Sunday, 17 August 2014

The rich get richer .....

Economists are puzzled.  The figures show that the numbers in work are rising, the numbers claiming benefits going down.  And while, of course, the figures are false for various reasons, the trend is still there.  But the economists' models aren't working.  More people in work should mean that wages are rising; but they're not.  If anything, they're falling.  And more people in work should mean that the tax take is higher; but it's not.  Explanations are cobbled together, some of them more plausible than others.  But I think there's a straightforward story.
At the top of society (if that word has any meaning now) is what's often called "the one per cent" and what I will now call the elite.  They comprise three main groups; the top of the financial industry (banks and the like); the top of big businesses; and the top of government.  They are all inter-connected, know each other well and have a common purpose in making themselves richer and more powerful.  In 2008 the elite crashed the financial system.  Bankers were blamed, but politicians had failed to regulate banking effectively (the Conservatives, in opposition at the time, had wanted even less regulation).  Now, some people claim there was a conspiracy among the elite to do this.  I don't know if that's true, but the result was the same.  Someone had to pay to put the system back together again, and it wasn't going to be the elite.  They suffered not at all.  Many of us were astonished that nobody could be held accountable; there was no criminal responsibility.
The crash was a marvellous opportunity for the elite.  To pay for the failure of the bankers we were to undergo "austerity".  It took a while for us to realise what that meant.  Those at the top of the tree could have a tax cut.  The elite were sitting pretty, as were those in the next layer down, those on £100k a year or more.  These are the people whose pay continued to climb and whose accountants devised ever more complex schemes to get them out of paying back any of their income in tax.  Salaries for top earners, along with bonuses, grew to absurd and obscene levels.  "Austerity" only began to be felt further down, in what we might as well call the middle classes.  Their pay stopped rising but their outgoings didn't.  Many who worked in the public sector found themselves out of work altogether, or having to get by on much less than they were used to.
The elite seized the chance to flog off what was left of the public sector.  Services should be making profits for them.  That could only be done by employing fewer people on lower pay, but that was part of the process of channelling money upwards into the pockets of the elite.  In what little remained of the public sector, pay was frozen.  This gave private employers more reason to freeze pay as well.  For people near the bottom of the heap - the old "working class" - the minimum wage became what it was never intended to be, the normative wage.  And that didn't rise either, except by an insignificant amount.  Employers found new ways to lower their wage bills.  Permanent jobs became casual work via agencies, with workers never knowing what, if any, hours they would get.  Then the "zero hours" notion spread, with even greater insecurity of income.
The cost of living, though, rose inexorably, and more and more working people couldn't survive without top-up benefits.  The biggest cost was housing; but there was no thought of capping rents, or even restoring some sensible regulation.  Instead, the total benefits a household could receive were capped.  For those right at the bottom of the pile, those dependant on benefits, life was made harder and harder.  They were the scapegoats, apparently the cause of all our problems.  Taking money away from them had little effect on the economy, but worked politically.  So inequality has reached unprecedented levels.
Economists believe that there is a natural limit to inequality, because at some point there will be a revolution - unless there is a particularly repressive government.  But the chances of revolution are very low.  Radical change was brought about in the past because people could organise themselves into an effective force.  Yesterday was the 195th anniversary of the Peterloo Massacre.  A crowd of up to 80,000 people had gathered in Manchester to demand change, but government forces killed 15 people and injured many more.  It wasn't the end of revolt, but the beginning.  Chartism very nearly succeeded, let down only by poor leadership.  The trade union movement grew stronger until, through the 20th century, it brought about a shift in power and decent wages and conditions for working people.  The movement was squashed in the 80s and is much weaker than it was.  There is no organisation through which people can fight back, and right-wing governments are adept at pitting the not-very-rich against the poor.
What happens now?  I have no idea.  But economists had better devise some new models if they are to understand what awaits us.

11 comments:

  1. Excellent summary of an on-going depression. Until the opposition MP's start to talk this way and link in our 'economic recovery' with real poverty, low wages, crazy uncontrolled rents, sanctions, food banks and under employment, we will not see any change for the better.
    I wish that we had an opposition that really cared for the welfare and potential of the people they were supposed to look after, but most of them are not interested in anybody but themselves and their own financial well being. Really sad and very worrying for where we are going to be as a society in the near future.

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  2. Well said, Historian.
    Izzy x

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  3. It seems that we have heard yet another sermon from the Archbishop of Downing Street today in support of Louse Casey, the “Troubled Families” female.

    The Pope of Downing Street will sermonise that it would not be “fair” to expect the elite to pay anything to support the said “Troubled Families.” Dear me, no. They’re all plebs and dole bludgers, aren’t they? So their fellow plebs and dole bludgers should do the all the paying ourselves, plainly.

    The Bean Counter of Downing Street won’t mind slashing the alleged £30bn costs of supporting the “Troubled Families” off the other plebs’ and dole bludgers’ receipts of Benefits money. The Aussie Redneck of Downing Street won’t object to that notion either.

    The elite will be able to rely on the Pope’s mantra that working one’s bollix off in order to keep the Bean Counter happy “always pays.”

    A cynical observer might argue that the latest sermon from the Archbishop of Downing Street is merely blatant electioneering aimed at making the Tory Party seem less “nasty” than usual. A cynic might also argue that a real Archbishop can be found in Canterbury and a real Pope in Rome.

    Meanwhile, the elite running the outsourcing companies will be rubbing their hands on avaricious glee. Who wants understaffed Prisons when you can make loadsaloot out of Troubled Families instead?

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  4. It is ironic,my long term partner gave her notice to her employer,for the last year she has worked irregular hours,1-2 hours at different sites,sometimes waiting unpaid for the next site to open,the phone starts at 5 am and does not stop till 11 pm..all unpaid,but she is expected to be available. Why is this ironic? after figuring out expenses,she is actually better off working less hours! "Making Work Pay" I was earning more 30 years ago,how do we survive today? I am ashamed to be unemployed,but what I have come to realise is that getting by with less is possible,uncomfortable,but possible.

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  5. I remember reading a post on a conspiracy type website once (this is before the financial crisis) with someone claiming to be from GCHQ saying that governments worldwide would "turn the screw" until people rebelled, why? because then they could offer us the solution to all of our problems which would be a system of world government (probably under the UN).

    Governments (western ones at least) no longer care about individual countries they're all about globalisation.

    Believe it or not, at least it makes sense for everything what is happening.

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  6. We now hear that top execs in Britain are on 143 times the average wage of their workers. Of course, we often hear the mantra of ''if you pay peanuts, you get monkeys''. Fair enough. But if you are going to use this argument to pay Chairmen / women, CEO's and Chief Execs, then surely this works at the lower end of the pay scale too.

    For example, I have vacuumed and mopped floors, cleaned toilets and urinals in my time as a cleaner in dept. stores and office blocks. For the most part, the staff never saw the cleaning staff but expected to return to clean offices, departments, kitchens and toilets every day. The amount cleaners get paid by agencies is pitiful. Yet they are expected to either turn up very early every morning of work till late every evening / night. And do a good job too. Why do cleaners (and other 'menial' workers thus not get paid a decent wage? Because they're seen as more expendable and les important to a company's performance than the chairman or CEO?

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    1. Yes, and because, so the argument goes, anyone can do the menial job while only very specially qualified and experienced people can do the top jobs. Supply and demand. Of course it's not that simple. I was a lowly-paid administrator for a long time. If all the administrators went on strike at the same time the country would grind to a halt within hours.

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    2. Yet, it was the highly paid elite that work in the City that crashed the financial system and went crying to the taxpayer for help #scroungers. As you say, it is not this class of worker that it is the foundation of our economy but those that work in the service sector for low wages #heroes.

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  7. Intellectual article on CEO pay over at The Guardian
    http://www.theguardian.com/commentisfree/2014/aug/18/state-bail-out-private-firms-executive-pay
    Much beyond my poor old brain cells after half a bottle of Aldi's best red but the conclusion rings true:
    "The answer to “why should the state intervene in what a private company chooses to pay its CEO?” is simply this: in an era of bastardised capitalism, where the public purse underwrites the risks and failures of private companies deemed too big to fail, it is not unreasonable for the state to have a say in factors that affect the stability of such corporations."
    Apologies to Historian for lifting from the article and transposing here.

    Now where has that bottle of red got to?

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    1. Its something we have been discussing on here for ages, the creeping privatisation of the public sector. This is because the private sector cannot make money in the real economy because of the squeeze in wages. I believe it is called corporate fascism.

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