Tuesday, 10 March 2015

The Price of Everything

How can we value our governments? What is the value of running the country one way, or another?

Since Margaret Thatcher came into power in 1979 we have been running the country one way. Her way was neoliberalism, the belief shared by Labour and Liberal parties that by allowing the rich to get richer the wealth would 'trickle-down' to the poor.

It probably sounded good at the time - free markets and privatisation, after years of planned and before that rationed economy. Across the Thatcher reign 1979-1990 GDP grew from £3,000 to £3,097 per person, inflation adjusted. The economy looked OK, and economics - the science that knows the price of everything - was supportive of neoliberalism.

But while the suited economists in Whitehall were celebrating, the woman on the Craigneuk omnibus was finding it harder and harder to find her fare. Because over that same period the poor were getting poorer. At the start of her reign, one in five people in the UK was poor [1]. By the end it was one in three.

And now, 36 years later we discover that while economics knows the price it does not know the value. The OECD report Focus on Inequality and Growth that Nicola Sturgeon pointed to when she launched Scotland's economic strategy last week shows that letting the rich get richer means that all of us get poorer - in OECD words "income inequality has a negative and statistically significant impact on medium-term growth." Specifically, the UK lost 9% of growth because of inequality. Why? Mainly because inequality makes it harder for poor people to get a decent education.

So the neoliberalism that Thatcher imposed and that David Cameron and Giddy Osborne still favour made us all poorer.

And now it might be about to cost Westminster a whole lot more.

Imagine (it's not hard) that the revitalised SNP wins this election in Scotland, and the next. It cannot be long until we get a second go at a Referendum on independence. If Scotland were to vote Yes next time, Westminster would lose about to one tenth of the people under its dominion, one third of its land area, the launch platform for its horrible WMD and its oily cash cow.

What then is the value of neoliberalism? It made a few people very wealthy. Nice for them. It has left one in three Britons living in poverty.

Why could economists not tell us that in 1979? Why could they not say 'Watch out Britain! You are being hypnotised, and robbed?'

What use, finally, is economics? 

OECDstats don't perfectly match the period - but in 1975 the poverty rate - the number of people earning less than 50% of the median wage - was 18% and by 1990 it was 29%.

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