By Michael Rosen I think I get to feel most irritated when I hear or read allegedly balanced commentators talking about the ‘debt crisis’ or the ‘deficit’ as if it’s a bit of the weather that blew in with the westerlies. Then, further to that, they tal …

Walton Pantland

By Michael Rosen

I think I get to feel most irritated when I hear or read allegedly balanced commentators talking about the ‘debt crisis’ or the ‘deficit’ as if it’s a bit of the weather that blew in with the westerlies. Then, further to that, they talk as if how we behave is indeed conditioned by this fact of nature: talking of ‘necessary action’, ‘tough decisions’ and the like.

By presenting it in this way, it serves very nicely to obscure from us what has happened, what is being done and why.

I was born in 1946 and so have spent all my life under the protection of the kind of social policy that my parents (born in 1919) dreamed of – and indeed worked to bring about. At the core of it are free schools, free health, child benefit, unemployment benefit, free higher education and a free social service system. Added in, was some degree of state-run transport and heavy industry. Various versions of this social policy were won and brought in during the middle years of the twentieth century across western Europe and north America. (Let’s leave Communist countries out of it for the moment.)

We have to be clear: a combination of governments and leading capitalists across this western landscape are saying over and over again ‘we’ can’t afford to have this any more.’ How curious! To take the example of Britain in this, they want us to believe that a Britain in 1946, shackled by debt, bomb damage and labour shortage could afford this, but a Britain in 2012 capable of producing massive wealth cannot?! Yes, that is precisely what they want us to believe and the servile commentators foist this nonsense on us morning, noon and night.

Their alibi is ‘debt’. Big bad debt. And cunningly, they make debt everyone’s problem as if the debt owed (or owned) by a bank or a nation state is the same as the debt you and I owe a mortgage or credit card company. They say, we are all part of ‘our’ debt, we must all worry about it equally, we are all responsible for it and because of it, ‘we’ can’t have the kind of universal provision people had in 1950. In fact, they’re telling us running up ‘our’ debt was either each of our individual faults or it was the fault of the people we voted for.

Meanwhile another story is told which says: debt is good. When we study history and economics at school, our teachers told us what a brilliant invention banking was because it enabled merchants and fledgling capitalists to raise money prior to their ventures, bringing together workers and materials, to produce and distribute goods and services for the benefit of all. (One of the great leap forwards for the world, they say, was ridding it of the chains of the stigma of ‘usury’ ie making interest (or, as some narratives put it, excessive interest) from lending money. So, not only does this story say, ‘debt is good’, it also says that ‘usury is good’.)

So, for capitalism to work, it needs debt. Very few enterprises can start or make leaps forward from the assets held by an individual or a group of people (a company). And the great enterprises which make this possible are of course banks and because usury is good, the banks make more and more money by collecting the interest payments. All good, say the commentators.

Bankers are clever people who suss out the best enterprises, companies and individuals to lend money to: that is, people who will go on and on and on and on and on paying the interest. (It’s not, as happens between individuals, those people who pay back the loan or ‘principal’ very quickly. Such speedy re-payers are not profitable to the bank.) The job of bankers then is to scour the world for suitable debtors, or, indeed suitable chunks of debt. Banks can buy debt off another lender so long (in their ideal world) as the interest payments carry on coming in. And of course banks can borrow money (‘leverage’) to buy debt. Loans to buy loans. Debts to buy debts with debts getting bigger and bigger.

At the end of these long chains of money-lending, there must be people who can pay it back. For people to pay it back, there needs to be something being made, services being provided: work, work that produces stuff or distributes stuff or provides stuff that people need or want.

But here lies a big problem for the money-lenders. People who run companies have to make a profit.(Profit is good.) To make a profit, companies have to keep costs down. They have to keep costs down because they are in competition with each other. (Competition is good, says the dogma. Debt, usury and competition all good!). The key way to keep costs down is to ‘cut labour costs’ – that’s to say, keep the wage bill down.

The three main ways to do this are: doing something to the wages (freeze or cut), sacking workers often through automation but also through ‘cutbacks’, getting governments to raise prices by pulling their ‘economic levers’ whilst freezing the wages. All this will help companies make profits.

One problem: it cuts back on the ability of workers (‘consumers’) to buy the stuff that the capitalists make. Pay people less, they buy less. Or, in technical terms: whoops!

Now back to the bankers looking all over the world for people to lend money to. At any given moment, there is, as it were, a league table of good debtors sitting on the bankers’ walls – good debtors because they will never stop paying interest; good debtors because they will pay higher interest payments than the next debtor. Now this is the key point: top of the debtors’ league table in the period leading up to this crisis was…other moneylenders! Mortgage companies, credit card companies (more often than not, subsidiaries of the banks themselves) and of course governments.

Now, remember that there is a strong motor within capitalism trying to pay workers less, i.e. making them less able to pay for goods and services. So, billions of people are confronted with two pressures: to buy more, to take home less pay.

In the middle of this push-me, pull-you is tax. Tax according to the same dictum that says, debt is good, usury is good and competition is good, is bad. Tax is bad. Tax is bad because it takes money ‘away from the economy’ (ie people aren’t spending it on the goods and services (and debt!). Instead government is spending it on these other touchy feely things like education, health, social services.

Now here come the commentators, who cast this debate about tax as if it is an argument about what’s in the kitty, what’s in the pot,and that this is the limit of ‘our’ wealth. This is a conjuror’s trick, a sleight of hand. As you can see from everything above, there is a huge amount of business going on outside of the matter of governments taking taxes from us and spending it. At the core of this ‘huge amount of business’, is of course ‘business’! That is the business of making profits.(Profit is good) Making a surplus of money, or wealth. As we’ve seen so far, there are two main ways of making these profits: companies making and distributing goods and services; lending money. (The third main way is through renting out stuff – houses, ‘plant’ etc.).

And here’s the mystery, the money that dares not speak its name, the untouchable secret: the total capitalists’ wealth. What is it? Where is it? What’s happening to it? Who’s got it? And, most importantly, why is it always outside of the debate of what ‘we’ can afford, what ‘our’ governments can spend money on, ‘our’ deficit. It’s rather as if we’re playing cards in a room where the kitty ‘we’ are allowed to gamble with is restricted to what’s on the table…other than that there’s a door at one end of the room which is the door to the safe. In there, are billions of quids which ‘we’ at our end of the table can’t touch. All the arguments and rows going on around the table about who’s got what are taking place as if the money in the safe doesn’t exist. In fact, to pursue the analogy even further, everything we do round the table seems to end up with more money piling up in the safe! When somebody says, ‘hey let’s send out for fish and chips’, somebody pops up with, ‘but we can’t afford it.’ . Then we all look at the kitty, and think, oh that’s true. Meanwhile, the safe is stacked full of money for thousands of fish and chip meals!

Now that analogy breaks down in one very important way. Work is not sitting playing cards and gambling. Work is the business of making and distributing goods and services that people need and want. Capitalists pay workers to do that but at the end of the year the price they get for the goods and services they sell must come to more than what they pay to the workers plus what they pay for the cost of plant and rents and interest. If it doesn’t come to more the capitalist either goes bust or borrows some more money.

So where are we now? What point have we arrived at in history where the ‘truth’ seems to be that ‘we’ can’t afford to have the social provision that we used to have?

Bankers lent money beyond the point debtors could afford to pay the interest.

Now ask the question, why couldn’t they afford to pay the interest? It’s because they weren’t (or aren’t) being paid enough. Why aren’t they being paid enough? Because capitalism (the system which is lending people money) is about paying people as little as possible, ideally less and less. Why are they being paid less and less? So that profits can be made. (Debt is good, usury is good, competition is good, profits are good, taxes are bad!)

Yes, there are huge profits sitting in the safe at the other end of the room, at the other end of town, at the other end of the country. And even if these profits sometimes take a dip, make no mistake, whether they are ‘frozen’ as massive assets of real estate or luxury goods, or whether they are simply rising less quickly, profits go on and on and on and on. The super-rich are superly rich and, in these times of ‘recession’ when ‘tough decisions’ are being made they are getting richer and richer and richer. And please, they don’t really get rich by paying themselves big salaries. They get rich by collecting profits (from dividends, rents and interest) at the end of the year.

So, this is a story about how we are tricked into thinking that what ‘we’ can afford is just or only about how governments tax us and spend the money, it’s about how we are tricked into not looking at what’s in the safe or indeed not even noticing that there’s a door to the safe right next to us! That safe is the holy of holies where we must not trespass. We must never imagine a system where what’s in the safe should be as much part of the discussion about ‘what we can do’ as what governments do about taxation.

At the moment, there is only one alternative on offer: the one that says what’s in the safe is not ours. And yet, it was only possible to stuff it full of money because people worked and worked and worked making and distributing the goods and services.

Note: in the last three years, the super-rich in the UK (the top 1000) have increased their wealth (ie got even richer) by £155 billion. That’s just about the same as what ‘our’ deficit is – the one they keep telling us must be paid back through our taxation and because of that ‘we’ can’t have the social provision we’ve been used to. £155 billion in the safe at the end of the room!

– Michael Rosen is a broadcaster, children’s novelist and poet. Visit his website and blog.


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Walton Pantland

South African trade unionist living in Glasgow. Loves whisky, wine, running and the great outdoors. Walton did an MA in Industrial Relations at Ruskin, Oxford, and is interested in how trade unions use new technology to organise.

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