Charles Wheeler October 4, 2011 at 4:36 pm
The blue pill’s been pretty effective for 30 years because debt has papered over the deep fissures caused by the startling polarization of wealth and economic power – most starkly in the US (http://goo.gl/SY5ZY) and UK. It’s enabled a majority to cling on in the housing market, finance tuition fees and hospital and school building programmes and retain the remnants of a safety net for those mired at the bottom.
But the arithmetic is changing. Pretty soon most young people will find themselves shut out of the housing market and denied social housing – doomed to serve up an increasing share of income to the rentier class; many more will find the prospect of student debts of £50k too much of a disincentive (particularly those who’ve already drawn the short straw of substandard ‘sink-school’ education and low expectations – leaving the field open to their less able but wealthier peers, exacerbating the divide between the Herberts and the Henrys). The elderly are already finding that the crippling costs of ageing are being transferred to the individual and the family. Disability benefits are effectively being abolished even for most of the most severely disabled, again pushing the financial, physical and psychological burden onto those least able to bear it.
As a result, confidence in the future is plummeting and the next generation are growing up with the realisation that they will be expected to worker harder and longer for less than their parents.
And this is before the effect of the cuts has fed through.
In the nineteenth century, as the ‘residuum’ grew liberals like Charles Booth set out to prove that the scale of the problems of the underclass had been exaggerated by socialists – only to find it was much worse than imagined. He then sought to scapegoat the casual labourer as the cause of society’s ills in much the same way that today’s economic liberals pin the blame on those at the bottom of the pile (the poorest of the 50% that share just 5% of the nation’s wealth). But it wasn’t just the poor that suffered insecurity, the drop for even the relatively comfortably off had become so precipitous that only a tiny proportion were unaffected by the psychological effect of the gravitational pull of poverty.
For the post-war generation life without a welfare state is just a distant memory. It’s a while since the majority have had to live with the concern that a chronic illness might bankrupt us; that a disability would leave us totally dependent on family, charity or face life in an institution; that any kind of incapacity in old age would wipe out our life savings in a few months (so much for the incentive to save!); that being born into poverty wouldn’t be an insurmountable obstacle to advancement or bar to opportunity. But, with the collapse of social care, the time-limiting of disability benefits and the slow death of the NHS, and the ‘marketisation’ of higher education, all those fears that plagued our Victorian forebears are coming back to haunt us.
In a sense, social democracy was a victim of its own success – the fact that most of us grew up expecting to be educated, receive healthcare and some help should we suffer a disability or live long enough to need some assistance in old age, as a right has led us to take these benefits for granted, or even to assume such guarantees are no longer necessary. But Polanyi’s announcement of the death of laissez-faire has proved premature. Beveridge’s ‘Giant Evils’ of squalor, ignorance, want, idleness and disease are being uncaged.
As more and more income has been taken by the top 10%, the tax burden on top earners fallen, and ‘trickle down’ morphed into ‘hose up’, only rising levels of debt have kept the boats afloat. Where, in 1980 a manual worker could finance a mortgage, run a car, take a holiday and see his children through university on a single wage – it now takes a couple working full-time to keep up with the rent and the car loan (see: http://goo.gl/xAO0 on decline of the middle income worker in the US). This is the root cause of the financial crisis, as ever more exotic financial instruments have been created to mask the growth of inequality. Instead of taking a share of growth in higher wages as happened in the immediate post-war period, this has been substituted with rising debt + compound interest (and even now the orthodox continue to chant the mantra from page 1 of the neoliberal playbook: wages are too high at £6 an hour!) – an ultimately unsustainable combination in a slow-growth economy. As a result even those back-stops we may have thought inviolable are being removed: universal healthcare, decent education, adequate pensions, the right to a life of more than mere subsistence for disabled people, the attenuation of child poverty.
Perhaps, under this assault, the effect of that blue pill is going to start to wear off.
See post and other comments at http://www.golemxiv.co.uk/2011/10/china-10-7-trillion-yuan-of-debt-going-bad/
