Private Sector Parasites: Who Are the Real Wealth Creators?

PS1

The private sector is evading its taxes, failing to pay workers a living wage, and becoming a burden on the tax payer for subsidies and bailouts.  At what point to we stop calling them wealth creators and start calling them parasites?

Bailouts

PS2

Neoliberal democracies around the globe have been using taxpayer money to underwrite and directly pay off phantom debts made by the banking sector.

In the bailout of 2008/9, the UK government had to guarantee funding to the banking sector, of 101% of GDP.  That is, the UK diverted over £2trn of tax payer money from public expenditure, to a handful of banks. This is equivalent to almost 3 times its entire annual budgettwenty years of NHS spending (£106.7bn a year); forty years of education spending (£48.2bn a year); or five hundred years of job seekers allowance (£4.9bn a year).

According to the Special Investigator General for the Troubled Asset Relief Program’s (SIGTARP) quarterly reports, the US government’s total layout in bailouts was $3.3trn whilst guaranteeing $16.9trn of future protections.  The GDP of the US currently stands at just $14.99trn, meaning the tax payer has guaranteed toxic bank debts to the value of 113% of their total annual earning capacity. This is equivalent to ten years of total federal spending ($6.3trn a year), sixteen years of pension payments ($1.1trn a year), twenty one years of total education spending ($0.8trn a year) or a whole twenty eight years of the entire welfare system ($0.6trn a year).

Most recently, the people of Cyprus have had the Eurogroup and the IMF place conditions on their bailout of the Cypriot Banking sector requiring Cypriot depositors (people holding their money in the banks) rather than bondholders (people investing in the banks).  This is the first time that the bailout of the banks has been made in such an explicit way.  The total sum required from Cyprus’ population of just 1.1 million people, is 5.8bn Euros.

One might argue the changes made to the Cyprus bailout have made it more egalitarian than those in the US and UK, given that all deposits under 100,000 Euros will be left untouched, whilst those over 100k could see up to 40% of their wealth confiscated in return for shares in the banks (worthless).

The approach in the US, UK and wider Europe has been to fund the bailouts through catastrophic ‘austerity’ measures that have seen the eurozone economies stall, public services cut drastically, and mass unemployment.

However, the precedent of the EU and IMF creating the legal framework and the technical capacity to flick a switch and transfer money directly from the bank accounts of citizens to central banks cannot be overlooked.

Not a single banker has been tried or jailed for their undisputed responsibility for the financial crisis.  Not one piece of additional regulation has been agreed for the derivatives market which the crisis emanated from, and the market continues unabated.  Today, there is $700trn in derivatives debt just waiting to kick off the next financial crisis.

The poor and middle classes of Europe and the US are being asked to make life limiting cuts to their standards of living, wages and public services; meanwhile, there is no such thing as austerity for the 1%.

Taxes Are for the Little People

PS3

It was revealed recently that only one in four of the UK’s top companies pay their taxes, meanwhile they receive tax credits to the tune of hundreds of millions of pounds funded by people who did pay their taxes.

Company taxes now constitute only 12.5% (Corporation Tax is just 7%) of the tax revenues of the UK.  In comparison, the people’s taxes (income tax and VAT) make up more than 60% of the tax income.

Corporation Tax is lower today than at any time in its history.  UK Corporation Tax in 1984 was 52%.  By 1986 it was 36%.  In 1999 it dropped to 30% and in the most recent budget it was cut to 21%.

Corporations have never had it so good.

The result of these tax changes is that tax receipts are lower today than in 1963.  Worse still, the composition of those taxes have changed as tax cuts to the wealthiest have seen tax rises to non means tested taxes that hit everyone.

Between 1979 (the launch of Thatcherite Neoliberalism) and 2012 the top rate of income tax was cut from 98% for unearned income and 83% on earnings to a flat 45%.  At the same time, VAT, which applies to almost everything your regular person might buy, rose from 8% to 20%.  National Insurance has almost double, from 6.5% to 12%. Whilst income taxes have dropped as a proportion of income for most since 1979, income tax as a proportion of income has dropped significantly more for those earning higher incomes.  In short, the total tax bill of the average waged earner has increased to attempt to cover the shortfall of a great tax break for the wealthiest.

We, the 99%, are the wealth creators (of any wealth that is shared, not hoarded). We pay the lion’s share of the taxes in the country and our taxes have gone up to compensate for the taxes of the 1% going down.

Whatever Happened to the Living Wage?

PS4

Wages are stagnating or falling for most of the 99%.  In  the US, the earnings of so called ‘High School drop outs’  have dropped 66% since 1969, and people with some college – the median education level in the US – have seen their wages drop by a third.

Outside of the US and UK, the outlook isn’t much better for the global 99% either.  Global wages, whilst still on the rise, have slowed to the point of stagnation.  Wages rose 3% in 2007, dropping each year since to just 1.2% in 2011 (0.2% is you remove China from calculations).

Contrary to the language of workers versus shirkers in the UK, and the language of Mitt Romney’s ill fated presidential campaign in the US, the working class are working harder than they ever have, and for less.

Research by the International Labour Organisation demonstrates that the rise in Labour Productivity has outstripped wage inflation at an ever increasing rate in recent decades.  Between 1999 and 2011 labour productivity (the output of workers time and efforts) increased at double the rate of wages.  In Germany, labour productivity surged by almost a quarter over the two decades to 2013, while real monthly wages remained flat.

The reality the world over is that people are working harder, for longer, for less and that work is more unlikely to see them move out of their social strata than at any time in the last five hundred years.

Don’t Even Talk to Me about Debt

 PS5

It is no surprise that with wages flat or falling and the cost of living (inflation) rising, that a rapid loosening of rules on personal ‘credit’ (debt) in the nineties created a personal debt boom as people fought to live the dream they were being sold.

In the ten years between 1999 and 2009, the annual salary rose 13.6%.  During the same period, house prices went up 130%, a loaf of bread went up 147%, a litre of petrol went up 42%.  Easy access to credit created consumer demand, which concealed the gap between wage and cost of living inflation. The consequence: Personal debt rose during this period by 158%.

Yet the most condemning verdict on neoliberalism during the period from Thatcher/Reagan to Cameron/Obama has been the explosion not of personal debt but of public debt.  By 1980, the national debt of the UK had fallen from a post World War II high of 225% of GDP to just 45% of GDP.

In the period since, we witnessed sharp rises in GDP, the deregulation of the financial services sector (the so called “Big Bang”), and the mass selloff of the nation’s national industries.

Debt not only did not fall, it trebled.  The national debt of the UK now stands at 138% of GDP.

We Are Masters Dressed as Servants

PS6

Personal and public debt have been used to mask the failures of capitalism and, to be specific, its neoliberal variant (the system we live in).  For decades wages have fallen, social mobility has seized up and wealth and income inequality have grown irreconcilably.  This decade is where we are witnessing the mounting horrors of neoliberalism’s chickens coming home to roost, and it’s the 99% who are being handed the shovels to clean up the mess.

Those with more than a vested interest in maintaining the status quo are rolling out familiar scapegoats from crises past…the poor become scroungers, and so do the immigrants.  According to them, we could all be living in the lap of luxury if it weren’t for these cretinous interlopers.

If, given our unprecedented access to information through the internet and the lessons we have learned in history, we are foolish and spiteful enough to fall for this again, we only have ourselves to blame.

The reality is we have been taught to covet ‘stuff and things’ by the people selling them.   We could abandon this, and choose instead to seek those things which create true joy – love, equality, freedom, human progress, community and time.  We could create a world that works for everyone on this blue-green planet.   But first we must recognise the parasites leeching our collective industry and consign them to the dustbin of history.

14 thoughts on “Private Sector Parasites: Who Are the Real Wealth Creators?

  1. As long as President Obama is in power, the wealth takers will prevail. And I say this beyond any reasonable doubt. It is a fact that the public servants who are supposed to be working on our behalf, paid by our tax dollars and charged with working to ensure domestic tranquility and promotion of the general welfare, seem to be alternating today between an apparent ambivalence and an adversarial position where our fiscal inquiries are concerned. In the name of correcting the weaknesses in the financial system, these agents of the state have launched a full-blown assault on the true creators of wealth in this nation, while the small group who actually participated in, promoted, and profited from the latest economic crisis have walked away with millions of our dollars in their pockets. When capital flees America’s shores and Obama is left with a nation of victims and government employees, it will not be long before his mendicants come knocking on the door of the White House demanding their monthly check the question will then be who is going to bail him out?

  2. What?! It’s a difficult case to make that the rich pay little in tax. The richest 1% pay around 25% of all income tax in the uk and the richest 10% pay around 55%.

    And all these sort of left wing arguments seem to be based on the notion that wealth and money is something that is finite and therefore needs to be shared round, rather than something that is created and potentially infinite. The best way to ensure everyone has wealth/money is to enable an environment where everyone can create it (while supporting those that truly cannot) – not to disincentivise people from creating wealth because they have to hand it over to their government!

      • Well, to be purest about this, it’s wealth that is created and money is just a representation of that wealth. An ultra basic example would be that i can go outside, plant some seeds and grow some potatoes – then i can then sell some of those potatoes and buy/ swap them for something else. All the time creating wealth. There are some good videos on YouTube that explain wealth/money creation (in far more detailed terms!) and are easy to find. Worth looking at whatever your political persuasion.

        • If you know how money is created then you know it is finite, unless more is created. It can only be created through debt. It is used as a proxy for wealth. We might well all be alot happier with our global commons back and ditching fiat currency given it’s inefficiency of a) distributing wealth, and b) maximising the utility ( how may people can access trade, markets and so on).
          So your first response about money ‘needing to be shared around’….that IS the point of money. If it does not circulate, it serves no purpose as part of the real economy.
          People as individuals cannot create money, they can merely access it through their labour (wage) or their products/services (custom). However, we have a pool of people who are outside of that market place, creating money themselves in the derivatives and securitization markets. They serve no social utility, the money they create does not make anything (other than personal wealth), they avoid taxation (which would bring it back into circulation) and then when they’re schemes collapse the taxpayer pays their debts. That’s not capitalism. Frankly, any self respecting capitalist should see this as the antithesis of Adam Smith.

        • You would only be able to sell those potatoes (and even to produce as you will need some initial investment) if there is some money in circulation. Theoretically you can swap them for something else but this is not how we do things in our economy… Real production of goods and money creation are two separate things… You can get more information on the topic on http://www.positivemoney.org

          • You’re absolutely right. This is why we need far better education regarding money and it’s role in society. If people do not understand how it is created or what it’s purpose is, they are barred from the real debate about current failures. Positive Money is a great site. I’ve linked to it before for just this purpose. Nice one J.

            • I take both your points about the limitations of currency – though transitioning to some form of alternative would have to happen organically if it were to avoid having a disastrous impact on the general population. But the fact is that there is money in circulation that does facilitate wealth creation, albeit clumped in certain areas. So people can create their wealth.

    • The richest 1% may pay the largest portion of income tax, but the tax they pay is a far smaller portion of their income than that of people on lower wages. They own more wealth than every other percentile – from the bottom 1% to the richest 99% ADDED TOGETHER, and their share of the national income is growing at an ever increasing rate, while the wages, wealth, and prospects of everyone else are decreasing. I’d go as far as saying this is deliberate policy driven by that wealthiest 1% who own the banks, industries, media and political parties, and use them for their own enrichment.

      This country has seen a period of huge wealth creation and simultaneous equalising of incomes, it was under the overtly socialist government of 1945. It also saw the creation of NHS, nationalisation of essential industries and infrastructure, and resulted in full employment and the biggest and fastest fall in public debt in the past 150 years. Only after the installing of neoliberal economic policy has the income disparity and general levels of poverty increased in our country. We are almost back in the same social and economic hole we were before Bevan and Attlee’s socialist reforms, and we need a longer term cure this time.

      • For the vast, vast majority of people we’re in a far better place than 1945, with much greater levels of comfort, health, movement etc etc. And that’s partly due to a liberal economy. Though we still haven’t cracked it for the bottom few per cent. Don’t get over hung up on the spirit level argument. And why wish for the men in Whitehall to control everything, less government for me, not more.

  3. Roddy, the point about spelling it out is NOT to depress us BUT to empower us. We ARE the wealth creators, even without any money we still somehow make them richer [its like insurance… the poor pay so that the insurance companies can pay the claims of rich folk whilst poor folk always get the “act of G-d, not covered” excuse]. Save your own money and don’t pay it to the insurance company… let the rich pay for their own insurance claims. I’m no economist, but the whole insurance thing is a pyramid scam in my mind. The design of insurance resembles the design template for everything else in England.

  4. Pingback: Private Sector Parasites: Who Are the Real Wealth Creators? | SteveB's Politics & Economy Scoops | Scoop.it

Leave a Reply