Reprinted from LeftHorizons UK
If anyone asks me, “what's this neo-liberalism everyone's talking about?” Rather than telling them to get mired in at the deep end of Michael Roberts's Blog, this is how I answer:
Apparently the term 'trickle-down economics' was an actual joke made by the American humourist Will Rogers, who mocked President Herbert Hoover’s Depression-era recovery efforts, saying that "money was all appropriated for the top in the hopes it would trickle down to the needy."
Clearly, Rogers understood economics better than Margaret Thatcher and Ronald Reagan, but unfortunately he didn't become the President of the USA.
All joking aside, even if in terms of incomes there is a 'trickle-down effect', which there clearly isn't, there is another factor to so-called Reaganomics which we never hear about.
The trickle-down theory argues that if taxes for the rich were cut, that this new capital would create more jobs and that the resulting surplus-value created by these would eventually be distributed downwards. It is often forgotten that workers' incomes do not consist solely of the amount they receive in their pay packets: they are also made up from a social wage, which includes health services, affordable housing, education, leisure facilities, infrastructure and a host of other public services.
Cutting taxes on the wealthiest means that there is less capital for this social wage. This is compounded by the fact that while we're waiting, until our hair turns white, for the trickle-down effect, our wages actually fall in real terms. This is due to inflation as well as the practice of continually renewing employment contracts, in which the terms and conditions are eroded. Reagan and Thatcher’s new economic plans included emasculating the trade unions, with the result that employers called the shots unimpeded by pesky shop stewards.
As part of the social wage for low paid workers, the state would subsidise low wage earners, but since the priority was to cut top taxes rather than to provide a safety net for the worst off, this subsidy would also be cut to offset the resulting losses of reduced tax revenue.
Now, in order to get any subsistence to offset low wages, workers are put through a gruelling, invasive regime, having to account for their every hour as if they were prisoners just released on probation.
Far from the workers becoming ‘better off’ as a result of ‘trickle-down economics', they are hit with a triple whammy – wages cut, subsidy against low incomes cut, then faced with having to pay (again) for health care and other services, because these services have now been sold off for a song.
On top of that, guaranteed affordable housing with life-long tenancy, which was also part of the social deal, has also gone. Forty years ago, a typical weekly rent for a council house cost about 10 -15% of a labourer's wage; now there are few council houses and most privately-rented housing (which once was council housing) will cost up to 60% of an unskilled worker's income.
As if all this wasn't bad enough, where those who found themselves out of work due to illness or disability in the past and were looked after as part of the social wage, they too found that they would be denied support. Instead, they would be used to create the fear factor – hundreds of thousands have been driven to despair and actual death in an attempt to show workers that if they don't put up with their lot and conform, they will end up homeless, destitute or possibly even dead.
Over the last few years a few proper journalists have been reporting on the growing inequality between the tiny elite who control the world economy and the rest of us. These reports are based on actual incomes in terms of hard cash, but they don't tell the whole story. Life for those at the bottom of society is actually much more precarious than even these reports suggest!
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