Shedding some light on the current global financial situation

[ttosca]

Please take a look at some of these figures:

www.tinyuploads.com/album/view2/tgfbci_fullb

And see that we're returning to the situation as it was during the Great Depression.

As I've said many times before, apart from corruption and the very real threat to democracy that such inequality creates, the main problem our economy faces is lack of demand. The reason being that wealth and capital has accumulated so such a great extent that people can't afford to live without borrowing, and won't spend any more than they need to because they have no money.

I like your charts - to me however they are more making a point about taxation differentials - politically popular to criticise but unlikely to solve the problem overall

Firstly, your figures are from the US which has its own peculiarities - many of which are not applicable to the UK.

Secondly, government spending has gone from a post-war percentage of GDP around the mid 30's to nearly 50% of GDP under Brown's splurge. Similarly, VAT will skew the figures since its introduction in the early 70's and needs to be considered. This taxation impoverishes families up and down Britain and explains why the economy?s growth hasn't directly translated into us getting as rich as we should have done.

Think about it, how many politicians have used phrases such as 'sharing the proceeds of growth'. This is shorthand for a larcenic grab of the bounty which our economic growth provides. Under those circumstances, one would expect to see average family incomes falling below the growth rate of the economy.

As an example, if the economy expands by 5%, the government takes 2.5% and workers get 2.5% richer. Over time this clearly puts workers below the growth rate.

Unless your figures include taxation, they are meaningless.

MrJudgeyPants-

First point-

Yes, they're for the US. No, the situation is not really much different in the UK. The situation in the UK is closer to the US than that of europe.

Second point-

Here is a matrix showing GDP spending in the UK as a percentage of GDP:

www.guardian.co.uk/news/datablog/2010/oct/18/historic-government-spending-area

and here is another source:

www.ukpublicspending.co.uk/downchart_ukgs.php?chart=F0-total&year=1900_2011&units=p&state=UK

The post-war period of spending averaged around 40% of GDP. The Gordon Brown era (up until the financial crisis) was about the same.

Neither show a 'spending splurge' under Brown as a percentage of GDP.

This taxation impoverishes families up and down Britain and explains why the economy?s growth hasn't directly translated into us getting as rich as we should have done.

Indeed, VAT is a regressive tax. However, wages in real terms also stagnated from the 1980s for the majority of people, so they were hit with a double-whammy.

As an example, if the economy expands by 5%, the government takes 2.5% and workers get 2.5% richer. Over time this clearly puts workers below the growth rate.

I think you're missing the point here. I know you want to make a point about high taxation. What I'm trying to show is that for the vast majority of the population in the West (especially the US and UK), the procedes of growth went to a tiny minority at the top (the top 10%).

Unless your figures include taxation, they are meaningless.

Not really, because they show wages have stagnated for the majority since the 1980s. Taxation will change the amount people take come, but in fact, showing tax rates would prove the opposite of what you're likely trying to put across: taxation has become more and more regressive over the past several decades.

Secondly, there is a chart on the page of that link which shows 'Change in share of income after taxes'. It clearly shows that the top 20% benefitted (the top 1% the most), whilst everyone else's declined.

Oh look! Having another look over the charts, it also shows effective tax rates - which have fallen dramatically for the top 400 households in the US.

Monty-

I like your charts - to me however they are more making a point about taxation differentials - politically popular to criticise but unlikely to solve the problem overall

They're not separate issues. That's the point.

There is a reason there was such enormous wealth and income disparity around the Great Depression.

Businesses cannot grow and sell products and services if there is no demand. There will be no demand so long as people have no money to spend.

ttosca It isn't quite so straightforward though. We have seen many chancellors using fiscal drag to push more households into higher tax brackets - the biggest bastard for doing this was Brown. As inflation has given everyone a bigger paycheck, the tax thresholds hardly moved to compensate.

The effect that this has is to make it appear that poor and middle income families are paying a greater proportion of the overall tax burden.

If you want to make the poor richer, stop taxing the poor buggers so much.

Sorry, this sentance "The effect that this has is to make it appear that poor and middle income families are paying a greater proportion of the overall tax burden."

should read "The effect that this has is that poor and middle income families are paying a greater proportion of the overall tax burden."

My apologies.