Monday, 4 May 2015

Austerity: Moving Money from the Have-Nots to the Have-Yachts

Lately I've been reading a gripping and addictive book that has at times shocked me so much I've had to put it down.  But this is not fiction, it's cold fact.

I'm reading Austerity by Kerry-Anne Mendoza who left a successful and highly lucrative career in banking to be part of the Occupy Movement.  She has insider knowledge of the economic system that is returning us to levels of inequality not seen since the 19th Century. Whatever your political persuasion, the evidence - the facts and figures - are indisputable.  This book has 5 star reviews and - if ever a book should be able to change the world - this book is it.  Everyone should read it, but the people who really need to probably won't.

Mendoza traces the origins of the Austerity movement to 1944 and the political and economic measures that were set in place to rebuild the architecture of the post-war global economy. It was rooted in neo-liberal capitalist ideas based on unlimited growth which was to be accomplished through de-regulation of the financial system and the international trade network.  These ideas were to be implemented by the International Monetary Fund, the World Bank and the World Trade Organisation and it was in reality Economic Colonialism. Countries in Africa and Latin America were sucked into the Debt Trap and laid waste by Austerity, long before it happened in the West.

Created to rebuild shattered war time economies, these institutions 'continue to set the roadmap for domestic and international policy to this day', over-ruling democratically elected governments and environmental groups.  There has been a gradual transfer of power from the State to private corporations.  We have now arrived at a point where individual global corporations are richer and more powerful than governments.

Mendoza is particularly lucid on the financial crisis of 2007/8 and the part played by de-regulation of the financial markets, the growth of derivatives and the selling on of bad debts to institutions who then took out insurance policies to protect themselves against defaults.  When the bubble burst, the banks were bailed out to the tune of £850 billion in the UK alone - twice the nation's annual budget.  So a toxic private debt was converted into public debt.  And we're the ones paying for it. Austerity was then wheeled in to make sure that we did.

It's called the Zombie Economy - the dark side of our financial institutions, sucking all the value out of them and leaving us with the bill. Only the 1% at the top make any money.   Mendoza uses water to illustrate how it works.  We all need water, but there are only a finite number of people drinking it and using it.  How to grow your market and increase your profits?

1.  Set out to gain control of the water supply and production. Now what?
2.  Then you get people to buy shares in your company.
3.  Then you can pay people to work for you and you can cream off a profit.  But it needs to carry on growing.
4. You get people to bet on whether the price of water will go up or down (futures - a favourite derivative).
5.  You can now manipulate the market in order to make more profit. You can even place bets yourself on whether the price will go up or down.

But for the consumer the price is always going up to pay - not just for the water - but for the profits and losses of all the people now in this corporate chain.

Almost the whole of our lives have now been swallowed by the corporate monster - our hospitals and schools (most of us are unaware of  the mechanics of PFI in the health service or the funding of Academies).  Mendoza is particularly scary on the facts and figures of the destruction of the NHS as is it sold piece-meal to private providers.  How many of us know that our GP practices are privately owned now? Only a few remain as originally intended. Education is going the same way, alongside the welfare system which is the safety net for those who are less fortunate.  'You can't run a public service like a business', Kerry-Anne wrote in a Guardian article.  They were created to 'serve' a public interest. But -

"The reality is that, wherever we look, all our major institutions meant to protect and serve the long-term public interest are stuffed with individuals who have abandoned this role in favour of their own short-term self-interest."

She quotes the Stafford hospital case as an example of what happens when commercial values replace the values of healthcare, when meeting a target is more important than whether a patient lives or dies. Using material obtained under the Freedom of Information Act, she reveals that in 2013 52 NHS staff have been paid £2 million in gagging orders, banning them from reporting 'significant failures of private healthcare providers operating NHS contracts'.  Prior to 2013, 'more than £15 million was spent silencing 600' staff.  We should all be worried.

When I read the facts and figures of what is happening to the social security system, I wept. The numbers of suicides, of hungry children having to be fed at school (this is making a huge hole in school budgets), of desperate single parents whose benefits have been stopped because they missed appointments, people with disabilities denied care, people dying of cancer being told that they had to work or have their benefits cut (one received the letter the week before they died).  The scandal of the Atos assessments (for which it was paid £206 million).  There are a number of case histories, all carefully documented and figures that can be verified. Foodbanks, once rare, are now operating in almost every county of Britain.

Meanwhile corporate salaries have continued to increase - bankers salaries and bonuses are back to pre-crisis levels.  The Sunday Times rich-list recently revealed that the rich are now twice as rich as they were before the crisis.  And Austerity has failed to restore the economy - growth is slowing (0.3 now, down from 0.6 in the previous quarter) and there are negative interest rates in Europe now - which effectively means paying people to borrow which is so crazy you can't imagine anyone doing it.  They haven't reached the UK yet, but the only thing keeping things from going under is the printing of money to fling into the wild waters of the economy - called Quantatitive Easing - but perhaps better known as Questionable Economics.

"This is not an economic recovery by any reasonable definition of the term. What is the point of GDP growth, if the benefits are not increasing the quality of our lives?  . . . Hunger, poverty and homelessness rising exponentially in a time of economic growth can only ever be a political choice. . .  It is the deliberate destitution of the many, to benefit the few".

I don't like corporate Britain where the only values are profit and infinite growth, where the environment gets plundered for diminishing returns and people simply become units of consumption. I want a fair society which benefits us all - one in which we preserve the environment, our heritage, for future generations.  Where the sick get the treatment they need and children get the education they deserve.  Where everyone has a roof over their heads and everyone has enough to eat. We have the resources to do it, we just need the political will.  In a democracy that means US.



Kerry-Anne Mendoza is a left-wing economist and journalist who blogs at the Scriptonite Daily






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