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Wednesday, 9 August 2017

How British Governments Have Made Life a Misery for Millions

Academics in the University of Manchester have published data [mostly derived from well-known official data] which shows that death rates among younger people in the deprived areas of northern England have increased over the past twenty years, while in the south there has not been a similar outcome even though dangerous drugs have become more common and alcoholic abuse has continued. The difference is that more people in the north take intoxicants more prolifically than in the south, and they do this in cold homes where their bodies are less well fed than those of the majority of southerners.

As one commentator on the TV said, as she was shown with the background of a canal and a derelict factory, this was the ambiance that viewers expected to see as she summarised the Manchester data. In the course of this presentation the term 'diseases of despair' was deployed to describe the effects of depression, alcohol and drugs in a society which appears to offer no hope of a better lifestyle. The lives that are to be seen in soap operas and other apparently-commonplace programmes, seem so different from those that the inhabitants of deindustrialised backstreets as to be unattainable. Coronation Street, Victoria Square and Ambridge occasionally present a denizen with a drink, drug, psychiatric or personality problem; and such individuals appear as searing exceptions to the societal norm, that enter into the script with the approval and encouragement of the lobbies who try to highlight those problems; but after a point has been made, the problem is removed from the script, and the characters return to lives that may be far from ideal, but which are far superior to those of hundreds of thousands of the most deprived people.

I used personally to bridle at the use of the term 'deprived', whether used of the people who experience these diseases of despair or the areas where they live; but as austerity has tightened the grip of despair and disease in these places I have recognised that these areas and these people have indeed been deprived. The schools are less well equipped and the teachers are more dispirited than in 'nice' southern towns; the hospitals have less resource and the dedicated staff are less able to give time to patients when the demands on them are swollen by staff shortages; provincial public transport is cut dramatically as London contemplates Crossrail Two; across the country Libraries are closed and the entire social infrastructure is squeezed.

Today, August 9 2017, has a good claim to be the tenth anniversary of the day when it became absolutely apparent - to anyone who understood the financial world to any degree - that there was a major problem emerging from the apparent technicalities of the financial markets which would affect the real lives of everybody in the money-using economy. It took fourteen months until the 'financial crisis' [or 'credit crunch'] reached such an intensity that government action, co-ordinated with the Bank of England and the authorities in the USA and the major European markets, was unequivocally necessary. It was essential that something absolutely drastic was done was done, or the financial world as we knew it could simply cease to function.

How had this happened?

The Thatcher governments were guided by Economists who suggested that 'the market' could grow best without government interference, and that organisations like trade unions impeded the market in finding the optimum way of allocating resources through society. So the Thatcherites deliberately removed support from coal mines and shipyards, and protectionist cover for steelworks and other industries that has previously been regarded as 'essential'. Simultaneously they reduced the excessive 'rights' that had been given to the unions under Labour governments; to the extent that workers' rights were placed at a discount of almost 100%. The result was massive deindustrialisation across much of the country. The Conservatives ignored this dereliction, because the financial services were largely replacing the losses to national income that came from factory closures. The 'big bang' of 1986 set the financial institutions free to develop their own fantasy markets: just at the time when computers placed unprecedented processing capability at their disposal. Transactions could become more complex and take place much faster than had every been contemplated when unknown forces were freed.

The economy continued to grow - in terms of gross aggregate turnover - because the growing financial sector constantly found new ways of creating purchasing-power from thin air, by creating new financial devices; of which one of the most prominent was securitisation. This device enabled the 'retail' banks and building societies to lend far more money than they could have loaned if they had remained dependent on their depositors to provide them with the stock of money to be lent. Now the lenders simply lent more, then bundled the mortgages and the credit-card 'balances' into blocks or 'packages' which they sold to institutions in the new 'wholesale' financial market. Thus money could constantly be recycled through new loans; and it was considered a triumph of innovation: until it became apparent that many mortgages [starting with 'sub-prime' mortgages in the USA] would never be repaid. Concern about the security of the 'securities' escalated during 2008 as more and more of the financial 'instruments' that had been traded through the wholesale finance sector came under suspicion as having no substance behind them. Eventually the Bank of England [backed by the government] promised to buy enough 'securities' [using newly-created credit] to keep the financial sector funded with : and they created billions of pounds of 'cash' every month for several years to keep the system rolling on.

In saving that fantasy world, that had been created by a tiny fragment of the population, the real world in which most people lived had to bear the cost of the exercise. At first, it all seemed to be a technical matter; but later a conflict opened up between the demands of the financial sector and the real economy: and by then the government was so committed to saving the financial world that real people in the real world had to forced to accept lower living standards and lesser public amenities. This began slowly under the Gordon Brown government, and consequently the government rapidly expanded its borrowing to continue funding social commitments.

Then came the coalition government, in 2010. To the incoming ministers, the amount of debt that the former Labour government had been incurring was unsustainable. Month after month, as the taxation that people had paid stagnated, the government had borrowed what was necessary to keep public and social services going. Large areas of the economy - especially of the real economy - imploded and ceased to pay taxes to the state or wages to former employees [who also ceased to pay taxes when their incomes failed]. Thus the temptation to borrow yet more to compensate for the failure of the material economy was pressed upon the new government: which boldly decided that the deficit must be eradicated. So austerity became the essence of the coalition's economic policy; and mass misery was ensured. Since most of the misery was well away from Westminster politicians and civil servants could ignore the consequences of their actions. And because there was no place for humanity or reality in their model markets, the Econocracy could ignore the situation entirely.

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