"Business policy has become political policy; and business values have become social values. We need to reverse this!"
With acknowledgements to Jayarava.
Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts
Monday, 18 March 2013
Sunday, 2 December 2012
Monday, 8 October 2012
Wednesday, 12 September 2012
Debt, Japanese style
Properly directed, the national debt becomes the spending money of the people. It stimulates demand, stimulating productivity. To keep the system stable and sustainable, the money just needs to come from the nation’s own government and its own people, and needs to return to the government and people.
http://www.globalresearch.ca/the-myth-that-japan-is-broke-the-worlds-largest-debtor-is-now-the-worlds-largest-creditor/
Other views of the Japanese government's management of its economy, and of its suport of its insolvent banks, are possible.
Sad and possibly unrelated news.
http://www.globalresearch.ca/the-myth-that-japan-is-broke-the-worlds-largest-debtor-is-now-the-worlds-largest-creditor/
Other views of the Japanese government's management of its economy, and of its suport of its insolvent banks, are possible.
Sad and possibly unrelated news.
Saturday, 8 September 2012
Never-never, or Never, never, never
Never Never Land or the Never-Never is said to have originated in the Australian Outback, unspecific parts of which were so named because they were a place which, depending on your outlook, you would never want to go to, or never want to leave. Apparently the phrase is still in such use in parts of Queensland and the Northern Territory.
It was J M Barrie who introduced the phrase into popular English usage. In Peter Pan Never Land was where the babies went who fell out their prams and were not rescued, and where they joined the lost boys (presumably little girls did not fall out of their prams in Edwardian times). So it was a place to which 'normal' people could never go, and from which it's inhabitants could normally never escape, and where they could never progress through mortality like the rest of us. (The Edwardian fear of mortality and its varying expression in the grandiloquent and the fey is a theme for other reflections.)
Yet 'never never' gained its strongest and most characteristic place in the popular English imagination when 'the never never' became the common term for hire-purchase, an early form of credit that enabled one to acquire goods and pay for them in regular stages. Of course it was not 'never' that one actually finished paying for them, but, so strong was then the residual popular sense that actually enjoying or using something before one had paid for it was the road to ruin, that it acquired a strongly morally disapproving overtone.
How far have we travelled from there, and to what place has it brought us, when credit is now so universal and interwoven into all our economies, personal, national and international? The acerbic commentator might say that even the prudent amongst us usually have little idea of exactly when the funds for their purchases actually leave their possession, and the feckless neither know nor care whether they ever were or ever will be in it - but in that they have been shown, quite literally, to be no different from those who have charge of our largest and most venerable banks, whose pretence to the ownership of funds is so large and so false that no-one dare challenge it.
'Never, never, never!' was the famously obdurate declaration of Ian Paisley senior that Ulster would never accept the Republic of Ireland's having a role in the constitutional affairs of Northern Ireland, something that was shortly to come about and which many would have regarded as historically inevitable. Indeed, so historically inevitable was it that the lion and the lamb were shortly to lie down together when he and Sinn Féin's Martin McGuinness were elected First Minister and deputy First Minister respectively to the Northern Irish Assembly, created by the Belfast Agreement, on 8 May 2007. They apparently got on so well that they became known as 'the chuckle brothers'. Of course Sinn Féin and Martin McGuinness did not actually represent the interests of the Irish Republic, but in earlier days Paisley would not have made such nice distinctions.
I do not wish to suggest Paisley has been without his merits and abilities or that he did not mellow with age; he was created a life peer in Gordon Brown's dissolution honours list in June 2010 (someone else whom we may expect to mellow with age, unlike Tony Blair - 'age shall not weary him'); in February this year Paisley was admitted to hospital with a serious heart condition from which he was later reported to be recovering.
Paisley no doubt intended a bastardised echo of Winston Churchill's celebrated 'We shall never surrender.' How masterly, or how natural, is Churchill's falling cadence with the word 'never', making it not something to be asserted but quietly acknowledged; how contrasting with Paisley's stridency; and how wide a gulf does it reveal between the culture of Churchill and that of Paisley.
So for us now, in our present polical-economic woes, is it never-never land, or never, never, never? Perhaps both.
We are indeed in never-never land in every sense. Our debts can never be repaid. Our economy is in a state of perpetual immaturity. Our past elysium, that brief post world-war-two interlude when there seemed to be a miraculous combination of steady material improvement and a recognition by those in power that there was a debt to be repaid to the ordinary citizens of the nation who had saved Europe from catastrophe, is well and truly lost.
There is no way forward except through reform, not the kind of 'reform' that Tony Blair and David Cameron like to talk about - masking their partisan political preferences in the language of historical inevitability and public benefaction in a false echo of the great Victorian Reform Acts - but something in the full, literal meaning of the word.
Yet for those who effectively control political, economic and financial power it is 'We say never, never, never!' and they say it with less grace, if less street-volume, than Ian Paisley. Never is there to be the necessary rebalancing of the financial obligations in the economy; never are financial pretences to be acknowledged; and never is the tide of the increasing accummulation of wealth amongst an extremely small minority of the population to be reversed or even halted. Yet theirs is the 'never' of Paisley as they increasingly lay waste the economy on which they depend both for the aquisition of their wealth and for some form in which it can be expressed and have value. And ours is the 'never' of J M Barrie, a land of the lost.
'Nothing shall come of Nothing. Think again.'
It was J M Barrie who introduced the phrase into popular English usage. In Peter Pan Never Land was where the babies went who fell out their prams and were not rescued, and where they joined the lost boys (presumably little girls did not fall out of their prams in Edwardian times). So it was a place to which 'normal' people could never go, and from which it's inhabitants could normally never escape, and where they could never progress through mortality like the rest of us. (The Edwardian fear of mortality and its varying expression in the grandiloquent and the fey is a theme for other reflections.)
Yet 'never never' gained its strongest and most characteristic place in the popular English imagination when 'the never never' became the common term for hire-purchase, an early form of credit that enabled one to acquire goods and pay for them in regular stages. Of course it was not 'never' that one actually finished paying for them, but, so strong was then the residual popular sense that actually enjoying or using something before one had paid for it was the road to ruin, that it acquired a strongly morally disapproving overtone.
How far have we travelled from there, and to what place has it brought us, when credit is now so universal and interwoven into all our economies, personal, national and international? The acerbic commentator might say that even the prudent amongst us usually have little idea of exactly when the funds for their purchases actually leave their possession, and the feckless neither know nor care whether they ever were or ever will be in it - but in that they have been shown, quite literally, to be no different from those who have charge of our largest and most venerable banks, whose pretence to the ownership of funds is so large and so false that no-one dare challenge it.
'Never, never, never!' was the famously obdurate declaration of Ian Paisley senior that Ulster would never accept the Republic of Ireland's having a role in the constitutional affairs of Northern Ireland, something that was shortly to come about and which many would have regarded as historically inevitable. Indeed, so historically inevitable was it that the lion and the lamb were shortly to lie down together when he and Sinn Féin's Martin McGuinness were elected First Minister and deputy First Minister respectively to the Northern Irish Assembly, created by the Belfast Agreement, on 8 May 2007. They apparently got on so well that they became known as 'the chuckle brothers'. Of course Sinn Féin and Martin McGuinness did not actually represent the interests of the Irish Republic, but in earlier days Paisley would not have made such nice distinctions.
I do not wish to suggest Paisley has been without his merits and abilities or that he did not mellow with age; he was created a life peer in Gordon Brown's dissolution honours list in June 2010 (someone else whom we may expect to mellow with age, unlike Tony Blair - 'age shall not weary him'); in February this year Paisley was admitted to hospital with a serious heart condition from which he was later reported to be recovering.
Paisley no doubt intended a bastardised echo of Winston Churchill's celebrated 'We shall never surrender.' How masterly, or how natural, is Churchill's falling cadence with the word 'never', making it not something to be asserted but quietly acknowledged; how contrasting with Paisley's stridency; and how wide a gulf does it reveal between the culture of Churchill and that of Paisley.
So for us now, in our present polical-economic woes, is it never-never land, or never, never, never? Perhaps both.
We are indeed in never-never land in every sense. Our debts can never be repaid. Our economy is in a state of perpetual immaturity. Our past elysium, that brief post world-war-two interlude when there seemed to be a miraculous combination of steady material improvement and a recognition by those in power that there was a debt to be repaid to the ordinary citizens of the nation who had saved Europe from catastrophe, is well and truly lost.
There is no way forward except through reform, not the kind of 'reform' that Tony Blair and David Cameron like to talk about - masking their partisan political preferences in the language of historical inevitability and public benefaction in a false echo of the great Victorian Reform Acts - but something in the full, literal meaning of the word.
Yet for those who effectively control political, economic and financial power it is 'We say never, never, never!' and they say it with less grace, if less street-volume, than Ian Paisley. Never is there to be the necessary rebalancing of the financial obligations in the economy; never are financial pretences to be acknowledged; and never is the tide of the increasing accummulation of wealth amongst an extremely small minority of the population to be reversed or even halted. Yet theirs is the 'never' of Paisley as they increasingly lay waste the economy on which they depend both for the aquisition of their wealth and for some form in which it can be expressed and have value. And ours is the 'never' of J M Barrie, a land of the lost.
'Nothing shall come of Nothing. Think again.'
Sunday, 5 February 2012
Gander sauce with all the trimmings
One of the reasons the international financial markets are said to be dubious about the economic prospects of Greece is that it has few flourishing industrial sectors.
Greek shipping is successful but brings little economic benefit to the country because the ship owners have structured their businesses to ensure that profits are retained in foreign countries. Hardly behaviour of which international financiers would approve.
Greek tourism is said to 'lack infrastructure'. Cue international development enterprises led by billionaires, flamboyant or crespuscular, with top dressing of star architects. See Aberdeen, or Bulgaria. Certainly the Ace of Trumps could never be accused of hiding his light under the scantest bushel, and is now too busy saving his own country to spend much time degrading Aberdeenshire. Is our noble Lord Gherkin crespuscular? One cannot think so, neither in Bulgaria nor here - although someone with potential profits at stake may need to work into the night if they are to overcome the massed ranks of the RSPB (the Conservative Party with binoculars) against the creation of the 'Thames Hub' or 'Boris Island'? Perhaps one of our architects might be persuaded to design something similar to beef up that Greek infrastructure for the returning northern European tourists once the Euro resurgent rises giddily above the Drachma reinvented.
Greek shipping is successful but brings little economic benefit to the country because the ship owners have structured their businesses to ensure that profits are retained in foreign countries. Hardly behaviour of which international financiers would approve.
Greek tourism is said to 'lack infrastructure'. Cue international development enterprises led by billionaires, flamboyant or crespuscular, with top dressing of star architects. See Aberdeen, or Bulgaria. Certainly the Ace of Trumps could never be accused of hiding his light under the scantest bushel, and is now too busy saving his own country to spend much time degrading Aberdeenshire. Is our noble Lord Gherkin crespuscular? One cannot think so, neither in Bulgaria nor here - although someone with potential profits at stake may need to work into the night if they are to overcome the massed ranks of the RSPB (the Conservative Party with binoculars) against the creation of the 'Thames Hub' or 'Boris Island'? Perhaps one of our architects might be persuaded to design something similar to beef up that Greek infrastructure for the returning northern European tourists once the Euro resurgent rises giddily above the Drachma reinvented.
 |
| Undeveloped Greek coastline |
 |
| Virgin Greek countryside |
 |
| Delapidated Greek public building in need of foreign investment |
 |
| Greece - step this way? |
Wednesday, 4 January 2012
Unicredit - and others
Shares in Unicredit - the largest Italian bank by assets - were suspended forty-five minutes after trading began at 8am this morning, during which time they fell by ten per cent.The trigger was the news this morning that Unicredit's emergency €7.5bn cash call was going to be priced at an even deeper discount than feared. The bank, which needs the funds (second only in quantity to those required by Santander) to shore up its capital reserves, is selling shares at a 43% discount to their market value, which had already fallen by fifty per cent over the past year.
Yet, least we should be feeling too comfortable here in the UK, look at this table courtesy of Morgan Stanley:
It seems we'd all be doing quite well by international comparisons if it weren't for the green column, courtesy of our much vaunted and nation-saving financial sector. For fuller and more balanced commentary refer to the article in Business Insider.
And consider also:
Bank share prices show a clear pattern of two waves of ‘collapse’ among large retail, or retail/investment, banks.
The 1st wave saw falls of 90% plus in the shares of banks such as Citigroup, Lloyd’s and RBS. No significant recovery in their share prices has taken place since – which is why they may, in terms of share prices, be characterised as ‘collapsed’ banks.
A number of other large banks – of which Barclays, Bank of America and Société Générale may be taken as examples – initially suffered very severe share price falls during the international financial crisis but then saw a significant recovery. Their share prices are, however, now again falling towards the level of the 1st group of banks. It, of course, remains to be seen whether this trend will continue, but a current tendency of a 2nd wave of banks being drawn into crises which essentially destroys share prices is clear.
Yet, least we should be feeling too comfortable here in the UK, look at this table courtesy of Morgan Stanley:
And consider also:
Bank share prices show a clear pattern of two waves of ‘collapse’ among large retail, or retail/investment, banks.
The 1st wave saw falls of 90% plus in the shares of banks such as Citigroup, Lloyd’s and RBS. No significant recovery in their share prices has taken place since – which is why they may, in terms of share prices, be characterised as ‘collapsed’ banks.
A number of other large banks – of which Barclays, Bank of America and Société Générale may be taken as examples – initially suffered very severe share price falls during the international financial crisis but then saw a significant recovery. Their share prices are, however, now again falling towards the level of the 1st group of banks. It, of course, remains to be seen whether this trend will continue, but a current tendency of a 2nd wave of banks being drawn into crises which essentially destroys share prices is clear.
Thursday, 22 December 2011
Christmas
The European Central Bank has just lent 500 billion Euros at a concessionary interest rate to European banks against low grade security. There was an even greater rush than expected from the banks to apply for the money. As I understand it, the motive was that European banks currently have liquidity (or is it solvency?) problems and American banks are unwilling to lend to them directly. The ECB and European national central banks had a little while ago struck an arrangement with the US Federal Reserve to supply dollars to Europe.
However the ECB is unable to determine what the banks will do with these new funds. The operation is about saving the commercial banking system rather than directing the way in which it operates. Banks might, it seems:
a) lend them to private and commercial borrowers;
b) hold on to them in order to increase their solvency;
c) use then to buy up high-yielding and therefore risky debt such as the bonds of economically stressed European states
d) use them for some even more clever ploy that the rest of us have not even thought of.
It's up to the banks, not the Bank. If they use them to buy up stressed European nations' bonds, (c), there will be a short and shallow sigh of relief but the inter-connection between vulnerable banks and vulnerable nations will be knit a little closer and the wonderful construction of financial instability raised to a slightly greater height.
A couple of weeks ago the international accountancy firm Deloitte estimated that the total value of 'non-core and non-performing assets' held by European banks (i.e. candidates for the kind of operation just carried out by the ECB) is 'at least' 1.7 trillion Euros. Deloitte reckoned that in the previous twelve months (before this latest ECB intervention) banks had managed to dispose of about 60 billion Euros worth. Without the ECB's deus ex machina it would have taken 28 years at that rate for the banks to get rid of their unwanted assets.
Of that European total the largest national holding was in the UK at 536 billion, closely followed by Germany at 522 billion. UK GDP in 2010 was approximately 1720 billion Euros, whilst German was 2536 billion. Italy the new sick man of Europe, with a GDP of 1572 billion (but with a third more industrial manufacturing than the UK within that total - woodworkers, much like handbag owners, know that their machinery has little chance of being manufactured in this country but may well come from Italy) had only 102 billion of these assets in their commercial banks' hands. Of course, these are only estimates, by an organisation not without complicity in our financial travails, of figures that banks are careful to conceal.
However the ECB is unable to determine what the banks will do with these new funds. The operation is about saving the commercial banking system rather than directing the way in which it operates. Banks might, it seems:
a) lend them to private and commercial borrowers;
b) hold on to them in order to increase their solvency;
c) use then to buy up high-yielding and therefore risky debt such as the bonds of economically stressed European states
d) use them for some even more clever ploy that the rest of us have not even thought of.
It's up to the banks, not the Bank. If they use them to buy up stressed European nations' bonds, (c), there will be a short and shallow sigh of relief but the inter-connection between vulnerable banks and vulnerable nations will be knit a little closer and the wonderful construction of financial instability raised to a slightly greater height.
A couple of weeks ago the international accountancy firm Deloitte estimated that the total value of 'non-core and non-performing assets' held by European banks (i.e. candidates for the kind of operation just carried out by the ECB) is 'at least' 1.7 trillion Euros. Deloitte reckoned that in the previous twelve months (before this latest ECB intervention) banks had managed to dispose of about 60 billion Euros worth. Without the ECB's deus ex machina it would have taken 28 years at that rate for the banks to get rid of their unwanted assets.
Of that European total the largest national holding was in the UK at 536 billion, closely followed by Germany at 522 billion. UK GDP in 2010 was approximately 1720 billion Euros, whilst German was 2536 billion. Italy the new sick man of Europe, with a GDP of 1572 billion (but with a third more industrial manufacturing than the UK within that total - woodworkers, much like handbag owners, know that their machinery has little chance of being manufactured in this country but may well come from Italy) had only 102 billion of these assets in their commercial banks' hands. Of course, these are only estimates, by an organisation not without complicity in our financial travails, of figures that banks are careful to conceal.
Monday, 12 December 2011
Financial crisis - latest
Astronomers have announced the discovery of the two biggest black holes ever seen, each one around 300m light years from Earth and with a combined mass equivalent to more than 30bn Suns.
These cosmological objects are some of the strangest in our known universe, where the laws of physics seem to break down and space gets very strange. One thing we know, however, is that getting close to one is a bad idea.
Black holes begin as giant stars (at least six times the mass of our Sun) and, after billions of years they collapse in on themselves into a point smaller than the full-stop at the end of this sentence. Nothing nearby can escape the pull of the resulting gravity.
Even at some distance outside the edge, it would take all the effort in the universe to resist getting pulled into orbit around the hole. Closer still, because of the sharp rate of increase of the forces, if your head was nearer the hole than your feet, the atoms in your hair would feel a stronger force than those in your toes. This difference would quickly tear you apart, turning you into a spaghetti-like line of atoms.
But a black hole would not need to suck the Earth in to cause us trouble. If one wandered within a billion miles of our solar system, its gravity could knock the Earth into a dangerous elliptical path around the Sun, where winters would drop to -50C and summers would reach hundreds of degrees Celsius. Or, if one knocked us out of the solar system, our planet would wander through deep space. Without our Sun, life on Earth would freeze to death within months.
Wednesday, 7 December 2011
Need a loan?
As I publish a new post on this blog, the page on which Google confirms to me that it has succeeded includes, quite beyond my control, a link to an advertisement offering "Small loans in an hour".
Perhaps I should ask them how long a few trillion dollars/euros would take.
As I said in my talk "we the public, the consumer play happily and child-like in the gardens created for us by the evil giants of Google and Apple".
But, did I imagine that? Do I malign Google? I cannot find find it next time around.
Perhaps I should ask them how long a few trillion dollars/euros would take.
As I said in my talk "we the public, the consumer play happily and child-like in the gardens created for us by the evil giants of Google and Apple".
But, did I imagine that? Do I malign Google? I cannot find find it next time around.
Wednesday, 23 November 2011
Debt or taxes
An interesting post by Golem XIV that elaborates a point I made in my talk to the Northern Contemporary Furniture Makers. See the Talks and articles page of this blog.
Wednesday, 16 November 2011
Wednesday, 9 November 2011
Demos
Until recently comment on the steady growth of non-democratic decision-making groups and practices in the handling of the European debt crisis has been mostly confined to free-lance comment such as that found on David Malone's blog. It is interesting to find the point now being argued very forthrightly by Larry Elliott in the Guardian
Wednesday, 5 October 2011
The blue pill
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/
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/
Tuesday, 20 September 2011
Making hay while the sun shines
'US stocks fell ahead of S&P's announcement [of a downgrading of Italy's soverign debt rating] but staged a late comeback as fears of a near-term Greek debt default faded on news of a possible deal to advance new bailout funds to Athens.'
Or at least while the can is still moving.
Or at least while the can is still moving.
Monday, 19 September 2011
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