In an earlier post on How to Read a Risk Register I described the ways in which risk can be managed, including the option is to transfer the risk – and the consequences of that risk – to a third party.
Ordinarily, this does not come without a cost. For example, you could buy an insurance policy in order to transfer the risk; or agree a fixed-price contract with a supplier who then increases the price to protect him/herself against the risk transferred to them. But this need not be the case: as in the footnote to the original post, where Apple Inc appears to be able to transfer the whole of the risk of late and significant changes of product design to a manufacturer. Where parties to a contract are unequal, it seems possible for one to transfer risk to the other without significant cost.
One of the most common examples of this in the UK is the payment of invoices. It is widespread practise for large companies to demand payment from small companies within a short – sometimes very short – timescale; and even more widespread for larger companies to defer payments of invoices to small companies for extended periods, sometimes months. By delaying payment of invoices, the larger company unilaterally transfers the risk against its cash-flow to the smaller company.
The logics of neoliberalism and their implementation in practise transfer risk from business and the wealthiest to the rest of us as individuals. The postwar company which employed people long-term – not unusually, for life – provided apprenticeships, training, pensions, and other benefits. In doing so it not only established itself as part of society, but also contained the risks of its employees requiring skills or needing to be re-skilled or “trained-up”; and it managed company pension funds on its employees’ behalf as part of a social bond between the employer and employee.
Deregulation is presented as liberation of risk-takers from bureaucracy, but is actually about liberating business from its social contract between itself and its employees and between itself and society. Business is relieved of managing the risks of pollution, energy use, and personnel management and allowed to focus on “maximising profits” (which in practise means cutting costs). It is relieved of the risk to profits of paying decent, living wages to its employees: the Government so reviled by neoliberals steps in to provide tax-credits to top up incomes, workfare to provide free or near-freee labour, and incarceration for those who are deemed unemployable. Business is relieved of taxation purportedly to create incentives, but in practise this has transferred the risk of providing the infrastructure for business to utilise to the government. It is blindingly obvious that there is dependency of business upon government to provide physical infrastructure for business to use: that risk has been transferred to the remaining taxpayers.
Neoliberal governments restrict the activities of, and break Trades Unions (often brutally, and sometimes murderously): the risk of increasing labour costs and management of labour is transferred from business to government. By depressing incomes and deregulating finance, neoliberal governments have enabled finance to profit by effectively lending us the difference between what our income now is, and what it would have been.
Because this is the ultimate transfer of risk from business to the rest of us: the neoliberal government actively provides business, risk-free or nearly risk-free, to business through privatisation and outsourcing of public services. Utilities, banks, prisons, schools, universities, hospitals, military: neoliberal governments hand public money to corporations. The Coalition government’s privatisation of the National Health Service promises hundreds of billions of government-funded business to private healthcare corporations.
The privatisation of education is proceeding at reckless speed in the USA and gathering pace in the UK. Not only will private corporations provide some form of education, but the education provided will be driven by the needs of business. Because businesses have largely discarded apprenticeships and training for young people, they are demanding that the government train people for them. Another risk transferred. Universities and schools are no longer described as places of learning, but as employment-training services paid for by government but provided, for profit, by corporations.
The vision of the welfare state is of a society sharing risk, not transferring it. To the indoctrinated this is heresy: because I am not ill, you have to contain the risk of your illness; because I do not have children, I do not want to pay for education; because I am employed, the unemployed must look after themselves. That is what individual responsibility is all about.
Neoliberalism, drawing on its fundamentalist faith in the “free-market”, actively prevents us from associating through government in order to contain our own life-risks. The current assault on the UK’s National Health Service by the Coalition government, its lobbying “thinktanks” and its corporate donors is not just about uncontained corporate greed but about imposing the ideology that people must be kept from action in unison or solidarity, because only people as atomised economic units can create Hayek’s heaven. The wealthiest are transferring their risk to the rest of us, and preventing us from managing it.