Saturday, 1 February 2014
How "Trickle Down" Works.
We've been living with the "trickle-down" theory of economics for over 30 years now - so the question is "How has it been for you?" One of the most striking facts to emerge since the banking crisis of 2008 is the growing gap between business productivity and wage levels. Across the western world productivity has more than doubled. Wages, especially in Britain and the United States, have however remained virtually flat in real terms. Essentially ordinary people, despite all the hard work, restraint and patience they have exhibited, have not had a real wage increase for over 30 years. Meanwhile large corporations, especially the banks, freed from what they call "the burden of over-regulation" embarked on the longest spree of outright criminal activity in the history of the world. Eventually greed overcame their common sense and they managed to crash the entire world economy. They achieved this remarkable outcome by the creation of sub-prime lending which was designed to underpin the demand that should have been supported by wages. Once the sub-prime lending market collapsed so did demand and the result was a recession. "Trickle down," it would seem, didn't work after all. In fact the reverse had been happening all along, with wealth pouring upwards as productivity increased but pay remained stagnant. But then again, and despite all the right-wing propaganda, that was what it was designed to do. When the banking crash brought the world economy to a shuddering halt the truth was plain for all to see and right-wing politicians across the world suddenly discovered words such as "society" and phrases such as "we're all in this together." Society, they told us, had to bail out the banks because we couldn't afford to lose them and, in the face of such an overwhelming disaster, we all had to pull together. So our tax money was diverted from things that benefit us to the black hole of the banking system while wages, instead of merely stagnating, were now deliberately shrunk. Having not benefitted one whit from the economic system in the last 30 years, it was now our responsibility to bail it out and suffer increasing poverty into the bargain. And that is how "trickle down" works. We pay with hard work and stagnating wages when times are good and then pay again with hard work and falling wages when times are bad. The truth, for those who care to look, is contained in the latest figures from the Office for National Statistics which demonstrate quite clearly that, despite Cameron and Osborne's claims to the contrary, real wages have fallen by 2.2% since the Tories seized power in 2010. Essentially they are at it again and we, as always, are paying for it while the "cost of living crisis," disguised for the last 30 years by cheap credit, is actually nothing new .