We must stop protecting the rich from market forces(41 Posts)
The 'American' global economy punishes the poor while giving handouts to failing banks. It's time for some balance
Superb article - explains simply what we all know is true.
You are right we did not save the Icelandic banks and I think the UK still has a claim against them or may be they just agreed to repay what people have lost.
Lehmann brothers was also allowed to fail.
The problem with bailing out NatWest etc is that now the banks think they will never be allowed to fail so in theory they could become riskier so the counter act that the state is interfering even more into how they are run.
One issue is to what extent do we treat investors as adults who can assess risk - I remember the high interest rates on Icelandic bank accounts and I avoided them. I did think there was some risk there.
I was an Iceland investor.. Very small scale Cash ISA in my case. The rates were 6% when others were 5.75% or 5.5%. Higher but not exactly silly money. Then again, post Northern Rock, I was aware that deposits were only protected up to a certain amount and stayed well under the threshold ... adult assessment of risk duly noted.
I don't think the 'never be allowed to fail' part is the biggest risk with banks today. It think it was that they were supported almost unconditionally and, once the opportunity to set conditions was squandered, we've never recaputred that moment. Despite fingers being burned all round we need them to keep lending.
'But I don't think he had much choice other than to save capitalism. The alternative would have been disastrous.'
This is the scare tactic line that is pushed by the elite in order to protect them from losses of billions. They male teh people take teh losses through austerity and their bonuses remain untouched.
A nobel-prize winning economist shows that the line that there was no alternative but to save the banks and impose austerity on the public is not true.
Very few people have savings of £30,000 and the puittamce that most pebsioners receive is nothing compared to the hundreds of billions that have been pumped into teh system to rescue the banks and the rich investors.
And they pay think tanks to spin us tales of the 'intergenerational' divide and how our pensioners have had it too good compared to the young and they say nothing of teh 'interstellar' divide of the plutocrats and banking moguls from the ordinary people. They say that there is no alternative to austerity and that the people must pay to "save the system", "save the planet" and "save the banks".
And they say the system is not rigged, they say it's regulated. They say it is our system and that we are all in it together and that there is no alternative to austerity for us and we should do nothing that risks alienating the moguls in case they consider leaving our shores.
And Channel 4 News reported on a woman in America living with 5 young children in one room in a hotel and the global elite tell us that there is no alternative. But there are probably empty homes, boarded up, just down the street on which the banks have foreclosed. Of course there is an alternative to this misery and waste, but they won't take it because the elite are not all in it together with the rest of the people.
I don't agree there is an elite in cahoots with each other. I do agree that most UK pensioners live in poverty and the suggestion they live the life of riley in unmortgaged homes on big private sector pensions is just wrong.
I don't agree with the solution and I do think freer markets could ensure people do better.
Free markets only ensure those most savvy or those most advantaged through birth or education do better.
I agree with Xenia tough, the elite are not in cahoots, they are in competition to each other, the net result though is the same.
Yes but you can become elite, can't you? There is nothing special about me. My great grandfather was a miner and his wife couldn't write. I just happen to work 50 weeks a year and have for nearly 30 years without a break.
We are made to compete and in fact for our species the fittest surviving which is in effect market forces works fine. We were like this for 2 millino years. We lived along side the Neanderthals - apparently those of us from the West have 2 - 3% Neanderthal genes in us but not Africans - the Neanderthals weren't there to mix with.
NO , we can not all become elite under a system that actively exploits others in pursuit of profit. You know that Xenia, you have often said that the underclass is there to do the dirty work.
What is more the competition particularly under the free market neo-liberal model ensures that more and more people from the middle class are being made unemployed, bankrupt and destitute.....joining the sludge at the bottom of the jar.
I watched this yesterday evening
A talk by Elizabeth Warren who teaches contract law, bankruptcy, and commercial law at Harvard Law School.
She sets out to explain what has happened to the labour market over the last 30 years and how the changes have had a massive impact upon the middle class. She also tackles the difficult and contentious issue about women entering the work force and the net effect this has had, she also shows how capitalists have forced families to provide two wage earners in order to survive whilst also at the same time, not investing in labour productivity through training and throwing millions more out of the workforce.
Do I think we can all make it if we just try harder.....no because income inequality will still persist, which leads to a situation where poorer workers can not afford the best ski resort... but also can not afford the best bread or any bread at all.
You cannot have social mobility without also people going downwards. It's a two way street.
I never said everyone can do well. However in the UK more than most countries as we provide free education etc if you are good and work hard you can do well.
I think it is great more women work. If that means wages are less or housing costs higher that is the price we pay for equality.
I don't agree the middle class are in a difficult period. My parents were first married under rationing after WWII. Today is a picnic compared to those days. The 70s were dire in the UK, not fun at all, inflation 6-0% over 3 years, 3 day week. Mass unemployed. I don't think there has been some halycon days for the middle class at all. It is rose tinted spectacles.
I certainly believe in the alleviation of absolute poverty and ensuring the poor are fed in this country.
China has an emerging middle class - see yesterdays' Weekend FT magazine which started a 3 part series which was interesting. They will of course have many many more people who aren't part of that economic miracle and more diffderences between rich and poor yet in a land where communism supposedly rules and now we find out all the top brass have biolionaire relatives. Plus ca change.
'income inequality will still persist'
Income inequality is not a bad thing. If someone studies hard and qualifies as a doctor, they should earn more than someone who works in an unskilled trade and who has fewer qualifications. If someone qualifies to be a teacher, they should earn more than a teaching assistant.
We need a free market for enterprise and opportunity, and we need a socially provided safety net. We need a meritocratic society where people are rewarded for contribution and effort.
But we also need a rule of law and regulations which prevent rich and powerful elites rigging markets or rigging interest rates that affect every other citizen.
We need free market policies that reward success and penalise failure i.e. we should not create a moral hazard where we are prepared to limitlessly bail out financial firms who have gambled recklessly with savers' money.
I thought the bank of England "rigged" interest rates! One of the reasons we are in this mess is because interests rates were kept artificially low so the debt party could carry on.
Someone rigged them. I don't think we have been told the full story and probably never will be. We are the "plebs", we only get to know what they tell us.
I think from 2001 interest rates have been kept very low (to keep inflation low and indeed in some ways we are lucky inflation has been low if you compare with UK 1970s 60% inflation over 3 years or Iran and Zimbabwe today). In theory it helps business as borrowing is low and helps new borrowers - I used to pay 12% when I was the age of my daughters. Basic rate tax was 35% I think.
However it is n interference in the market. if we let banks free to lend at whatever rates they chose then we presumably would not have had the property price increases we have had. If you look at the "free market" of pay day loans you see what levels some rates can reach.
Thing is though with stagnating wages the only way in which demand can be stimulated is through lending. So what has happened is that interests rates were kept low to stimulate both business borrowing and household borrowing. This of course doesn't work, not least because workers have never had the means to purchase what they produce. The difference between what a worker earns and what a workers can afford to purchase remains absolute under a capitalist economy because of the "profit" realised when the commodity sells. The only way in which to prop up the system at nation state level is through exports but this is longer possible here because of globalisation, massive corporates with tentacles in everywhere, manufacture where labour is cheap and sell to the "service" sector reliant west.
Of course there has been rising productivity (manufacturing/service sector) but these profits are realised by corporates that do not have loyalty to UK. Do not pay their taxes here and yet take massive subsidies in terms of infrastructure, access to markets and increasingly public sector contracts which are in the long run going to cost us more. Can you imagine paying for 5 bin collectors at £20 to find £10 went into management pay , £5 went to share holders not all of who reside in the UK for tax purposes, £3 went into investment but that investment wasn't into the uk, only £1 went to your bin men and they were not only liable for tax, but on such low pay that they received tax credits and HB, free school meal........ Which meant the government paid there wages twice!
Now Xenia do you get where the money goes neoliberalisation of markets and globalisation will be the death of the UK, it's already in decline and i don't think we have seen anything yet. On the other hand the booming economies are almost all state capitalist. Proving that capitalism whilst not ideal can at least function under certain circumstances but again that relies upon export.
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