Yesterday, was the one year anniversary of the ConDem coalition’s coming to power and it was accompanied by some expected, but still distressing, economic news. Let’s call it what it is deliberate impoverishment and class war.
Watching and reading the news, I had a strange feeling of déjà vu. For the third time since the ConDems have come to power, the governor of the Bank of England (Mervyn King) has down-graded growth forecasts for the British Economy. This has been combined with rising inflation which is expected to soar to 5% this year. Rising inflation has been caused by the increase in VAT which is leading to increased heating and fuel prices (clearly affecting the incomes of poor, working poor and those on fixed incomes); this has compounded rising food prices deriving from speculation on the commodities future markets (also primarily affecting the poor, working poor and those on fixed incomes). The overall affect is a clear and concerted decrease in incomes for the poor, working poor, working and middle class and those on fixed incomes. We can add to this scenario cuts in housing benefits, welfare benefits, disability benefits which are specifically aimed at the impoverishment of the poor and working poor. One final present from the ConDems to this dismal situation is high rates of unemployment and increases in unemployment to come (arising from cuts in government spending, investment, employment and the impact of local Council Tax freezes forced on Local councils by the ConDem government preventing them from actually covering services while facing central government funding cuts).
Deliberate Impoverishment
Why the feeling of déjà vu you ask? Well, this is beginning to resemble a 1970s stagflation scenario. Of course, they are unable to blame this on Keynesian economics. The only thing that is missing from the classic stagflation scenario is wage inflation; that is, raising wages to keep pace with rising inflation. And unsurprisingly, this was addressed by Mervyn King, whose biggest worry at this time is keeping wages from rising commensurate with rising inflation (obviously concern for those whose income is being squeezed is not high on his agenda) and stressed the dangers if the unions have the gall to actually push for wages rising commensurate with inflation.
There is a risk that continuing high rates of inflation will push up on inflation expectations, or lead to some resistance to the erosion of real take-home pay […] Either […] could put upwards pressure on wages and prices looking ahead, and imply that inflation will not fall back as sharply when the temporary effects of higher VAT, energy and import prices come to an end (http://www.thisislondon.co.uk/...).
Now, what people need to understand is that if wages are not rising commensurate with rising inflation what we are getting is deliberate impoverishment of the poor, working poor, working class and middle class; this is a deliberate erosion of incomes.
Increasing Wealth Gap
In fact, this combines nicely with a report I had read the day before on the fact that there is strong evidence of increasing wealth gaps between classes and between whites and minorities in the UK. (http://www.telegraph.co.uk/..., also see, http://www.barclayswealth.co.uk/... discussing the rising number of millionaires at a time when the poor, working poor and working class are facing attacks on already low incomes).
From the Telegraph article above (http://www.telegraph.co.uk/...), the report demonstrates the following:
• Parents of public school-educated sons can expect their children to be paid eight per cent more by their mid-20s than boys educated at state schools;
• At school poor British white boys are well below the national average by the time they are seven, deteriorating further after they are 11.
• Women are paid 21 per cent less than the national average, despite women into their 40s having better qualifications than men;
• Britain has one of the most unequal societies in the world, with income inequality ahead of Ireland, Japan, Spain, Canada, Germany and France. Inequality is worse in England than Wales and Scotland;
• A typical professional on the verge of retiring is worth nearly £1 million compared with just £59,000 for someone who is long-term unemployed.
• Poverty rates are among the worst in Europe, with only Italy, Spain and Greece faring worse.
• Average and below average White British children are less likely than those from minority ethnic groups to go on to higher education.
• More than half of children educated at private schools, and more than 40 per cent of those with professional parents, go to the top Russell group of universities.
• Two-thirds of those with professional parents receive firsts or upper seconds, but only half of those with unskilled parents.
(one quick important clarification: in the UK public schools are elite private school, state schools are what are known as public schools in the US).
For minorities in the UK, the wealth gap is truly staggering:
The UK’s Department of Work and Pensions has found that 60 % of black and Asian households have no savings at all, compared to 33 percent of white households.
The average white household had £221,000 (roughly $350,000) in assets, Black Caribbean households had £76,000, Bangladeshi households £21,000 and Black African households £15,000.
Omar Khan, director of policy research at the Runnymede Trust, pinned the blame for the disparity on the low-income jobs that are offered to ethnic minorities and migrants. (http://racismdaily.com/...).
So while those with lower incomes are seeing their incomes further eroded, the wealthy are actually seeing rising income and further concentration of wealth.
Blame the Unions
We can add to this whole picture, the latest series of arguments that then ties this whole package together nicely: the argument that incomes in the public sector are higher than those in the private sector.
The average public sector worker was paid £23,660 a year, compared with private sector workers who were paid £21,528 a year, in the three months to the end of November.
This is the first time that the gap, which has slowly widened under the Labour Government, has hit more than £2,000 and came as figures showed that the discrepancy between pay increases in the public and private sector had never been so wide.
The data from the Office for National Statistics (ONS) prompted experts to warn that so far the private sector had borne the brunt of the recession and that the Government needed to take action sooner rather than later to tackle the growing public sector wage bill (http://www.telegraph.co.uk/...).
Of course this is a gross exaggeration that is being done deliberately as part and parcel of the attack on the Unions and the State sector. Let’s be precise as this is not referring to those working in the City (the UK version of Wall Street). Even in the case where we are talking about comparable jobs existing in the public and private sector requiring the same level of education, the comparison merely serves to demonstrate the protection that unionisation has afforded state workers. High levels of unionisation in the public sector which has protected workers from the erosion of wages that has occurred throughout the private sector whose wages are not protected by unions and hence who felt the impact of the economic crisis on their pay (a more developed criticism of this meme can be found in this Guardian piece by Richard Seymour: http://www.guardian.co.uk/...).
King’s argument becomes relevant and this is nicely combined with the arguments of the ConDem government with respect to the budget deficit, the cuts leading to increases in unemployment of public sector workers and the need for the private sector to pick up where the state sector is no longer operating due to the budget cuts (yep, we are still waiting for that, good thing we are not holding our breath). Raising unemployment in the hopes of driving wages down is a good strategy which has been very effective in the history of capitalism; the problem again is the lack of job creation even with the decreased corporate taxes, increased wealth concentration and high levels of unemployed.
I am waiting for the inevitable conclusion, albeit one with absolutely no foundation in economics or reality: the blame for the whole situation to fall on the public sector unions. Really, how long do you think before they blame the whole problem on the public sector unions causing the budget deficit which of course is responsible for the falling growth; as opposed to the reality and economic fact that the ConDem cuts in investment and government employment are clearly not being compensated by the private sector stepping in to take over the tasks that used to fall to government?
Somehow in all their rush to destroy the state sector and the social welfare state, they forget one very important thing … capitalism is a demand-driven system. Economic growth, profitability (and expected profitability), increased employment and investment are dependent upon demand and expectations of rising effective demand. How is this possible when you are squeezing the incomes of the majority while covering the needs of the extremely wealthy and corporations? We have ample evidence that wealth does not trickle-down … that is another in a long line of ideological lies given legitimacy by mainstream economic analysis.