Regular readers will know that I have spent quite a lot of time reading the…
The neo-liberal class warfare on the poor and the rest of us
I read a report just released yesterday (March 9, 2016) – The uneven impact of welfare reformby the Centre for Regional Economic and Social Research, which is located at the Sheffield Hallam University in Britain. It showed that the British Government is successfully prosecuting a class war against the disadvantaged and, increasingly, against segments of ‘middle’ Britain. It confirms the view I formed in 2010 when the Conservative government was elected and announced its first fiscal statement in June of that year that it was intent on pursuing some unfinished business – to wit, entrenching the attacks on workers and income support recipients and redistributing national income in favour of capital. These attacks were somewhat interrupted by the urgency to deal with the meltdown associated with the GFC. Leopards don’t change their spots and the Conservatives are intent on finishing off the agenda that began back in the 1970s with the attacks on unions and public services. I was thinking about the report as I was reflecting on a radio program I heard the other day about how the Australian National Library is being forced to make severe cuts to its archival services among other things in response to federal government austerity plans. Mindless is the first word that came into my head when I was listening to the program. In the case of Britain, the attacks are being dressed up as ‘welfare reform’. In the case of Australia, the spending cuts are being dressed up as ‘efficiency dividends’. The neo-liberal nomenclature is an attempt to obscure what is really going on – a massive attack on society, its disadvantaged, and its cultural institutions. Neo-liberals hate society and anything that provides inclusive access to all in the benefits that society can deliver. These cuts are deliberately targeted to reduce social inclusion and undermine information access.
1. make change in (something, especially an institution or practice) in order to improve it.
First to Britain and a quibble about the Report from the Sheffield Hallam University. The title of the report The uneven impact of welfare reform bothered me for the same reason that I find the constant references by the IMF and the OECD to the need for
‘structural reform’ irksome.
Neo-liberals are always talking ‘reform’ yet mostly the policies that they are talking about are not consistent with what I would call improvement.
Undermining worker prosperity and increasing precariousness of their working lives is not an improvement.
Causing families with dependent children to go without necessary items that a civilised society would define as being requisite for social inclusion and a minimum standard of living is not an improvement.
Devastating regional areas that are already under severe stress from declining labour demand and rising unemployment is not an improvement.
Not disciplining a housing price bubble, which erodes housing affordability and forces more disadvantaged people in the social housing, and then, undermining the real income of those who do rent social housing, is not an improvement.
Targeting “the sick, the disabled and the unemployed” with pernicious spending cuts is not an improvement.
All this and more are documented in the Report, which is one of the only studies I have seen that analyse the impacts at the micro economic level of the British government’s austerity program.
But, I wish they had used a different descriptor of George Osborne’s austerity program. There is no sense that we would consider the policy positions taken since 2010 in Britain to be consistent with a ‘reform’ agenda.
Neo-liberal governments always try to hide their tracks. For example, in Australia, an essential table in the ‘Budget Papers’, which analysed the distribution impacts of the proposed fiscal policy strategy of the Commonwealth government, was purged two years ago so that none of us could easily appreciate what the austerity program was going to do to disadvantaged people.
Subsequent private analysis showed exactly why the government purged the analysis – their proposed policy changes would have devastated the most disadvantaged Australians.
So the Sheffield Hallam University report is very welcome and should be amplified throughout Britain.
The Report concludes that:
… welfare reform will hit the poorest places hardest because they generally have large numbers of people reliant on benefits. On the other hand, the reforms extend well beyond just those who are out-of-work to include significant swathes of the employed population as well.
Overall, some £14,490 million by March 2016 will have been cut across a range of categories (Tax Credits, Child Benefit, Housing Benefit, Council woke up Tax Support, etc).
A further £12,920 million per year will be cut by 2020-21. So, “a cumulative total of more than £27bn a year as a result of the welfare reforms implemented since 2010” will have been taken from welfare claimants.
Some of the planned cuts have been less than expected because of operational difficulties encountered. For example, the attempt to cut so-called “incapacity benefits”, that is, driving disabled people off benefits, has been less successful because the medical tests have found fewer people than were expected to be cut.
The Report is too detailed to consider in depth here. The summary message is clear:
1. The income losses are spread unevenly across the geography of Britain. The areas “hit hardest” include the “older industrial areas”, the “less prosperous seaside towns” and some “London boroughs” which are already “relatively deprived” with high housing costs.
These regions already have elevated levels of unemployment, low wages, and large numbers of people renting privately. All of these categories of disadvantage have been targetted in the latest round of austerity cuts by the British government.
Their disadvantage will worsen over the next five years as the austerity program unfolds.
2. “There is a clear and unambiguous relationship: as a general rule, the more deprived the local authority, the greater the financial hit”.
3. Low income “households with dependent children” will “lose large sums” from the changes. “Lone parents with dependent children” are also “hit hard”.
“83 per cent of the overall financial loss arising from the post-2015 welfare reforms” falls on “families with dependent children”.
4. “nearly all the financial loss from the welfare reforms falls on working age households … in the social rented sector”.
The losses in “the worst-hit places … are typically around £2,500 per household per year.”
And so it goes – so-called ‘welfare reform’.
One commentator reacted to the release of the Report in this way (Source):
The story about deficit reduction is a smokescreen to cover what is an ideologically motivated attack on the weakest in society … The effects will be increasingly felt more widely, particularly among working families … The recent mini-boom, partly driven by the housing market, is coming to an end … Austerity will increasingly be a drag on economic activity, leading to falling employment and weakening wage growth.
The ‘welfare reforms’ are just a thinly disguised attack on the working class and will achieve the aims of the Conservatives to finish off the agenda that started with Margaret Thatcher but was rudely interrupted by the GFC.
I should correct the starting point. As my current series on globalisation and neo-liberalism is revealing, British Labour led the Monetarist charge – Thatcher just rode in on their efforts.
While all the ‘losses’ are documented with some regularity, the winners of this strategy are not at all transparent. The wealthy and the large corporate interests are doing quite well out of this massive redistribution of national income in their favour.
Small-scale capital and workers are losing out badly.
Efficiency neo-liberal style
Which brings me to Australia and the recent decision by the Australian government to impose so-called ‘efficiency dividends’ on the Australian National Library.
I have spent a lot of time in and accessing many libraries around the world in my career. I have to say that the National Library of Australia is one of the better examples of public initiative. It is a brilliant resource and is a major asset to the nation, its citizens and citizens of other nations who want to learn about Australia.
Which makes it a perfect target for mindless neo-liberal fiscal attacks.
Just like I hate to term “welfare reform” to describe class warfare attacks on the most disadvantaged, I also have get angry when I read claims by the government that they are simply reaping ‘efficiency dividends’ – making the public sector work better – when they announce spending cuts to departmental budgets.
It is one of those terms that smarmy politicians use to screw public services and who play on irrational beliefs among the population that somehow these public servants have a good life (better than the rest of us in terms of pay and conditions) and need to deliver some ‘efficiency dividends’.
3. a benefit from an action or policy.
Like reform, which is a source of improvement, something that extracts a dividend (in the non-corporate setting) is delivering a benefit.
The Australian National Library was an early entrant into the digital age and had the foresight to anticipate the massive advantages that accessible information would present a population in terms of understanding our past, appreciating current events, and a host of other advantages.
In the early days of the Internet, one of the issues it was regularly discussed was the concept of ‘information poverty’, which referred to a new type of disadvantaged based upon lack of access to information.
Libraries around the world have worked to overt that type of poverty by creating marvellous resources that are publicly available and easy to navigate.
The Library of Congress service in the United States is a good example. The Archives nationales in France is another example. I use the latter often to find old documents about European history.
The Australian National Library’s Trove service is one of the best examples. Currently you can “Find and get over 473,064,350 Australian and online resources: books, images, historic newspapers, maps, music, archives and more”.
The NLA say that the “Trove helps you find and use resources relating to Australia. It’s more than a search engine. Trove brings together content from libraries, museums, archives and other research organisations and gives you tools to explore and build.”
More than 70,000 unique visitors access this treasure trove of information, which grows by the week (both the visitors and the trove).
1. Is free and uniformly accessible to all who can access a computer, which means almost everyone (even if one has to go to the many public libraries in the suburbs to gain free access).
2. It brings together a mass of information that is stored in libraries, museums, archive services and more.
3. It provides a very fast way to ‘test’ the existence of information, one of the problems researchers always face – searching for the ‘non-existent’.
4. It makes the research process very ‘efficient’ and we use that descriptor as it should be used – getting higher quality outcomes for less resource deployment (including time).
5. It brings the nation to the world in an accessible and easy way.
In the digital age, these type of resources are indispensable for a society aiming to be open and sophisticated.
Of course, neo-liberals generally hate transparency and the democratisation of information. It exposes their dirty tricks more easily, which is to be discouraged.
Which is why the National Library of Australia has become a target for massive (relative) budget cuts by the Federal government.
These cuts have been dressed up as the “government’s efficiency dividend”, which means that departments (and bodies like the National Library) have to deal with ad hoc annual squeezes on their spending capacity and still try to deliver first-class services.
The idea has no credibility. Even if there is some slack (waste) in an area of public sector activity at some point in time, it is ridiculous to assume that a public department can continually be eliminating slack over an extended period.
That assumption underpins the so-called ‘efficiency dividend’ justification for spending cuts within the public sector.
The National Library of Australia has been hit hard by these spending cuts and in addition to cutting staff numbers, scrapping international print and online subscriptions, abandoning public education programs and, increasingly, automating services (that is, eliminating person-to-person interactions), the Library has also announced it will cease to add further content to the Trove to deal with the spending cuts.
There are other related ‘cultural’ institutions in the public sector that are being confronted with similar cuts. Over the next four years, key insititutions such as the NLA, the “National Portrait Gallery, Museum of Australian Democracy, National Film and Sound Archive, and the National Gallery of Australia” will lose $A20 million in funding – a massive amount for these institutions to lose (Source).
As this article (February 29, 2016) – Turnbull, cuts and the culture of forgetting – concludes:
Cutting funding to our national institutions is not “innovation”. It is old-fashioned fiscal thinking that values short-term politics over one of the real drivers of human fulfilment – knowledge and cultural connection. To reverse this culture of forgetting we need to appreciate these institutions for what they really are … living, breathing entities. They strengthen our civic and democratic life by enabling us to critique the ephemeral rhetoric of the present.
The Australian government issues its own currency. It has no need to make these cuts. The economy is no where near full capacity and the NLA and related cultural institutions are hardly driving an inflationary spiral with their spending.
The destruction of the capacity if these institutions makes us poorer, in a different way than the mis-named ‘welfare reforms’ in Britain is making its disadvantaged citizens poorer, but both source of poverty are unacceptable and totally avoidable in a modern society.
Meanwhile, the IMF has really lost it.
The IMF’s Deputy Senior Something was chanelling Winston Churchill earlier this week (March 8, 2016) in his Speech – Policy Imperatives for Boosting Global Growth and Prosperity when he quoted the conservative demagogue: “I never worry about action, but only inaction.”
The IMF official continued to propagate the story that “volatile financial markets” are creating “fresh concerns about the health of the global economy”.
He claimed that:
These concerns are partly being fed by a perception that policymakers in many economies have run out of ammunition or lost the resolve to deploy it.
This is coming from an organisation that is a member of the Troika speaking that has crucified Greece by denying it the legitimate ‘ammunition’ that might have been used to stop its economy shrinking by around a 1/3 now and will maintain unemployment in excess of 25 per cent for the foreseeable future.
The same organisation was leading the austerity charge across the globe at the very time when fiscal deficits had to rise further to allow the non-government sector to reduce the precariousness of its balance sheet (run down debt) and regain confidence.
Now they acknowledge 8 years into the crisis that we should “be concerned … because protracted low global demand, and adverse feedback loops between the real economy and markets may generate additional deflationary pressures, putting us at risk of secular stagnation”
Macroeconomics basic rule No 1 which the IMF has never seemed to grasp – SPENDING EQUALS INCOME EQUALS OUTPUT – which drives employment and material prosperity.
Fiscal austerity at a time when non-government spending is weak is the anathema of adhering to that basic rule. The IMF has been consistently guilty of advocating what we refer to pro-cyclical fiscal policy interventions, which means that government policy, in a recession, exacerbates the economic downturn rather than counters it.
Please read my blog – IMF agreements pro-cyclical in low income countries – for more discussion on this point.
The IMF official also claimed that in adopting “Only positive sum policies”:
… countries should bolster aggregate demand, not just attract it from abroad.
Which means that export-led growth strategies should be rejected – the IMF model, that is!
What did he offer as an encore?
He said that:
… fiscal policy has to take a more prominent place in the policy mix.
But then he laced this with a ample coating of IMF poison – all the usual stuff.
First, that governments were limited in their capacity by their “fiscal space” which is one of those neo-liberal concepts that have made the crisis deeper and longer yet has nothing at all to do with the capacity of currency-issuing governments to spend.
Please read my blog – The BIS adds to the financial turbulence and should be disbanded – for more discussion on this point.
Second, that there are “risks to public debt” which limit the capacity of fiscal policy. For a currency-issuing national government there are no operational limits on the public debt that you can issue.
If the non-government bond markets don’t wish to purchase the debt at realistic yields then the government can simply instruct its central bank to purchase the debt.
Or more simply, such a government can just stop issuing debt altogether and instruct its central bank to credit relevant bank accounts to instantiate its spending plans.
Please read my blog – Japan – another week of humiliation for mainstream macroeconomics – for more discussion on this point.
And, to get back on the theme, the IMF official finished by arguing for more rapid “structural reform”, which is IMF code for hacking into worker protection, undermining job security, and shifting the bargaining balance increasingly in favour of capital to the disadvantage of labour.
Meanwhile, some other unit in the IMF has been hard at it recently maintaining its neo-liberal message just in case these calls for increased fiscal action might lead one to think the IMF is changing and becoming relevant.
On January 20, 2016, it released a Staff Discussion Note (16/02) – The Refugee Surge in Europe: Economic Challenges – where it advocated a position where European employers should pay migrant workers below the minimum wage.
In jargon, they recommended “derogations of the minimum wage for refugees”, which will also help “to reduce any possible resentment” of local workers to the newly arrived workers.
Of course, if nations really pursued ‘growth friendly’ fiscal policies and created dynamic efficiencies by ensuring vacancies ran ahead of those entering the unemployment pool – that is, a state of true full employment – then employers would be falling over each other to employ these new arrivals.
But, it is much easier for a pro-capital organisation such as the IMF to advocate policies that undermine the rights and entitlements of workers and create a race to the bottom mentality among employers.
The IMF is a very confused organisation these days. Its forecasts are typically very poor and contribute to on-going destabilisation. It policy bias undermines prosperity.
The damage this policy bias of austerity has caused is dragging the institution into the real world and so we get these conflicted speeches from senior IMF official about the need for fiscal expansion only to be followed in the next sentence by a sort of self-flagellating qualification, which reflects the organisation struggling to reconcile its pro-capital ideology with the obvious real-world damage its policy advice has caused.
The IMF should be disbanded. If there was one austerity cut I would approve of at this time, it would be for governments which contribute to the IMF budget to withdraw their cash and send the institution broke. The world would be a better place.
FINALLY – Introductory Modern Monetary Theory (MMT) Textbook
I will write a separate blog about this presently, but today we finally published the first version of our MMT textbook – Modern Monetary Theory and Practice: an Introductory Text – today (March 10, 2016).
The long-awaited book is authored by myself, Randy Wray and Martin Watts.
It is available for purchase at:
1. Amazon.com ($US60)
2. Amazon.co.uk (£42.00)
3. Amazon Europe Portal (€58.85)
4. Create Space Portal ($US60)
It is retailing for $US60 at Amazon.com or £42.00 or €58.85 from Amazon Europe (UK).
By way of explanation, this edition contains 15 Chapters and is designed as an introductory textbook for university-level macroeconomics students.
It is based on the principles of Modern Monetary Theory (MMT) and includes the following detailed chapters:
Chapter 1: Introduction
Chapter 2: How to Think and Do Macroeconomics
Chapter 3: A Brief Overview of the Economic History and the Rise of Capitalism
Chapter 4: The System of National Income and Product Accounts
Chapter 5: Sectoral Accounting and the Flow of Funds
Chapter 6: Introduction to Sovereign Currency: The Government and its Money
Chapter 7: The Real Expenditure Model
Chapter 8: Introduction to Aggregate Supply
Chapter 9: Labour Market Concepts and Measurement
Chapter 10: Money and Banking
Chapter 11: Unemployment and Inflation
Chapter 12: Full Employment Policy
Chapter 13: Introduction to Monetary and Fiscal Policy Operations
Chapter 14: Fiscal Policy in Sovereign nations
Chapter 15: Monetary Policy in Sovereign Nations
It is intended as an introductory course in macroeconomics and the narrative is accessible to students of all backgrounds. All mathematical and advanced material appears in separate Appendices.
A Kindle version will be available the week after next.
Note: We are soon to finalise a sister edition, which will cover both the introductory and intermediate years of university-level macroeconomics (first and second years of study).
The sister edition will contain an additional 10 Chapters and include a lot more advanced material as well as the same material presented in this Introductory text.
We expect the expanded version to be available around June or July 2016.
So when considering whether you want to purchase this book you might want to consider how much knowledge you desire. The current book, released today, covers a very detailed introductory macroeconomics course based on MMT.
It will provide a very thorough grounding for anyone who desires a comprehensive introduction to the field of study.
The next expanded edition will introduce advanced topics and more detailed analysis of the topics already presented in the introductory book.
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.
This Post Has 18 Comments
“reform” has become a euphemism when used in a political context, it is also wonderfully non-specific.
It is an over used term that I hate.
There should be a second dictionary definition:
“2. to enact change in and institution or practice to fit a certain ideology”
“today we finally published the first version of our MMT textbook – Modern Monetary Theory and Practice: an Introductory Text”
Well done getting this out of the door.
The “efficiency dividend” eh?
The Sans-Culottes extracted something in that line in 1789 and later.
Maybe we could do with a rerun.
Not exactly on topic, but Counterpunch printed today this criticism of neoliberal propaganda denigrating the poorer people in society. The author describes the USA, but we are rapidly falling in line.
As someone who is on Benefits in the UK I can assure everyone outside the UK that the gratuitous suffering is pure scapegoating and vindictiveness. ‘Efficiency dividend’ take the biscuit for Orwellian language reframing. We had a similar episode here with the Bedroom Tax being reframed as the ‘spare room subsidy.’
The Tory language reframing and scapegoating project started started very soon after their installation-it went as follows:
1. Those out of work referred to:
a) Skivers (not ‘strivers’)
b) Those with their ‘blinds drawn in the morning.’
c) Those that don’t get up in the morning.
2. Whereas, condescendingly. those struggling in work on low pay/high housing costs were:
a) hard working families
b) Doing the right thing
They massaged the population into using the people who were most vulnerable as a spitoon for their frustration due to the effects of housing bubbles/debt/stagnating wages and ‘precariat’ jobs.
Beyond despicable. And only a few days ago more cuts were announced to those on Employment Support Allowance (formerly Incapacity Benefit) reducing benefits from £103 to £ 75 a week. The Government maintained that it would ‘incentivise’ the disabled into work (FFS!).
Will your other books be coming out on Kindle ?
I find it troubling that Neo liberalism has been operating worldwide, on a continuous basis, for many years, as a definable political movement catering only to the interests of a definable socio-economic class ,and yet, to my knowledge no elected political party goes by that name.
Congratulations on releasing the book!
reply to J Christensen:
The problem is there is no political opposition to neolibralism.
Here in NZ both main parties (Labour & National) have identical economic agendas.
There is no opposition and there hasn’t been for over 30 years!
Just bought your book. Should be here on Saturday.
Quote from Draghi on ECB stimulus:
Dear Amazon Shareholder (at 2016/03/10 at 21:32)
Thanks for finding the typos (now fixed).
The text book will be out on Kindle but the other books are distributed differently and are available as eBooks via Google.
One of these days there will be blood!
I have long held that the proper term should be ‘deform’.
For a long time I have been associated with an Australian economic reform organisation (i.e. real economic reform, meaning “change for the better”), and currently edit its bimonthly publication. Many years ago I began receiving an unsolicited copy of a glossy monthly magazine put out by an american libertarian foundation. The articles published in this magazine clearly reveal it as an organ of neoliberal propaganda. Evidently on seeing the name “reform” in the title of our organisation, the magazine’s distributors simply attributed to it the meaning they habitually attach to the word (I suspect they obtained the postal address from the website without even bothering to read its content). On one occasion I took the trouble to criticise one of the magazine’s articles, and was immediately dropped from their distribution list. Not that this troubled me in any way; it was a relief to be rid of this intrusion.
Thank you so much for your article. Wonderful stuff. I have tweeted it and FB’d it. Hope that it gets passed around and seen very quickly.
universal welfare benefits are much harder to undermine.
Child benefits and old age pensions are well excepted by popular opinion.
If only we could mitigate the central conflict of capitalist labor markets between
profits and wages.If only there was a democratic monetary sovereign power which
could raise people’s income without increasing firms costs whilst at the same time
removing spending power from the elite to undermine their control of the land and
the fruits of the land that all our labours bring forth.
“universal welfare benefits are much harder to undermine.
Child benefits and old age pensions are well excepted by popular opinion.”
child benefit has already been removed from ‘higher earners’ and the state pension is a pittance compared to the living wage.
Universal benefits suffer from the same problem as all ‘free money’. The question asked is what are you doing to deserve it?
Once you remove a ‘universal benefit’ from those high earners, the high earners increase their questioning as to why anybody else is getting it. And the whole thing gets undermined.
It’s the same as public services. Defund the public service. Watch it start to fail. Spin it as public sector incompetence and then privatise it.
This to me seems the usual “mediamacro” argument in terms of “austerity” and “anti-austerity” framing.
The reason why Labour is considered less good with managing the economy is instead tremendously simple: a Labour government let southern property prices slip in 2007-2009, for whatever reasons, southern voters don’t care.
It is similar in other countries like Australia. Look at Turnbull on negative gearing.
Every time in the past many decades a sitting government party lets southern property prices slip it has to spend 10-15 years in opposition so that southern voters forget that slip in property prices.
The conservatives lost their reputation for managing the economy in the 1991-1996 southern property price fall, and T Blair won the 1997 elections speaking of “aspiration”. So did G Osborne in 2010.
“suffer from the same problem as all ‘free money’. The question asked is what are you doing to deserve it?”
Well a lot of people already see rising southern house prices and pushing down wages and benefits as a bad and not a good. But these people, mostly voters outside the south, don’t matter as to returning parliamentary majorities.
The question is when southern property owners voters will turn against earning a 100% “interest” every year on their cash invested in property as they have done for the past 25 years. The answer is obviously “never”.
This major example of free money – property capital gains in Southern England *cashed in* via mortgages, has massive sums involved.
And it is NOT mere feelings of wealth it is *cashable wealth*, thanks to the magic of remortgages, and the amounts involved are amazingly large, they are not small.
The biggest part of the Tory story is exactly the opposite: they tell voters that they will become rich only by maxing out the credit card to borrow a lot of debt for highly leveraged property speculation, and that a Tory government will lend (or even handout cash) to them whatever it takes to satisfy that “aspiration” for lots of debt and the resulting tax-free capital gains.
Note that this story applies *only* to voters in the South East.
The minor story is that the same voters in the South East are tired of their precious capital gains being wasted in rather small part on the unemployed and disabled people in the North, and they want that part of the national “maxed-out credit card” to be cut.
Look at all the policy announcements the Tories have made: the big ones have always been about bigger cheaper government sponsored loans/handouts to South East property speculators.
Usual quote from George Osborne that carries both stories:
“A credible fiscal plan allows you to have a looser monetary policy than would otherwise be the case. My approach is to be fiscally conservative but monetarily active.”
Here “fiscally conservative” means “cut spending on the Northern scroungers” and “looser monetary policy” means “bigger cheaper loans to aspirational South East property speculators”.
According to the Halifax/Lloyd house prices index (sheet “All(ANN)” in their historical spreadsheet), South East average property price was £50,302 in 1985, £77,248 in 1995, £217,963 in 2005, and £294,371 in 2015 (£49,149, £49,419, £134,555 and £138,269 in the North).
That over 30 years including two periods of large house price falls gives average “interest” (capital gain profit) of £8,135 per year per average South East property, tax-free, effort free, purely redistributive without producing any value; a yearly “interest” on a deposit that given an initial price of £50,000 was probably *less* then £8,135, for a yearly “interest rate” of at least 100% on cash invested over each year; that is simple interest, not compound; to get a £244,069 total return from an £8,135 cash investment over 30 years would take a 12% *risk-free* compound interest rate, the stuff of legends (4-6 times GDP growth for 30 years!).
Note also that an “average” southern property with a price of £50,000 in 1985 was typically a terraced 2-up-2-down purchased by working class southern voters with “average earnings” before tax of around £12-16,000 per year, that is the yearly 100% “interest rate” resulted in “interest” that nearly doubled their after-tax income, and probably was twice as large as their earned disposable income.
Much bigger proportional effects for the southern voters in the even more “aspirational” middle and upper middle classes who could afford the larger deposit to speculate on 3-bedroom semi-detached or 4-bedroom detached properties and for whom a 100% yearly “interest” on that deposit meant “free” holidays in the Caribbean and “free” private school fees, a lifestyle like “upstairs” gentlefolk.
And all this without considering the benefit from not paying rent, or the income from renting out.
My usual quote on remortgaging:
“Under Thatcher, this exploded to over £250bn across her premiership – a staggering 104% of GDP growth. … But Blair did his homework and let loose – as did Thatcher – a wave of cheap credit, financial deregulation, house price inflation and an equity withdrawal-led consumption boom. Withdrawals under Blair’s leadership totalled around £365bn, that’s a full 103% of GDP growth over the same period”
It is not a mere feeling, it is huge spending power redistributed southwards and upwards.
What is staggering is the enormity of the story, and how the “intelligentsia” largely rather prefers to discuss topics which by comparison are more like which end of the egg to break 🙂
Southern voters are in effect, democratically, selling their votes to the highest bidder, and not for a mess of pottage, but for really significant amounts of money.