What will it take?
The following is an edited excerpt of my upcoming book, How The World Really Works* (title may be due to change).
Voters across the developed world are caught in a contradiction of their own making.
We sneer as President Barack Obama takes $400,000 from Wall Street for a single speech, as we did Hillary’s speaking fees from Goldman Sachs.
We claim to oppose elitism and tire of Wall Street’s influence over the political process, and yet, across three continents we elected multi-millionaires and billionaires whose personal fortunes are the direct result of the very economic levers keeping millions in poverty, and millions more in financially precarious positions.
Turnbull, May and Trump: Each are the beneficiaries of sizeable inheritances, tax havens in the Caymans, (tax free retirement / superannuation / 401k accounts), property development and investment.
In the case of Trump, he owes his success to screwing thousands of students out of their education at Trump University and his casino bankruptcies screwed thousands of workers out of millions in retirement savings.
Trump himself has declared corporate bankruptcy six times, not including the 2014 bankruptcy of Trump Entertainment Resorts, of which he owned a 5 percent stake.
Words like ‘productivity’ mean nothing anymore because workers know they will never see the spoils of their increased labour. Median income is lower than it was in 2007, according to historian, Thomas Frank. Workers share of the profits hit a record low in 2011, while investors’ share of the take hit an all-time high the same year and has continued to increase ever since. Median income per hour is the same now as it was in the late 1960s.
From the middle of the Great Depression through to the 1970s, low income American workers took home 70% of the country’s growth in income. But since 1997, the dawn of the new economy, the same group of workers pocketed zero per cent, which instead went to the country’s investors, financiers, managers and professionals. The privileged are doing better than at any other time in history, though their numbers are limited.
The nation’s voters need to come to terms with the fact that governments no longer have responsibility over the economic well-being of the people which votes it into power. No amount of hard work, toil and canny savings strategies will reverse our financial misfortune.
We need to stop casting ballots in favour of our own economic enslavement. (In the US many need to learn how to cast a ballot in the first place, that that is a topic for another column).
Voters need to accept that voting in a millionaire who has made a career out of bankrupting his business partners will not reverse the situation, or increase the personal fortunes of the individuals responsible for bringing him to power.
Today’s 25-year-olds are worse off than those who were 25 back in 1996. And 2027’s 25-year-old’s will be worse off than those who are 25 in 2017.
“The same is true, incidentally, of people who are thirty-five, forty-five, and probably fifty-five” writes American political analyst, historian and journalist, Thomas Frank, in his book Listen Liberal.
This trend will only increase in its severity unless voters stop buying the bullshit and see the world for how it is.
We have more power than we give ourselves credit for. Governments would do well to remember what happens when the wealth created by the masses is held hostage by the ruling elite.
It’s called the French Revolution and even though Zhou Enlai (the first Premier of the People’s Republic of China) is famously attributed as having said in the early 1970s it was ‘too soon to tell’ what the consequences of that event were for world politics, it certainly didn’t end well at the time for the ruling French elite.
I don’t know what to say that hasn’t already been said. No leader across the developed or developing world is living up to our already low expectations.
President Fuckstick Von Clownface admitted yesterday – to absolutely nobody’s surprise – that he was not up for the job, which as it turns out, is more difficult than he had anticipated.
In Australia, President Trumble continues to disappoint almost everyone except seven blokes on the backbench.
Only Theresa May, the reanimated corpse of Maggie Thatcher seems to be enjoying the confidence of the people for her promise to keep things exactly the same, buoyed by Labour’s complete lack of confidence in Corbyn, a well-meaning leftist totally unsuited to being party leader, backed by dozens of Blairites, who these days sit ideologically closer to the Tories than the party of the working class.
Some pretty powerful contradictions have led us to this moment in history.
America voted for a man whose nostalgic promise to “Make America Great Again” envisioned a return to the era which benefited from the greatest expansion of the public sector in living history, while his administration has set about dismantling the very laws, initiatives and programs which endowed the post-war middle class with wealth assets that appreciated over their lifetimes: free college education, business grants and loans, infrastructure services and organisations.
Yet many continue to support policies of neo-liberalism and so-called ‘free-markets’ wrongly believing these ideologies are the only route to their prosperity.
And, strangely, we continue to vote for candidates we know ahead of time will disappoint us. In Trump’s case his lack of competency seemed to bolster his popularity.
Examining how to get leaders to change their behaviour is a futile exercise.
Only voters can change the course of history. But the learning curve is steep and we have to get up to speed, fast.
Learn this: If the right to fairly paid employment, public education, health care for all and deficit spending are the marks of a socialist society, then it might do well to remind your nation’s leaders that without these post-war time initiatives there would be no wealth for the privileged to now enjoy.
Moreover, the private sector seems to be comfortable with its own version of socialism, in the guise of corporate welfare.
In the US, the big banks were subsidised to the tune of $70 billion in 2012, according to the IMF. In Europe it was $300 billion, and in the UK up to $110 billion (around $85 billion pounds).
February’s Good Jobs First report revealed that three-quarters of all state economic development subsidies went to just 965 corporations since the beginning of the study in 1976, with Boeing the greatest recipient with more than $13 billion received in corporate subsidies.
Other companies include Alcoa ($5.6 billion), Intel ($3.9 billion), General Motors ($3.5 billion) and Ford Motor ($2.5 billion).
Goldman Sachs received $661,979,222 worth of subsidies across 28 different award programs. Amazon received $330,756,147 across 39 programs, Google $632,044,922 across 26 awards, and Samsung received $317,148,838 17.
These awards have gone not only to the corporate parents but also to their divisions and subsidiaries. For example, hand-outs worth more than $1 billion have been given to Warren Buffett’s Berkshire Hathaway by way of its holdings such as Geico, NetJets, Nebraska Furniture Mart, General Re Corporation, Lubrizol Advanced Materials, and Webb Wheel Products.
In Australia, the fuel tax credit, one of the longest running corporate subsidies in operation since the Howard era, accounted for $2 billion of the $5.2 billion claimed from this scheme in 2011. The subsidy averages $2.3 billion a year, from 2012-2016, according to Environment Victoria.
Australia’s Big Four Banks – Commonwealth, NAB, Westpac* and ANZ received $3.75 billion in subsidies from the Australian government in 2013. Price Waterhouse Coopers unironically charged the government $10 million for a report on social welfare.
PwC has taken more than $759 million from the government over the last 10 years, according to stockbroker and journalist, Michael West. Ernst & Young has banked $525,064,685.80 and Deloitte $415,773,994.86. KPMG takes almost $100 million a year from the government.
So, we can do away forever with the idea that markets and free and unregulated. To the contrary, economies have been selectively regulated or manipulated to the benefit of specific and individual companies. The same set of rules do not apply from one business to another.
Far from a socialist economy, we are living through an era of corporate communism. And if governments applied the same subsidies to individuals as they do to the private sector, it would still be capitalism, as it is now. Except the government would be investing as heavily in infrastructure, education and employment as it is in the private sector: Generously.
The world needs to come to terms with welfare as a tool of both the private sector as well as lower income earners.
We are told taxing the rich is the only solution to poverty and middle-class economic insecurity, the argument neatly arranged into competing polarities where one person’s prosperity comes at the cost of another’s poverty.
The truth is the rich needn’t be taxed a single extra dollar to raise the living standards of 90% of the western world.
Government spending is the rising tide that floats all boats.
After years of deficit fear mongering, Australia’s Treasurer, Scott Morrison tried, awkwardly this week, to manoeuvre himself out of the rhetorical bind of his own creation, explaining that actually, debt isn’t all that bad.
In fact, he said, there is good debt, and bad debt.
Well, first off, what a load of horse shit.
All debt should be good debt if the government is confident in the benefits of its fiscal decisions. Bad debt is another way of saying ‘we spent or borrowed money and we don’t know why, because there are no foreseeable returns’. And, in a sense, as we shall see, government debt isn’t debt in the conventional sense of the word at all. It is better thought of as a form of money. The problem is never ‘paying it back’. The problem if there is too much of it is that there might be inflation. In any case, that is what taxation is for.
But while we are on the topic of bad debt, let’s not forget that governments’ refusals to spend has forced private debt to skyrocket in Australia, the US and UK.
Forcing workers to take on more debt than they can afford because you won’t dig into the public purse, that is what can reasonably be referred to as bad debt. But that’s not the kind of debt Sco-Mo wants us thinking about. He’d prefer we believe that if the government spends more than it can afford, inflation will result, there will be a recession and you’ll go bankrupt. In reality, the quickest route to bankruptcy is taking on more debt than you can afford to pay back, either as an individual, a household, a business or company.
Worse, the need for a loan would be neutralised or at least diminished by the creation of assets and infrastructure that would spur investment, create jobs and keep the currency healthy.
Absent a trade surplus, an economy can’t grow for long without a fiscal deficit, and can’t maintain equitable full employment.
To meet the needs of outgoing expenditure, the government issues bonds to investors in exchange for a loan, which is paid back with interest.
In a growing economy, (or even a steady one) with a rising price level, the private sector needs assurances that their financial assets are safe. The only source of these safe financial assets is the monetary sovereign government – whether in the form of risk free interest-bearing government securities or in the form or in the form of base money (electronic bank reserves at the central bank and physical currency).
The only way to maintain the value and safety of the private sector’s financial assets is for governments to run fiscal deficits. The safer the financial assets the non-government sector wants to hold, the bigger those fiscal deficits will need to be.
But the private sector has conspired to put the fear of god into workers whenever they hear the word ‘deficit’. Goodness knows why, because the private sector benefits every time the government borrows.
“If the government is not prepared to run large enough fiscal deficits to meet the saving needs of the private sector at full employment, then either the private sector will have to abandon its saving desires, which will lead to a more fragile financial system as time goes by, with more private debt, or the economy will not be able to grow and will have to contract, leading to unemployment and underemployment,” says Economist Dr Steven Hail.
Economists such as labour market practitioner Dr Victor Quirk Dr Bill Mitchell have argued that the 5.6% unemployment rate is a deliberate creation of the government and private sector conspiring to keep wages low.
Running fiscal deficits is, then, a matter of sustaining full employment, without growing domestic financial fragility and without exporting that fragility to other nations. It allows the private sector to net save without shrinking the economy, and to build up its holdings of nominally safe financial assets within robust household and business balance sheets.
A responsible fiscal policy involves a commitment to run sufficiently high fiscal deficits over time to allow for the maintenance of full employment, while not running deficits which exceed those consistent with the productive capacity of the economy. Never mind the fact that inflation has been well below acceptable levels for the better part of 25 years.
Responsible governments run fiscal deficits. A fiscal surplus should be rare indeed, and a consequence either of a persistent trade surplus with the rest of the world, or it being appropriate to allow the ratio of private debt to GDP to continue increasing over time.
“A useful function of a job guarantee is to automatically adjust the scale of that deficit to the needs of the economy,” Dr Hail says.
Voters need to learn their lesson and stop voting in contradictions.
Trump, Turnbull and May are no more likely to fix the system and increase our personal fortunes any more than Obama, Abbott and Cameron were prepared to before them.
History is repeating itself and we are letting it.
Voters and workers need to raise their expectations and immunise themselves against rhetorical bullshit. People need a genuine option for change, or for a return to a time where the financial well being of voting constituents was the primary concern of government.
Doing the same thing over and over expecting different results is the definition of insanity.
Claire Connelly is working on her first book, How The World Really Works, a guide to recognising rhetorical red flags and immunising yourself against bullshit. You should definitely buy it when it comes out. A podcast of the same name will also be launching in the coming months.