Double Dip Recession

Middleagedwino the problem with this approach is that it sets a wage cap on the genuinely talented and allows the mediocre and the crap to get the same level of pay. For example, the boss of a hugely successful company (think Tesco's under Sir Terry Leahy) would be able to earn 100x the shelf stackers (minimum) wage which would be around £1.25 million. Similarly, the boss of the failing Woolworths would have also been able to pay himself £1.25 million despite being a hapless tool.

Surely a boss should be paid a sum commensurate to the job they do and pay awards, and bonuses, should all be ratified by the shareholders. It is, after all, the shareholders company and their money to remunerate the senior management with as they see fit.

You will probably tell by what i am about to say that i am no financial expert. (not much of any expert to be honest!) but if the top boss in any company could only earn 100(ie)x the wage of the lowest paid then that would bring the rich poor divide closer and when the top dogs fancied upping their wages they would have to raise the lower pay grades(they could embrace their greed and the lower grades would all benefit) How frustrating would it be, they want more but don't want us to benefit. I can't stop smiling when i think about it . Ok so i like to dream, but in an ideal world!!! P.S. Bonus's have to follow the same pattern and only 1 a year when earned. Ok rip me to pieces i can take it but it's only a dream.

The Victorians did build magnificent public libraries and public baths, and museums and art galleries, all of which we appreciate hugely today. Unfortunately, these grand projects were generally instead of improving the lives of people living in slums in squalid conditions, not in addition to it, and those people were too poor and unsavoury to benefit from any of it themselves (somehow I don't see a little chimneysweep being allowed in to look at any of the glorious artefacts, or borrow any books, even if he could read). Wealthy people like the power their wealth brings and often, if Victorian Britain is anything to go by, would ensure that their money went towards very visible things that aggrandised them as much as they produced anything worthwhile. Expecting charity to go towards the things the State currently provides is just forgetting how that utterly failed to work in the past, when people supposedly had a much larger charitable impulse (restated to them every week in church). It was always the same old excuse then as it is, now - my colossal pile of wealth still isn't enough to make a dent in the lives of the masses of impoverished starving employees at my factory, but building a huge and ornate public library will get me remembered and might even earn me a statue and a public honour.

And the most wealthy in society today still have plenty of money to get involved in big, civic projects, despite their tax bill, so nothing has changed in terms of disposable income amongst those in a position to build public baths...

How many people here, who have worked hard for the material wealth they now have, would be prepared to share their food, or the use of their car, the space within their house. How many people here would work hard and then hand over their money to someone less fortunate.

I have a very big fridge freezer. It is half full and I am happy. Ask someone else and they might say, "mine is half empty" despite the fact that they have more than enough to eat.

Coercion isn't ever a good thing, redistribution through taxation isn't either but we do need to find a way to get back to what makes us human. We are social animals, communal and tribal. Without the pervasive link between work, private property wealth and the power dynamics it creates we could simply get on with the business of feeding and valuing everyone.

flatpackhamster - 100 years ago, people who didn't have any means of washing themselves at home went to the public baths. I don't want to return to that. People were as selfish then as they are now. Capitalism is built on selfishness. Capitalism will happily let people crowd into filthy, polluted cities to die of malnutrition, rickets, cholera and typhoid until the death toll is sufficient that it has an impact on profits, or fails to provide a healthy enough population to fight other countries.

Socialism leads to selfishness no the obsessive nature of private property acquisition leads to selfishness.

I don't think human nature is 100% greed and selfishness, though, niceguy2. And society as a whole can encourage more or less greed through the way it is structured and led. At the moment, it seems the pendulum has swung too far in the direction of personal profit being the only worthy motivator for getting anyone out of bed in the morning and anyone with alternative motivations must be weird, possibly bordering on dangerous.

No we haven't witnessed true socialism/communism because those states that tried to take that path came up against huge pressure from within and without, ie the coercion.

Have we forgotten the cold war? we created a bogey man, a fear within ordinary people that a great threat loomed large. Of course the threat wasn't to us, the threat was to capital accumulation. It also fed into the need for governments to engage in an arms race that cost billions, rather than feed and educate, we spent billions with private companies on arms. The public/private nexus to spread fear and create private profits.

Now we have a new bogey man, Islamic extremists.

A socialist state would not have a money economy and wouldn't need coercion. We will only experience socialism when several spheres of thought, experience and material fact are in accord. We need to change the way we conceptualise private property and it's relationship with power. First we need to understand the link and then we need to overcome those obstacles and it can not be done by force.

rabbitstew

I'm sure we would be happier. But what's happened is that Big State has stripped us of any reason to be less selfish. 100 years ago my nearest town had a public swimming bath built. It had facilities for anyone to come and wash, bathe, clean their clothes etc. The great and the good paid for it. No taxpayers' money went near it. Those rich people could see the difference their tax made.

Nowadays the tax money comes straight out of our salaries, and straight in to government, who spend it in an invisible way. How much of my tax goes to help the people where I live? The square root of eff all, is the answer to that.

So by centralising and nationalising tax - and socialising it - you rip away the localism and the feeling of 'My money makes a difference' that creates that willingness to donate. Socialism leads to selfishness.

Yes rabbit I agree on that statement. Unfortunately human nature means that's not the case.

That's exactly it, flatpackhamster - it needs to be voluntary. If we were all voluntarily less selfish, we'd all be much happier.

minimathsmouse

No, we have witnessed true socialism. Every failed socialist state had true socialism. North Korea, Cuba, the Soviet states - all true socialist states, with the brutality, disregard for Liberty, low living standards and dismal pollution that inevitable follows.

Socialism in small social groups can work because it's voluntary and not coercive. Everyone knows everyone else, everyone has a vested interest in everyone else's success. Socialism in countries cannot work because it has to, by its very nature, be co-ercive.

And as for China. Wasn't that a mess before communism even got its hands on it? And wasn't Russia a mess before communism, too? And isn't the excuse that Russia is still a mess that it takes a long time to build something up from a mess?

Surely we can all just rely on charity to sort out the tiresome thinking of others rubbish that doesn't interest us or make us any money? After all, it worked so brilliantly in the past...

It seems to me that, as minimmathsmouse pointed out, people justify their own individual greed to the extent they don't see the link between that and the bigger picture. After all, why should Bob Diamond or anyone else give up any of their wealth when it would only make a tiny dent in anyone else's situation? Why should anyone give up any of what they have for anyone else, when that doesn't encourage entrepreneurs? Why should anyone have anything other than greed as their guiding principle? Surely governments are strong enough to overcome this and come up with sensible legislation to rein it in without any effort whatsoever being made at self control by the people who elect them?...

Mismanagement happens because politician's are only good at one thing. Politics YY

Hands tied, blind fold on, led like lambs. A days work seems to be, manage the press more rather than the economy, snipe at each other from either side of the house like schoolboys and hoover up gin at our expense.

The precious metals and resources in china, in order to cash in on these resources they had to open up to the free market. This wasn't done so they could provide for their people though.

I'm not in favour of isolationism, it isn't healthy on any level. I think we both agree on that. The root of the problem lies with money and private property

We have NEVER witnessed true socialism, some anthropologists have studied small remote tribes and noted that they live in a way which is based on socialist principles. Of course these tribes are isolationist and totally remote so therefore haven't had outside pressure.

I disagree that USSR/China failed because of external pressures. They both had big enough populations and land/resources to manage very well without outside pressures. Just look at where much of the natural resources come from now. 90% of the worlds precious metals like platinum comes from China. We import our gas from Russia. They were never tapped at all until they both took on capitalist reforms.

Mismanagement happens because politician's are only good at one thing. Politics. They make crappy entrepreneurs. They have no incentive to keep companies efficient, in fact quite the reverse.

I'm not arguing that we should have a totally free economy with no checks & balances. Just that we should accept that the model we have now is better than the alternatives, which have never worked and never will.

Lastly a forced redistribution of wealth from the likes of Bob Diamond to the poor & starving in Africa doesn't really fix the problem does it? Take his millions and spread it around. You may buy some a meal for the day but it's just a short sighted fix. Plus you dissuade many other entrepreneurs from taking risks and creating jobs for others.

The best model I think is neither pure socialism nor free market. For me the best model is mainly free market with govt regulating the bare minimum required.

I think one of the main obstacles to almost any discourse is the fact that the command economies of china and USSR not only failed because of outside pressure but also because of internal mismanagement.

I would be the first to agree with you. However as Ms Average points out allowing the free market to dictate all conditions of human life incl sifting through and eliminating humans as though they were garbage is not humane.

I can accept differences of opinion but when I see someone like Bob Diamond wracking up bonuses in the millions, I would without a second thought, like to see him and his class up against the wall. They don't give tuppence whether children are dying in Africa or women work for 18hrs for little more than $1.25 a day.

The chinese have a massive economy but they now have a massive welfare issue that they didn't have before.

Yet despite all of the above mini, capitalist economies have outperformed every socialist/communist economy. Full stop.

The biggest economies in the world are all based around capitalism. The standard of living even for the poorest are better than what you'd see in Cuba/North Korea (about the only controlled economies left). That said, even Cuba is playing around with free market reforms now.

China is case in point. Despite having one of the largest countries in the world and the biggest population, when they had a command economy they couldn't feed their own population. They'd have been the laughing stock of the world, had it been a laughing matter. Yet some twenty years later after adopting free market/capitalist reforms they're poised to be the biggest economy in the world, certainly they are the richest now.

Is capitalism perfect? No. It's wasteful and does not spread wealth equally. But it's a damn sight better than the alternative. The alternative doesn't work and every country that has tried command economies have only prolonged their existence with the use of a large state security system which uses fear to keep the population in line.

Booms & recessions are natural features of free market economies. Governments are supposed to keep money aside during the good times to use during the bad, to smooth out the edges. Some countries like Norway did that. Unfortunately our last PM thought he was cleverer, had abolished boom & bust so spent all our money during the good times and left the cupboard bare for the bad.

Mini, I expect the answer to be that crises are all caused by state limitations of the free market. Even when a crisis was caused by deregulation (say, the latest one), the regulation is still to blame. Only truly free market (never ever seen by anyone) is a best cure for all economy problems.

Watch out, any apology of free market usually has one unspoken but always existing convention: when a human dies, it's just fine. Natural wastage of excessive recourse.

Hands up who reads the Guardian? I don't.

I am thinking of reading Ricardo Next, anyone up for a an economics book club.

Major Crisis since 1970. There may be others I haven't mentioned, not an exhaustive list.

1973, UK/Us property market, fiscal debt crisis, Oil price hike.

79-82 Inflationary surge, tackled by breaking the unions and imposing stagnating wages and high unemployment.

82-90 Developing countries debt crisis caused by the volker high interest rate shock.

1984 Collapse of several US banks, bailed out by the fed and pretty much hushed up

84-92 Closure and rescue of over 3000 financial institutions.

1987 the bank of england and the fed bailed out banks

1990 Property market nordic states & more bank bailouts by governments in US

1994 Rescue the mexican currency because america depended upon it.
1997 Asian currency crisis

1998 Long term capital management bail out

98-2002 Dot com bubble, more bank collapse notably enron
2007-10 Current crisis

So as you can see, capitalism is in grand health.

Daffo, I think austerity will stay. There's a realisation now that countries cannot be in perpetual debt and that their budgets must balance over time. Certainly in some countries, Greece being the prime example, the state was completely out of control and was literally haemorrhaging money.

That said, I think there will also be a change in strategy to promote investment to stimulate growth. So road building, tunnel building that sort of thing. But the age of throwing money on welfare projects, pensions and pet political vanity projects is pretty much over.

There is some fantastic doublethink going on here. On the one hand, executive pay and bonuses must be capped because they are too high and, therefore, somehow wrong. On the other hand, you want these same businesses to become co-operative partnerships meaning that, in the real world without shareholders to 'share' some of these excessive profits, the executives? pay and bonuses will be even higher.

I know you believe pay and bonuses to be too high but, from the left's perspective (and I disagree with the left on this), the problem isn't with how the companies are organised; the problem is with the size of the profits themselves. You really do need to understand, and I mean with a greater understanding than the typical Guardian columnist level of understanding, what co-operatives actually are, how they differ from publicly limited companies, how the free market should work, how it actually works, why it works in the way that it does and what happens when you incentivise (subsidise) or de-incentivise (tax) the free movement of capital.

Until you understand this you will continue to thrash around looking for a silver bullet to the world's woes, getting nowhere.

Will Europe stick to austerity? What do you all think?

Allesio comes across as a psychopath. Scary.

Daffodilly, I hope you are right but being a bit of a cynic I don't think anyone will stop and make the link btw individual greed and avarice and the bigger picture.

One of the major problems for this crisis is a slump in demand but this is a flaw within capitalism itself because even if you increase wages/social security payments the total wage bill is always less than the total capital in circulation.

At the moment it could be said that we need to open up new consumer markets for yesterdays goods. However if areas like the south east increase wages to stimulate demand, (esp china) it undercuts its own global competetive advantage. That is why china would rather lend money to the west than create its own consumer demand internally.