Public Domain
We live in the sixth richest country on the planet yet this winter millions may well go hungry or freeze or both. Thousands of small-medium businesses will also face a desperate fight to stay alive.
Despite this, on Friday the Tory government introduced a bonanza of tax cuts which benefit the wealthiest in society the most. Apparently, these tax cuts which will greatly increase government debt at a time of rising interest rates, will boost economic productivity and effectively pay for themselves. This is yet another attempt at ‘trickle down economics’ which are thoroughly discredited and just do not work. Even President Joe Biden, a long time friend of Wall Street, has recently criticised this approach saying:
I am sick and tired of trickle-down economics. It has never worked.’’
This government is not going to address the rapidly increasing social and economic inequality in this country which greatly contribute to Britain’s very low labour productivity.
Since the 2008 great financial crisis labour productivity in the UK has remained well below the historical average of 2%. Reasons for this include zero hour contracts, low wages, the growth of part time workers, and a lack of investment in R&D, new technology and better working practices.
The current government has no plans to address any of these issues. Instead, it is committed to increasing the wealth of the richest people in society. Even international financial markets don’t believe the absurd claims of the government that tax cuts will increase labour productivity and boost economic growth. Look at the collapsing value of the British pound which is nearing parity with the US dollar. The devaluation of the pound is greatly adding to inflationary pressures in the economy as imports become much more expensive hitting living standards even more.
Over the last twelve years since the 2008 great financial crisis we have witnessed the largest wealth transfer in human history. In 2021 the House of Lords produced a report that acknowledged that central bank money printing, benignly known as quantitative easing, has massively increased the wealth of the billionaire class while living standards for the bottom 60% have gone down. During 2009-2012 period the top 5 % saw their wealth grow by a staggering £128,000 each. Then during the Covid era of magic money printing by central banks, which created over £11 trillion out of thin air, that again saw a massive increase in the wealth of the top 5%. In the UK 24 new billionaires were created while living standards went down for millions.
The massive increase in social and economic inequality in the UK over the last 12 years will be eclipsed by the calamitous collapse of living standards during the course of the next recession. Even the Bank of England acknowledges the massive fall in living standards to come.
Of course, it does not have to be this way. The British people do have the choice of taking collective action together to try and avert the economic hurricane we have entered.
Last Friday's tax bonanza for the millionaire and billionaire class has caused the British pound to collapse in value. On Monday morning ir almost reached parity with the US dollar. This devaluation of the pounds purchasing power is highly inflationary and will exacerbate the cost of living crisis which is ongoing in the UK at the moment.
As if this was not bad enough the tax cuts for the rich budget has caused turmoil in bond markets with a huge sell off in British government 10 year bonds leading to huge spike in yields which reached 4.51% on Tuesday. This prompted an emergency intervention from the Bank of England which has promised to buy long dated bonds such as the 10 year for the next few weeks to calm financial markets and instill confidence that UK plc is still a viable economic concern.
It would appear that financial markets don't believe that the UK government has a credible plan for paying off the huge amount of debt it has accrued due to its massive tax cuts and the emergency intervention into capping energy bills for consumers and businesses.
Some speculators and financial analysts are warning that the UK may need an IMF bail out if the pound and UK bonds don't settle down. Many are stating that the Bank of England needs to institute an emergency rate rise to calm markets. If the meltdown continues then the UK government is in serious trouble. Of course, an sovereign debt crisis for the UK government will lead to more austerity for the hard pressed public reeling from a rapid decline in living standards this year.
This all illustrates the bankruptcy of the capitalist system which can only promise declining living standards, economic turmoil, blackouts, hunger and support for a continuation of the proxy war with Russia via Ukraine.