Exposing the Myth of Economic Growth

Economic growth does not work for the vast majority of us! Yep, you read the right, the fabled solution to all of our problems, our government’s plan to get us out of this mess, leads only to more problems. Never has our economy been so large and yet most people are facing real wage cuts, privatisation of basic tax-payer owned services and unemployment. In the US over the last 15 years, 93% of economic growth has been gorged by less than 1% of the population. Economic growth is a lie foisted upon us to force us to make the sacrifices needed to feed wealthy bank accounts. To really follow this argument you have to accept that money isn’t real. Of course we really have some notes and some coins, but it is worth only the amount of goods or service that we agree it is worth. We have to learn to think of it as separate from the items we buy with it, in that people would still produce things if we decided to change the way that money works.

 There is something called the Philips Curve which demonstrates the relationship between unemployment and inflation. You spend money to curb unemployment and this causes inflation. When prices go up two things happen. Firstly it disproportionately affects the rich, since the proceeds of their ventures are worth less in real terms. However, it immediately affects the poor as prices rise meaning living standards decrease and the poorest do not have the savings to insulate them. Since developed countries will not tolerate hunger and deprivation where it is clear and blameless, we have mechanisms in place to ensure that workers can unite to force their masters to share the spoils of the ever growing cake. This is what happened throughout the 60’s and 70’s, after a massive boom caused by revolutionary public spending where all our living standards improved, the economy came to a juddering halt. Workers, realising that employment was better than low inflation battled for the right to work and refused to accept any attacks on this. When inflation kicked in they battled for higher pay to keep pace or stay ahead and if they didn’t get what they considered a fair deal they downed tools and stopped producing the wealth that fed their financial superiors. Obviously such a course could not be tolerated by the wealthy and so the Philips Curve was disproved (no it wasn’t, but that was the story).

You see, the Philips curve had to be disproved since while that relationship was held to exist, no government would ever be elected by the masses, that favoured policies which threatened employment. Even now, when we talk about changing our system to make sure people can be sacked more easily by their super-rich over-lords we call it “making the labour market more flexible”. The terms here demonstrate how working people have been turned into a commodity, this is backed up if we consider titles such as “Human Resources”. People are bought and sold, but markets take the blame. However, that relationship between unemployment and inflation still very much exists, it has not been disproved but merely hidden. For example, there were over 20 changes to the way that unemployment has been counted between 1979 and 2000. All but one of these has served to reduce the published figure of unemployment. The way we measure inflation too has been altered, the new count (CPI) is disgned to produce a lower figure than its predecessor (RPI). If we still used the 1979 system, unemployment would be considerably over 4,000,000 people, and inflation heading toward double figures. We now count the amount of unemployed in this country not by counting those who claim unemployment benefit, or those that suddenly stop paying income tax or some other sensible method. No, we use a system which is much more simple to manipulate, a survey (seriously, who really believes a survey is going to accurately predict this?). But, this had to be done, you cannot justify rich individuals and organisations treating workers as resources if they are seen to be suffering. You have to demonise the working poor, to hoodwink those lucky enough to have a job into thinking the unemployed are the ones responsible for life’s difficulties. Well, I have never known an unemployed person close an outlet and fire all of its it employees just because they wanted to join a trade union, McDonalds on the other hand…  Nor have I ever known an unemployed person cut tax for the highest earners while indirectly increasing it for the lowest, our government however…  “Benefit cheats” cost us around £1b per year according to even the most ascerbic estimates, while anything between £60b and £100b is lost from the tax avoidance or tax aversion by the richest in our society.

It’s worse than that though, we have actually given the right to some companies to print money! Ladies and gentlemen, I give you then banks. The popular assumption is that a bank receives deposits from savers and then lends that money out, keeping some in reserve to ensure savers can withdraw money if they want to. This is wrong. Criminally wrong. While the rest of us scrape by and deal with job insecurity, pay freezes, loss of rights and loss of democracy, the banks create their own wealth. They do not actually lend out money that has been deposited, in this digital age there is no legal requirement for them to be able to guarantee their debts. Hold on, I’ll walk you through it. If I go into a bank and deposit £2 in a new account, the bank is then legally allowed to create £100 and lend it out. They hold on to my £2 as they have to hold 2% of whatever they lend, but the £100 is new money. Notes and coins are produced by the government, and when they are created the government charges interest to the banks. However in our digital age only 2.4% of money in our economy is actually paper and coin, the rest is numbers in a computer. Banks are free to add these numbers to the computer whenever someone walks in with a deposit, and they are allowed to add 50times the value of that deposit. Incidentally, this is what really caused the financial meltdown. The banks can only create this money if they have someone to lend it to, and so the search was on for ever more lending opportunities until the only way to continue to grow was to lend to people who couldn’t pay it back.

The scam goes deeper however, most people borrow money for big ticket items like houses which require a mortgage. Well, if banks decide they will lend more money in mortgages, despite the fact that there aren’t actually any extra houses all that happens is there is a bidding war which forces prices to go up. No one is materially better off since the money we can borrow is taken up by the inflated cost of living. Even if you choose not to buy a house, you still need somewhere to live and that most likely means renting. If your landlord is forced to borrow more and thus pay back more to secure the property it stands to reason that the rent is going to be higher. What actually happens is the banks create this money, which causes a boom in the economy in the same way that the public spending did after the Second World War. The difference is that the banks are the beneficiaries of the money they lend, since it is then paid into the bank of the person who sold the house, and that bank can now lend 50times what was deposited. But that’s fine because the value of the house will increase so we always have that. Wrong again. Sooner or later as the banks give ever riskier loans to produce the growth in their balance sheets that their shareholders demand, they lend to people who can’t pay it back. Oops, now the banks are in trouble and don’t have enough money to lend meaning house prices fall. Fortunately, they have a safety net in the lender of last resort, enter The Bank of England. Our government did not choose to bail out the banks, it was legally obliged to do so. The Bank of England guarantees all other banks, and thus the money printing, growth grabbing monsters of the private sector are effectively bankrolled by the public sector! We all put money into a pot which is used to guarantee profit making companies as they lend us thin air. We use this thin air to impoverish ourselves and guarantee that we will spend the rest of our lives paying for a home that should be a basic human right. The act of borrowing this thin air and using it to buy the things we need causes these organisations to lend more thin air meaning that more people have more thin air to compete against each other with. In reality there are the same number of houses so the people selling them can sell them for ever more deepening our debt, and deepening our servitude. Now all of a sudden we cannot afford to lose our jobs, and must work ever harder to avoid the arbitrary blade of the axe, since the axe represents the loss of everything we have spent our lives acquiring.

We are slaves. Slaves to a system that we finance and work within. Slaves to a system that we no longer even question. Slaves to a very small number of people with the knowledge and the organisational means to impoverish us if we refuse to bend to their will. Economic growth is an illusion that only tightens our chains. And when economic growth falters we must pay once again, with our jobs and our homes, to repair our crumbling prison.