Wednesday, July 27, 2011

Why George Osbourne Is Happy With 'Plan A'

The 'cake' may be bigger, but the ruling class has the knife
Yesterday, it was announced that the UK's Gross Domestic Product (GDP) growth had slowed from 0.5% in the first quarter of 2011 to 0.2% in the second quarter. Immediately, my Twitter timeline exploded with various 'left' types taking the opportunity to lay into Chancellor George Osborne, and his claims that the latest figure was "positive news". But what is GDP anyway, and what significance does it have for the working class - the immense and overwhelming majority of our society?

To put it as simply as possible, a country's GDP is the total value of its economy over a time period. There are a number of controversies associated with this measure (see the Wikipedia entry for some), but the media generally tells us that high GDP growth is a good thing, and low growth is a bad thing. When GDP grows by a large amount - as it generally did during the Blair years for example - this is seen as proof that the country's 'economic cake' is getting bigger. When GDP actually shrinks - like at the start of the financial crisis - the cake gets smaller and the economy is said to be in recession.

That's all fine and dandy, but to extend the cake metaphor, it's the working class who makes the cake, and the ruling class who has the knife. For the last thirty-five years, it's been an obsessive concern of each successive government to make sure the already 'fat cats' get an even bigger slice of GDP. This obsession has reached insane levels since the onset of the last recession.

As a recent High Pay Commission report put it:
"The UK’s top earners are taking a bigger slice than ever of the national income. Between 1949 and 1979, the share of income going to the top 0.1% of earners dropped from 3.5% to 1.3%. Today the top 0.1% of earners takes home as big a percentage of the national income as they did in the 1940s. If current trends continue, by 2025 the top 0.1% of earners will take 10% of the national income and by 2030 we will have gone back to levels of inequality not seen since Victorian England.”
It must be reiterated that the top 0.1% of earners create no wealth at all, but they hold a huge percentage of it. It is for that elite that Thatcher, Major, Blair, Brown and now Cameron have exclusively governed.

But maybe we wouldn't care about inequality, so long as we were getting wealthier. The problem is we're not. Figures from the Office for National Statistics show that the average wage has increased by about 2% per annum since the UK officially came out of recession two years ago. Even that figure is skewed by much higher rises at the top, but once you factor in inflation at 5%, the average worker is about three pence in the pound worse off this year than last. 'Personal inflation' rates increase as incomes go down, so poorer paid workers are even worse off relatively.

Bearing this all in mind, we can see that any increase in the overall economy cake is almost irrelevant, when most of us are shocked by the price of bread. But what about those calling for measures to stimulate the economy, for a 'Plan B'?

Global elites are competing to smash 'their' working classes
The best way to temporarily stimulate the economy would be to seize the assets of the richest, and distribute them amongst the rest of us. But we can be sure the politicians won't do that - they are the servants of the financial ruling class, and want to run the economy in their interests, so that their own economic worth will increase when they retire (just look at Blair, for the best example). Instead, they seize the assets of the poorest, slashing government spending in a kind of inverse Keynesianism.

The politicians are not stupid. They understand that less money in the pockets of the general public will mean less consumer spending, and a slowing or shrinking economy. However, they recognise that the current financial crisis provides them with a once in a lifetime opportunity to send working class living standards back to pre-war levels. Around the world, government after government is making "savage cuts", to borrow the Deputy PM's phrase - Greece, Italy, Portugal and the USA are just the most current. When some finance minister or other so much as pauses for thought, the credit ratings agencies and bond traders are immediately on his or her back, whispering a none-too-subtle "do it" in their ear. Blinded by the need for short-term profit, they can not or will not see that this is the road to a new great depression.

Even if Ed Miliband was Prime Minister tomorrow, with Ed Balls as his Chancellor, they would be picking up the scissorhands exactly where the current coalition let off. To do otherwise would be the end of their political careers, as they would have deeply angered their real constituency - Wall Street, the City of London, and its global equivalents.

If and when the global working class acts in our own interests, and seize knife, cake and bakery, we can all get enough cake. Until then, more and more of us will be working harder, and yet going hungry.
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