed largely in the 19th century in line with the then prevailing ideology and vested interests, and before the arrival of universal suffrage, has now become hopelessly outmoded and even more damaging to the public interest than it was in Marx’s day.

The government’s crash course in austerity has been widely condemned as not learning the lessons of history and sacrificing a return to healthy economic growth for unnecessary pain and long-term unemployment. But you think that, even without cuts, we still face economic decline. Why is that?

An equally big failure to learn the lessons of history is that of the ‘Keynesians’ who are still peddling the delusion that growth can be boosted through expansionist fiscal and monetary policy, forgetting the experience of the 1970s, which demonstrated that these mechanisms cannot necessarily generate growth beyond a short period without resulting in inflation. This is not, of course, to argue for fiscal austerity, which the UK and some Eurozone countries are busy demonstrating once again must lead to even greater disaster, confirming that the neo-liberal, monetarist approach is equally unworkable.

It is particularly perverse in present circumstances to argue that a further bout of fiscal expansion – deficit financing – could get us out of the hole we are in. This is because since the start of the credit crunch in 2008 the global economy has been paralysed by a massive burden of debt (public and private) which is largely unpayable; not just sub-prime mortgages.

This debt, increasingly underwritten by the state, has been run up over the last 20 years, particularly during the ‘bubble economy’ of 2003-07, in an effort to keep the economy growing long after it should have suffered the big shake-out that the normal action of market forces would dictate. Because this indebtedness has now surpassed the level of what is sustainable, it is a cruel deception, as I and others have consistently pointed out since the start of the crisis, to suggest that individuals or enterprises can or should be induced to borrow still more. Rather sustainable growth can only be revived at all once this burden is removed, which would require a destruction of capital  – involving liquidation of enterprises and elimination of jobs, ven greater than that which occurred in the great depression of the 1930s and probably lasting even longer.

The more fundamental delusion is that high economic growth is attainable in any event, or even desirable. Leaving aside the question of whether it’s environmentally sustainable, the record since the 70s, whether under Keynesian or neoliberal strategies, has shown that growth can’t be maintained at a level high enough to achieve an adequate utilisation of either capital or labour under a market system, and thereby prevent the downswing of the business cycle from bringing about a sustained market contraction. The result has been a resort to ever greater market distortions and imbalances as different interest groups struggle to increase their share of increasingly stagnant markets, including the wasteful subsidisation of activities which either have no lasting benefit or are positively harmful, such as investment in urban regeneration or high-cost sources of alternative energy, and whose only beneficiaries usually turn out to be investors and big corporations.

If there is a left alternative economic strategy, it could be summarised as making corporations and the rich pay their fair share of tax, properly regulating the financial sector, not cutting public spending, and (if you include the Green New Deal) creating an army of ‘carbon’ workers to reduce the economy’s dependence of fossil fuels. As the organisers of the March for the Alternative put it, ‘jobs, growth, justice’. But you think this approach is inadequate. What is it evading?

The weakness of the ‘left alternative’ stems from the failure and/or refusal to grasp the nature of the impasse the global capitalist system has now reached. Rather its advocates, such as Mark Serwotka of the PCS union, are perpetuating the myth so beloved of the more militant unions at least since the 70s, that the capitalist system can always buy off trouble even if that entails borrowing still more. Or, in other words, that money really does grow on trees.

It is, of course, a perfectly correct demand that corporations, bankers and others, who have enjoyed a huge increase in their share of the cake, without adding any real economic value, should be forced to pay more in taxes. What is not defensible is to claim that the ratio of public debt to GDP – or of private debt to income / assets – can be pushed ever higher without regard to the capacity to repay.

The other major flaw in their analysis is their insistence on targeting job creation, whether in pursuit of green energy production, clearly a desirable goal in itself, or any other supposedly employment generating activity. Our own experience and that of other countries, notably the US since the credit crunch of 2008, shows conclusively that, thanks to a continued transformation of the labour market driven to a great extent by technological change, we cannot conceivably restore anything close to full employment as traditionally understood.

In Beyond the Profits System, you argue for ‘dethroning the god of growth’. What does the ‘new economic model’ you advocate involve?

First of all, it involves recognising that maximising the growth of output is not a valid guiding principle of economic management in a modern society. While in pre-industrial societies, where scarcity and famine always threatened, a tendency to produce as much as possible may have been an understandable default position, it is no longer justified in an era when the production problem has effectively been solved, i.e. we have the technical capacity to produce far beyond our capacity or need to consume.

But if we have solved the production problem, we clearly haven’t solved that of distribution; hence the phenomenon of mass global poverty amid plenty. At the same time we face a new scarcity in the shape of such vital productive factors as land and water, though not in relation to food production for the most part, on a finite planet as a consequence of our very success in expanding output and population.

It should be obvious that a competitive, capitalist market system is singularly ill-suited to enable us to cope with these new imbalances. This is because it depends on perpetual growth, facilitating the redeployment of surplus profits, to maintain its stability and it inevitably leads to a skewed distribution of income, particularly as technological change leads to ever greater structural unemployment. The latter problem points to the need to overthrow another fetish – that of maximising employment, or indeed of ‘work’ itself – in a world where productive capacity is shown to be surplus to requirements.

If growth is no longer to be considered the principal public good, what should be the overriding aim of economic policy?  Reverting to first principles it seems obvious that, in an age of democracy and universal human rights, it should be to provide people with what they need and want to the maximum extent possible with the available resources.

Of course this begs a number of questions about how to determine people’s wants and public priorities for investment, service provision etc. Yet while markets will have a role in this process, experience has shown that the traditional reliance on supposedly free competition by profit-maximising companies – who claim to be driven by a belief that ‘the customer is king’ but are really the slaves of their shareholders – is no longer good enough. Rather resource allocation decisions will have to be made on a collective basis at local, national or international level. It makes little sense to try to anticipate what new models of economic organisation will emerge. All that can be hoped – if not predicted – is that they will be run on the basis of democratic accountability and transparency. To improve the chances of this happening, it will be vital to institute reforms to the political process such that it cannot be bought by those with the deepest pockets, as is currently the case everywhere, including the UK and, most egregiously, the US.

You think a citizen’s income is essential. Why?

Given the ever growing global surplus of labour noted above, it is no longer possible to pretend, if it ever was, that full employment is a realistic goal. This is already widely understood, though not explicitly recognised, across the political spectrum in the UK, where attempts to devise a welfare system that encourages people to work while ensuring they avoid deprivation have proved futile over the years – as illustrated by New Labour’s attempt to cajole single mothers to take menial or non-jobs on the basis that they could then afford to hire a child minder. This points to the necessity of devising a system of income distribution which incentivises people to undertake only work which is necessary – including caring activities which at present are largely unpaid – and does not penalise people for being unemployed.

The most obvious benefits of a basic or citizen’s income, paid at a flat rate to every adult irrespective of their income or employment status, would be that every individual would be assured of basic subsistence without the need for means testing. The administrative costs of means testing would be saved, as would the personal irritation and humiliation.

People could undertake paid work or start small businesses without losing any benefit, while at the same time they could afford to undertake unpaid work of value to the community – including as carers – which might otherwise not be done.

Global growth was, according to the IMF, 4.6 per cent in 2010 and unemployment in is not a high as many in 2008 thought it would be. Is global capitalism is more resilient than Beyond the Profits System says it is?

No. It needs to be remembered that the revival of global growth in 2010, to the extent that it’s genuine, has been achieved on the back of ‘extraordinary measures’ – rises in fiscal deficits and debt, rock bottom interest rates and ‘quantitative easing’ (money printing) – which cannot be  sustained beyond the short term. In any case, this has not prevented unemployment from rising in many countries, most notably the US.

There is uncertainty over what will happen in the world economy over the next few years – slow growth, no growth, a new financial crisis. What do you think will happen? Will the economic system have to be plainly seen not to work before change is on the agenda?

Given the abject failure of the left in Europe or anywhere to develop a radical alternative in spite of all that has happened in the last decade or more, it seems clear there will have to be an even greater disaster before any such ideas as those outlined in the book can start to be taken seriously. The good news is that just such an event, in the form of a renewed financial crisis, seems imminent. The bad news is that the mainstream left remains hopelessly ill-prepared for it, stuck in their Keynesian fantasy world. In contrast the right  (Murdoch, Fox News, the Tea Party etc)  have a much clearer grasp of what’s at stake and are evidently prepared for all-out class war. Another disturbing factor, though potentially positive in the long-term, is the political and economic breakdown of the Arab world, also tending to spread to other ‘developing’ regions, even including China. In the absence of any coherent analysis from right or left of what is happening, this would seem as likely to lead to prolonged conflict in much of the world as to any rational solution.

Beyond the Profits System: possibilities for a post-capitalist era is published by Zed Books

His front door is pink, and his front room a beguiling mess of books, children’s toys and old jazz records. There no bust of Marx, but there is a Tottenham Hotspur pendant hanging from the wall.

The ‘they’ in question are the Corporation of London, the ancient political entity that represents the City of London. Accustomed to anonymity, the Corporation has been unnerved by the persistent desire of Glasman and his associates at campaigning group London Citizens to open up a political dialogue. The aim is some kind of recompense for the banking bail out. But incensed by the group’s anti-usury campaign, which demands a cap on interest rates at 20 per cent, and was launched provocatively at a synagogue in the City, officials stormed out of meetings. ‘Last week they were so beside themselves with fury they threatened to cut off all relations with us,’ Glasman says.

But it’s not just Glasman’s campaigning activities that have cast him as a modern-day Spartacus in City eyes. It’s also his determination to hold the City accountable for the crash. To him, the worst global economic crisis since the ’30s is the culmination the City’s decades-long striving to free finance from all regulation, a model assiduously exported around the globe. ‘The Corporation of London is responsible for the entire economic policy and all its consequences, that we’ve lived through for the last 30 years,’ he says. ‘It’s time for a reckoning.’

Glasman’s City odyssey began in 2000 when he joined the opposition to plans to demolish part of Spitalfields Market, which adjoins the City. He advised campaigners to apply for a planning review just before building was due to start. Usually such delays stop developments in their tracks because companies cannot afford to pay workers to do nothing. But not in this case. ‘The work was halted while there was a review, and I was amazed that all the workers there were paid, everything was fine,’ he says. ‘I couldn’t understand where they money came from for millions of pounds of idle workers. I looked into it and realised it was the City of London that was funding the project.’

The Lord Mayor, Glasman discovered, has at his disposal the City Cash, a fund which generates £200m in interest alone. But no one knows the real size of the City’s assets because it’s never been in debt, and never taken a loan. Even Parliament is not entitled to ask. ‘It was at that point I began to realise I was dealing with something strange and outside my experience,’ he says. ‘Both the political and academic person in me realise this was more interesting that I ever expected.’

For 900 years the City has eluded control by the British State, says Glasman. William the Conqueror overwhelmed the rest of England but ‘came friendly’ to the City. Charles the First attempted to send the army into the City and precipitated the Civil War. The City chartered the Empire-building East India and Hudson’s Bay Companies. It committed treason by supporting George Washington in the American War of Independence and brokered the peace. No government since Charles the Second – barring the symbolic banning of City banquets after the Second World War by Attlee – has made any attempt to interfere with the City’s privileges, he says.

Nowadays, its role is assumed to be largely ceremonial. But quaint medieval trappings mask real, undiluted power, says Glasman. The Lord Mayor may wave to the crowds each November as he processes in a state coach to pledge allegiance to the Crown. But he is also a global lobbyist for the UK financial sector, spending a third of the year overseas. This ‘non-political’ figure is, according to the Corporation of London, treated as a Cabinet level minister abroad, as he expounds the “values of liberalisation” and opens markets for City businesses.

At home, the City possesses the Remembrancer, the oldest lobbyist in the world, dating from the 14th century. He is paid by the Corporation to lobby government and Parliament. He has, in the words of the Corporation,’ day to day contact with officials in government departments responsible for developing government policy’ as well as a role in the drafting of legislation. He has a seat behind the Speaker in the House of Commons and has the power to enter the chamber and brief MPs during debates.

Glasman believes the fruit of this influence has been the relentless promotion of the financial sector at the expense of the rest of the British economy, and the progressive freeing of finance from regulation. The City funded events, hosted meals and underwrote think tanks in order to persuade the Thatcher government to introduce the ‘Big Bang’, which ended national regulation of capital flows. It pushed for privatisation in policy papers and lobbying. It helped ensure that the Financial Services Authority’s constitution did not ‘discourage the launch of new financial products’ and ‘avoided erecting regulatory barriers.’

‘Over a period of 500 years the City has supported deregulation at every turn’, states Glasman. At the time of the crash regulations in the City of London were softer than they were on Wall Street. ‘The consequences of this are massive,’ he says. ‘You had fraudulent products – the cause of the crash – debt being repackaged as an asset and then being used as leverage. The assets they held and credit they generated were on a ratio of 50-1. There was no effective regulation of this, no effective oversight.’

This year, to his surprise, the Corporation started answering Glasman’s letters for the first time. Then in June, they agreed to meet him and London Citizens. He senses apprehension. ‘They have been exposed by the bailout’, he says. ‘They have refused more than ten years of requests from us and suddenly they agree to meet. I think they are concerned that the political parties will move to a more manufacturing, less financially-based economy.’

It is a grudging relationship. Corporation officials have walked out of meetings only to return ten minutes later. None of London Citizens’ demands – a living wage for the City’s other workforce of security guards, cleaners and cooks , the transfer of assets to build affordable housing and the 20 per cent interest cap – is close to being accepted. But Glasman’s ultimate ambition would probably have the Lord Mayor reaching for his pearl-encrusted ceremonial sword.

The Square Mile is a city within a city. London’s other Mayor, Boris Johnson, has no jurisdiction over the capital’s thirty-third borough, which even boasts its own police force. And while Johnson has to answer questions in Parliament each year, the Prime Minister and Chancellor – in their annual Guildhall and Mansion House speeches – both come to the City to justify how they are serving the interests of finance.

The City may have a population smaller than Norwich in the 9th century but the Corporation towers above, in influence and wealth, any other institution of municipal government in the capital.

As Glasman puts it, ‘There is the City of London but London was originally called the London County Council, then the Greater London Council. Now it called the Greater London Authority. And it has no status at all. While the City is a commune, autonomous of government, the GLA is a more akin to an elected quango, subordinate to the state.’

Glasman wants a single London Mayor, based in the Mansion House and an all London Parliament in the Guildhall. In this, he says, he is merely trying to make good the attempt by Charles the First in 1632 to unify London by asking the City to extend civic rights to thousands of refugees from enclosure in Whitechapel, Clerkenwell and Southwark. The City refused. Now Glasman think it’s time to ask again.’ I don’t want to see the Corporation of London abolished, but expanded,’ he says.

One London government would mean the City’s assets – its funds and global property portfolio, thought to encompass substantial parts of London, New York, Hong Kong and Sydney – would pass to the population of the capital. The City has never published an inventory of its assets but they generate £600 million a year in interest; Glasman says the chair of the corporation’s finance once told him the full amount was ‘truly colossal’. Such a transfer of wealth would mean a draining of its influence. ‘The City’s power would be diminished,’ says Glasman, ‘and the financial sector would have to work with the same rules as everyone else, through the British Bankers Association, for example.’

It’s not hard to see why the City would regard this as the kind of nightmare of expropriation thought to have passed safely into history with the Berlin Wall. But Glasman’s reputation as a Marxist in misplaced. He is director of the faith and citizenship programme at London Metropolitan University, and has joined forces with London Citizens, an alliance of faith groups, schools and trade union branches, inspired by the US community organising movement that trained the young Barack Obama. And while he does confess an intellectual allegiance to an émigré economist who settled in England, it is isn’t Karl Marx. Glasman’s main debt is to Karl Polanyi, whose work The Great Transformation sought to explain the collapse in the nineteenth century liberal economy into depression and war. Markets turn both people and nature into commodities, with consequences lethal to both, argued Polanyi, and they needed protection in a regulated economy.

In fact Glasman espouses a ‘very conservative socialism’ rooted in family, the work ethic and mutualism. He considers family life and faith institutions as ‘huge moral resources’ in resisting capitalism. ‘You need faith communities, unions, families, local people with long-term relationships with each other, trying to live their lives without being commodified’, he says. ‘But for the Left the minute you mention family and faith, you are automatically considered to be reactionary’.

Yet beneath his conservatism lurk some very radical proposals. The problem with the bail out, he says, is it did not change the banks’ corporate governance and the same irresponsible interests are still dominant. Inspired by the co-determination model of the West German economy after the Second World War and the original ideals of Solidarity in Poland, he believes in a new balance of power in the way companies are run. All institutions, public and private, with more than fifty workers, should be governed by boards made up of equal representatives of owners, workers and the locality in which they are located.

Glasman has grouped these ideas under the rubric of Blue Labour, in contrast to the Red Toryism of ‘progressive Conservative’ Philip Blond. He will present them to a seminar at Number 10 in February, that will be attended backbench thinkers Jon Cruddas and James Purnell, as well as energy secretary Ed Miliband. ‘For the first time leading Labour politicians are listening’, Glasman remarks.

Glasman expects a ‘shabby compromise’ with the powers that be. But he is determined not to let the Corporation of London off the hook. ‘Everything depends on how we narrate the crash …. Do we narrate it as just one of those things, say we depend on financial services for our wealth and get on with it, or do we narrate it as the culmination of a catastrophic period of English history, where we’ve become politically powerless, where work has been degraded, where the pressure is on every individual to sell themselves to make ends meet, to pursue short-term financial ends rather than the common good? And that now has to change.’

Shutt is an economist who occupies the dissident edge of his profession. At the height of the boom, while the masters of the universe where hiring the Palace of Versailles for weddings and Jennifer Lopez for birthday parties, Shutt was busy writing densely argued, if casually dismissed, counterblasts such as The Decline of Capitalism. Barely a decade after its victory over communism, and just at the point of its hegemonic conquest of China and India, capitalism, he argued, was far less healthy than it appeared to be. In fact, it was heading for a fall.

Now, in the midst of the worst global downturn for 70 years, Shutt’s words have an eerie prescience. ‘The lies and financial crimes that have underpinned this evanescent economic ‘miracle’ are only now being exposed as a result of a financial crisis, which , it is already clear, is the most catastrophic to hit the world since that of 1929-31, which heralded the Depression of the 1930s,’ he wrote in 2004.

Greed is not to blame

But now that the crisis that Shutt predicted has finally arrived, he is concerned that blame is being pinned on the wrong culprit. ‘People are hitting on greed,’ he says. ‘But greed is not a cause of things, greed is a symptom. Greed has been with us since the Garden of Eden.’

And it’s not just greed. For Shutt, many of the headline features of the economic crisis – sub-prime mortgages, liberalisation, fraud and unsustainable personal debt – are mere symptoms of something more fundamentally wrong. That something, in his view, is the deepening stagnation of the capitalist system over the last 30 years and increasingly desperate measures on the part of western governments and financial elites to avert a major collapse. ‘Instead of the promised revival of economic growth from the 1970s the rate of increase in global output has continued to decline in each succeeding decade,’ he says.

You don’t have to be a starry-eyed cheerleader for the market economy to retain a certain scepticism about claims for a fatal crisis of capitalism. This is a system that has shrugged off perennial Marxist predictions of its imminent demise and penetrated into every corner of the globe. But Shutt claims that through ‘Orwellian processes of deception’ the global establishment has been able to divert attention from the reality of deepening economic crisis and maintain the illusion that the system was working well. Until reality got too real to ignore.

In order to understand Shutt’s explanation for the crisis, it is necessary to take a brief detour through Marx. According to Marx, capitalism is a system of accumulation. Profits are made but can’t all be consumed by owners. Extra profits need to be recycled through the market. ‘The only way you can successfully recycle them is to either expand your existing business or diversify into another business,’ says Shutt. ‘It all depends on the ultimate consumer, consuming more and more. It has to grow, growth is built in.’ The problem is that as profits are invested into the market, generating more profits that in turn have to be reinvested, production expands until it reaches a level that can no longer be absorbed by consumers. The market is glutted, and recession results. But the destruction of capital and jobs creates pent up demand for the whole process to begin again in time.

That, in brief, is the business cycle. But Shutt’s argument is that western political leaders have, for years, based their economic strategy on avoiding or limiting the downside of the cycle, a doctrine encapsulated in Gordon Brown’s famous boast of an ‘end to boom and bust’. Credit expansion has been fuelled, household debt recklessly encouraged, state services privatised, financial institutions subsidised and regulations banished all in order to find profitable outlets for a burgeoning ‘wall of money’ generated by the system. A high rate of growth is needed to maintain this process, but can’t be sustained because of the weakness of demand in the economy.

The consequence is that money, frustrated in its search for productive activities to invest in, has turned to speculation. ‘When you get to the point that you can’t actually make profits by producing more stuff – organic growth – profits get recycled into speculation,’ says Shutt. ‘In other words, you start placing bets that certain assets will increase in value.’ And once speculation takes hold, it becomes advantageous to bring even more money into the market, because that pushes up the value of assets. Hence, the ‘leveraging’ by speculators – the borrowing of more and more money to speculate on financial assets.

‘Over the last 30 years you’ve had a progressive postponing of the evil day,’ he says. ’1974/5 was the first financial crisis since the second world war, then you had the 1987 crash, which was inflated away by pumping lots of money into the banks. Then it was shifted offshore. We’ve had the Mexican crisis, the East Asian crisis and the Russian crisis. The big one was the dotcom bubble eight years ago. And since then, we’ve been building up to this one.’

What the prolonged amassing of this huge surplus of capital cum fraud-driven credit bubble, means, according to Shutt, is the inevitable crash – the inexorable end of the business cycle – is going to be far more severe that it would otherwise have been. ‘I think we are looking at negative growth, for an absolute minimum of two or three years and I wouldn’t be surprised if it’s five or ten. That would be a depression,’ he says.

No light at the end of the tunnel

It’s not a cheering prognosis – a protracted downturn of several years with the likely side effects of military conflict and scapegoating of minorities. But Shutt hasn’t finished yet. There is no light at the end of the tunnel, or if there is, it’s very dim. He believes that that this slump will be much more difficult to emerge from than in previous downturns because traditional engines of growth are no longer available to drag us out. Remove debt-fuelled consumption and property speculation from the equation, and you are left with anaemic subsititues such as the internet, the service sector and green technology. The arguments of centre-left Keynesian commentators that the answer lies in re-regulating the financial sector and encouraging consumer spending, ignore the fact, says Shutt, that the demand for capital – the availability of new profitable productive activities to invest in – is in long-term decline, and consumer spending power has been exhausted.

‘It is easy to say that we’ll emerge from the slump eventually, but to quote Keynes, “in the long run we are all dead”,’ he says. ‘In other words there has to be a huge contraction in the meantime and the impact on livelihoods and lives is likely to be intolerable. The fundamental misconception of mainstream commentators is that people can and should be induced to consume more when they’re already ‘maxed out’ on credit. In practice it is right and necessary that they should now be forced to rebuild their personal balance sheets, which means saving rather than spending. Only once they’ve done this, probably after several years will they be able to start spending again. This pinpoints a fundamental weakness of capitalism. In order to function it requires the perpetuation of unsustainable levels of consumption in order to absorb the endlessly expanding stock of capital.’

The bust and its consequences demonstrate that the profit maximising model results in an unacceptably large number of losers says Shutt. ‘And people, as we know from long historical experience, don’t accept being losers forever. Destitution and hopelessness is not something they will accept peacefully and indefinitely.’ We need a rational alternative. But he is not advocating taking control of the commanding heights of the economy, in erstwhile Marxist fashion. He is not advocating nationalisation at all. Instead, he says, enterprise should be made answerable to the public interest.

‘I wouldn’t say abolish private property. If people want to invest in risky ventures, such as gold mining in Angola and they want to maximise profits from that, that’s fine, go off and do it. They can even do it in Scotland, provided they adhere to environmental standards. But if it fails you’re on your own,’ he says.

‘On their own’ means that investors would no longer enjoy the protection of limited liability, which restricts their financial liability to the amount they have invested. If enterprises wanted the legal privilege of limited liability, they would have to demonstrate that what they were doing was in the public interest and they respected the public interest in the way they ran their business: ‘As an entrepreneur, you must tailor your policies and what you do in terms of investment, employment, wages and prices in the interests of the public, and we are going to have a veto over what you do.’ Growth would cease to be seen as a public good. Any bank, which sought public funds, would be subject to these conditions.

Shutt is not delusional. He is quite aware that such proposals are nowhere near even being contemplated in any mainstream circles. But he is also convinced that the ruling elites of western societies are also clueless about the nature of their predicament. ‘The confidence of our rulers, be they business leaders, politicians, or journalists, is shot to bits,’ he says. ‘They don’t know a thing and they are floundering.’

But despite his comparison of today’s elites with the French aristocracy before 1789 and the Soviet regime prior to the fall of the Berlin Wall, Shutt believes there will come a point when reality has to be confronted. ‘There are limits to denial,’ he says. ‘If the consequence of this is that nobody can step out of their house in Mayfair without being mugged, they maybe they might think differently. All I can do is to try and get people to recognise the realities.’

The Decline of Capitalism is published by Zed Books

Like a patient’s giveaway nervous habit, James, the clinical psychologist who first put Britain on the Couch 12 years ago, seizes upon British consumers’ clamour for plasma TVs as the as the sign of a deeper social neurosis. ‘The only way they can sell them is because they’re more expensive and people have it in their heads that this is something they’ve got to have.’

But what really interests him is that consumers in Denmark don’t exhibit the same compulsion. ‘If you want to sell a flat-screen TV for a grand, well nobody will buy one in Denmark,’ he claims. They just wait until the price drops. But Danes, according to James, are far less afflicted by the disease he terms ‘selfish capitalism’.

Selfish capitalism sounds like a populist way of describing neo-liberalism. It’s characterised, says James, by privatisation, insecure working conditions, the redistribution of taxes from poor to rich and the conviction that the market can meet almost every conceivable human need. So far, so depressingly familiar. But what James adds is the assertion that wherever this system spreads, mental anguish follows.

Stagnating real wages, the growth of short-term, service industry jobs, a workaholic culture, combine with intensified status competition for consumer goods (frequently new and more expensive versions of existing items) and the exaltation of the consumption habits of the rich, to create a toxic cocktail of limited economic means and unrealisable desire. Depression, anxiety, substance abuse and low impulse control ensue.

And you can actually measure it. English-speaking countries, the epicentre of selfish capitalism, exhibit levels of emotional distress twice as high as more sheltered continental Europe. For example, 26 per cent of Americans suffer ‘mental distress’ each year, according to a World Health Organisation study, compared to eight per cent of Italians. While Australia provides a controlled experiment on its effects. The country deregulated consumer credit and home loans in the mid-90s, sending mortgage costs spiralling. Australians now have three times as many credit cards as Europeans and work the longest hours in the developed world.

Coincidentally, Australia was also the site of two studies measuring levels of emotional distress, in 1997 and 2001. The second study showed that the proportion of people who were severely distressed, to the point of urgently needing treatment, had increased by two-thirds in just four years. Among women it had nearly doubled.

Misery equals economic growth

What James regards as his ‘most interesting claim’ is that selfish capitalism does not merely leave depression and anxiety in its wake, it also actively works to destroy anything that might improve the well-being of the population ‘It is absolutely critical for everybody to go around feeling miserable, filling the emptiness with commodities, dealing with misery by trying to give yourself short-term boosts with hamburgers or drink,’ he says.

The system is ‘akin to the biological notion of natural selection’. For it to work, we have to be unhappy. Materialism produces anxiety, and anxious people consume more. It loves divorce and separation, he claims. Besides legal fees, each partner has to buy or rent a new home and get a new set of electrical essentials (TV, DVD player) and furniture. Misery equals economic growth.

James’ book, The Selfish Capitalist, relentlessly piles on the evidence that the economic model of the last thirty years has created an epidemic of depression. But the ultimate effect, in common with many contemporary critiques of capitalism, is to give the impression of a picture so bleak and a system so powerful as to leave an abiding sense of hopelessness. We have internalised the values of the system, says James, becoming ‘marketing characters’, to borrow a phrase of the Marxist psychologist Erich Fromm, whose description of 1950s America, The Sane Society, prophesised many of the trends James says have been exported here. ‘Service industries have taken over from manufacturing and personality is crucial,’ he says. ‘It’s like a Big Brother show where you are on TV trying to win hundreds of thousands of pounds by performing and pretending to be a certain kind of person. It’s a metaphor for the way of life in the English-speaking world, a permanent Big Brother show.’

We may be miserable and in debt, but we are in denial about the source of our distress. Despite James’ insistence that the citizens of English-speaking countries have been roundly conned by the economic revolution of Reagan, Thatcher, Clinton and Blair, rebellion doesn’t seem to be in the air. A Prozac revolution is hard to imagine.

‘It’s implicit in my theory that people are going to find it difficult to take this on board,’ he concedes. ‘But there is a whole other side of people that is totally disgusted by the situation and sick to the back teeth. I’m saying the system contains within it the potential for people to go on strike, though not go on strike literally because that’s been made illegal. How will the system change? It will change because people will ultimately reject it and I’m optimistic that somebody will come along and start offering us something much better.’

That something better, in James’ eyes, will involve reining back the market through the very methods – public ownership and redistribution of wealth – that were discarded in the ’80s and ’90s. But it also entails scaling back the intrusion of work into our personal lives and placing a new value on care of children. ‘Most of all, I’d put stress on a situation that when two parents have a child – whether they get married is not important – they stay together and the care they proved is child-centred rather than parent-centred or society-centred,’ he says. ‘That is the foundation of mental health’. He advocates the adoption of the Austrian policy which pays new parents the national average wage so they don’t have to go back to work until their child’s third birthday.

A Thatcher of the left?

Implicit in James’ argument is a rejection of the libertarian individualism that he says the Left peddled, to the ultimate benefit of its free market nemesis, in the ’60s and ’70s. ‘In the English-speaking world, the Left created a gaping hole into which it was possible for Thatcher and Reagan to go,’ he says. ‘We hadn’t thought through the implications of making a shift from a collectivist to an individualist society. Sure, there were a lot of benefits from going from a situation where you are defined by your gender, class and background. In an individualist society, identity is achieved through education and career. We set everyone free in the ’60s and ’70s and you ended up with an anarchistic, chaotic scenario with technology whizzing along in the background.’

James predicts a Thatcher of the Left, probably a woman, will appear to define our predicament and offer a radical change of direction. That requires, he says, strong leadership. He has contempt for politicians who claim they are responding to voters’ wishes. Like an unyielding therapist, he thinks we need to be told what’s good for us. ‘Politicians should say, ‘this is what we think is the right thing to do, this is what we think men, women and children should be like, this is what think education should be for. And we’re going to impose this on you. We are going to create laws and you must obey them.’

James doesn’t see this as authoritarian. ‘It’s not authoritarian, it’s democracy. People will accuse you of paternalism and patriachalism but I think that what will happen is that you’ll get a politician that says the last 30 years have been a disaster and we need to start taxing the rich properly and totally rethink the purpose of education. We need to nationalise the public utilities and take the money back that’s been stolen from us and we need to renationalise the railways and create a decent transport network that really works. If somebody came forward and said all that, they’d be voted in with a massive majority.’

Curiously for someone who quotes Marx on false consciousness and revolutionary potential and seems intent on reviving the ghost of socialism, James is being courted by the Conservative party. They consult him on policy. ‘Cameron did have a window of opportunity,’ he says. ‘I was talking to his people and there were people around him would would’ve genuinely agree with everything I’ve said.’ Cameron, he says, has read The Selfish Capitalist.

He describes Cameron’s director of strategy, Steve Hilton as a ‘very nice person’ unlike New Labour who ‘don’t get it all’.

So where does James stand himself politically? He confesses to a brief spell in the Labour party in the early 1980s but adds, ‘I’m not a political economist, I’m not a political philosopher, I’m not a political administrator, I’m not all at an expert on politics. My instinct is with George Orwell in that he wasn’t a member of any political party. I’m deeply, deeply sceptical. I don’t think I’d be doing anyone any favours if I was banging a drum and urging people to vote for someone or other. I’m more interested in influence than in power.’

The Selfish Capitalist: Origins of Affluenza is published by Vermilion