Friday, 24 April 2015

The UK Economy. Part three: the race to the bottom

Thatcherism and the meteoric rise and total takeover of the free market has resulted in much larger and wider-reaching changes to the economy as a whole than even they could have dreamed.

Free to grow as big as they can by whatever means possible: huge companies have become so powerful they have changed almost everything. Suppliers have no power and are routinely shafted by the big retailers until they can barely afford to exist. Consumers think they have power, and occasionally they do, but they are manipulated and conned by the retailers into spending more and getting less. If you boil down retail to it's basics, it is basically someone selling something that someone else has produced. The producer, in my opinion, should hold the power: they have the skills and the expertise to produce what people want and they should be able to make money out of it. But in most cases, this is just not the case any longer, unless they too are vast and can shaft their own suppliers in the way the retailers shaft them.

Milk is now cheaper than water. Farmers producing all kinds of food are being driven out of business by the supermarkets' never-ending race to be the cheapest and because the supermarkets have all but killed the high-street bakers, butchers, greengrocers etc, if they're not selling to supermarkets, they're not selling to anyone. Quality is suffering and the environment and animal welfare is bottom of the agenda. Slavery is back with workers being paid for far fewer hours than they've worked and being subjected to chemicals which cause lung and skin diseases. All to put cheap produce on UK shelves.

It's ironic that some of the biggest players are now the victims of what they themselves have created. Tesco have announced a £6.4bn loss. They led the way in the big four supermarkets' land-grabbing, high-street-closing, town-takeovers and at their peak, were able to force all suppliers and consumers to make bigger and bigger profits for their shareholders. But once austerity hit the UK after the financial crash, and with the economy flatlining and bills rising, people saw their rising shopping bills and wanted cheaper: after all, that's what Tesco and the other supermarkets had taught them to seek. Step into the fray Aldi and Lidl. What is behind their cheaper prices, I'm not sure: I suspect in some cases, produce is lower quality but their overheads are also smaller (although interestingly, they pay their staff higher wages than their bigger rivals) as they haven't gobbled up prime land and don't have the huge stores whose shelves must always be full. In response, the big guns have lowered their prices. In some cases, this is not entirely true: look more closely and you'll see that many of the products which have been reduced in price have also reduced in size/weight. In other cases, the producers have been shafted even further.

Britain has become so used to everything getting cheaper and cheaper and being able to buy more, newer, more frequently, that they've become anaesthetised to the consequences: mass deaths in Bangladeshi factories; children being forced to work producing our clothes and technology; animals being kept in terrible conditions for ever cheaper meat; all sorts of unknown additives making our poor-quality food taste better and last longer; piles of last year's unwanted goods being shipped to West Africa where it's not illegal to produce toxic fumes by burning plastics and metals. And there are other consequences of cheaper and cheaper and cheaper, such as low wages. The profits still being made (even Tesco's losses have only been very recent and have followed year after year of massive profits) should be reflected in the staff wages, but they're not. The state has to top up low pay with in-work benefits just so that people can afford to live.

The free market almost ended manufacturing in the UK, with cheaper labour from abroad being used instead. It has made ghost towns of our high streets. It has massively increased inequality. It crashed our economy; it leeches off the state; it holds back environmental and animal welfare issues.

It is bad for society and bad for the planet and we need to reign it in. NOW.

Thursday, 23 April 2015

The UK Economy. Part two: the minimum wage and top earners' pay.

Before the last Labour government introduced the national minimum wage, the media and the conservative party were up in arms. Employers wouldn't be able to pay it and people would go out of business, they claimed. It didn't happen. Now, many people are calling for a living wage. That basically means a wage that is enough to live on. Surely that should be the minimum wage? Instead, the benefits system is topping up low wages where they can't afford to keep a roof over their heads or food on the table.

The cost of living keeps rising, despite the best efforts of a few huge supermarkets driving more and more suppliers to bankruptcy in their pursuit of the cheapest price in town (more on this in part three). Housing in particular is so expensive that only a small percentage of people trying to get onto the housing ladder are currently able to. In some areas, even people on significantly higher than the average salary can't afford to. So that leaves renting, and landlords are raking it in, all over the country but especially where homes are in shortest supply. Many Tory MPs are landlords and many of their donors are too. So why would the Tories ever want to build enough affordable homes?

I do think that the way things are for many smaller employers in the UK (and employers generally, although larger ones are much to blame for 'the way things are' - again, more of this in part three) means that some will struggle to pay a living wage. I would suggest a system whereby new employers and very small companies (1-10 employees) wanting to expand could apply for temporary relief which would be paid to them to help them cover the living wage. These applications would be assessed based on the companies' overall pay structure and finances in general. It would be rejected if, for example, management were seen to be taking huge salaries for themselves, or making unnecessary purchases (e.g. overly expensive premises or company cars) to bring their finances down and thus necessitating the state assistance. This way, instead of the state subsidising low pay permanently, they would help companies into a position where they could afford to pay the living wage without help.

Flying in the face of claims that companies can't afford to pay the living wage, is the increases in executive pay over the last decade and more. Senior salaries are now so out of control that even some right-wing economists are calling for companies to be forced to have employees sitting on boards of directors (the idea being that they would be able to veto large salary increases for the top earners if the lowest earners see very small or no increase in their wages). I would add that the amount of money being siphoned out of the UK into shareholders' off shore bank accounts is another piece of evidence that certainly large employers can afford to pay the living wage.

The final point in support of increasing wages, and one that I have made before, is the Henry Ford philosophy. Ford realised that he would make a lot more money if his employees could afford to buy his cars. So he raised his employees' salaries considerably. Not only were they happier and more productive, they bought his cars and Henry Ford made a huge amount of money. What blinds today's big companies from seeing that if more people could afford their products and services, the more money they would make? The answer might be in Part Three.

The UK Economy. Part one: individuals' incomes and the taxes they pay.

It's easy for the right and even many so-called centrists in the UK to reduce tax. Once people have paid income tax, national insurance, council tax, VAT, other duties (e.g. on fuel and alcohol) etc, their pay is significantly lower than the raw sum at the top of their payslip. So tax cuts always go down well and the public don't seem particularly enraged if the highest earners are those benefiting the most.

So what do we pay for?

  • Hospitals
  • Ambulance Services
  • GPs
  • Community Nurses and Care Workers
  • Police
  • Defence
  • Education
  • Roads
  • Transport*
  • Energy and Water*
  • Child Protection
  • Street Cleaners, Environmental Health and Waste and Recycling Services
  • Benefits such as the state pension, job seekers' allowance, child benefit, incapacity benefit etc.
  • Ministers who decide on how to manage the above

*These services have been privatised but infrastructure and upkeep always requires more public money.

The above list is not exhaustive: it costs a lot to run a country. In the UK we pay lower taxes than the majority of developed countries and as a result, we often have good reason to complain about the services we receive. But still, people just see the bottom line of their pay slips and the added on taxes elsewhere and feel ripped off.

But we need council workers making sure shops and takeaways are selling us food that won't make us ill. We need people to clear up after unscrupulous companies who fly-tip their waste to save a few quid. We need benefits to help anyone out of work (I've been there; it's not all shirkers despite what the media try to tell you) to eat and continue paying their bills until they find a job. We need the police to prevent crime and Schools to teach us skills to give us a good chance of a decent life. We need to fork out for improvements to railway lines and power networks because the companies making huge profits providing these services can't reach into their pockets (because their pockets are in far-flung tax havens). We need care workers to look after us if we need help with everyday tasks. And what is so important is that we need to pay good money for all of these things, otherwise standards will fall.

Too often, councils can't afford to clear up the mess left by lazy, cheap people (I walk through woods every morning past tonnes of dumped rubbish). And Schools are too often falling into disrepair. Right now, waiting times in A&E are as bad as they've ever been. Care workers are paid so little, it's really difficult to get good people to stay in the job. Pay generally is too low in the public sector and perversely, in-work benefits top up their wages to they can afford to live in the area they work. Where's the sense in that?!

So we need to pay taxes and the government's overall tax revenue needs to be higher than it currently is. But this government has cut tax for the lowest earners and the highest earners. Why? The highest earners have a great deal of influence over government policy. And the highest earners often employ the lowest earners so if the government reduces the tax the lowest paid earn, the influential employers needn't worry about increasing the poverty wages. Simple. So, in this way as in so many others, the state is effectively subsidising the big profit-making companies and individuals who often help to fund the 'think-tanks' who tell us the state is bloated and needs to be reduced!

If only people knew more about why some parties are so anti-tax and who really benefits, they might be happier to pay it and be more critical of their employers than they are of the 'tax man'.

Wednesday, 8 April 2015

Either way you look at it, more Thatcherism can't fix our economy.

Some people will insist on believing that the last Labour government are to blame for the UK's current economic climate. It's no wonder: the Tories and most of the media claim this too. Let's look at the conditions that created economic collapse.

What happened

  • Thatcher's Tories were responsible for deregulation of the UK financial industry. 
    • This was very popular with wealthy and influential businesses, lobbyists, much of the media and right-wing and centrist politicians and was successful in bringing a great deal of wealth to the capital (albeit mostly in just a few hands).
  • New Labour continued financial deregulation in the late 90s and early 2000s.
    • They had to. It was seen as the driving force behind the boom in the City of London which is still considered to be (although figures don't actually support this: the service industries and manufacturing are both larger) the basis of the entire UK economy. And even if they wanted to re-regulate the industry, the power and influence behind big trading would have proven too much.
  • The Tories, in opposition, approved of Labour's continuation of financial deregulation but also said further regulation was necessary.
  • Deregulation allowed very risky and highly dubious practices to go unchecked and after a period of unbridled success, the pressure of unstable international markets (notably the US which was using the UK system for its own dodgy practices) brought it all crashing down.

So the Tories began and championed deregulation of the financial markets that caused the crash and meant that the government had to bail out the banks, spending around £1.5 trillion pounds doing so. Had the Tories been in power, this still would have happened and they would have also bailed out the banks and the UK's budget deficit would be in the same position it is now (in 2007/8 before the crash, the Tories promised to match Labour's public spending plans).

A much more simple argument

If you still can't accept that the above facts mean the crash would still have happened if the Tories were in power then how about this:

Margaret Thatcher herself said that her greatest achievement was Tony Blair and New Labour. "We forced our opponents to change their minds." New Labour continued Thatcherism and virtually all of its free-market policies. This being the case, how is what New Labour did any different to what the Tories would have done?

And more urgently: if New Labour's Thatcherite economic policies did nothing to prevent the crash, how would yet more Thatcherism from the current Tories ever be able to fix the problem?!