Payguy
Today 12:19 AM
For a while now I have been focusing on the question of what economic policies would cure the Global Financial Crash. This is as we have seen the trivial question with a straightforward answer.
The real question I should have been asking is why hasn't a solution been proposed and debated. The shocking answer I have come up with is that those with the power to get us out of this mess have decided it is not in their interest to fix the world economy.
Consider that under austerity the relative wealth of the world richest people has increased. For example the Times Rich List of the 1000 wealthiest people in the UK has shown their combined wealth has increased by 5% in the last 12 months to a new record high of £414 billion-
BBC News - Sunday Times Rich List suggests UK's wealthiest defy recession
As an aside we might ask why these people are so desperate to earn their next billion. My own preconception is their greed is a product of the way they were potty trained, serious only child syndromes and seriously bad bullying in certain English boarding schools. Certainly these people are dysfunctional enough that they are capable of inflicting limitless misery on everybody else in order to get exactly what they want.
Back to the point though which is to compare the effect of austerity on the super rich and the other 99.999% of the population. The effects of the austerity policies propagated by the Tory led coalition have been severe and immediate
With average incomes dropping over 6% last year in the UK (according to ONS earnings figures).
Indeed austerity is likely, with only 10% of the Tories cuts implemented, to intensify and carry on for at least a decade. For example see last years IFS report-
Presenting its analysis of 2011 autumn statement, the Institute for Fiscal Studies (IFS) predicted real median household incomes would be no higher in 2015-16 than they were in 2002-3. In other words, more than a decade will have passed without any increase in living standards for those on average incomes.
The same analysis estimates 1 in 4 children will also end up in poverty.
So the implications are clear. Our current policies lead to rising incomes for the ultra rich but grinding poverty for everybody else. But what would endanger this balance and result in policies that increased living standards for the 60 million UK citizens as the expense of constraint in inequality for the ultra wealthy?
To my mind the answer to this and the reason the entire right wing press, the Institute of Directors, CBI, economic think tanks, Tory donors and so forth are behind the austerity is the role of wage equalisation in international trade.
It has been known for a long while (Factor price equalization - Wikipedia, the free encyclopedia) that when two countries enter a free trade agreement, wages for identical jobs in both countries tend to approach each other. After the North American Free Trade Agreement (NAFTA) was signed, for instance, unskilled labor wages gradually fell in the United States, at the same time as they gradually rose in Mexico.[citation needed] The same force has applied more recently to the various countries of the European Union.
The implication of this is that globalisation has begun to open up the huge workforces of China and India who are currently paid much lower wages than their US and European counterparts.
Given that we know, through Factor Price Equalisation, as long as we continue free trade, that the wages of these workers are going to equalise over the next 20 years.
There are of course two ways that wages could equalise. In the first scenario governments in Europe and the US deliberately pursue their current austerity program's and suppress workers wages. The Chinese and Indian wages gradually rise to meet our levels and the converged wage for workers in a decade or twos time is modest. This scenario of course supplies much larger profit margins to the ultra wealthy owners and managers of multinational corporations as their wage bill is low. Bankers are happy to as austerity allows greater indebtedness to them and
inflation isn't allowed to eat into the real interest paid by households on the debts owed to those that have lent the money. As a side benefit, privatising the profitable parts of the state (tuition fees, the NHS, NATs etc) under the excuses of austerity allows further tax payer backed profit opportunities.
The other scenario for wage equalisation- sovereign debt monetization, tax reform , financial transaction taxes, Keynsian stimulus etc- are not to be welcomed by the global elite. They circumvent the Au